United is cutting up to 60% of flights from its Cleveland, OH hub and removing nearly 500 jobs
Looks like United is no longer #CLE-Friendly.
Rumors leaked on Saturday, February 1 that United was going to pull the plug on its 8th-largest hub, cutting up to 60% of its flights and eliminating nearly 500 jobs effective this April. Local news station WKYC The Investigator was able to receive confirmation from United later that day.
Although the news isn’t necessarily shocking by any means, the circumstances surrounding the nature of the hub closure have been handled by United, and CEO Jeff Smisek, in a very shifty matter, in my honest opinion.
In fact, I think the real shock is that nobody seems to be expressing more outrage at how two-faced United executives have been about the whole Cleveland situation, dating back to the merger days in 2010. There has definitely been some back-pedaling here, and while this has certainly happened before in the US airline industry merger mania post-world (read: Delta @ Memphis), the fact that the political dirty-play has finally claimed Cleveland as its latest victim needs to be acknowledged, at the very least.
The speculation of the hub closure began circulating on the internet from CLE-based United employees, and around 5:00 PM Eastern Standard Time on Saturday, allegedly, Smisek sent out a memo to substantiating that indeed the rumors were true. Here’s an excerpt from his message, sourced from airliners.net:
From: Jeff Smisek
Sent: Saturday, February 01, 2014 4:39:31 PM (UTC-05:00) Eastern Time (US & Canada)
Subject: United to Reduce Flying from Cleveland
Dear Cleveland co-worker:
I want to let you know that we have made the difficult decision to substantially reduce our flying from Cleveland. We will make this reduction in stages beginning in April.
I wanted you to know this information before the press found out, but unfortunately they found out earlier than we planned. I apologize for this getting in the press before we were able to tell you directly.
Our hub in Cleveland hasn’t been profitable for over a decade, and has generated tens of millions of dollars of annual losses in recent years. We simply cannot continue to bear these losses.
Personally, I find the tone of, “we wanted you to know this information before the press found out, but unfortunately, they found out earlier than we planned,” to be somewhat cryptic and very cringe-worthy. I suppose accidents happen with news leaks and there really isn’t an alternative explanation, but nevertheless, this serves as another data point underscoring how Smisek is just SUCH an awful leader.
The logic behind cutting Cleveland goes in tandem with the plans to cut $2 billion in expenses announced at United’s Investor Day Conference back in November 2013. However, it would have been responsible to MAYBE consider indicating to investors and employees at that juncture that United would have to make some adjustments to its network, and that some of its domestic operations, namely the Cleveland hub, would be impacted directly in the near-term future.
Instead, Smisek talked about improving customer satisfaction scores (up from falling in last place from the year prior) and gave updates on the (very-delayed) Wi-Fi installation, supposedly slated to be the “best in class,” or something insipid like that.
Point blank, it’s really embarrasing that United had to break the news to its employees, on a weekend, AFTER they were outed by the local media. Hundreds of people and their families are going to be affected by this decision, and the hub itself is estimated to be valued at $4 billion in annual impact to the Greater Cleveland community.
It’s also bothersome to me that roughly 19 months ago, in June 2012, an article ran in the Crains Cleveland with the title, “United execs laud efforts to back local hub.” Allegedly, at the time of the United-Continental merger in 2010, Smisek spoke to an audience of Northeast Ohio Civic and Business leaders saying, “Every hub needs to earn its value every day…the key for Cleveland is to have a level of business travel so that we can have either consistent profitability or have that hub’s profitability in a clear line of sight.”
According to the article, the early signs of CLE’s performance in the newly merged United-Continental system had apparently been favorable. Then-United Senior Vice President of Network Greg Hart, who has since moved into a new role as Chief Operating Officer as of December 2013, commented at the time, “Year after year, (Cleveland Hopkins International Airport’s) performance is better than some of the other hubs in terms of profitability.” He then went on to commend the people of Cleveland for encouraging customers to choose United Airlines.
Whoa. Am I reading this correctly? United’s profitability performance at Cleveland was BETTER than some of it’s other hubs in 2012, according to its SVP of Network?
Yet, in January 2014, Smisek says the hub hasn’t been profitable in over a decade.
That’s kind of messed up. Either something changed in 18 months (which I doubt) or the whole thing was smoke and mirrors.
The article then went on to discuss how the Greater Cleveland Partnership launched a new marketing campaign designed to preserve-the-hub by spending $60 million in 2012, amid a grand total of $530 million taxpayer funds to be invested towards improving the airport’s appearance and passenger experience over a 5-year period.
Now, with United chopping Cleveland’s operations from 165 peak day departures to a mere 72, and cutting 430 airport operations positions and 40 catering jobs, the whole business case behind the initiative has been shot in the foot.
What’s even more sad is that the people of Cleveland were willing to go through the lengths to support the infrastructure of the hub even though they were largely subjected to flying in and out of CLE on regional jets and prop planes. In his memo to the Cleveland employees on Saturday, Smisek blamed the “pressure that the new federal regulations have placed on [United’s] regional partners, and our reduction in regional flying,” as another reason supporting the closure of the hub.
I suppose one silver lining in the whole situation is that even with the reduced schedule, CLE flyers will now get to enjoy a higher concentration of mainline flights on United to the key 20 markets the carrier will retain from Cleveland.
However, the fact remains that United played dirty pool with the City of Cleveland, and I don’t think it’s really all that admirable. I support the rationale to make difficult business decisions, and I never truly believed that the Cleveland hub contributed significantly to United’s bottom line. In fact, I was also very skeptical about whether the hub would survive over the long-run.
Nevertheless, I don’t believe it’s ethical to tell business and civic leaders that the hub is “more profitable than some of the other hubs” in the UA system and then rake them over the coals less than two years later.
While I do agree with Smisek that the new FAA pilot regulation rules have created a new challenge to curb the costs of regional jet operations, the economics of 50-seater planes have been deterioriating for well over a decade. Yet, these civic leaders and their taxpayers don’t know this. All they want is a nonstop flight to get to where they want to go, even if they are paying an arm and a leg for it (let’s face it, fares out of CLE on UA are not cheap) and on cramped regional jets. What’s worse, these people are willing to throw their money into maintaining the facilities and infrastructure to support the hub, which is now more or less turned into a bottomless pit and hopeless dream for them. Some of that will be covered by United, but much of the burden will remain on the City of Cleveland to brunt.
Way to lead them on, United. You never fail to out-do yourself by making promises you can’t keep, especially to the resilient people in Northeast Ohio who were led to believe otherwise by you.
Maybe the reality is that in a twisted course of events, the people of Cleveland aren’t showing much backlash because United’s actions are par for the course. It’s not like the “new United” was their real hub carrier for the nearly three decades during which pre-merger Continental operated a hub at Hopkin’s International.
Summary of CLE reductions:
United current system map from CLE (note: services to Portland (OR), Seattle, San Diego, Portland (ME), Charleston, SC, Fort Meyers, Miami, Tampa and West Palm Beach are seasonal operations – but TPA and RSW will be retained post-dehub.
Small markets within a 250-mi radius from CLE that will lose service on UA metal to Hopkins. Not pictured: Toronto Pearson Int’l (which will still be served on Air Canada). Small mining towns in Pennsylvania and West Virginia, including Franklin, Bradford, Dubois and Parkersburg will ALL lose commercial airline service once the cuts go into effect, as they are operated on Silver Airways Beech 1900s.
Cleveland’s new route map after the de-hubbing process goes into effect. Services to Boston, Chicago, Denver, Fort Lauderdale, Fort Meyers, Houston, Las Vegas, Los Angeles, New York, Newark, Orlando, San Francisco and Tampa are currently operated on mainline. However, mainline services to Cancun, Punta Cana, Phoenix and San Juan will be chopped.