United Benefits from Continentals Downsizing

United had been building up its Denver hub since 1991, increasing its total departures 9% in 1992, 22% in 1993, and 9% in the first six months of 1994. Stapleton is United's second largest connecting hub after Chicago O'Hare (ORD) ahead of San Francisco (SFO), Los Angeles (LAX), and Washington Dulles (IAD) International Airports, as shown in Exhibit 11-7.

In response to the downsizing by Continental, United is expected to absorb a significant portion of Continental's Denver traffic by means of increased load factors and increased service (i.e. capacity), particularly in larger markets where significant voids in service might be left by Continental. United served 24 of the 28 cities served by Continental from Stapleton in June, 1994, with about 79% more total available seats to those cities—23,937 seats provided by United compared with 13,400 seats provided by Continental. During 1993, United's average load factor from Denver was 63%, indicating that, with its existing service and available capacity, United had the ability to absorb many of the passengers abandoned by Continental. In addition, United had announced plans to increase service at Denver to 300 daily flights by the end of the calendar year.

Exhibit 11-7. Comparative United Airlines Services at Hub Airports, June 1993 and June 1994

Exhibit 11-7. Comparative United Airlines Services at Hub Airports, June 1993 and June 1994

NOTE: DOES NOTE INCLUDE ACTIVITY BY UNITED EXPRESS.

SOURCES: OFFICIAL AIRLINE GUIDES, INC. (ONLINE DATA BASE), FOR PERIODS SHOWN.

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NOTE: DOES NOTE INCLUDE ACTIVITY BY UNITED EXPRESS.

SOURCES: OFFICIAL AIRLINE GUIDES, INC. (ONLINE DATA BASE), FOR PERIODS SHOWN.

As a result of its downsizing in Denver, Continental was forecasted to lose more than 3.9 million enplaned passengers from 1993 to 1995—a total decrease of 80%. However, this decrease was expected to be largely offset by the forecasted 2.2 million increase in enplaned passengers by United and 1.0 million by the other airlines, resulting in a total of 15,877,000 enplaned passengers at Denver in 1995. As discussed earlier, it was assumed that, in addition to a continuation of historical growth, United and the other airlines would pick up much of the traffic abandoned by Continental through a combination of added service, larger average aircraft size, and increased load factors.

From 1995 to 2000, the increase in total enplaned passengers is based on growth rates of 2.5% per year in originating passengers and 3.0% per year in connecting passengers. Between 1995 and 2000, United's emerging dominance at the airport (with almost twice the number of passengers of all other airlines combined) should result in somewhat higher fare levels in the Denver markets, and therefore may dampen traffic growth. As shown in Exhibit 11-8, of the 18.2 million forecasted enplaned passengers in 2000, United and United Express together are forecasted to account for 70% of total passengers at the airport—up from about 51% in 1993—while Continental's share, including GP Express, is forecasted to be less than 8%—down from about 33% in 1993.

Exhibit 11-8. Enplaned Passenger Market Shares Denver Airport

Exhibit 11-8. Enplaned Passenger Market Shares Denver Airport

SOURCES: 1993: AIRPORT MANAGEMENT RECORDS.

Total connecting passengers at Stapleton increased from about 6.1 million in 1990 to about 8.2 million in 1993—an average increase of about 10% per year. The number of connecting passengers was forecast to decrease in 1994 and 1995, as a result of the downsizing by Continental, and then return to steady growth of 3.0% per year through 2000, reflecting expected growth in passenger traffic nationally and a stable market share by United in Denver. Airline market share of connecting passengers in 1993 and 1995 are shown in Exhibit 11-9.

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