The report will seek to review the routing of United Airlines into a new destination, Zh Airlines and Route Selection and Aircraft Allocation United Airlines is a major airline that serves various local and international routes. The airline has presence in most parts in Asia region. The airline is also a part of the Star Alliance that comprises various major airlines across the world. It faces stiff competition from other U.S domestic airlines including Alaska Airlines and American Airlines among others. The airline is publicly traded in the NYSE under UAL, its parent company with a market capitalization of more than $21 billion. The huge market capitalization shows its ability to manage its air flight destinations effectively and efficiently. However, United Airlines does not operate in Shenzhen. United Airlines operates in 4 destinations in China including Beijing, Chengdu, Hangzhou, Shanghai, and Xian. The management should consider increasing its destinations in the Chinese market. Shenzhen is one of the highly populated parts of China connecting Hong Kong and mainland China. The city comprises of numerous malls with large number of wares and other shopping products. United Airlines should capitalize on the demand for shoppers to travel to Shenzhen to expand their current passenger base. Therefore, Shenzhen destination has a potential due to the huge passenger travel demand in the city.
Performance Capability United Airlines has the capacity to meet the demand and payload requirements for operating in Shenzhen. The airline has been operating in China for many years and thus, it has the right capacity and understanding of the Chinese airline network to meet the passenger demand in Shenzhen. China is one of the fast-growing markets for passenger airline and it is estimated that the overall passengers in China grow to more than 1 billion passengers by 2020. United Airlines has been operating in China for many years with other destinations to grow the overall revenues. United Airlines will be able to benefit from the growing number of passengers in the region while entering a new destination in Shenzhen. Operating in Shenzhen is possible for United Airlines because they will be able to capitalize on the demand for air travel in the market.
As of January 2018, United Airlines reported a net income of $580 million, some diluted earnings per share of $1.99, and before tax margin of 6.4%. 67% 56% 44%
As of January 2018, United Airlines reported a net income of $580 million, some diluted earnings per share of $1.99, and before tax margin of 6.4%. The annual year net income of 2017 is $2.1 million that is critical in growing overall operational performance. Most passengers recognize United Airlines for their reliability and focus of growing the customer experience and capability. United Airlines is also committed to grow the profitability in the long-term period creating strong platforms for significant financial performance. The strong financial position of United Airlines is effective in shaping the long-term success potential in Shenzhen. Passenger and Cargo Demand
Shenzhen Bao’an airport mainly serves cargo transportation. In 2011, the airport underwent major expansion plans. The expansion program increased the passenger movement to around 43 million in 2017. The airline has a huge passenger demand considering that more than 43 million passengers are served by Shenzhen airport. United Airlines will be able to rely on the passenger demand and expected growth of the payload to expand their operations. In 2016, the volumes of Cargo transported to Shenzhen is more than 3.5 million tonnes. The cargo from United States accounts for 24% of the total cargo moved to and from Shenzhen. The large amount of cargo moved to Shenzhen provides a huge opportunity for airline cargo business.
The airline passenger movements and cargo business will expand into the various networks including 17 destinations. The air flight movement from Shenzhen to United States will pass through two or one destinations. The integration of the flight movements will allow the airline to serve the new destination easily. Most air flights to China are served through linking to other destinations in Europe. Both the passenger and cargo demand in Shenzhen to United States is high and United Airlines should consider its opportunity to expand into the destination. Fig.1:
New Schedule for Shenzhen. Depart Arrive Duration Flight & Aircraft Mon to Sunday 16.50(JFK) 18.20(PEK) 18h 55m Boeing 747 2h 5m layover in Beijing(PEK) 20.50(PEK) 23.45(SZX) 18h 55m Boeing 777-200/200ER)
The new flight schedule will involve a 2hours and 5 minutes layover in Beijing to allow for crew to prepare for the long flight to New York destination. The new schedule will make it for passengers to prepare well for the U.S travel journey. Based on the current demand for passenger travel and cargo demand to the Chinese market, as of 2017, the number of passengers is 3.4 million. The passenger load factor is 77% for the United States flight. The passenger yield is $23.6 million with an on-time performance of 73%. The total RASK for the flight destination is $22.1 million. The passenger load factor is lower than the international passenger load factor is 78%. However, the airline has a potential of increasing its overall investment in the new destination. Investing in the new flight destination is useful in growing the overall yield revenues.
Key Costs The main direct operating costs for the Shenzhen route is fuel, crew cost, and aircraft cost. The crew costs will include the cost of hospitality and providing good hotel services to the passengers. The proper management of the airline costs would involve investing in good management and personnel who have a good understanding of the airline destinations to Shenzhen.
The two important direct operating costs related to the new flights will include ground handling charges and the inflight services. 30%
The two important direct operating costs related to the new flights will include ground handling charges and the inflight services. The ground handling charges are the costs of managing the flight operations after arriving into the new destinations. The airline should work with the airport services and authority to get proper information and support for their ground handling services and works. Working with the airport management is effective in reducing the costs associated with the ground operations for the airline. In terms of the inflight services, they mainly involve the crew costs including the catering services and providing good customer service to the passengers during the flights. United Airlines mainly outsources its flight services to third parties who have specialized their services. Outsourcing of the functions helps in reducing the high costs of managing the services. Thus, it is critical to work with other specialized firms to provide quality inflight services such as catering and cleaning services.
Other important costs for the airline operations includes marketing and security costs. Marketing costs will help the airline in getting more revenues by advertising to the wider market in Shenzhen. The company faces stiff competition from local airlines such as Shenzhen airlines. Working with local marketing consultants and firms will help in growing their passenger and cargo base in the market. The security costs will involve hiring experienced security personnel or outsourcing the security services to other specialized firms.
For United Airline, the operating costs for its Boeing 737-300ER per block hour is crew costs, $927, fuel costs $487, maintenance $1048, and ownership cost of $510.
The estimated total costs of operation are $2974. 33%
The estimated total costs of operation are $2974. The management of United Airlines should try to manage the costs of the airline. The reduction of the operating costs will require proper assessment of the costs and the airline flight schedules. For example, the management should try to adopt more direct flights to and from Shenzhen in an effort to reduce costs of operation.
Conclusion and Recommendation Based on the review and demand analysis, it is recommendable for United Airlines to expand its operation in the Shenzhen destination route.
The destination has a good passenger and cargo demand. 33%
The destination has a good passenger and cargo demand. The forecasted yields revenues are also high. The management of the United Airlines is critical and provides an opportunity to expand the revenue base and capacity. The reception of the Shenzhen market is good and the potential of getting more passengers is high. Such factors make it possible to grow the overall airline market in the Shenzhen passenger market. The performance capacity of United Airlines is also good including its good financial performance. The financial position of United Airlines makes it easy for them to operate into new destinations in China without unnecessary financial challenges. Personal Learning Paper
Three important aspects of airline reroute and fleet planning process includes demand forecasting, operating costs of the airline, and reviewing the economic potential of the destination market. The understanding of the demand for cargo and passenger is critical in ensuring that the rerouting of the airline is good and will profitable. Understanding the cargo demand and passenger potential helps in ensuring that the route is viable. The operating costs will also help in managing the overall costs working in the foreign destination such as Shenzhen. Costs will include the fixed and variable costs such as the cost of inflight services, crew costs, and the maintenance costs among others. The economic metrics and potential of the Chinese market, more the growing population in Shenzhen city is critical in providing capacity for more passengers. These aspects should be well understood before deciding on investing in a new foreign destination such as Shenzhen.
In addition, I also learned that the management of the airline should work with the airport authority and other partners to ensure that they reduce costs of operation. For example, it is critical to collaborate with Shenzhen airport authority in security aspects to help in providing some security to the passengers and cargo and thus, reducing some expenditures related to safety management of the airline. Without working with other partners and firms, it would be highly costly to run airline operations in the new destination, Shenzhen. Therefore, the recommendation for United Airlines to operate in Shenzhen is good and it would assist in growing the overall revenues.

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