How Airlines Decide Which Plane to Use | Wendover Productions

0:00Why airlines fly which plane wear is mostly demand? Big planes fly to big places, small planes fly to small places. But it's not all demand. An incredible, nearly endless array of factors dictate the rest of it. While each airline is unique in how it decides which aircraft to fly, as an example, United Airlines has 28 different aircraft variants. This is quite inefficient. You can tell it's inefficient because low-cost airlines like Southwest and Ryanair streamline their fleet down to one aircraft type. Each additional aircraft variant and a fleet adds very real cost through increased operational complexity. Maintenance costs more, crewing is more complicated, even airport operations get less efficient. So each of United's 28 aircraft variants must somehow be justified. And perhaps the most convoluted justifications occur within the regionals. The very smallest aircraft in the airline's fleet. The composition of this subset is almost entirely dictated by Section 1C1

1:02of United's fiercely negotiated collective bargaining agreement with the airline pilots association, the union representing its pilots. This is what's referred to as the scope clause, and it essentially limits how much flying United can outsource to regional airlines. In the US, smaller aircraft are not technically operated by the major airlines whose name are on the aircraft. United, Delta, and American. Rather, they're operated on their behalf by regional airlines like Sky West, Onvoli, and PSA. The unions don't love this because it's pretty overtly a way to circumvent the higher pay rates they've negotiated. The pilots in cabin crew at the regionals are typically either non-union or represented by weaker unions, while United, Delta, and American consistently have more bargaining power than with their own staff since they can respond to cost increases at one regional by shifting flying to another. So this manifests in dramatically lower pay scales. A first-year captain at Sky West, which flies United CRJ200's 550's, 700's, and E 175's, earns $141.40 per flight hour, whereas a first-year captain at United mainline

2:07makes a minimum of $342.75 for that same flight hour. So to protect their pay, United's collective bargaining agreement, which is quite similar to Delta and Americans, sets strict limits on how much flying the regionals can do. They're allowed unlimited flying on 37-seat turbo props, although in practice, United hasn't flown turbo props since 2018. They're also allowed to operate as many 50-seat jets as they want, so long as the total does not exceed 90% of that of the mainline single-Ile fleet. In practice, this is effectively unlimited as the 50-seat jet total has never come even close to that of the single-Ile fleet total. The most meaningful part of the scope clause is the next one. They can only fly up to 255.70 and 76-seat aircraft, of which no more than 153 can be 76 seats. Looking at United's fleet inventory, they fly exactly 255.70 and 76-seat aircraft. This creates some rather bizarre fleet complexity. For example, United flies two different versions of its E 175.

3:12One is outfitted with 76 seats, but of course, the airline is limited in how many 76-seat aircraft it can operate, so they also fly a 70-seat variant. It removes a row and a half of economy seats and uses the space to give everyone an economy an extra inch of legroom and add this luggage locker in the back. But this is only the start of artificial disefficiency for the sake of fulfilling union requirements. EC Embraer, the manufacturer of the E 175, has developed a second generation of the aircraft called the E 175 E 2. This aircraft is quieter, more advanced, and dramatically more efficient thanks to its geared turbofan engines. Fuel burn is an estimated 16-25% lower, but no U.S. airline operates it. The problem is that the E 2 variant has a max takeoff weight of 98,000 pounds, and that's 13,000 pounds over the limit the collective bargaining agreement scope clause imposes upon its 76-seat aircraft. But this goes yet further. One challenge of United's 50-seat jets, historically,

4:14is that they did not have first-class seats. They operated with an all-economy configuration. Premium cabins are the most profitable part of the plane, so this left a lot of money on the table. But the scope clause prevented the airline from adding more of the higher capacity premium cabin-laden regional jets to their fleet, so rather, United worked with Bumbardia to develop a brand new airplane, technically. It's called the CRJ 550, and physically, it's pretty much just a CRJ 700, but technically, according to the FAA, it is its own distinct aircraft model. What United and Bumbardia essentially did was convert a 70-seat aircraft into one compliant with the Union's 50-seat regulations. Of course, they had to reduce the seat count by 20, so they added four more first-class seats, four more economy-plus seats, then reduce the economy count from 48 to just 20. With the leftover space they added luggage lockers, preventing the typically-frequent gate-checking of bags due to the CRJ's limited overhead bin space.

5:15They also added a walk-up snack bar as the plane now legally could and would be sapped by a single flight attendant, rather than the typical two on the CRJ 700, but they'd be tasked with much more work than on a typical 50-seat jet due to the inclusion of a first-class cabin requiring more personalized service. But there's still the maximum take-off weight component of the scope clause. For a 50-seat jet, that was set to 65,000 pounds, but the CRJ 700 airframe is rated for 75,000. So for the CRJ 550, software artificially limits how much fuel can take on to keep it under 65,000 pounds. So strangely, despite lighter passenger loads, the CRJ 550's range is lower than that of the heavier-loaded CRJ 700, despite being physically outfitted with the exact same fuel tanks. Now, whereas on the one hand, this increases United's per-seat operating costs, on the other hand, it ups their competitiveness in smaller markets. Their other 50-seat jets are not popular among passengers. The CRJ 200 has even earned the nickname Satan's chariot given its cramped conditions.

6:19So while costs might be higher, so-too-might profitability given the addition of first-class and a generally-improved passenger experience. So what's seen in practice is that the CRJ 200 and E-145's fly to small, uncompetitive markets. In fact, they're the aircraft of choice for destinations where United has a monopoly, like Cheyenne Wyoming, Lincoln, Nebraska, and Fort Dodge, Iowa. Meanwhile, the CRJ 550 is suited for the most competitive markets, with low enough demand to only justify regional jet service. In particular, it's what United uses for many mid-size markets in the Eastern half of the US where Delta and American also have a strong presence. So while United might not necessarily be the largest carrier in St. Louis, for example, it has a decent shot at competing for the higher-fair premium and business-traveler market thanks to the CRJ 550. Meanwhile, the other regional jets, the CRJ 700 and E-175, fill in the middle, serving as the aircraft of choice for small to mid-size markets with average passenger dynamics

7:19and demographics. And it's once one gets into these mid-size markets that aircraft choice gets more complicated. That's largely down to the all-important distinction of leisure versus business travel. You see, vacationers care first and foremost about price. Generalizing, they'll just pick the cheapest reasonable itinerary between their origin and destination on the day they want to depart. Business travelers, meanwhile, care far more about timing. They might have a meeting that ends at 2pm, then they want the fastest itinerary leaving soon after that. They would not even consider staying an extra night. They want to get home and, since their company is paying for it, they don't care how much it'll cost. That's why airlines like United go way out of their way to appeal to the business-traveler crowd. Even if they're not the majority of passengers, they generate far more profit per passenger than the vacationers since they book closer to departure, pay for premium cabins, and fly more frequently. To appeal to them, the key is to offer a lot of frequencies to the destinations they're

8:19likely to fly to most, which goes on to dictate aircraft choice. The United Route of Chicago to Burlington, Vermont and Newark to Pittsburgh have somewhat similar capacity. The United operates 415 daily seats on the former and 556 on the ladder. But there's not much business demand to and from Burlington. Not none, but the planes there are filled much more by people going on vacation, visiting family, attending a wedding, etc. Pittsburgh, meanwhile, has major hospitals, universities, corporate headquarters, and a burgeoning tech scene. It's a major business-travel origin and destination. So United takes a very different approach to serving these two destinations. Chicago to Burlington is served by a morning 737-800, a midday E-175, and an evening 737-max-9 each day. Pittsburgh to Newark, however, is served by 8 daily United flights on a mix of E-175s and CRJ-550s, allowing for flights about every two hours throughout the day. It's a bigger destination, but it's served by smaller planes.

9:21Of course, the biggest determinant of whether a destination should be served by regional or mainline jets is just demand. And it's when one gets into that next category that the distinction between aircraft gets increasingly muddled. United's conventional A320 family aircraft serve pretty much the exact same role as its conventional 737 family aircraft. They're both core narrow-body aircraft with very similar capacity and performance stats. There are few meaningful differences between the Boeing and Airbus aircraft themselves that justify having both. The fact United has both has more to do with the practicalities of running an airline. Incorporating a new aircraft type into a fleet has some very real costs. An airline has to build a new pilot roster certified for the aircraft. They have to hire mechanics trained on the aircraft. They have to get their ground crews accustomed to its particularities. Therefore, if an airline only operates, say, A320 aircraft, Airbus will know that they really would prefer not to buy Boeing aircraft when it's time for a new order. Therefore, Airbus might think that it doesn't have to give them quite as much of a bargain

10:23to win the order. So a mixed fleet strengthens the airline's negotiating position. It also allows for the greatest level of flexibility, especially because aircraft make their way into fleets plenty of different ways. Beyond just new purchases, some aircraft are leased, some aircraft are bought second-hand, with a mixed fleet, airlines can grow or shrink more on their own terms based on the market of the moment. If a major A320-based airline just went bankrupt and flooded the leasing market with supply, then having an A320 fleet allows an airline to grow at a lower cost. Although while there's little distinction between how United uses its A320 family aircraft versus its 737 family ones, there is a distinction in operations between its conventional A320s and 737s versus the newer Max and Neo generations. The 737 Max's for example are about 15-20% more fuel efficient than the previous generation, so the airline deploys them predominantly on longer-distance routes. After all, the longer the flight, the higher the proportion of cost attributable to fuel costs, and therefore the more savings to be made from flying a more efficient aircraft.

11:27So a huge chunk of the Max's flying is transcontinental flights, and it even serves a burgeoning niche role of flying even longer low-demand routes like the 7-hour flights from Anchorage to New York or New York to Funchild Portugal. Now the logic would follow that just as the conventional 737s and A320s are more or less interchangeable, so too with the 737 Max's with the A320 Neo family aircraft, Airbus's newer generation of narrow bodies. But so far, that's not quite the case. The A321 Neo is now United's second highest capacity narrow-body aircraft with 200 seats, and it's essentially replacing its only larger single-Ile, the 757-300. In recent years, the 757-300 has served just a few very particular high-demand purposes. Hub-to-hub flights, Hawaii routes, Florida routes, and the one daily flight from Denver to Washington National. That's DC's downtown airport, which has a perimeter rule typically restricting flights of this length, with limited exceptions including this one daily flight. With each of these purposes, United wanted to deploy more capacity on the route, but not

12:31quite that of a wide-body aircraft, so the 757-300 was well suited. The 757-300 is getting old. The airline's youngest was built in 2003, the aircraft is no longer in production, and it's quite inefficient compared to newer generation aircraft. So the A321 Neo is essentially United's replacement for it. But in the long term, this new aircraft's role is expected to go well beyond that. You see, United's executives are of the belief that the U.S. air traffic system will not grow in capacity anytime soon, particularly in and around its key hubs. Things like Houston, Newark, and Chicago are stretched to their limits in terms of gates, runway, and air traffic control capacity, and there's not a whole lot of respite in sight. But of course, an aircraft only ever takes one gate, one landing slot, and one air traffic controller, no matter if it's a tiny CRJ-200 or a massive 777. So United's strategy for growing along with U.S. air traffic demand is to simply make its aircraft larger, and the A321 Neo is a core part of that.

13:33The airline has almost 200 unorder from Airbus, and as these enter the fleet, they're dramatically pushing up the average capacity of the airline's narrow-body fleet. They also plan to incorporate A321 XLRs, a longer range variant, and outfit them with lifelad premium cabin seats to replace the 757-200s, which serve premium, transcontinental, and lower-demand long haul routes. The final category of predominantly domestic aircraft is a rather unique one. In fact, United is the only U.S. airline with it. Essentially, the airline created a sub-fleet of triple-7200 wide-body aircraft exclusively for domestic and international short haul use. These two dozen aircraft are ancient. The fleet even includes the oldest triple-7 still flying for any airline N774UA built in 1994. They're outfitted with an incredibly dense configuration of 336 economy seats, devoid of seat back screens, plus 28 premium cabin seats, not even from the last generation of United Live Flat seats, but the one before that.

14:35In fact, these aircraft are so dense that they're actually the airline's highest capacity planes. That's to say, United simply does not care about the onboard experience on these wide bodies. While it might be deeply uncompetitive for long haul flights, it's similar to the onboard experience of the narrow-body planes that typically do the same type of flying. After all, this triple-7 sub-fleet exclusively flies two types of routes. The first is super high demand hub-to-hub routes like Denver to Chicago, Chicago to Los Angeles, or Los Angeles to DC. And the second is a small number of super high demand leisure-focused destinations, Cancun, Las Vegas, and most notably Hawaii. Now, much like this domestic triple-7 sub-fleet, United's international 767s are very, very old, most rebuilt around 25 years ago. This means there's some of the least fuel-efficient aircraft out there, and operating costs are therefore quite high, but there are some advantages to this. The value of a 25-year-old 767 is almost nothing in aircraft terms.

15:38These aircraft sell on the used market for single millions, compared to hundreds of millions for new wide bodies. So the opportunity or least cost of their aircraft is super low, which means the airline doesn't have to worry as much about getting their money's worth. 767s are perfect for surge capacity. They fly a lot in the busy summer, and a lot less in the lower demand winter. The fact that they sit idle doesn't matter much since they cost so little. When they do fly, United predominantly deploys them on US East Coast to Europe flights since these are some of the shortest long haul flights in their network, and often have poor aircraft utilization compared to other long haul routes, as aircraft fly overnight to Europe, sit around for a few hours, fly back to the US, then sit around even more until repeating. But the airline has also split at 767 fleet in two to capture even more revenue. This is their high J configuration. Essentially, it's a layout of the plane with a super high ratio of premium to non-premium seats.

16:3846 business class, 22 premium economy, 43 economy plus, and 56 economy. That makes for a total capacity of just 167, less than the airline's narrow body's 737-900s. United therefore flies this configuration to destinations with the strongest premium demand, London, Neese, Zurich, Geneva, etc. Meanwhile, the traditional 767 configuration, with 18 fewer business class seats but 36 more overall, flies to destinations with more typical demand like Amsterdam, Dakar, Lima, and Rio. It appears to have had fantastic foresight when rolling out this configuration in 2019, as today, while overall international demand has more or less stagnated, premium demand is surging, and other airlines are leaving revenue on the table by just not having enough business class seats. Now, the next category of aircraft, the 787, flies the other side of the spectrum of long haul routes. The Dreamliner is extremely expensive to purchase or lease, but is tremendously more fuel efficient.

17:41But 30% on a persy basis in a similar configuration. So while the airline had to pay a lot to either purchase or lease the planes, it can make that back in fuel savings by just flying them a ton. That's why aircraft utilization is key. It's always tightly scheduled with just two or three hours between flights, and also flies the airline's very longest routes. DC to Cape Town, San Francisco to Singapore, Houston to Sydney. It also works as a solution to lower demand long haul routes that are beyond the relatively short ideal operating range of the 767. San Francisco to Christchurch or DC to Lagos, for example. But what both the 767 and 787 are not great for is cargo. Cargo is responsible for a relatively modest portion of the United's overall revenue, about 3%, but it can absolutely make or break the economics of individual long haul routes. The triple-7, particularly its dash 300 ER variant, is by far the highest capacity cargo hauler with room for 44 loading containers.

18:42For this reason, the aircraft is disproportionately deployed on the airline's Asian routes, where air cargo demand is highest. The airline currently serves Hong Kong four times a day, with two 787 flights from Los Angeles and two triple-7s from San Francisco, which likely is far more than they would if not for air cargo. The destination's demand has slowed since COVID, and to fill planes, United has to offer relatively low fares given the steep competition from Asian airlines. Hong Kong is a major air cargo hub, sitting right next to China's manufacturing capital of Shenzhen, and that likely justifies its status as the airline's second highest capacity Asian destination after Tokyo. Fleet selection is so core to an airline's business model that it almost single-handedly explains it. The United's strategy is centered around the hybrid of domestic and global connectivity, with service to both small towns and far-flung capitals. That's different from, say, Emirates, which, with its wide-body-only fleets, is about connecting far-flung high-dband destinations with a little consideration for small markets.

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