Hi, it's Glenn and it's Tuesday, the 18th of March.
The economic environment in which our industry operates has changed significantly over the past several weeks. Continued uncertainty about the overall U.S. economy with the price of fuel at historically high levels has put significant pressure on all U.S. carriers.
Fuel is our largest expense, as it is for the industry overall, and every 1 dollar increase in a barrel of oil increases our costs by about 60 million dollars. In the last six weeks, the price of oil has increased by some 20 dollars a barrel. United has led industry efforts to pass on some of these fuel costs to customers, as other industries pass on their commodity costs.
United has led two fare increases in as many weeks, the second matched by other carriers this past weekend. We have also led the industry in taking critical – and responsible – steps to reduce domestic capacity to work to maintain profitability.
Last summer, when we assessed the competitive environment and outlined our five-year plan, we determined that we would take a different path relative to our U.S. competitors – one that would strengthen the core business and put United in the best possible position to be successful.
In the current environment, that work and our direction remain sound.
We will continue to invest in specific elements of our business that are critical to safety; and on improving service delivery, with a focus on areas that provide value and a return to all stakeholders.
As we recently outlined to our investors, we are pursuing new revenue opportunities from unbundling products and services, giving our customers the opportunity to pay for that which they value. This will generate important incremental income that will in some part offset costs that are beyond our control.
At the same time, our progress in reducing cost through standard work and continuous improvement becomes even more critical.
We will redouble our focus on conserving resources and reducing our spending in areas that are not critical and do not provide a return in this environment; and we will also continue our actions to responsibly deploy capital and divest the company of assets that no longer provide an acceptable return.
In that regard, today we will announce a reduction to our fleet of 15 to 20 aircraft by year-end, eliminating from our fleet older, less fuel efficient, narrow-body aircraft. We will continue to review the deployment of our aircraft to ensure we are using our assets appropriately where they can provide the best return.
These decisions, in addition to being responsive to the difficult business environment, are consistent with the overall strategy we outlined in our plan last year to make our company more financially resilient.
That said, today’s environment only amplifies the serious issues facing U.S. carriers in the global marketplace. At United, we have been candid and realistic about the growing gap between U.S. network carriers and our overseas competitors for some time. As the impact of today’s business realities hits home, the issue of sustainability should be front and center.
It is in no one’s interest -- not our employees, our investors, and certainly not our customers – for U.S. network carriers to be so vulnerable to inevitable, as well as unexpected, economic downturns. U.S. airlines must function like other businesses, making investments and providing service where we can do so profitably.
Delivering an acceptable level of return is the premise for everything we have in our five-year plan; from managing our individual lines of business with a clear line of sight to how they perform and add to the core business, to managing every element of the company more efficiently.
This industry has serious challenges ahead; we have never been in denial about the issues our company has faced, and we are better positioned than most to address those that confront the industry today.
That's all for now. I'll be talking to you again soon. Until then, stay focused on our customers, and, of course, on one another...and stay united
Hey Glenn give us pilots a decent contract so we can help you otherwise...******************** YOU!
uke:
