Future of United???

[Yeti]

So if UAL does go into chapter 11, what becomes of the United Express carriers like ACA which rely heavily on them?

Timp

Bump...

How would this hypothetically play out?

 

[Wiggums]

Pileit: Yes, at the current rate of loss, even with the loan guarantees, United will run out of cash in the next two to three years. However, this is assuming everything will stay the same indefinitely. Fortunately, when the economy is going well United, along with other large airlines, usually do very well. Look at 1997-1999, United made over a three billion dollar profit. Yes, right now airlines like Southwest and JetBlue eating away at routes and yields, but the market cannot be served only by Southwests and AirTrans. In the future not all flying will be done on regional jets. There is a need for large international carriers such as United and American.

United did hire bankruptcy lawyers, but this happened right after 9/11. Even so, there are other airlines that are much weaker then United that will go under before them. US Airways only has a little over one billion on cash, and this is after receiving 900 million dollars in federally guaranteed loans. US Airways is still around, even though they haven’t really made any money in over ten years.

United isn’t a slowly dying airline like US Airways, TWA, or Pan Am. It is a pretty decent franchise, with a good route structure. Pay cuts for the pilots and management will save the airline $100 million each quarter for the next three years. Also, as the economy recovers United will slowly bring back equipment and employees, which will further reduce losses and lower the breakeven load factor. The recently announced codeshare agreement with USAir will also help to reduce losses. I expect United to be around and be profitable again when the airline industry recovers.

 

[publisher]

question

I do not think that there is any question that United will be around, just what level they will be at.

It si becoming pretty apparent that the differences between low cost carriers and majors on domestic routes is hard for the customer to see anymore.

United has been through a series of things that have not done it any good and the customer base is eroding. Now a strong franchise can get it back to some extent but I think there is a systemic change here that will make it more and more difficult for them to come back to the predominant postion they used to enjoy.

 

[TurboS7]

As soon as the major's cut their meal service that was the only thing to seperate them from the SWA and the likes. Now one is the same as the other so why pay the extra, makes no sense.

 

[AWACoff]

United has approximately 2.7 billion in cash right now. They have approximately 900 million in debt due immediately. That leaves around 1.8 billion. Since they are losing about 1.3 to 1.5 million a day, that still leaves a good number of years before they go "belly up". Don't panic people.
P.S. These numbers came from one of the owners of Air Wisconsin.

 

[Iced_up]

that still leaves a good number of years before they go "belly up".

I wouldn't consider 3.2 year very long in the grand scheme of things.

 

[JimNtexas]

How can United compete with Southwest, Jet Blue, and other low cost carriers? Their costs are so high in comparison, and the culture of both labor and management seems very dated and inflexible.

The only difference between Southwest and United to the passenger is that you can reserve a seat on United. People won't pay extra just for that.

It's like watching a Greek tragedy. You know what the outcome will be, but it hurts to watch.

Jim

 

[Wiggums]

What has changed so suddenly that United cannot compete with low fare airlines? Hasn't United been completing with low fare airlines like Southwest, America West, People Express, and New York Air for over twenty years?

 

[habubuaza]

There are so many variables working against Airlines like United. First of all companies like United don't have a lock down on reservations and travel agents. The internet took care of that. They don't have a lock down on the Business travelers market fractional jet ownerships took care of that. And the forgotten economy traveler, the segment of the traveling public that has been forgotten for so long, well JetBlue, SWA and Airtran took care of that. Combine that with massive debt. Combine that with shriveling revenues from cargo and mail. Combine that with out of control labor costs. Last I checked Frontier wasn't doing too bad out of Denver. And who does United pair up with USAirways. It's like 2 rocks tied togethor in a lake. They don't even have a CEO for Christ's sake. I think that United, American, Northwest, Continental, and even Delta have big big problems ahead.

 

[TIMP]

Without getting into a quantitative balance sheet analysis I personally can't see how UAL can survive in the future unless they go through some MAJOR structural changes in management, operations, and labor/management relations. They are so large and regimented that they can't seem to adapt to change quickly enough to accommodate unforeseen economic pressures (not just speaking of 9/11).

Unfortunately, I think this is the inevitable fate of any "old school" company that grows so large. Kind of like "hardining of the arteries". Survival is possible, but only through painful restructuring (IBM and Sears come to mind). All those low cost carriers like JB, SWA, etc, are still small enough to flex against pressure. And when they do increase in size they need to work hard to maintain their operating principles that kept them healthy.

UAL and DAL remind me of "full service stock brokers" whereas JB and SWA are the discount brokers. Most of my friends, including myself (average middle-class Americans), go for what ever is cheaper as long as it's not unreasonably inconvenient and gets the job done. For me meals and seat reservations can't justify and extra $200-300.

I do hope they pull through, though.