UAL, the new Southwest

[Green Banana]

Bankrupt United Airlines will set up a shuttle service on the West Coast next year in an effort to regain financial footing as it struggles to negotiate pay cuts and secure a $1.8 billion federal loan guarantee, an official said Thursday. The new service will operate much like Southwest Airlines, with "point-to-point service" of low-cost routes without layovers. It's fleet will include Boeing 737s and Airbus 320s.

http://biz.yahoo.com/ap/021212/united_airlines_1.html

 

[bobbysamd]

UAL Lite

Didn't they try that already? Or, were going to?

 

[Bluto]

Continental lite was CAL's huge embarassing failure. Shuttle by United is UAL's Southwest clone. Let's all hope United fixes its problems and recovers quickly.

 

[dkwid]

UA Shuttle flew for several years on the West coast. They even had an ugly paint job, for competative resaons I imagine. Not certain why it failed or was discontinued. US Air's failed, Delta's failed.

Only interesting piece of news here to me was that UA intends to fly both 737 and A320 on this West coast shuttle. If they were truly looking to shadow SW....I guess we can chalk this up as mistake number one. Simplify United.................

 

[414Flyer]

UA Shuttle flew for several years on the West coast. They even had an ugly paint job, for competative resaons I imagine. Not certain why it failed or was discontinued. US Air's failed, Delta's failed.

Only interesting piece of news here to me was that UA intends to fly both 737 and A320 on this West coast shuttle. If they were truly looking to shadow SW....I guess we can chalk this up as mistake number one. Simplify United.................

I agree. People say that UAL and the others have to be as good as Southwest.

WRONG.

They have to do BETTER and be more efficient to achieve similar costs

SWA flies one type of aircraft, often using outlying airports instead of the busiest, most congested and expensive ones, doesnt fly aircraft at all hours of the night, and does not rely on the business traveler to support it.

I do not see UAL ever being able to achieve the efficency of SWA, with their multiple types of aircraft and different kind of operations, so they will have to find some way to compete, that does not rely on someone walking up and paying 2000 for a ticket at the last minute, because it just isnt happening.

I certainly hope they can do something. besides just bickering back and forth over who is right and who is wrong, because you can still be right and be out of a job if your airline goes under.

Personally I think both management and the unions made some very foolish decisions, based on a couple quarters of good profits. Did they both just think that economic cycles did not apply anymore, and that there would always be record profits forever? Thats just plain stupid. I dont recall my college GPA coming from my best test score I ever had, nor should long term business plans and union contract negoiations be based on short term profits either.

 

[canadflyau]

COME ON!!

What gives SWA their advantage is their cost structure... Why would it save UAL for them to set up a carrier within the carrier that will generate less revenue than they are generating now!! The load factors at UAL isn't the problem it is the overhead of the largest Management in the aviation sector!! Too many people are employed that are not directly tied to the revenue generating!!! The key to SWA success is that they are fairly streamlined.. they don't have thousands of analysts like the other majors do, they keep it simple and conservative...

In my opinion front line labor doesn't need to give a dime in order for UAL to succeed, the problems are not at the airport.. You pay the people well who are on the frontline (pilots, flight attendants, mechanics, rampers, gate agents, etc) they will give superior customer service and win back customers... unlike what you see right now with people fearing for their livelihood and their paychecks. I used to be a junior analyst at one of the majors, I was one of 150 people not related to the revenue process at all, and we spent multi-millions to try to find annual savings of .5 million for the airline in a very limited/specific aspect of the business.. I think it is a fleece. People (I met) in mgt were really good at building their own empires and making themselves look important by getting a larger and larger budget anually to surround themselves with people that they could make do things... I am not exaggerating, it is sickening..

UAL will never succeed by trying to imitate SWA with their current structure. Don't get me wrong there is a lot that can be learned from SWA, and it will be drastic change that saves UAL. But not by starting with frontline furloughs, less flights, etc. Don't start by restricting revenue when you have decent load factors like UAL does. Hopefully they will slash management, work on refining operations (maybe be more SWA-like), but also work on how to attract customers... The majors seem to view SWA as a thief, taking away passengers, driving down fares... but I do not agree! I think SWA has marketed to a portion of the public who never thought flying was a tranportation option. Sure there are some passesngers who have been lost to lower fares, but those customer do not like standing in line after line after line, to run onboard and get a prized seat.. UAL and the others need to market to those flyers whom they have lost, and most importantly those flyers whom the low cost carriers have attracted!! They are now a captive audience, they have experienced flying and you bet they want to taste what it is like to fly one of those other airlines...

My solutions:
-Market to the new flyers the low cost carriers have attracted. (Maybe a shuttle division can work with lowered overhead)
-Make management proportional (limit the amount of $$ that flies out the door and is not directly related to generating revenue.)
-Stop subsidizing what would be unprofitable aircraft if operated stand alone (RJ's are flawed in many business models if they could not be run without supplemental income and generate a profit)

 

[SDF2BUF2MCO]

Hey Canadflyau, are you familiar with the cartoon "Dilbert"? If so, just wondering if it could be applied to where you worked before?
I have the opportunity to be involved with several other big companies. Many "feel goodism" jobs. Of course it can be job security for some people as long as the revenue supports it (kind of like the government!). Oh well, at least it keeps some people off the streets and "gainfully" employed.

 

[HPaul3]

It never ceases to amaze me how quick everyone is to try to hop on the Southwest business model bandwagen when profits turn south and the industry sours. Problem is, it just doesn't work that way, and it never will. Why? Let me illustrate with a few paraphrases of sentiments I've read on these boards:

"United can win back customers by emulating Southwest."

Never. They don't have the corporate culture to do that, let alone anywhere near the cost stucture, despite their best efforts at emulating a LCC with the Shuttle, which has already been tried and failed miserably. Ask yourself, why was the Shuttle the first thing to get thrown out by the company last fall after 9/11, if it was making the company any money? Does UAL really believe the Chapter 11 judge is going to be able to find that much cost reduction in the company to make this thing profitable? This has been tried before and has failed. What is different now, besides the obvious (Chapter 11)?

"United has lost the $2000.00 walk-up business customer, therefore they cannot make a profit."

This statement doesn't go far enough. It's true, but it's not the loss of the $2000.00 walk-up that has cost them, it's the loss of the $16,000.00 (I'm serious) walk-up that has cost them. I heard this quote from the UAL new-hire representative on the first day of orientation in Denver, in the fall of 2000: "Every afternoon, there's a fully-loaded United 747 that taxis out to the runway at O'Hare, bound for Tokyo. That airplane carries with it a $1.4 Million NET PROFIT [my emphasis] every time it takes off. This is how we at United can fly a 727 from Des Moines, IA to Chicago, losing money all the way." That is (or was) United's business model. When I heard that statement, coming directly from the horse's mouth, as it were, I got a tingle up my spine. I remember thinking, wow, that's a pretty precarious business model. What happens if that $16,000.00 walk-up customer stops walking up? Well, they did. So here we are. And I ask you, how in the hell are you going to turn that ship around, if that's your business model and your corporate culture? Southwest, on the other hand, makes a profit on practically every 737 that takes off for them. And do not be fooled....they carry lots and lots of business travelers. They just don't carry the kind of passenger that would even consider paying $16,000.00 for a stupid leather airline seat! And let's be honest....if you can find that kind of customer anywhere these days, I'll give you a steak dinner. Those guys have apparently all bailed to the fractionals, which is very understandable. I swear to God, I'm not making those numbers up. The man stood in front of me and the other folks in the room and used his nice laser pointer on his briefing slides, and spoke those words.

"Southwest is OK if you don't mind the cattle car, being elbowed and stepped on by the other passengers to get the good seats."

I've always gotten a "good" seat, either an aisle or a window, on every Southwest flight I've been on. Granted, there's a little more anxiety and a little more urgency to get to the gate early, but apples to apples, if I get to the gate an hour early for any flight, be it United, American or Southwest, I get a good seat. The other day I flew the 5:40 PM "cattle car" Southwest flight from St. Louis to Chicago, on a Friday. Jam packed. I arrived from my connection a little late...had only about a 20-minute turn between flights. I was in boarding group 3 (GASP!). I still found a nice window seat, although I had to climb over a couple sharing a row. Big deal. On that 45-minute fllight, the FA's made three trips up/down the aisles, served drinks and snacks, and provided great service. And the plane was loaded with business passengers. It was just like being on the Chicago trains, with seatbelts, peanuts and a drink thrown in for good measure. What's so bad about that?

Obviously something has got to change. The huge walk-up fares are gone; those customers are headed for jail [Enron, Worldcom] or the fractionals. The United business model, as professed by the new-hire rep, is deader than Elvis. Jet Blue is on to something. SWA will continue to prosper, as they have throughout. Can the BK judge and UAL CEO pull it out? I'm not sure I'd make that bet in Vegas. And believe me, their potential failure hits very, very close to home. I wish the company, and all the employees in career peril, the best of luck.

 

[generaltso]

"Failure is the opportunity to begin again more intelligently."
- Henry Ford

 

[GuppyPuppy]

HPaul3-

I remember the same speech on Day 1 of indoc. I couldn't, and still don't, understand the rationale of even operating that 727 from DSM to ORD if we weren't making a profit on that flight. I remember the new-hire coordinator proudly stating that 80% of our revenue comes from 20% of our passengers (not the exact numbers, but close enough). Well, that plan is out the window, eh?

I hope you have found gainful employment. I'll be gone next month and have been filling out applications all week. Don't know if I'll ever return to United. I don't know when, or if I'll ever get recalled. And if I do get recalled, who knows what kind of life I'll have then. Maybe I'll like my new life after UA and won't want to go back. Truly a sad time for all involved.

Cheers!

GP

 

[HPaul3]

GP,

You're right -- it is a sad time. I remember well the excitement all around the class during orientation. It was like a buzz in there. And I also remember the little voice in my head at the talk of the business model. But at the time it seemed to work! How things change.

Again, my best to you and all the United casualties.

HP

 

[ClassG]

Isn't there anything you 55% owners can do to stop this lunacy?

Can't you get together to vote 3/4 of management out now, before it's too late? And please don't tell me that employees make bad managers. Apparently, so do the managers. Antything would be better than watching United sink under a new bad idea.

If you cut off the dead weight at the top, you'd have the beginnings of an efficient airline that could compete better with Frontier, Southwest, etc.

I realize there much more to it than that. But you'd better start somewhere. You're already bankrupt, why not use it to your advantage instead of letting the brass line their pockets for two more dismal years of the same shiite?

Pile on.

 

[greg20]

GuppyPuppy-

I couldn't, and still don't, understand the rationale of even operating that 727 from DSM to ORD if we weren't making a profit on that flight.

Not every flight on a network airline needs to be profitable (although they wish it were!) for the entire carrier to be profitable. DSM-ORD may not have made a profit in itself but it was fulfilling its purpose of feeding passengers to or from the hub. Airlines need to contine to operate some flights (well, 'all flights' right now but I'm speaking in general terms) at a loss to provide feed to the hub for other destinations. Most times it is worth it to bring pax in from small markets at a loss, but then they connect to a flight in a predominately business market or internationally and the net effect for the carrier is a profit. Plus, the 727s were probably fully depreciated or close to it, so if it will add bottom-line incremental profit to the carrier, the argument usually is "why not"? Of course I'm assuming that the profit of the connecting flights is enough to outweigh the ORD-DSM (or similar market)'s loss. I'm not saying this in support of UA's business model but AFAIK that's how it works, and is one reason why there are record profits in good economic conditions and record losses in bad.

 

[GuppyPuppy]

I understand the importance of feed traffic. If a particular route wasn't profitable for a 727 then why not put an RJ or T-prop on that route? You'd still get the high fare for the passenger connecting to the 747 at the hub. This is what UA is going through right now.

United is dropping 5 U.S. cities on 1/7/03, which will become UAX cities. Also dropping 4 international cities which will be served by Star Alliance members. My fear is that United will become a virtual airline. The board would love that....an airline with no airplanes, no employees...just codeshares!!! We have plenty of "passengers" right now who book tickets on United and never set foot on a United airplane, yet the company still gets revenue from that "passenger". A friend of mine bought a ticket on United from San Jose to Bangkok last year. Flew an RJ to LAX and Thai Airways from LAX to Bangkok. United gets revenue from that! Hmmmm....pretty crafty, eh?

Why in the heck did I get on this tangent anyway? Sorry, need a DF steer to get back on course.

Anyway...all those decisions are way above my pay grade. Come to think of it, in January cleaning toilets will be above my pay grade!

Cheers!

GP

 

[greg20]

Thanks for your reply. I wasn't sure how much you knew about feed traffic - You could probably explain it better than I can!

If a particular route wasn't profitable for a 727 then why not put an RJ or T-prop on that route?

ORD-DSM will most likely become an RJ or turboprop route, if it hasn't already on some of the frequencies (don't have UA info handy). Since the number and type of aircraft that any airline possesses is finite, that could explain why there is a 727 on the route. A 727 may be 'expensive' to operate (fuel guzzler/3 cockpit crew), but a lot of it has to do with allocation of resources. It would be great if we could match the most appropriate aircraft (capacity wise) to each route, but in reality there are so many interrelated factors (scheduling, aircraft availability, mx, crew scheduling issues, competitive reasons, etc) that it becomes next to impossible to do so consistently. The available RJs have probably been allocated (at least, I hope they have) to markets where they are even more appropriate than ORD-DSM. And to answer your question further, that is exactly what the airlines are doing - replacing routes with overcapacity with smaller aircraft. Although this trend is well underway, it takes a long time to propogate throughout the system.

Codeshares are a wonderful thing for the airlines, and as we have seen in SkyTeam and Star, they are always trying to out do each other for bragging rights. It's true you can buy a ticket on UA, DL, and practically fly around the world without ever (or hardly ever) setting foot on UA or DL mainline metal. Maybe one day they will be as seamless (re: FF miles, baggage delivery, signage) as advertised.

You probably got off on the tangent because I answered what may have been a rhetorical question.