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Dow Jones Business News
UAL Looks to Redo Regional Deals in Effort to Trim Costs
Tuesday December 17, 2:43 pm ET By Ann Keeton
CHICAGO -- United Airlines parent UAL Corp. (NYSE:UAL - News) wants to save $70 million to $80 million a year by renegotiating agreements with regional-airline partners Air Wisconsin, Atlantic Coast Airlines Holdings Inc. (NasdaqNM:ACAI - News) and SkyWest Inc. The bankrupt airline, the nation's second-largest carrier, has also asked two regional airlines it doesn't now work with to submit bids on regional business.
Regional airlines, which fly smaller planes and have lower labor costs than United, fly routes to smaller airports that aren't profitable for United itself to serve. Flying under the United Express name, the regional carriers receive fees from United for each takeoff and landing, as well as performance bonuses. A United spokesman Tuesday confirmed the cost-savings goal, which was filed to the bankruptcy court last week by United's attorney, James Sprayregen. But United said it couldn't comment further on plans for cost-cutting at United Express. In the court brief, United said one United Express partner had already agreed to freeze its 2002 fees at 2001 levels, and to retire high-cost turboprop planes, which should save United $23 million this year. Analyst Jamie Baker at J.P. Morgan Securities said United has been looking to cut costs with its regional partners since November of last year, when airline business slumped after the Sept. 11, 2001, attacks. "This is the first time I've seen a dollar figure on it," the analyst said. Mr. Baker said he didn't know which partner had already agreed to concessions. He said most likely it was Air Wisconsin, since the other two airlines had indicated in third-quarter conference calls that they hadn't concluded concession talks with United. Officials at the regional airlines didn't immediately return calls seeking information. It's hard to say just what the proposed cuts would mean to UAL's existing regional airline partners, Mr. Baker said, since the company doesn't divulge how much it pays in fees. Mr. Baker said he believes UAL pays about $3,300 per regional jet departure. "We don't know who the competing regional airlines are that United has talked to, but the most likely would be Mesa, Chautauqua or Mesaba," Mr. Baker said. Mesa Airlines is a unit of Mesa Air Group Inc. (NasdaqNM:MESA - News) , operating in partnership with US Airways Group Inc. (UAWGQ), Frontier Airlines Inc. (NasdaqNM:FRNT - News) and Midwest Express. Mesaba, part of Mesaba Holdings Inc. (NasdaqNM:MAIR - News) , provides commuter service for Northwest Airlines Corp. (NasdaqNM:NWAC - News) . Chautauqua, part of Republic Airways, has code-sharing agreements with AMR Corp.'s (AMR) American Airlines unit, America West Holdings Corp. (NYSE:AWA - News) and US Airways. Mr. Baker said United could save money with Mesa and Chautauqua, which are believed to charge $300 to $400 less on fees for departure than Atlantic Coast and SkyWest do. "But it's not like United can just flip all that business to somebody else," Mr. Baker said. For example, he noted, " Mesa has many fewer planes than Atlantic Coast."
Could this make hiring worse?
Dow Jones Business News
UAL Looks to Redo Regional Deals in Effort to Trim Costs
Tuesday December 17, 2:43 pm ET By Ann Keeton
CHICAGO -- United Airlines parent UAL Corp. (NYSE:UAL - News) wants to save $70 million to $80 million a year by renegotiating agreements with regional-airline partners Air Wisconsin, Atlantic Coast Airlines Holdings Inc. (NasdaqNM:ACAI - News) and SkyWest Inc. The bankrupt airline, the nation's second-largest carrier, has also asked two regional airlines it doesn't now work with to submit bids on regional business.
Regional airlines, which fly smaller planes and have lower labor costs than United, fly routes to smaller airports that aren't profitable for United itself to serve. Flying under the United Express name, the regional carriers receive fees from United for each takeoff and landing, as well as performance bonuses. A United spokesman Tuesday confirmed the cost-savings goal, which was filed to the bankruptcy court last week by United's attorney, James Sprayregen. But United said it couldn't comment further on plans for cost-cutting at United Express. In the court brief, United said one United Express partner had already agreed to freeze its 2002 fees at 2001 levels, and to retire high-cost turboprop planes, which should save United $23 million this year. Analyst Jamie Baker at J.P. Morgan Securities said United has been looking to cut costs with its regional partners since November of last year, when airline business slumped after the Sept. 11, 2001, attacks. "This is the first time I've seen a dollar figure on it," the analyst said. Mr. Baker said he didn't know which partner had already agreed to concessions. He said most likely it was Air Wisconsin, since the other two airlines had indicated in third-quarter conference calls that they hadn't concluded concession talks with United. Officials at the regional airlines didn't immediately return calls seeking information. It's hard to say just what the proposed cuts would mean to UAL's existing regional airline partners, Mr. Baker said, since the company doesn't divulge how much it pays in fees. Mr. Baker said he believes UAL pays about $3,300 per regional jet departure. "We don't know who the competing regional airlines are that United has talked to, but the most likely would be Mesa, Chautauqua or Mesaba," Mr. Baker said. Mesa Airlines is a unit of Mesa Air Group Inc. (NasdaqNM:MESA - News) , operating in partnership with US Airways Group Inc. (UAWGQ), Frontier Airlines Inc. (NasdaqNM:FRNT - News) and Midwest Express. Mesaba, part of Mesaba Holdings Inc. (NasdaqNM:MAIR - News) , provides commuter service for Northwest Airlines Corp. (NasdaqNM:NWAC - News) . Chautauqua, part of Republic Airways, has code-sharing agreements with AMR Corp.'s (AMR) American Airlines unit, America West Holdings Corp. (NYSE:AWA - News) and US Airways. Mr. Baker said United could save money with Mesa and Chautauqua, which are believed to charge $300 to $400 less on fees for departure than Atlantic Coast and SkyWest do. "But it's not like United can just flip all that business to somebody else," Mr. Baker said. For example, he noted, " Mesa has many fewer planes than Atlantic Coast."
