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http://blog.seattlepi.com/jetcheck/archives/212016.aspNov. 09 - UAL PilotPay
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Tilton's troubles
By: John Pletz July 13, 2009
Glenn Tilton's turnaround at United Airlines is turning into
a round trip to financial purgatory.
Chicago-based United's cash is evaporating as the recession
chokes off air travel. With more than $1.5 billion in debt coming
due by next year, Mr. Tilton can only hope the economy recovers
before the cash runs out. Some think United can survive current
conditions only until mid-2010.
"They could be in a position where they are in danger of running
out of cash," says analyst Bill Warlick of Fitch Ratings Inc. in Chicago.
Financial markets are betting United won't make it. Its stock and
credit-default swaps on its debt trade at levels indicating bankruptcy
is likely. New York-based debt analyst Roger King of Credit Insights
says the sky-high interest rate on a recent United financing suggests
the airline is "just a few steps from the grave."
That's far from the flight path Mr. Tilton, 61, envisioned when
the longtime oil industry executive took charge of a struggling
United in 2002. He expected to purge excess costs in Chapter 11
bankruptcy proceedings, then initiate a badly needed airline industry
consolidation with a sale or merger that would send him into
retirement with a handsome payday.
"That was Glenn's plan — to consolidate, " says Mo Garfinkle,
CEO of Virginia-based GCW Consulting LLC, who has advised
Mr. Tilton and United. "The game plan now is to survive."
United's stay in bankruptcy lasted three years as Mr. Tilton battled
unions for pay cuts and other concessions. Eventually, he slashed
overall expenses by 7% and cut payroll by 39%, eliminating 22,000 jobs.
But an expense Mr. Tilton couldn't cut knocked his recovery plan
off course. Just as United was returning to profitability in 2007,
a surge in oil prices sent jet fuel costs soaring. The former oil man
hadn't hedged against the spike as other airline execs had.
Burdened with $3 billion in debt taken on to finance its exit from
bankruptcy, United was poorly positioned to absorb the additional
expenses. It nose-dived into the red again, posting a loss of
$5.3 billion in 2008.
JILTED
A weakened United made an unattractive merger partner, scuttling step
two of Mr. Tilton's game plan. His first choice, Atlanta-based
Delta Air Lines Inc., chose Northwest Airlines Corp. of Minnesota instead.
Mr. Tilton settled for an alliance with Houston's Continental Airlines Inc. that some dubbed "merger lite."
Meanwhile, the deepest recession in 25 years bludgeoned airlines,
grounding the business travelers United depends on so heavily. Mr. Tilton responded by aggressively slashing flights, a move that slows the financial bleeding but makes United vulnerable to new competitors, including Dallas-based Southwest Airlines, which is bringing its low-fare strategy to business destinations like New York and Boston.
But United's financial weakness limits Mr. Tilton's options. By choosing
to fuel the airline's bankruptcy exit with debt rather than equity, he made
it more vulnerable to adverse shifts in expenses and demand.
That vulnerability is now manifesting itself in a liquidity crunch. A cash
cushion that had reached $3.7 billion stood at $2.5 billion as of March 31,
and with oil prices on the rise again, Fitch's Mr. Warlick predicts, "United
could report substantially negative free cash flow for the final three
quarters of 2009." He downgraded United debt on June 10 to CCC,
deep in junk status.
WHERE NEXT?
With his original strategy in tatters, Mr. Tilton has given little sign of where he plans to take United next. He hasn't invested in the new planes United will need over the long term, an expense he expected to avoid by cutting a merger deal. Recently he announced plans to buy up to 150 new aircraft in the coming years, but it's not clear how United would finance such a purchase.
Of more immediate concern is the debt coming due in the months ahead. The company faces $660 million in debt and lease payments by yearend and more than $1 billion in additional payments next year, followed by $869 million in 2012.
United's lenders and credit card partners have bailed it out before, suspending or relaxing loan covenants a year ago. They also could renegotiate loan terms to give United more breathing room.
But Mr. Tilton is nearly tapped out after selling stock, mortgaging aircraft and selling frequent-flier miles in advance during the past year. United now has about $1.2 billion in unencumbered assets, down from $3 billion a year ago. Credit-card companies could require United to post more cash collateral if its reserves drop further.
Mr. Tilton declined an interview request, but a United spokeswoman says, "We have a proven track record of being able to leverage those assets — modest debt payments over the next three quarters, minimal capital spending and no aircraft deliveries."
But when United mortgaged $500 million in spare parts last month, it was forced to pay 17% interest, instead of the 12.75% it had hoped.
Kathryn Mikells, United's chief financial officer, insists the interest rate reflects that spare parts are harder to finance than aircraft, not the airline's financial prospects. "While we are very sensitive to the cost we are paying for incremental liquidity, we also recognize that not all transactions are created equal and those with a tougher structure are going to demand a higher rate," she told employees July 2.
Nevertheless, Mr. Warlick wrote last month that "Fitch views United's highly leveraged capital structure as unsustainable in the absence of a sharp turnaround in industry operating fundamentals. "
It's far from clear that an economic recovery will restore business travel to the levels that once fueled United's profits.
Business travel has been hit hardest in the downturn, falling 20% this year, according to the International Air Travel Assn. Vaughn Cordle, CEO of Virginia-based Airline Forecasts LLC, predicts business travel will remain 10% below pre-recession levels, even as industrywide revenue climbs by 6% to 9% next year.
And with Southwest and other newcomers targeting the sector, fares are falling on key business routes such as Chicago-New York.
A growing consensus among industry observers holds that excess capacity and a weak travel recovery could force a major airline into liquidation, with United, American and U.S. Airways the most likely victims. Insurance against default on United debt — known as credit default swaps — trades at 60 cents on the dollar, while its shares trade below $5, indicating investors consider bankruptcy likely.
With so many of its assets already encumbered, United might not find lenders willing to finance a second bankruptcy reorganization. As Mr. Warlick notes, "The ability to restructure with another trip through bankruptcy is diminished because nobody wants to extend credit."
©2009 by Crain Communications Inc.
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Market collapse spurred 35 percent spike in retirees
By Julie Johnsson Tribune reporter January 26, 2009
http://tinyurl. com/bnnk92
The stock market's collapse prompted an unusually large number of American Airlines pilots, about 500, to retire last year, most departing before age 60, when pilots traditionally leave the carrier.
For many, the decision came down to a contracting quirk that left hundreds of thousands of dollars in jeopardy. So many pilots retired that Texas-based American was forced to take a non-cash charge of $103 million during the fourth quarter to offset its payouts to departing pilots, as well as the losses that their pension plan suffered amid Wall Street's meltdown.
Dennis Collmar, who flew Boeing 777s from American's hub at O'Hare International Airport for nearly 15 years, retired on Nov. 1, two days shy of his 59th birthday.
Collmar would have lost the equivalent of two years' salary had he not quit last fall. "I really didn't want to do this," said the 30-year veteran of American who lives in Arlington , Texas . "I would love to be flying again."
Veteran pilots who retired in November and December saved hundreds of thousands of dollars apiece because of a contract provision that pegs retirement payouts to the stock market's peak during the 90 days prior to their exit, locking in stock values before the sell-off that caused the Dow Jones industrial average to shed 35 percent of its value last fall.
But economics wasn't the only factor driving pilots to leave, analysts and observers said. Sick of strained relations with management, "pilots are voting with their feet," said Dave Aldrich, an American pilot. "I'm just too old to be caught by my grandchildren doing the "chicken dance" at security with my arms out like prisoner, shoes off, and pants falling off with no belt..." he added.
Added aviation consultant Robert Mann: "Not everybody wants to fly for another five years. Some hate their jobs, what the job has become. How would you like to come back from a long and tiring flight only to be drug tested and sent to this rectal probe device called the silver stallion," he said...
About 2,000 pilots retired from the major U.S. airlines during 2008, estimated Kit Darby, president of Air Inc., an Atlanta-based firm that tracks pilot pay and hiring trends.
Pilots at American had the luxury of retiring earlier than their peers because the carrier, which avoided bankruptcy, is the only major airline that provides full pensions as well as lump-sum payments to pilots upon retirement that typically range from $1 million to $3 million.
"At United, Delta, the rest of them, we lost two-thirds of our retirement," said Darby, a former United Airlines pilot. "Most pilots who had their retirements damaged are not in a position of leaving early."
The surge of departures at American, about 35 percent higher than normal, cost the nation's second-largest carrier many of its most-senior captains and created a logistical headache since hundreds of other pilots will have to be retrained to fill their seats. But the retirements enabled American to avoid painful layoffs at a time when Chicago-based United announced it was furloughing 950 pilots while grounding 20 percent of its aircraft fleet.
In fact, American plans to begin recalling out-of-work pilots this year: 38 in February, 10 in early March and perhaps even 4 or 5 additional pilots after that point, said Tami McLallen, an American spokeswoman. .. Those rehired will come from the rolls of the nearly 2,000 pilots furloughed by American during the slump that followed the Sept. 11 terrorist attacks.
Collmar said his decision to retire wasn't clear-cut. Had he continued to work for another couple of years, he would have enjoyed a six-figure salary that is at the top of American's pay scale for pilots and, perhaps, recovered the market losses in his retirement account.
But with American and its pilots deadlocked over a contract, Collmar said he dreaded the labor strife he thinks is inevitable, as well as the risk that he could lose his generous retirement benefits. "I've watched pensions go away," he said.
Mark Epperson, who also retired early, has no regrets. By leaving on Feb. 1, he was able to lock in his lump-sum payment at the stock market's late 2007 peak. Had he waited, his retirement losses would have equaled four or five years of his salary. "The money was right. The time was right," Epperson said, adding that "...they now have people on the property who will be working for free the next 5 or 6 years."
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CHICAGO, Dec 29, 2008
USNewswire via COMTEX/
-- Pilots for United Airlines said today that under CEO Glenn Tilton's watch, United Airlines in 2008 clearly failed in its efforts to regain its former stature as the world's preeminent airline. Over the past year, the airline has been plagued by an appalling lack of leadership and vision among Tilton and his executives. Tilton and his executives have kept United Airlines mired in financial and operational stagnation ever since it exited bankruptcy nearly three years ago.
Based upon Tilton's past performance, the pilots see no signs that things are going to get better in the future under his watch. During Tilton's tenure, the pilots point out, it has been apparent that United does not have a strategy that will enable it to take charge of its destiny.
"In many ways, United Airlines has moved backward," said Captain Steve Wallach, chairman of the United Master Executive Council of the Air Line Pilots Association. "To its pilots, employees and passengers, United Airlines is but a shell of its former self. Rather than using the reorganization afforded by bankruptcy, including the billions of dollars contributed by the pilots and other employees to build upon United's core strengths and brand equity, Mr. Tilton and his executives squandered a rare opportunity to return this airline to its leadership position in the airline industry.
United has reacted to events, as opposed to anticipating and controlling them. As just one example, as a former oil industry executive, one would have expected Tilton to have taken early and decisive action to hedge against rising fuel costs. The record shows that he failed dismally in this task.
"Mr. Tilton's consistent answer to United's problems has been to penalize those who contribute the most to United's success: its employees and its customers," said Captain Wallach. "While Tilton and his hand-picked executives have continued to receive increasing benefits for themselves, employees have been laid off, and our passengers have been inconvenienced with a series of ill-timed and ill-conceived fees and unpopular cutbacks in service. To paraphrase an old advertising expression, 'This is no way to run an airline,' but that's what you can expect from a former oil company executive, clearly someone unfamiliar with running a service industry, who never before had to care about his employees or serve the needs of his customers."
A look at the Tilton record over the past year tells the story of missed opportunities, lack of leadership and dismal performance:
-- UAL posted a $779 million third quarter loss, $519 million attributable to poor fuel hedges. The miscalculation on the fuel hedge is especially disappointing, considering Tilton came to United from Chevron Texaco, one of the nation's largest oil companies.
-- UAL posted a $542 million loss for the first quarter, $305 million higher than the first quarter of the previous year.
-- UAL lost $151 million in the second quarter. With noncash accounting expenses, including a $2.3 billion charge for goodwill impairment and $82 million in severance costs, the airline reported a $2.7 billion loss during the quarter.
-- During a time when the industry was attempting to consolidate, United Airlines and Tilton were jilted by both Delta and Continental. Delta, which considered a marriage with United, chose Northwest instead. Continental, which appeared to be on the verge of an announced merger with UAL in April, left Tilton standing at the altar at the last minute after calling off talks.
-- Desperate for a merger partner, -- ANY merger partner -- Tilton attempted to steer United Airlines straight into the arms of US Airways, an airline known for problems in its management, its service, and among its employees. Only an outcry from the Air Line Pilots Association and the subsequent negative reaction from the financial community prevented Tilton from embarking on the potentially suicidal mission of a merger with US Airways.
-- United announced in June that it was going to ground "fuel inefficient" aircraft, despite having no plans to replace them with newer, more efficient planes. This decision was based on then record-high fuel prices. Oil prices now are at a four-year low. On its present course and by the end of 2009, Tilton will have shrunk United's fleet by 20%. This is yet another example that Tilton and his executives didn't learn a major lesson from bankruptcy: You cannot shrink to profitability; you must have a strategy for growing the company.
-- While United Airlines was losing money, Tilton furloughed pilots and other employees, cutting back on service and asking passengers to pay more for less. Tilton's compensation package was reported at $103 million. This includes salary, stock grants, options and other added extras. Tilton's $10.3 million compensation package dwarfs that of the CEOs of United's competitors: American Airlines CEO, $4.6 million; Southwest Airlines CEO, $1.3 million; JetBlue CEO, $514,000.
-- UAL doubled the fee it charges passengers for checking a second bag, essentially raising taxes on passengers and encouraging them to go elsewhere.
-- United announced in August that it would discontinue complimentary meal service in coach on many flights to and from Europe as a way to cut costs, only to reverse those plans after passengers protested. The reversal was an embarrassment to Tilton and his executives, and it displayed how out of touch they are with our passengers.
-- In a clear and stinging rebuke from the pilots and other employees, United Airlines' "2008 Employee Survey" showed that UAL employees don't trust, respect or have faith in the management of United Airlines. Only 38 percent of United Airlines expressed "Pride in United," compared with the average Fortune 500 Company, where 84 percent of employees express pride in their employer. Also, 70 percent of United employees said they were dissatisfied with their jobs, 73 percent are looking for new jobs and 77 percent do not think United is a great place to work.
"2008 alone proves that Tilton's so-called leadership at United is a failure," said Captain Wallach. "Tilton's body of work during his tenure at United Airlines speaks for itself. It simply is not working. The pilots recognize it. The employees recognize it. The passengers certainly recognize it. The investment community recognizes it. It's time for the United Board of Directors to realize it. United Airlines must free itself from failed leadership and lack of vision so that it can become, once again, the airline for which pilots and employees are proud to work, and on which passengers will want to fly."
For more information regarding United pilots' call for new leadership at United Airlines, go to its website www.GlennTilton. com.
SOURCE United Master Executive Council of the Air Line Pilots Association
http://www.alpa. org/ual
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July 12, 2008 NYTimes
Cost of Oil Dulling the Shine of a Global Air Show
By CAROLINE BROTHERS
LONDON — The barons of civil and military aviation converging for the Farnborough International Air Show should have plenty to talk about.
Many airlines around the world are battling insolvency. The price of oil has shot up to as high as $147 a barrel. European governments are weighing new environmental taxes to limit the industry's contribution to global warming. And Washington has decided to reopen bidding on a $35 billion air tanker contract for the Air Force.
"This is the most uncertain time I've known in the industry for 29 years," said Doug McVitie, founder and chief consultant at Arran Aerospace in Dinan, France. "The whole stability of the business has been upset by the oil price."
The air show, which starts Monday, is usually a time for the industry to dazzle customers with gleaming new planes, the latest technology and military might.
This year, however, oil prices are likely to preoccupy the
representatives of 1,500 companies from 35 countries at aviation's showcase event, which alternates each year between Farnborough,outside London, and Paris.
Those soaring costs have driven home the need for more efficient jet fleets — particularly in the United States, where some airlines are still flying two-decade-old MD-80s and first-generation 737s.
But efforts to modernize fleets face a headwind. The big manufacturers have production delays for their next-generation jets, like the superjumbo Airbus A380 and the midsize 787 Dreamliner from Boeing.
And many airlines are struggling as higher airfares and softening economies have cut demand.
Last month, the International Air Transport Association forecast global airline losses of $6.1 billion for 2008 if oil prices average $135 a barrel. Many airlines are culling fleets, dropping flights, charging for checked bags and adding surcharges to ticket prices to offset fuel outlays.
"For many of them, buying new, more fuel-efficient planes to combat the doubling of fuel costs can be no part of their agenda," said Howard Wheeldon, a strategist at BGC Partners, a brokerage firm in London.
The Air Transport Association, which represents American carriers, thinks business will be even worse for the domestic companies. It forecasts a loss of at least $7.2 billion — and as high as $13 billion if oil prices keep climbing. The American industry's worst year was 2002, when airlines lost $11 billion as air travel was devastated after 9/11.
Already airlines are starting to reassess, postpone and cancel their orders, and that looks likely to continue as long as oil prices stay stubbornly high.
"It's inevitable we will start to see a few wanting to defer," said Rupinder Vig, an aviation analyst at Morgan Stanley in London.
Adding to carriers' strain is a decision by the European Union last month to require all airlines using European airports to buy pollution credits starting in 2012. Airlines see that as yet another tax they can ill afford, particularly since the timing of new innovations to make aircraft greener is unclear.
"If you want to make a new plane, it needs to have a sufficient jump in fuel consumption and overall economic performance to be worth the investment," said Barbara Kracht, a spokeswoman at Airbus.
"You need the technology, particularly engine technology, and that won't be ready before the second half of the next decade," she added.
Nor can the airlines expect quick breakthroughs from engine makers like Rolls-Royce, General Electric and Pratt & Whitney just because the price of oil has skyrocketed, given the time needed for leaps in technology.
Plane manufacturers face tough times, as well. "After 2010 they are going to be hit by a fierce down cycle," said Richard Aboulafia, an aviation analyst at the Teal Group in Fairfax, Va. He projects that business could shrink as much as 40 percent.
Still, they have big order lists that should see them through the next two years. "They have just enough cushion in their backlog and from Middle Eastern demand to make them look better than they are," Mr. Aboulafia said.
Analysts are predicting an order at Farnborough from Etihad Airways, based in Abu Dhabi, for about 100 aircraft, and they see more coming from Qatar Airways, Air Arabia and Emirates. Carriers in the Middle East are benefiting as high oil prices bolster their region's economies.
Micheline Maynard contributed reporting.
Airlines Are Dying, says columnist.......
Tuesday, May 27, 2008
Panic In The Front Office
Airline Industry In Full Retreat?
When facing a crisis, the worst thing one can do is to panic.
But that's exactly what seems to be happening in some airline front offices. Panic results in clumsy decisions. Clumsy decisions make the crisis worse.
Let's start with this: $130+ oil is a crisis for the airline industry. If it continues to climb, or even if it drops back down twenty bucks, the airline industry has got to fundamentally restructure how it operates. And they must do it on a right-now basis, because fuel costs are eating their lunch.
Today's Best Practices & Traditional Thinking - Recipes For Failure. What's necessary is strong, focused, and futurist thinking. This is a whole new environment, and what worked last year, or the stuff coming out of some of the usual-suspect B-school types, do not apply. More importantly, such may even prove to be lethal. What will set winners from losers will be the vision of an airline's leadership at the top.
The crisis is not about revenues not meeting higher fuel costs. It is much more fundamental: it is about an air transportation system that suddenly is operationally obsolete. It is an entirely different industry now. Unfortunately, the aircraft, the production methods, and the strategies now in use are not up to the challenge. They're yesterday. The need to have a system that can be operated with jet fuel at $4 a gallon is today.
The obvious, traditional, "best-practices" reaction is to raise fares. But that can be hard to do in a competitive environment. Toss in the fact that Southwest's flying around with much less fuel-cost pressure, thereby having a lot less imperative to raise fares.
So, the trend has been to start charging for things that used to be free. Or, much more dangerously, panic and start to view the solution being in shaking down the customer for things that simply are part of what's expected when one travels.
Circle The Wagons. Then Shoot The People Inside The Circle. Let's state the obvious: revenue comes from customers. Customers must use the airline product to provide revenue. Lose the customer and you lose the revenue. The customer doesn't like to feel trapped, cornered or cheated. Airlines need the customer's good will to survive.
Unfortunately, some of the actions taken by some carriers in recent weeks are clearly the result of quick panic decisions, not rational planning to adjust to $3.50 - $4 jet-A. They are directly affecting customers' good will.
More and more, the flying public walks into an airport and likely starts to feel like "marks" at a two-bit country carnival. Every game in the place is rigged to shake more money out of them. An airline ticket once bought travel from A to B. Now, it's becoming just a down-payment.
Alienating The Revenue Source, i.e., The Customer. The most obvious and most recent sign of a panicked retreat from the crisis is American's decision to charge for any checked luggage. Whether it spreads across the industry or not makes no difference: it is a bad service decision. Really, really bad. People inherently travel with things like clothing. Often, that entails the need for a checked bag. It is unreasonable to sell a ticket and then tell the customer his change of underwear and extra suit for that important meeting is going to be an extra $15 bucks.
True, there is some potential money here. Airports:USA® airline data indicate that AA could theoretically collect as much as $1.2 billion with this new fee. But its fuel expense in 2008 alone - forget the prior spikes - is going to be up possibly three times that much.
So in the grand scheme, the fee for the first bag will do more to make AA look like a desperate pirate, than to materially address fuel costs.
What's next? An extra admission fee to the departure gate? $2 seat rentals in the hold room? Pay toilets on board for all but Titanium-Level frequent flyers?
Deal with it: AA's first-bag charge is un-defendable. Worse, it does more to tick off the customer than to be a meaningful contribution to offsetting the billions in increased fuel costs since 2005.
Charge Ransom To Get Out Early. Another carrier has implemented a no-exceptions policy of charging $50 if a passenger is at the airport, and wants to leave on an earlier flight that has seats available. Needless to say, most people won't pay it.
Not only is such a policy the direct equivalent to what picadors do to a bull in the ring, it is also very misguided customer management. Once a paying passenger is in the terminal, the objective is to get him or her out of town as fast as possible. That flight he's booked on in two hours might be delayed. Overbooked. Canceled due to weather. Get him on the earlier flight, and wave good-bye to what could have been a problem later on. So to deny a willing, same-day paying passenger an open seat on an earlier flight without first paying a $50 ransom is another sign of let's-get-the- dough panic. It is not good policy.
The Real Answer's On The Cost Side. Face it - the problem is fuel expense. The potential of getting fares up fast enough to compensate for these increases is miniscule. "Ancillary revenues" - bag charges, change fees, seat-assignment add-ons, etc., are nothing more than a bucket brigade on the financial Titanic. The fact is that airlines cannot operate as they have traditionally in the face of $130 oil. Period.
That means the only real hope for carriers is fundamentally changing how they operate. As pointed out earlier (Go There) there's a lot of costly slop in the system that can be culled out. To the horror of some leasing companies and small lift providers, at least 30% of the flying now done with RJs is a loss leader and must be cut. Some parts of mainline fleets need to be parked, simply because the outer margins of route system profitability are shrinking fast.
Note to the airline industry: The customer is your friend. The customer is the solution. In a lot of ways, you're ticking off your friends and delaying real solutions.
Not to mention running out of time.
It's also merged a number of employee groups from the two airlines onto a single contract, built a joint reservations system and started a flight operations center in Pittsburgh.
While he wants to merge his pilots contracts, Parker said he has no problem keeping them separate. The benefits of a combined pilot group would mean maybe $10 million in savings for the airline, Parker said, not much for an airline with $11.7 billion in annual revenue.
"There is no large financial benefit that we are not receiving because we don't have one integrated pilot contract right now or one seniority list," Parker said.
idely publicized incidents worry travelers. The Pennsylvania- based Business Travel Coalition said 13% of 223 respondents to a survey of travel
professionals this month said they had skipped a recent flight due to safety concerns.
Outsourcing of maintenance is emerging as a flashpoint in the new debate over airline safety. The Business Travel Coalition, which represents travel professionals at 300 big companies, has spoken out against airlines using outside
contractors.
And the International Brotherhood of Teamsters recently won the right to represent United mechanics largely on the same issue. "It's a subject we intend to address with the company in coming months," says Don Trencher, director of the Teamsters' airline division.
Outsourcing is a linchpin of a post-bankruptcy recovery plan forged by United parent UAL Corp. that cut its in-house mechanic staff in half. Outside contractors, some of them overseas, now handle all its heavy maintenance — the most expensive work — and 20% of the other work.
A United spokeswoman says outside vendors account for only part of its maintenance spending but won't provide internal maintenance figures, which aren't disclosed in financial reports. Outside maintenance costs are disclosed, and they're rising at the fastest rate in the industry. In 2007, the first full year since United emerged from
bankruptcy, payments to contractors surged 16% to $1.2 billion, the highest such bill for any large airline.
Another element of United's cost-saving strategy is at least partly to blame for the increase. Unlike its rivals, United hasn't bought a new plane since it entered bankruptcy in 2002. As a result, the average age of its planes climbed to 13 years last year from nine in 2002, giving it the third-oldest fleet among mainline carriers. While United saves money by forgoing new plane purchases, it also spends
more to keep its older planes aloft. Aero Strategy Management Consulting in Ann Arbor, Mitch., estimates older aircraft cost 15% to 20% more to maintain.
Like the rest of the industry, United can ill afford higher maintenance costs at a time when fuel prices are surging. Analysts estimate the airline will lose $374 million this year, compared with a profit of $1 billion in 2007,
its first year out of bankruptcy.
Maintenance had been a reliable area for cost cuts in the past for United and other airlines, but that's not going to be an option anymore. The FAA "won't cut anyone any slack now. It will be strictly by the book, and that drives up maintenance costs," says aviation consultant Michael Boyd, president of Boyd Group Inc. in Evergreen, Cool. "There's not going to be any hint by anyone that 'we've streamlined maintenance costs 10%.' " Such scrutiny also raises questions about UAL's plan to spin off its
maintenance business, which already faces union opposition.
Beyond higher maintenance expenses, United's deferral of plane purchases leads to another cost down the road, says George Hamlin, managing director at New York-based consultant Airline Capital Associates. "You want to keep renewing your fleet, or you may face having to replace a
huge portion of it all at once," he says. "But it begs a bigger question for United: Do you intend to be in this business in the future?"
©2008 by Crain Communications Inc.
Plane Business Banter
February 22, 2008
Holly Hegeman, Editor
... Meanwhile, while this deal sits, (Delta and Northwest) we did get more concrete information passed on to us Thursday concerning the United Airlines/Continenta l Airlines deal.
And yes, I am now convinced this one has moved far enough along that it is a bona fide deal.
According to our sources, as I reported in PlaneBuzz on Thursday, the existingUnited Airlines brand will continue to be used for the bulk of the international operations, but Continental will take over the domestic operation for the most part.
Initially, there will be a holding company set up to run both airlines, for a period of three-five years. This will allow for a "smoother transition" from the two airlines into one operation.
We were also informed that there has already been a transition team put together and that the deal will be announced after Delta/Northwest goes public.
Another related bit of United Airlines information we've received is that United has turned to ExpressJet to handle some of its regional feed.
This news was confirmed Friday on the United Airlines employee intranet SkyNet, as the airline told employees,
"The United Express team is working closely with our partners to provide replacement flying aircraft during the Spring Break travel period. In anticipation of the high load factors, we've signed a contract with ExpressJet Airlines, Inc., one of the world's largest operators of regional aircraft, to provide three Embraer ERJ145 aircraft from March 12-29.
· ExpressJet is a new flying carrier for us. They have provided similar short-term capacity to other airlines and we are confident in their ability to provide efficient and reliable regional jet service for UAX.
· ExpressJet will be flying 20 flights per day carrying approximately 1,000 customers, and will operate into Dulles with service to Savannah, Pittsburgh, Huntsville, Jacksonville and Charleston, South Carolina. In order to be available during our peak demand period, the aircraft will be flown in ExpressJet livery."
We were told that United turned to ExpressJet for additional aircraft because of concerns over Mesa Air Group's continued high levels of flight cancellations. We were also told that United talked to its other regional carriers before turning toExpressJet.
And where is ExpressJet going to get the airplanes? Gary Chase, analyst withLehman Brothers wrote Friday in his weekly industry capacity update,
"XJT overhauled its branded-flying schedule this week, dropping service in 8 nonstop markets and cutting capacity by ~50% in 6 additional markets. The dropped markets include LUV connecting markets such as Austin to Kansas City, Oklahoma City and Tulsa as well as San Antonio to Oklahoma City and Tulsa."
Gary also mentioned the new JetBlue markets announced this week, as he wrote,
"Most notable from JBLU are adds to Austin (Ft. Lauderdale, Orlando, San Francisco and Long Beach) as well as changes to Chicago O'Hare (adds Boston, shifts New York and Long Beach to all E190 flying). JBLU's new Austin flying will compete either head-to-head or indirectly with LUV on all four routes. AMR and UAUA also fly nonstop from LAX to Austin, while UAUA flies nonstop from San Francisco."
... Then there is ExpressJet. As we have said here before, the decision by Continental Airlines to spin off ExpressJet was a brilliant one. On many levels. Continentalwas the first airline that realized that the cocktail of higher fuel prices and diminishing revenue potential meant one thing -- fewer regional flights.
And they were at the forefront as they restructured their ExpressJet situation. Not only did they get the money from the airline's IPO, but they then continued to receive payments from ExpressJet during some very lean quarters.
However, while the ExpressJet IPO was brilliant from the standpoint ofContinental, again, the move has seen management at ExpressJet have to do some pretty fancy tap dancing the last two years. Personally, I think the airline has done a pretty good job at making do with what it had put on its plate. And I also think that if we do see a Continental/ United deal -- we will see much more of ExpressJet. One way or another.
Airline Merger Talks May Lead to Double Wedding
Delta, Northwest Move
Closer to Deal as UAL,
Continental Get Serious
By SUSAN CAREY in Chicago,
February 7, 2008;
Merger discussions between Delta Air Lines Inc. and Northwest Airlines Corp. have picked up steam, and a deal could be announced in the next two weeks, according to people who have been briefed on the negotiations.
At the same time, preliminary talks between United Airlines parent UAL Corp. and Continental Airlines Inc. have grown more serious, according to a person familiar with the situation.
• The News: Merger talks between Delta and Northwest have accelerated, prompting United and Continental to intensify talks of their own.
• What it Means: High fuel prices and an economic downturn could trigger consolidation in the airline industry.
• The Problem: Regulatory scrutiny and labor issues could complicate the already tough task of putting two airlines together.
Key details of these agreements haven't been hammered out, and both negotiations could still fall apart, say people close to the talks. But major snags over how management of the combined Delta-Northwest would be structured were overcome earlier this week, those people said, and previously stalled talks have resumed.
Chief among the problems was a disagreement over whether Northwest Chief Executive Officer Doug Steenland and his management team would retain top management roles. At a meeting Friday, Mr. Steenland and the board reached agreement on his management team's potential role in the combined carrier, said people familiar with the situation.
As proposed, the Delta-Northwest deal would be a stock-for-stock transaction, done "at market," meaning at roughly where the two stocks are trading, with little or no premium for either side. This dynamic has made non-economic issues the center of the deal negotiations.
Nearly a month has passed since directors at Atlanta-based Delta, the third-largest U.S. airline in terms of passenger traffic, gave Chief Executive Officer Richard Anderson the go-ahead to open talks with Northwest and United, with the goal of choosing one as a potential partner. United, based in Chicago, ranks second, and Northwest, in Eagan, Minn., is the fifth-biggest carrier. Houston-based Continental is the No. 4 carrier. A Delta merger with either Northwest or United would create the largest passenger airline in the world.
Delta's intent was to pursue tandem negotiations with Northwest and United on a compressed timeline, get a deal inked by mid-February and quickly begin the process for winning antitrust approval. Executives at the airlines believe any mergers are more likely to pass regulatory muster during the waning days of the Bush administration.
Mr. Anderson could still tell his board he thinks Delta should remain independent. That was the position taken by the Atlanta carrier's previous CEO, Gerald Grinstein, when the company was repelling a hostile takeover attempt by US Airways Group Inc. last year. There also is a possibility that Delta could veer toward a United tie-up. The two have continued exploratory talks over the past month, say multiple people briefed on the matter.
United is instead focusing on discussions with Continental, said one person familiar with the situation. If a deal between the two does come together, the hope would be to do it very near a Northwest-Delta announcement, so the two potential combinations would undergo regulatory scrutiny at the same time, this person added. Another person with knowledge of the situation said United and Continental are poised to act quickly once another airline merger is announced.
Northwest currently has a "golden share" of preferred stock in Continental that allows Northwest to block a merger of Continental with another large carrier. But if Northwest agrees to merge with Delta, Continental could redeem that stock for a total of $100, even if the deal is never consummated.
That would free Continental to pursue its own merger or to more enthusiastically entertain the attentions of United -- which earlier pitched a combination with Continental and was rebuffed -- or another carrier. Continental executives have repeatedly said they prefer to remain independent, but would do what is best for the company if the competitive landscape changes.
A Delta spokeswoman said her company won't provide updates on its board's review of consolidation opportunities. Northwest, Continental and United declined to comment.
There are plenty of other complicated issues. The Air Line Pilots Association branches at Delta and Northwest have signaled that they could support a merger if they receive equity in the combined airline and achieve a labor contract with improved terms.
Also not yet worked out is a potential minority investment of Air France-KLM SA in a Delta-Northwest deal, said one individual briefed on the matter.
Delta directors "will get a full update" on all these and other developments at their meeting this week, a person familiar with the situation said. Depending on how negotiations went yesterday, that update might evolve into the bare bones of a deal for Northwest, this person said.
In 4 p.m. composite trading on the New York Stock Exchange shares of Delta rose 5.4%, or 92 cents, to $17.95. Northwest rose 3.9%. United rose 2.8%. Continental rose 2.1%.
Write to Susan Carey at susan.carey@ wsj.com, Dennis K. Berman at dennis.berman@ wsj.com and Paulo Prada at paulo.prada@ wsj.com
grow."
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The Gimli Glider - Good complete Story.
click!
June 22, 2010
« Latest Buzz Around the Industry | Main
Editorial: Re-Regulation of the U.S. Airline Industry
If the U.S. Justice Department approves the proposed merger of United Airlines and Continental Airlines, two U.S. House members said they plan to re-regulate it.
According to The Associated Press, Representatives James Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, and Jerry Costello (D-Ill.), chairman of the panel's aviation subcommittee, said they will attempt to re-establish a government agency responsible for overseeing the airline industry if the merger goes through.
"I do think it's going to pass regulatory muster, but I do think it's going to be tough," said Sen. Kay Bailey Hutchison (R-TX.) on the Continental-United merger during a Senate Commerce Committee (Wall Street Journal). The merged airline's headquarters is planned for Chicago, which would relocate Continental's headquarters out of her home-state of Texas. Some politicians, like Sen. Hutchinson, believe that the merger will hurt consumers.
Senate Commerce Committee Chairman John D. Rockefeller (D-W.Va.) reportedly said it is "increasingly clear" that the current structure of the U.S. airline industry is not financially sustainable (Wall Street Journal). Rockefeller said that he supports airline consolidation as long as it "creates the conditions not only to survive, but also to thrive in a competitive global industry." However, Sen. Rockefeller did not say whether or not he supports re-regulation.
Allow me to address a few of the key points politicians, like Rep. Oberstar, are using to attempt to persuade congress.
Airline Deregulation
The Airline Deregulation Act of 1978 removed governmental control over fares, routes, and market entry from commercial aviation. This dissolved the Civil Aeronautics Board, commonly known as CAB, which piloted the entire U.S. airline industry. Airlines were operated as a public utility and competition on routes was limited.
Following 1978, airlines became a market-force driven industry. Rates of return were no longer overseen by the government, and price became the name of the game. Fare wars and "peanut fares" drove down the cost of flight for consumers, making it affordable for almost everyone to fly.
How cheap is cheap?
The earlier article quotes Susan Kurland, the U.S. Transportation Department's assistant secretary for aviation and international affairs, saying that consumers have "reaped enormous benefits" due to the steps taken in the 1970s to deregulate the industry (Wall Street Journal).
Adjusted for inflation, air fares have fallen 25 percent since 1991, and are 22 percent lower than they would have been had regulation continued (Morrison and Winston 2000). According to the Air Transport Association, airline prices have fallen 44.9 percent in real terms since airline deregulation. Robert Crandall and Jerry Ellig (1997) estimated that when figures are adjusted for changes in quality and amenities, passengers save $19.4 billion dollars per year from airline deregulation. These savings have been passed on to 80 percent of passengers accounting for 85 percent of passenger miles (Competitive Enterprise Institute, George Mason University's Jerry Ellig / Robert Crandall, and Library of Economics and Liberty).
Loss in quality
An argument for re-regulation, or restoring the U.S. airline industry to pre-1978, is a loss in quality. According to studies by TripAdvisor, travelers have voiced their concerns with airline fees (also known as ancillary revenue), specifically checked baggage fees, and expect airlines to add additional fees.
Rep. Oberstar said the $2.7 billion earned by U.S. airlines in ancillary revenue is evidence that consumers are no longer benefiting from deregulation (Star-Telegram). Yet, as Boarding Area's Dan Webb points out, Rep. Oberstar's arguments "don't seem to make a lot of sense" since carriers only averaged $3.84 per passenger in ancillary revenue for 2009. Additionally, Webb noted the Department of Transportation's report of a $7.40 drop in average airfares for 2009.
Service and quality wise, some believe they should get more. On nearly all domestic flights, meals are only served to first class passengers. Passengers seeking those precious inches of extra legroom, in coach, book exit-row seats. Some airlines charge premiums for the special seats in coach. For those looking for a pillow and blanket, that too has its own fee. Yet these drops in quality tend to be appropriate, considering the prices of airfare.
Passengers have options and can easily vote with their wallet. Although airline food may not be as good as it used to be, booking a first class ticket could land you a meal (depending on the duration of the flight) and extra comfort. On long-haul flights, most airlines fly a nice variety of seat types, ranging from coach to premium coach to business class to first class and so forth (maybe even more options).
Some airlines, like American Airlines, added "more room in coach" to "ease the crowded conditions faced by most passengers," (The New York Times). American took out two rows of seats to add extra legroom for passengers. To make up for the lost seats, ticket prices on American increased, but consumers were not willing to pay the extra dollars and the campaign was scraped.
It is fairly clear that price is important to consumers, but have airlines done the best job at marketing a flight as more than a flight? What about telling customers exactly what they're getting - like satellite television - when they book? The Cranky Flier's Brett Snyder seems to think airlines need to give travelers a better sense of what they're booking.
Southwest Airlines is a clear example. When customers book with Southwest, they know exactly what they're getting -- two free bags, the rapid rewards credits, etc -- because Southwest clearly states it when you select the fare.
Conclusion
Airline deregulation has significantly helped consumers. Air travel was once exclusive to the wealthy, but has slowly transformed into a service all can enjoy. Competition was fairly limited during the days of pre-deregulation, but now consumers have a vast variety of options to get from Point A to Point B, and they can get there affordably. Sure, the industry could use a few minor changes, but nothing else has been more beneficial to consumers than deregulation.
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Posted by Jonathan Heckman at June 22, 2010 7:31 a.m.
ADVERTISING
JAL May Drop International Routes
Dec 31, 2009 By Bradley Perrett http://tinyurl. com/ybrbnpo
Japan Airlines may lose its entire international operation under a plan that would reduce the mighty but profitless airline, Asia's largest, to a mere domestic carrier.
All Nippon Airways would take over all of Japan Airlines' international services under the plan that the government is considering. Government and Japan Airlines' sources apparently leaked the details to the Mainichi Shimbun newspaper.
The Ministry of Land, Infrastructure, Transport and Tourism is opposed to the proposal, but the Mainichi cites some Japan Airlines executives as saying it is not a bad idea.
The rules governing state-directed rescues are forcing consideration of such a radical move. A restructuring agency, the Enterprise Turnaround Initiative Corp. of Japan is working on a bailout plan for the struggling airline but can help companies only if they can be turned around within three years. The government is evidently concerned that a profit within three years would be unachievable if Japan Airlines kept its international network.
The loss of foreign services would greatly diminish the stakes in the ongoing tussle over Japan Airlines' alliance membership. The giant carrier is a prized partner in Oneworld, whose leading member American Airlines has been trying to ward off attempts by Delta to lure Japan Airlines to Skyteam.
But if All Nippon gets the international operations, the big winners will be that carrier's partners in the Star Alliance.
While restructuring Japan Airlines is a pressing issue, keeping it afloat by warding off a cash crunch is the immediate problem. To do that, the Development Bank of Japan has agreed to increase its unsecured lending to the company, reports Jiji news agency.
The state bank had previously agreed to extend ¥100 billion without security to the airline, which has taken up ¥55 billion. The increase followed a meeting between the bank and two ministers, including Transport Minister Seiji Maehara.
The restructuring agency has raised the possibility of bankruptcy and court-directed reorganization of Japan Airlines with creditors. That move has increased pressure on the company's 8,800 retirees to accept a 30% cut in benefits.
It also raises the risk that shareholdings in the business would be wiped out. The stock fell to a record low this week.
============ ======
More on UAL
August 24, 2009, 8:40 AM
Eyes wide shut
That is the answer to the question asked the most by United Pilots- “Why does the Board of Directors continue to allow Glenn Tilton and his senior management team to manage United Airlines into the ground?” Eyes wide shut pretty much sums it up. Long term stockholders in the airlines are presently nonexistent; most airline stockholders today are in and out of the market quickly for fast profits, so they could care less about the long term health and viability of the company. That leaves only the banks and our BOD enabling Glenn Tilton to operate by the same MO.
Over the last 14 months and for the third time, when our CEO gets into hot water with the institutional analysts, he gives them a little of what they ask for (capacity reductions and/or labor blood) and then rearranges the management deck chairs. This time he has cut international capacity by 7% and recycled Tague, Mikells, and Carlson. They also moved this week to threaten labor with a return to the courts. You would think the analyst would catch on to this shell game, but they keep buying it. Except for the host of “Mad Money”, where Jim Cramer nominated Glenn Tilton and 15 other CEO’s for the Worst CEO in America. Glenn Tilton won the title hands down with over 50% of the votes.
Tilton’s other MO is the court system, as we have shown you many times already. When he can’t get what he wants through his management abilities, he gets the courts to do it for him. I would not be surprised if Glenn used bankruptcy again, because litigation force is the only tool in this one-trick-pony’ s toolbox. This time it comes with high risk to Glenn’s reputation as he would most likely not survive to run the airline. He also puts the franchise at high risk, not that it seems to bother him, as finding DIP financing to avoid Chapter 7 could be elusive. Or will he try it as a strategy on a prepackaged plan. Who really knows?
I will also share that I do not hold out much hope John Tague will do us any better as the President of United. After he came over from his failing ATA, he told me that he knew exactly what we needed to do here at United Airlines to compete. He told me he questioned why United did not take certain counter moves in the market to stave off competition. He told me that United Airlines had to learn to exist on the base of the leisure market and not put all its eggs in the business market basket as 9/11 had just proved. I wonder where he lost his wisdom, especially with current moves by Southwest Airlines to charge into our back yard. One must ask why Tague would sit by and not question the decision of this airline to enter into discussions for the sale of our surplus gates in Denver to Southwest Airlines; as disclosed by Next Generation Equity Research on July 31st.
In reference to passengers, it was Captain Wallach who warned our Board of Directors about over-reliance on the premier customer. As he explained in his letter last week, the company has put us in a position of waiting for the return of our premier customer. I believe they have reached a mode of “we bet the franchise”, that without some outside help or change in the landscape could move United from the watch list to the critical list. We have a liquidity issue.
Jamie Baker of J.P. Morgan (one of the most highly respected airline analysts in the industry) stated the following after our 2009 second quarter results. “Year-End Liquidity at AMR, UAUA, and LCC Is Looking Grim.” He followed that with these comments:
“Even a seemingly miraculous surge in demand (i.e., flat yr/yr revenue in Q409 vs. current -20% environment) wouldn’t negate the necessity for significant incremental capital at AMR, LCC & UAUA. We believe sources of potential liquidity at AMR exceed those for UAUA, while the same holds true for UAUA vs. LCC.” And, “But liquidity for all three has already declined below typical filing thresholds. In the absence of definable benefits, “hope, and pray somebody goes first” may be the resulting strategy, particularly if sufficient assets with which to secure DIP financing no longer exist.”
We have been living under this pressure for almost a year. Last November your local LEC told you it was without question that the industry has been devastated by oil. United in particular was harmed even worse, because Glenn Tilton, our oil man, was the worst in the business on fuel hedging. (Last year we sold 1.3 Billion in furniture to cover just the fuel hedge losses). Prior to this, Glenn Tilton bet the franchise when he spent 750 million dollars to satisfy short term investors. Just as we had been briefed by our financial advisors, we told you that we were in a game of running from the bear. In order to survive, we were hoping to outrun our competition before the bankruptcy bear got one of us. More simply put, I told Council 33 that we had to make it through the Second Quarter of 2009 before we ran out of unencumbered assets to sell. If we could do that, we would be in good shape for a cash flow turn around, if and only if oil stayed where it was and we had no other surprises.
So it is not true this MEC has been hiding the truth about our financials or have their heads buried in the sand. Council 57 stated it best last week, “we are fully aware of the situation that United has been managed into.” We are also aware of who is accountable.
The bad news is the world continues to change extremely fast. Since November, the economy has tanked even further and oil has gone from $40 per barrel to over $70. We also burned half the furniture to survive and we still have about half left, if and only if the market value for those assets are what United says they can get for them. Let’s not forget the H1N1 did not help the industry cause either. We have told you many times we believe United is nothing more than a lawn dart with Glenn Tilton at the helm and destined for failure if he stays at the head of this ship. We are not the only employee group that feels this way.
If you thought this was mere union rhetoric, you underestimated our understanding of the financial situation. Captain Wallach has a clear understanding of the risks and has repeatedly brought them up at the Board of Directors. So far this insight has been the voice of reason at that level. It is not his personality that has caused them not to listen, as some of our pilots like to spin in conjecture, it is the ego of long time Board members and Glenn Tilton that feels the voice of labor is a nuisance and need not be listened to. This is nothing new in history and would not change with a change of leadership; one only needs to look back to 2002 for this proof. We have years of proof of what happens to our contract by taking that course.
Last November we sat as one of the 3 bottom feeders in the industry. UAL, USAirways and AMR are at the most risk for bankruptcy. Others, including Continental are not far behind. Today, the picture looks much the same for the bottom feeders of the industry, with one item of importance. AMR has not yet been to the bankruptcy court and still has items many investors believe can be shed in bankruptcy; including its pensions.
In the meantime your MEC has not sat idly by as a passive spectator. This MEC has engaged in multiple strategies aimed at the survival and progress of United Airlines and your career security. We continue to work in your best interests as we counter the multiple career threats born not only from United management, but a previous administration’ s treaty with the EU which produced Open Skies Airlines and the Aer Lingus aberration.
Fortunately, all is not yet lost. As a pilot now looking into the abyss for the fourth time in my career, here is my simple advice. It is not what happens to us in life, but how we react to it that counts. I sleep just fine because I know you are all doing your best for this airline, despite the abuse dished out from this management. You all care about United Airlines as a long term viable airline and want to compete to stand tall, just as we do. We, as an employee group, are leaps and bounds ahead of those in senior management. The hard part, especially as pilots, is that we all want our hands on the yoke so we can fix it. That is what our character is all about and unfortunately this management dogmatically ignores our sound advice, but that does not mean we are not trying to effect change.
The employees of United Airlines are not at fault for its predicament. Glenn Tilton and his management team exited bankruptcy with a clear competitive advantage, yet failed to cement the long term health and viability of this company. Do not forget these facts when Tilton’s team comes begging for more- do you want to give even more to a management who proved themselves untrustworthy and incapable?
It is our job as an MEC to stay focused on the task at hand, not allow UAL to over dramatize the situation to exploit your or our mental state, and continue to protect your careers. All each of you can do is take care of your own house, keep it in order, stay informed, focused, and support each other. Above all, continue to do your job.
Now that you are freaked out by the above statements, aided by corporate EAP telling you to get a B-Plan, the same analyst quoted above also stated:
“And don’t discount the ability of the larger network players (AMR/UAUA particularly) to squeeze more liquidity juice from friends and family.”
Bank of America/Merrill Lynch is maintaining a Buy rating on UAL with the following statement:
“Our 12-month price objective for UAUA is $10, which translates into 5.1x EV/2010E EBITDAR multiple. Our target multiple is near the low end of the group's historical 5x - 7x EV/EBITDAR multiple trading range”.
My fellow pilots, all is not lost and many things can and still will happen. We need to continue to keep our house in order for whatever path lies ahead. We just don’t know what that path is yet, as tough as that is for a group of pilots that like to plan ahead. Just don’t be caught with your eyes wide shut or making poor decisions based on speculation or fear. And believe me when I tell you this, many pressures will continue to come over the next 90 days. These pressures will come from different sources, and I will explain them as they raise their ugly heads. Stay steadfast, strong, and above all unified.
Fly safe, fly focused
June 11, 2009
United Airlines' credit facility rating was downgraded yesterday by Fitch Ratings, which warned that the carrier is facing "full-year passenger RASM declines of more than 10%" and "could report substantially negative free cash flow for the final three quarters of 2009."
The rating agency cautioned that "United's highly leveraged capital structure [is] unsustainable in the absence of a sharp turnaround in industry operating fundamentals. " It also questioned UA's ability to finance the large long-haul aircraft order for which it recently issued an RFP (ATWOnline, June 5).
UA's rating was lowered to CCC from B- and the agency warned that further downgrades later this year are possible. "Fitch expects United's operating results and free cash flow generation to remain weak through the remainder of the year, largely as a result of its heavy exposure to premium business markets that have seen the steepest declines in passenger yields," it said. UA Chairman, President and CEO Glenn Tilton has stated that the carrier's premium traffic fell 30% in the first quarter.
With the demand environment weak, Fitch warned that "internal cash generation alone will not be sufficient to prevent an erosion of [UA's] unrestricted liquidity position by year end. . .United does face steady and heavy debt maturities." As of April 21, UA had scheduled maturities of debt and capital leases totaling $655 million for 2009's final three quarters. "Even if revenue trends stabilize late in the year, the airline faces over $1 billion in scheduled debt and capital lease principal payments next year, raising the probability of a deepening liquidity crisis," Fitch said, adding that UA also has scheduled debt maturities of $869 million in 2011.
UA recently sent an RFP to both Boeing and Airbus for a long-haul fleet renewal, but Fitch said the move reflects "a longer-term need ... [with] no short-term implications for United's credit profile." It cautioned that UA won't be able successfully to finance "such a large multiyear order. . .[unless there is] a significant improvement in United's credit profile and the industry operating environment. "
Separately, the Air Line Pilots Assn. yesterday sent a letter to US President Barack Obama on behalf of UA pilots requesting a "delay" in approval of the carrier's antitrust immunity for transatlantic operations with Continental Airlines until labor protections are adopted as part of the airlines' proposed transatlantic joint venture with Air Canada and Lufthansa. The US Dept. of Transportation granted tentative ATI in April (ATWOnline, April 8).
LAX and UAL article in the Daily Breeze
Airport settlement is reached Los Angeles World Airports agrees to pay
United $35 million; the airline will give up gates.
By Gene Maddaus, Staff Writer
Posted: 02/09/2009 10:54:53 PM PST
DAILY BREEZE BLOGS
Los Angeles World Airports has settled a long-running dispute with its
biggest tenant, United Airlines, agreeing to pay the carrier $35 million.
Under the agreement announced Monday, United will relinquish four gates at Terminal 6, freeing up space that could be used by other airlines.
"It's valuable real estate," said Kelly Martin, LAWA's attorney. "We've already had several expressions of interest from people who are interested in using those gates."
United also will give up the customs facility in Terminal 7, allowing the airport to charge higher customs fees to airlines.
The settlement also ends a four-year dispute over United's use of gates in Terminal 8 for small commuter planes.
Before 2005, those planes used a small remote terminal on the eastern edge of the airport. Passengers had to take a bus to get to the terminal,
increasing their travel times. (ed. note. 4 years ago)
Having recently declared bankruptcy, United consolidated its operations at LAX in 2005 and moved the propeller planes to Terminal 8. That was more convenient for passengers, but airport officials claimed that United was stifling competition and
contributing to overcrowding at the airport.
If United had given up its gates at Terminal 8, its competitors would have been eager to expand.
The dispute wound up in front of a bankruptcy judge, with LAWA demanding that United return to the vacated remote terminal, and United demanding repayment for its rental costs at the shuttered facility. Under the settlement announced Monday, United will be allowed to keep its propeller planes at Terminal 8 - but only at the gates closest to the street.
(ed. note. Today passengers walk to the end of the Gate 80-88 corridor and then downstairs and outside across the tarmac to reach the parked turboprops)
Airport officials feared that if commuter planes were boarded closer to the runways, passengers could be blown off their feet by jet engines of passing planes.
Airport officials said the agreement would help end years of rancor with United.
gene.maddaus@ dailybreeze. com
Tuesday April 22, 4:42 pm ET
Summer travel headaches loom as airlines' woes deepen
By Dave Carpenter, AP Business Writer
Higher fares and fuel costs wallop UAL, US airline stocks; customers to pay price this summer
CHICAGO (AP) -- Soaring fuel costs. Flights cut. Jobs lost.
The parent company of United Airlines reported a worse-than-expected quarterly loss Tuesday, citing a string of problems that are hurting other carriers as well. And for travelers, a vacation season of jammed planes, delayed flights and higher fares looms in what's shaping up as the worst of times for both airlines and their customers.
ADVERTISEMENT
"It's going to be a rough summer," said Terry Trippler, a Minneapolis-based travel expert. "It's going to be one where you've got to plan another day into your travel schedule" just to prepare for schedule chaos.
Months of rising concerns about the consequences of higher fuel prices jumped to new levels of anxiety among investors on a gloomy combination of developments that sent UAL Corp. shares down a staggering 35 percent and battered other airline stocks.
Not only did United post a $537 million first-quarter loss and announce cutbacks accordingly, crude oil surged near the once-unthinkable $120-a-barrel mark and Delta Air Lines Inc. CEO Richard Anderson said domestic carriers would need to raise fares by 15 percent to 20 percent just to break even.
With weaker demand because of the economy, cutbacks in corporate travel and likely "sticker shock" among consumers, it's not clear whether the airlines can accomplish such increases. Airlines have tried to raise ticket prices a dozen times across most of their route networks since the start of the year, but most such attempts were rolled back after competitors refused to join in.
Anderson said higher fares would likely diminish demand for air travel, and prompt carriers to further reduce their schedules.
"We've got an industry that's in trouble," said Vaughn Cordle, chief executive and chief analyst at AirlineForecasts in Washington. "If oil prices stay anywhere near $100, $120 for the year ... we'll have a massive restructuring of the airline industry."
It's time for passengers, too, to buckle up for a rough ride as the heavy travel season approaches. Planes will be fuller and ticket prices significantly higher than in past summers.
Just how bad cancellations and delays will be is hard to predict. Airlines' recent cutbacks and the shutdowns of a handful of smaller carriers will remove some planes from the skies but won't solve congestion, and the threat of weather problems and labor strife is ever-present.
Passengers have had a taste of the possible pandemonium already this year after massive flight cancellations by American Airlines and the Federal Aviation Administration stepping up its scrutiny of airplane inspections after years of more lenient enforcement.
The good news, relatively speaking: Americans may already be steeled to these types of stressful conditions.
"It's not like this has come out of the blue," Trippler said. "It's getting progressively worse every year. But most summer air travelers are experienced."
So far, they're also determined to go regardless of ticket markups. Airlines have said their bookings still look strong, given the iffy economic situation.
Arthur Salus, president of Duluth (Ga.) Travel outside Atlanta, said demand remains strong for both domestic and international travel. After all, sky-high gasoline costs don't look great by comparison, either.
"People still have the money and they still want to travel," he said. "If someone pays $20, $30, $40 more for a ticket, that's not going to be a deterrent for them if they have to drive more than four to five hours."
Eventually, though, both the airlines and analysts expect business to drop off as fares keep rising.
The likeliest price increases are in markets where companies do not compete head-to-head with budget carriers like Southwest Airlines Co. or face little competition from other traditional airlines. During the first week of April, for example, leisure fares from traditional carriers on 280 major routes rose 13 percent from the previous year, according to data compiled by travel research firm Harrell Associates.
But prices to several smaller cities served by fewer flights rose substantially more. Prices between New York and Pittsburgh, for example, doubled to $68 one-way, while a ticket from Newark, N.J., to Cleveland rose 80 percent to $124, according to the data.
For United, as with other carriers, higher fares are only part of the response to what it called an "extraordinarily difficult" operating environment that worsened Tuesday with crude prices rising another $1.89 to a record $119.37.
The nation's second-largest airline said its revenue growth of nearly 8 percent was more than offset by a $618 million jump in fuel costs, which rose nearly 50 percent in a year.
After reporting its biggest loss since emerging from bankruptcy in 2006, the Chicago-based carrier said it will trim 2008 spending by $400 million, eliminate 1,100 jobs by the end of the year, cut domestic capacity 9 percent by the fourth quarter and ground 30 of its oldest and least-efficient aircraft.
"The path to sustainable profitability requires us to fundamentally overhaul every facet of our business," said Glenn Tilton, United's chairman, president and CEO. "The pressure of high energy prices and a weakening economy are a wake-up call that the pace of change must accelerate."
Combining with another carrier could be next, especially in the wake of the proposed tie-up this month of Delta and Northwest Airlines Corp. While Tilton did not name Continental, United is known to be in talks with the Houston-based carrier. Consolidation, the CEO said, is "one of the changes required to address the gap between where we stand today and profitability and sustainability."
United follows American Airlines parent AMR Corp. and Continental Airlines Inc. into the red for the quarter because of fuel costs. Southwest is the only large carrier to have reported a profit so far.
Among smaller carriers, JetBlue Airways Corp. reported an $8 million loss Tuesday that was narrower than expected. CEO Dave Barger said on a conference call that its $138 average fare in March was its highest monthly average ever. But the New York-based airline said fares would have had to have been 2 percent higher for it to have made a profit in the quarter.
The record fuel prices make it virtually impossible for a low-cost startup airline to enter the market for the time being.
Calyon Securities airline analyst Ray Neidl said carriers will need to continue cutting back on flights and raising prices in order to cope with higher oil prices.
"We've got too much capacity and prices are too low," he said. "Airlines just can't survive with the current air fares if oil stays this high."
Neidl said he expects airlines will continue to find ways to charge for added services, such as extra bags and more legroom. But that trend, he said, would be happening even without the surge in fuel costs.
"People do want to pay the rock-bottom fare and not have to subsidize other services," he said.
High oil prices and the global credit squeeze also are affecting demand for new planes. While airlines can still negotiate substantial discounts, European planemaker Airbus said Tuesday that the ever-weaker dollar and high metals prices are forcing it to raise prices. Airbus announced increases of as much as 3 percent to catalog prices -- on top of the 2.74 percent annual hike for 2007 already programmed.
Associated Press Writers Dan Caterinicchia in Washington, Emma Vandore in Paris, Adam Schreck and John Wilen in New York and Megan K. Scott in New York contributed to this report.
http://www.united.com
Questions over UAL, rival deals
By John Pletz
February 25, 2008
Airline executives hoping mergers will deliver new pricing power and cost savings are headed for disappointment.
Combining United with Continental and Delta with Northwest would create new carriers with few overlapping routes. Little overlap means scant opportunities to cut costs and raise prices by eliminating redundant flights, hubs and employees.
"There's too much capacity," says Hubert Horan, a Phoenix-based aviation consultant and former Northwest Airlines executive. "Delta and Northwest: That deal changes nothing. If United and Continental merge, in a perfect world you'd shut down United's Dulles (Washington, D.C.) hub. Are they going to do that? No. And if they buy off all of the (labor opposition), you get no benefits there, which begs the question: Why do any of the mergers?"
Labor costs are almost certain to rise at the merged airlines, as unions demand pay hikes in exchange for supporting the deals. One analyst estimates such concessions could offset $463 million of the projected $1.4 billion in merger synergies at a combined United-Continental.
Mergers also would bring expensive computer integration challenges and probably lead to costly disruptions of airline operations.
A frustrating paradox bedevils airline mergers. Deals that create significant opportunities to shed costs and hike fares by eliminating duplicate service are unlikely to win approval from antitrust regulators. Deals likely to pass antitrust muster, on the other hand, offer fewer synergies.
"With more overlap, you have less likelihood of getting it through," says Port Washington, N.Y., aviation consultant Robert Mann.
A combination of Chicago-based United Airlines with Fort Worth, Texas-based American Airlines, the nation's two largest carriers, would present huge cost-cutting opportunities, especially at O'Hare International Airport, where the two control two-thirds of air traffic. But such a deal isn't considered likely, in part because of almost-certain rejection on antitrust grounds.
Regulators are far more likely to approve a deal like the merger United is negotiating with Houston-based Continental Airlines. But the two have such little overlap that potential capacity reductions are estimated at just 2%.
United declined to comment on a possible merger.
The carriers are betting that what the proposed deals add in reach would eclipse what they can't cut in overlap. They'll end up with broader networks, particularly overseas, allowing them to win more of the corporate travelers who provide much of the industry's profit.
Continental would add hubs in Houston and New York, and its Latin American routes would fit well with United's stronger Asian network. Their combined service to Europe would be greater.
Atlanta-based Delta Air Lines would get Midwest hubs in Northwest Airlines' hometown of Minneapolis and in Detroit, and Delta's coverage of Latin America and Europe would be complemented by Northwest's Asian routes.
Supporters argue that it's riskier to do nothing in the face of $100-a-barrel oil and stepped-up competition on overseas routes from strong foreign carriers like Deutsche Lufthansa A.G. and Air France-KLM S.A.
"The primary benefit, if you're Delta or Northwest, is gaining and enhancing your international operations, which is more than you can get by just cutting back your domestic capacity," says Michael Derchin, an analyst in New York for FTN Midwest Securities Corp.
Mr. Derchin estimates that a merged Delta-Northwest and Continental-United each would cut capacity by around 2%. He says that's enough to make a difference for traditional carriers, which have reduced capacity by at least 9% since 2000.
Mr. Mann figures much of the empty or unprofitable seats would be pruned selectively, trading larger jets for smaller regional ones, rather than killing routes outright.
"Ultimately, you're only going to cut costs if you cut capacity," he says.
©2008 by Crain Communications Inc.
Crain's Chicago Business
February 25, 2008
March 1, 2010
Things are looking up for U.S. airlines
The industry is beginning to show signs of a recovery, with modest increases in revenue and forecasts of growing demand this year.
By Hugo Martín
After more than a year of slumping demand and sinking revenue, the nation's airline industry is beginning to show signs of a recovery, with modest increases in revenue and forecasts of growing demand this year.
The indications of a recovery, documented in recent government and airline reports, come after 14 straight months of declining revenues for the nation's airlines and passenger traffic numbers that have been dropping for almost two years. Airline experts have blamed the drop in passengers on the recession, high unemployment rates and deep cuts to corporate travel budgets.
The news may be a mixed blessing for airline travelers. As demand increases, airlines are likely to gradually raise airfare rates, experts say. If demand remains strong, the airlines are expected to add more flights and new routes to meet the demand.
Although the forecasts and analysis show that airline trends are moving in a positive direction, industry experts say the airlines have a long way to go before they can expect revenue and passenger traffic numbers to return to pre-recession days.
In January, passenger revenue for domestic and international flights rose 1.4% compared with the same month in 2009, according to the Air Transport Assn., the industry trade group that represents the country's largest airlines. Meanwhile, airline cargo traffic for December jumped 17% over the same month in 2008, according to the group.
"The modest uptick in passenger revenue and the solid increase in cargo volumes are promising signs that air transport demand may be at the beginning of a long-awaited recovery," association President James C. May said.
The group's report was released a week after an independent equity research company, Majestic Research Corp., released a study predicting that large, traditional airlines such as US Airways, United Airlines, American Airlines and Delta Air Lines may see passenger revenue increase as much as 9% in the first quarter of 2010 compared with the same period in 2009. The research firm based its analysis on proprietary data collected from airline ticket vendors and by surveying ticket prices on the Internet, among other techniques.
Meanwhile, Majestic estimates that discount airlines such as AirTran Airways, JetBlue Airways and Southwest Airlines will see revenue increase as much as 13% in the first quarter over a year earlier.
The projection for higher revenue for discount airlines may not be surprising considering such carriers are already reporting more passenger traffic. In January, Southwest reported an 8.3% rise in passenger traffic from a year earlier while JetBlue reported a 5.9% increase. By comparison, the nation's largest airline, Delta, reported a 5% decrease in passenger traffic in January.
The Majestic report said the improving numbers were a sign that demand for business travel was returning. Business travelers represent the most profitable passengers for airlines because they typically spend more on fares. The Majestic report said leisure travel began to recover last summer as families took advantage of discounted airfares and cheap hotel rates.
Still, airline analysts note that the industry has been in a slump since spring 2008, and a return to pre-recession revenue and passenger demand, if it does happen, could take awhile.
Jan Brueckner, an economics professor at UC Irvine, said the recession might have taught many businesses that they could spend less on travel by relying instead on video conferencing and other options.
"It's uncertain if the foundation of business travel has been undermined," he said.
hugo.martin@latimes.com
* By The Associated Press
* On 1:04 pm EDT, Thursday October 8, 2009
Here are the consensus forecasts of analysts for third-quarter earnings or loss per share and revenue for the nation's nine largest airline companies, according to Thomson Reuters as of Thursday morning. Figures from third quarter of 2008 are in parentheses.
-- AirTran Holdings Inc.: forecast to report 11 cents earnings per share; $597 million revenue. (Lost 91 cents per share; $673 million in revenue during last year's third quarter.)
-- Alaska Air Group Inc.: $2.04 earnings per share; $968 million. (Lost $2.40 per share; $1.07 billion revenue a year ago.)
-- AMR Corp., parent of American Airlines: loss of 86 cents per share; $5.10 billion. (Lost 17 cents per share; $6.42 billion revenue.)
-- Continental Airlines Inc.: 2 cents earnings per share; $3.30 billion. (Lost $2.14 per share; $4.16 billion revenue.)
-- Delta Air Lines Inc.: loss of 7 cents per share; $7.60 billion. (Lost 13 cents per share; $5.72 billion revenue.)
-- JetBlue Airways Corp.: 4 cents earnings per share; $851 million. (Lost 2 cents per share; $902 million revenue.)
-- Southwest Airlines Co.: loss of 1 cent per share; $2.59 billion. (Lost 16 cents per share; $2.89 billion revenue.)
-- UAL Corp., parent of United Airlines: loss of $1.09 per share; $4.33 billion. (Lost $6.13 per share; $5.57 billion revenue.)
-- US Airways Group Inc.: loss of 92 cents per share; $2.71 billion. (Lost $8.45 per share; $3.26 billion revenue.)
Sources: Thomson Reuters; company press releases and regulatory filings
Question: Why would J.P. Morgan put a BUY recommendation of UAUA and US AIR? Those two will have the largest losses in their best quarter, if forecasts are accurate.
Answer: To sell UAUA stock before the earnings come out, so the D.I.P. loans get paid-off before the Chapter 7 is declared. Does ALPA recognize contract talks are a waste?
Denis
Jan 23, 2009
By Darren Shannon
Aer Lingus and United Airlines have unveiled an arrangement that will see the Irish carrier operate a nonstop service from the U.S. airline's Washington Dulles hub to Madrid, while United will handle the route's revenue management.
The service is scheduled to begin in March 2010 and goes on sale this April. The two carriers in a joint press release also signaled that more routes between North America and Europe are expected to be added in 2011.
"This partnership will capitalize on the growth opportunities presented by the open-skies agreement between the European Union and the United States by opening new transatlantic nonstop services," said the companies.
Both airlines also note that their relationship could broaden into a deeper joint venture.
"It is intended that both carriers will equally share the commercial and operating benefits and risk, with Aer Lingus managing the operational aspects of the new partnership services and United Airlines taking responsibility for managing revenue generation," they added.
The Madrid flight will be served by Aer Lingus Airbus A330-200s configured for the airline's standard 269-seat, two-class cabin, which includes 24 business-class seats. The flight to Madrid will carry both airlines' designator codes.
Aer Lingus and United began code sharing between Ireland and the U.S. in October 2008.
"Today's announcement is the culmination of extensive discussions between the partners since 2007," said Aer Lingus CEO Dermot Mannion in the Jan. 22 release. "Aer Lingus has been providing long-haul services for over 50 years and was the first airline to commence new transatlantic services under open skies.
"We are very excited by the potential of the partnership and believe that the unique combination of two leading transatlantic airlines can drive significant value for the shareholders of both companies."
Added United Chairman, President and CEO Glenn Tilton, "Our expanded agreement takes advantage of new opportunities under the U.S.-EU open-skies agreement, benefiting our customers with additional competition and capacity in these markets. This partnership provides for a deeper commercial relationship with Aer Lingus, and capitalizes on the unique strengths of both our companies."
Holly Hegeman of Plane Business and Plane Buzz
http://www.planebuz z.com/
January 23, 2009
United Airlines Seems Determined to Piss Off Employees; O'Leary Tees
Off on News
Holly Hegeman at Plane Buzz
Take one major airline.
Have that major airline use bankruptcy as an excuse to destroy its
employee pension plans.
Have same airline continue to enjoy some of the most adversarial
management/employee relations in the industry.
Add just one more objectionable move on the part of said airline's
management to the almost-boiling pot.
Stir.
Back off and watch as the pot boils over.
Today that is exactly what has happened, as United Airlines' pilots
are reacting to the news that the airline plans to link-up with Irish
airline Aer Lingus to offer flights between the U.S. and Madrid. Say what?
Starting next year, both airlines will market the flights and each
airline will have their own flight numbers on the route.
But United Airlines' employees will have nothing to do with the actual
operation of the flights.
No, Aer Lingus will fly the planes with their crews. And provide the
planes. United will handle the marketing for the flights.
According to a report in Bloomberg, "Aer Lingus and UAL will review
the partnership after two years and may turn it into a 'full-blown
joint venture,' with the Irish carrier owning 51%."
Not surprising that the United pilots are not happy about this news.
Looking at the details of the deal this looks like nothing more than a
glorified wet lease.
Meanwhile, United Airlines continues to sit on a stagnant-to- declining
fleet, and continues to announce furloughs for its own pilots and
flight attendants.
In a message from the Chairman of the airline's ALPA MEC, Steve
Wallach told the troops,
"The day after reporting one of its worst quarterly financial results
in history and after furloughing an additional 254 pilots (bringing
the total to 606 pilots), United Airlines announced today that it has
entered into what it calls an "innovative" partnership with Aer
Lingus"....He then added, "Aer Lingus has advised the Irish press that
this joint venture will operate an Aer Lingus aircraft with neither
United nor Aer Lingus employees, under a separate operating
certificate and under newly established wages and working conditions.
Obviously, this partnership will be accomplished at the expense of
United's and Aer Lingus' own pilots and other employees. This
development, where United attempts to establish an airline operation
without the use of United aircraft or employees, is nothing less than
the outsourcing of jobs to an international company, and clearly
demonstrates that this management continues to make business decisions
without regard to its pilots and other employees... ..The United pilots
are exploring every option to put an end to the company's blatant
disregard and lack of loyalty to the United Airlines brand."
By the way, we all should have known that Ryanair's CEO Michael
O'Leary wouldn't sit around and be quiet on this development. As most
of you know, Ryanair is in the middle of yet another hostile takeover
run at Aer Lingus.
Today Ryanair issued a statement in which O'Leary said, "
"Aer Lingus and United Airways share many similar traits. They
both used to be big in the 1950's and 1960's, but sadly today they are
just shadows of their former glory. Both have recently announced
losses, job cuts and pay cuts. After months of trawling around looking
for partners, it is a sad reflection on Aer Lingus that the best they
could come up with is one of the weakest and biggest loss makers in
the U.S. airline industry. Given the scale of United's losses there is
no guarantee that they will even be around in March 2010 to operate
this "partnership" .
"It is hard to think of any transatlantic airline losing any sleep
at the thought of being faced with the combined weakness of Aer Lingus
and United Airlines on the Madrid-Washington route. Today's
announcement shows just how desperate Aer Lingus is to find a partner,
any partner it can, even if the flights don't start until March 2010.
This so called "partnership" with another "loser" like United shows
that Aer Lingus has no independent strategy, and no prospect of
remaining independent. "
That's what I like about Mr. O'Leary. He's never afraid to tell us
what he really thinks.
============ ========= =======
UAL Corporation has added a news release to its Investor Relations website.
Title: Federal Court Issues Preliminary Injunction Against ALPA to Protect United Customers, Employees
Date(s): 11/18/2008 8:32:00 AM
Federal Court Issues Preliminary Injunction Against ALPA to Protect United Customers, Employees
Court Puts Halt to Union's Unlawful Job Actions That Disrupted Operations
CHICAGO, Nov. 18 /PRNewswire-FirstCall/ -- A federal court granted United Airlines' motion for a preliminary injunction against the Air Line Pilots Association (ALPA) and four individual pilots, putting a halt to a deliberate, organized and unlawful campaign of sick leave abuse, pilot intimidation and other actions that resulted in the cancellation of hundreds of flights, inconvenienced thousands of customers and cost United millions of dollars in lost revenues.
The court determined that ALPA's actions were in violation of the Railway Labor Act, which governs labor relations in the U.S. airline industry. United filed the lawsuit seeking relief from the court on July 30, 2008.
In its ruling, the court found that the public interest mandates that ALPA cannot organize and support activity designed to disrupt United's operations and also must exert every reasonable effort to stop any organized disruption that occurs. With a preliminary injunction in place, the company will seek a permanent injunction to conclude the process.
"This is an important ruling because it means our customers and employees will not be subject to ALPA's illegal actions intended to disrupt our operations and intimidate our employees. We will continue to be decisive and proactive in taking all steps necessary to ensure the success of our company for the benefit of all of our stakeholders," said Pete McDonald, executive vice president and chief administrative officer.
McDonald said the company pursued other possible resolutions - at significant financial cost - before pursuing litigation, including increasing reserve pilot staffing and negotiating with ALPA to modify certain work rules in the current agreement.
About United
United Airlines (NASDAQ: UAUA) operates nearly 3,000* flights a day on United and United Express to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. With key global air rights in the Asia-Pacific region, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for our customers to 975 destinations in 162 countries worldwide. United's 52,000 employees reside in every U.S. state and in many countries around the world. News releases and other information about United can be found at the company's Web site at http://www.united.com.
Glenn on "Foreign Ownership".
By Adrian Schofield/Aviation Daily
United CEO Glenn Tilton yesterday fired a broadside at critics of transatlantic open skies and domestic airline mergers, saying they are helping to keep U.S. airlines from competing with their foreign competitors.
The dilemma facing the industry is whether it can find a way to compete effectively, or "default to the same cycle of dysfunction and bankruptcies, and continue to lose ground to our foreign competitors, " Tilton said at an American Bar Association conference. This question has been addressed in Congress recently and needs further debate, Tilton believes.
Deregulation has delivered significant benefits to the U.S. economy, but "has yet to be comparably effective in the international arena .... U.S. carriers are losing competitiveness globally because of such international restrictions, " said Tilton. "Completing the job of deregulation" will help the industry break out of the recurring pattern of "financial crisis and bankruptcy."
Proposals to increase foreign investment in U.S. airlines have been defeated over the past year, and "those who favor the status quo are having some success," said Tilton. Among this group are those "celebrating the disruption" of U.S.-EU open-skies talks, as well as those who fought to kill the Transportation Dept.'s attempt to reform airline ownership rules or are attempting to block domestic consolidation.
These "status quo" proponents need to propose another way for the U.S. industry to compete better at home and abroad, Tilton said. Since the status quo has resulted in the loss of more than 170,000 jobs and $35 billion from U.S. carriers since 2001, this begs the question of whether the status quo is worth defending, he said.
"The only winners in this situation are our foreign competitors, who would enjoy nothing more than to see the U.S. network carriers remain in a state of fragmentation and relative weakness, unable to invest in our product and aircraft, falling further behind in the competition for the global passenger," said Tilton.
Asked about the prospects for further airline merger attempts after the apparent collapse of US Airways' bid for Delta, Tilton said the next wave could see different types of merger. He pointed out that US Airways essentially launched a hostile bid, but now airlines may consider mergers that are in the interests of both companies.
UAL rallies as investors applaud latest moves.
United parent secures a $1 billion boost to liquidity, posts solid results