WGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 37 Posted (10 years 4 months 2 hours ago) and read 3241 times:
I have seen several posts recently on the topics of "How is AA doing?", "How is UA doing?" and "How is Delta doing?". Perhaps now would be a good time to sit back and evaluate the overall performance of all of the Big Six US Majors, in comparison to one another and in comparison to their competitors, and also to contemplate their current financial health and the prospects of their survival. By "Big Six" I am referring to the following airlines: United, American, Delta, Continental, Northwest and US Airways. I do not wish to start a debate about whether or not other airlines should be added to this list, I am merely using the 6 airlines that were considered to be the Big 6 in a recent Motorbooks publication.
In my opinion, the airlines are in the following positions:
United: Endangered, but possibly surviving.
American: OK so far, having avoided bankruptcy, but disagreeable business practices and possible problems further down the road.
Delta: OK for the time being, but disaster possibly on the horizon.
Continental: Same as Delta, but smaller.
Northwest: Slightly isolated from the rest, but apparently OK.
US Airways: Somewhat "iffy" but momentarily stable.
Not knowing the actual conditions of these airlines of course, these are mere guesses based on recent news items and their current apparent situation, and I would prefer to hear the more informed opinions that some of you doubtless have about these airlines. I will look forward to reading your replies.
Artsyman From United States of America, joined Feb 2001, 4745 posts, RR: 36 Reply 1, posted (10 years 4 months 2 hours ago) and read 3173 times:
May I ask why you suggest Disaster for Continental. They have almost 2 billion in unrestricted cash, are making money as opposed to losing money, have good employee moral, are not messing their employees around more than they have to, are paying the pension fund, successfully renegotiated a lot of leases, and landing rights and arguably have the best overall product of the majors.
WGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 37 Reply 2, posted (10 years 4 months 2 hours ago) and read 3154 times:
Artsyman, it was just a guess based on some very questionable rumors I had heard, nothing more. I am glad that it sounds like they will be alright. They do have some competition over their routes and there was some question as to whether they could hold out overall, but I think based on your comments they appear to be in a stable position. I posted this topic in the hopes of seeing this kind of discussion, and thanks for your input! Again, good to hear CO is better off than I thought-they have a fascinating history with Bob Six, Frank Lorenzo and so forth.
StevenUhl777 From , joined Dec 1969, posts, RR: Reply 4, posted (10 years 3 months 4 weeks 1 day 23 hours ago) and read 3068 times:
For what it's worth....
UA: Surviving, restructuring, evolving....somehow merges with USAirways, not sure how or when.
AA: Has some serious challenges, but ahead of UA. They'll make it, and avoid Ch. 11. I can maybe seeing them buying out a LCC at some point.
DL: Disaster on the horizon? Hmmm...biggest challenge I see are wage reductions and pension reform for the pilots. Other than that, they're well on their way to recovery. Don't know enough about Song.
CO: Seems to be going well, don't really know a whole lot else. I would agree that they will probably merge with DL or NW at some point.
NW: Have to reduce pilot wages and pension benefits, in the midst of fleet replacement, Asian revenue picking up now that SARS is over...these guys just might be OK! I do see them as a merger candidate with DL and/or CO.
Capt078 From United States of America, joined Jul 2003, 421 posts, RR: 1 Reply 5, posted (10 years 3 months 4 weeks 1 day 14 hours ago) and read 3031 times:
looking at the top six (and by the way, swa is the 6th, with us airways 7th, but let's continue calling us airways 6th for the sake of this topic), here is the my assessment of the aforementioned carriers.
united: in a catastrophic situation and most likely will not survive. ual has the worst employee relations, extremely high debt ratios, and astronomical costs. they are bleeding money at an almost uncontrollable rate and barely are making their minimum levels to continue their debtor financing under chapter 11. unless significant improvements in performance and cost reduction are made, ual will lose its financing established under chapter 11. this would be the death knell for the airline. chapter 7 liquidation is entirely an unfortunate possibility for the airline. on the upside, the airline (thanks to gov't loans and reimbursements) has increased its short-term cash positions, and the employee bases are slowly warming to the newer management and are recognizing the dire situation for the airline. best thing for ual would be for american to enter chapter 11.
american: not much better than ual, though they did stave off chapter 11 temporarily. like ual, aa's costs are too high while its high-yield revenue has disappeared, as business travelers have run for the low-cost-carriers or are waiting for cheaper fares (and using ff miles). like ual, aa's employee basis will become a problem as more employees are furloughed and as aa renegs on its agreements with former twa employees. most likely, ual would fall before aa did, in which case the reduction in supply would probably be enough for aa to survive. a run in chapter 11 is foreseeable for the airline, although it would probably be a much quicker emergence than that of ual.
delta: the number three carrier is by far the best situated of the big three. enormous cash reserves and recent profit only further prove its case. in addition, delta is not plagued with the labor problems facing the number one and two carriers, as only delta's pilots are unionized, giving the airline tremendous relative flexibility. furthermore, delta does not face the same level of competition out of its main hubs as either ual or aa do in chicago and out west. also, delta's recent development of its song unit has so far proven successful and management's forsight on the matter should only benefit the carrier. delta will stand to lose from the rise of low-cost-carriers, but these losses should only be temporary, as the decline of ual and aa will only benefit the atlanta carrier. furthermore, delta's recent allignment with continental and northwest will further better position the carrier against its larger rivals.
northwest: also recently profitable, northwest should weather the recession with only minor and moderate changes. there has been discussion of reducing the memphis hub to only a regional jet facility as well as adding milwaukee as a focus city (aimed certainly at dismantling midwest airlines). northwest's delay of fleet renewal (most noticeably the continued use of dc-9s over newer alternatives) has proven to be a wise move as the airline was able to maintain significant cash reserves. however, these older planes cost great amounts to maintain and are only becoming more expensive, and the airline is now starting the fleet renewal, commencing a depletion of the cash reserves. like delta, nwa will benefit from the alliance with the number three and number five carriers, although recent suggestions of a break in the nwa-klm alliance is of concern. lastly, the end of SARS fears and return of asia travel will help maintain the airline, particularly if ual scales back or dissolves.
continental: the best positioned of the major full-service carriers (followed by delta), continental has weathered the depreciated aviation climate with only minor losses. the airline's management has done an excellent job of staving off losses by deferring superflous aircraft delivery, maintaining a young fleet, and most importantly, keeping employee relations and morale positive so that concessions and adjustments can be made without lenghty negotiations. the airline's extensive latin american and european route network have survived intact, in large part to newark's close proximity and convenience to nyc. all in all, because continental has the lowest operating costs among the top five, it is best positioned to survive in this market of decreasing air fares.
us airways: the future of us airways is certainly ambiguous although recent events have suggested it will fare well. certainly the carrier will decrease in size and will become in the east what alaska is in the west: a niche carrier with frequent eastern flights and occasional transontinental service. this is supported by us airways' recent declaration for increasing amounts of regional jets, as well as its increasing service on the east coast and the carribean. us airways does face much more competition than does alaska, but with the carrier's allignment with united, us airways should be able to maintain its loyal following.
Jetjack74 From United States of America, joined Jul 2003, 7365 posts, RR: 51 Reply 7, posted (10 years 3 months 4 weeks 1 day 11 hours ago) and read 2934 times:
I don't think you're going to see any airlines merging with one another anytime in the near future. I'd be willing to bet that, at least one of the carriers in bankruptcy will just go out of business as well as some LCC's. The LCC's are basking in the sun at the moment, but one they have the majors on solid ground, the honeymoon will be over for them and they'll have their hands full. The other airlines are learning they're lessons bit by bit. Any of the airlines that have recieved the loan guarantees will not be allowed to spend any money on a merger with any carrier. That is a clause in the agreement. United and USAir cannot enter into a merger, unless they are the seller. The buyer, in turn must assume the debt of that carrier including the loan guarantees. AMR is still licking it's wounds from the TWA marriage and will continue to do so for sometime to come. UAL and USAir are duds. NW, DL, CO are in a good position at the moment and once they are in full-swing of profitable quarters, will not risk putting themselves in jeopardy with costly and nasty mergers. I see airline realignments coming. With the big six in these alliances, they're going to want to cut down on regional competition within the alliance. Look at some of the positions of hubs of the carriers. List the hubs by carries and alliance. Some may have closed or scaled back from being called true hubs, but look at the strategic positions. All of these hubs were based in the competition concept.
Capt078 From United States of America, joined Jul 2003, 421 posts, RR: 1 Reply 8, posted (10 years 3 months 4 weeks 1 day 11 hours ago) and read 2904 times:
Ladevale: i read and follow extensively the happenings of us airlines. primarily, i read the larger aviation publications (airways, airliners int'l, atw, airlines, oag,...), every us airlines' news and financial releases, as well as any article or report i can find. also, i did my thesis on the matter and teach economics here in boston (with aviation as my focus).
i have to ask you something, what is so imaginative about my above comments? try taking bias, emotion, and ignorance out of your response please.
Flynboy747 From United States of America, joined Mar 2001, 93 posts, RR: 0 Reply 9, posted (10 years 3 months 4 weeks 1 day 5 hours ago) and read 2850 times:
"On the other hand, Delta Air Lines, the best positioned of the US hub-and spoke carriers with some 2.5 billion in cash, is unthreatened by the specter of bankruptcy, at least in the next 18 months." (Airways Magazine- Aug. 2003)
Flymia From United States of America, joined Jun 2001, 6765 posts, RR: 6 Reply 10, posted (10 years 3 months 4 weeks 1 day 3 hours ago) and read 2815 times:
I don't see AA having huge problems. And they wont go out for sure. Also unless UA merges I don't think the government would let them go out. And just to say the US economy Situation is doing a lot better and I say we will start are way up to normal situation. I don't think all these mergers are going to happen. But UA/US would be a good idea.
"It was just four of us on the flight deck, trying to do our job" (Captain Al Haynes)
US Air/TWA Fan From United States of America, joined Mar 2001, 125 posts, RR: 0 Reply 11, posted (10 years 3 months 4 weeks 1 day ago) and read 2764 times:
My list of best off airlines in order from best to worst:
1. Continental (most efficient of the majors; will be first to true profitability)
2. US Airways (the restructuring went very well in securing a better future for US)
3. Northwest (Asian network and low a/c payments will help)
4. Delta (Much better than AA or UA; but Song is likely to be a financial disaster)
5. American (employee-mgt mistrust will eventually be less significant; will downsize, but likely survive; watch for more cuts at STL, JFK, maybe more)
6. United (Ahhhh! where to start. Employee-mgt relations the worst of any airline, very high costs vs depressed business market; watch for more planes to be retired and likely LAX/IAD hub closures...in the end, UAL probably will survive but will be about 2/3 of its present size)
Paddy From Taiwan, joined Jul 2003, 390 posts, RR: 0 Reply 12, posted (10 years 3 months 4 weeks 1 day ago) and read 2747 times:
I'm no expert but here are my impressions, correct me if I'm wrong:
AA: Doing okay, but they need to stop using 50 year old business models. Closing some hubs/streamlining services should help.
UA: not doing so well for obvious reasons, they REALLY need to stop using 50 year old business models. Morale/labor seems to be a problem too. I talked to a UA pilot a couple weeks ago and he said that it feels like he is working for a different company compared to a few years ago. Tough times indeed.
NW: Doing fairly well? Good codesharing partners, updating fleet, strong in Asia.
DL: Financial problems looming on the horizon? They aren't doing as bad as AA or UA but I've been getting the impression that they aren't doing too well either. I wish I could remember the specific articles I've read regarding them.
CO: The best of the bunch? Aren't they actually making a profit this year? And joining SkyTeam too right?
US: I see them as the odd man out. Unless they carve out their own niche I don't see them going anywhere. Maybe a stronger United will emerge and swallow them up.
Capt078 From United States of America, joined Jul 2003, 421 posts, RR: 1 Reply 13, posted (10 years 3 months 4 weeks 16 hours ago) and read 2648 times:
i pretty much agree with the last few comments (ironically they are similar to my above post), although i disagree with the assessment that delta is doing poorly and that song will be a "financial disaster". regarding delta's recent negative news, i believe you are referring to their announcement that the airline will no long issue stock dividends. this can be interpretted as bad, however i believe that it is in line with leo mullen's intentions to further increase the company's liquidity. for clarification, here is the link to the latest financial information released by the airline:
regarding song, here is a quote from that release:
"Song, Delta’s new low-fare operation, was successfully launched on April 15 and served nine markets with 10 aircraft during the June 2003 quarter. Song has consistently achieved load factors above 70.0 percent during the quarter. Song is exceeding operational expectations with a completion factor of 99.9 percent and on-time performance of 90.8 percent for the June 2003 quarter. Furthermore, Song flights have consistently been able to achieve a turn time of less than 50 minutes by using new, more efficient processes. Due to the success of this initiative, turn time efficiencies are currently being tested for use on Delta’s mainline flights. By November, Song will be fully implemented, serving 28 markets with 36 aircraft."
if you haven't flown song yet, i highly recommend it. i have flown the bos-pbi route seven times now, and every flight has been excellent. the flight attendants (who had to "audition" for the song position) are great and hilarious. each flight had buy-onboard meals that were rather good, quick and attentive service, and they hand out gameboys to the kids (until the ptvs are installed). also, each flight was full, completely full. not only do i think song will be a success for delta, i think we will see delta expand song beyond current targets. granted, song will never have the operating costs of jetblue or southwest, the unit will most definitely realize significant cost reductions relative to the mainline, and therefore be a success.
WorldTraveler From , joined Dec 1969, posts, RR: Reply 14, posted (10 years 3 months 4 weeks 14 hours ago) and read 2592 times:
The structure of the industry has essentially remained unchanged for 10 years. In contrast to Europe, no major US carriers have failed since 9/11 and in contrast to the air transportation crisis after the first Gulf War even though the latest was far more damaging to the world economy.
It is not realistic to think that all 6 US network carriers can continue to survive any more than all of the European legacy carriers will survive. Each of you can interpret the data as you wish but some carriers will be lost either by liquidation or acquistion. I personally think UA and US are most likely to fail, if you put it in that perspective.
There are very few major U.S. markets left in which the pricing is not controlled by low cost carriers and Europe is fast moving in that direction. The surviving network carriers must have costs only slightly above the low cost carriers. Network carriers will always have some markets that have higher fares than comparable markets in which low cost carriers are present. Only time will tell whether the number of markets with higher fares will be enough to sustain all of the network carrier hubs (and the carriers that operate them). The same principle applies to Europe.
Remember that low cost carriers also operate hubs with their cost and complexity (Airtran and Frontier) so hubs are not the issue as much as the underlying costs at a carrier. For example, Southwest, a largely point to point carrier, is going to have to some costs like the big 6 now that employees have been with them long enough to have a full pension.
Capt078 From United States of America, joined Jul 2003, 421 posts, RR: 1 Reply 15, posted (10 years 3 months 4 weeks 13 hours ago) and read 2576 times:
WorldTraveler: thank you for your very astute and informative assessment. while i agree with the majority of your comments, i do disagree with your suggestion that "there are very few major U.S. markets left in which the pricing is not controlled by low cost carriers". i think a clear indication that this is not the case is the fact that not only are all the lcc's expanding, but we are also looking for new entrants (most notably a virgin-us operation). certainly, if the major markets were saturated with lcc's to the point where they controlled the pricing, new entrants and expansion would be less seen. the fact that we are seeing the expansions, is indicative of high demand for lcc's in conjunction with low supply of low-fare travel. otherwise i completely agree with your assessment.
oh yeah, i also believe that us airways will survive, but do agree that ual most likely will not. i see us airways' future as that similar to alaska airlines in the west; certainly a successful business model.
Deltadude8 From United States of America, joined Feb 2000, 569 posts, RR: 4 Reply 16, posted (10 years 3 months 4 weeks 13 hours ago) and read 2563 times:
CApt078- I could not agree with you anymore in everyone of your posts...I think you are on the right track with your statements...let me just back you by saying...When the news is on and they begin to talk about aviation which airlines do the mention most...United and American and sometimes USairways, but rarely do you ever hear anything about DL, CO, or NW (who might merge one day...???)(I think look for DL and CO to merge in 5-10 years...(long standing rumor at DL))
Capt078 From United States of America, joined Jul 2003, 421 posts, RR: 1 Reply 17, posted (10 years 3 months 4 weeks 12 hours ago) and read 2538 times:
Deltadude8: thank you for your support, i certainly appreciate it. of course, we all have our own opinions and speculations, and it's certainly nice to not be berated for differing from others.
i do not believe delta and continental will ever merge, for many reasons, not the least of which is the government and its regulations. i am very pleased that the two (and nwa) have joined in an alliance, and i certainly hope it is successful. also, i do believe that ual will not make it and if that is the case, the sudden decrease in supply would further dissuade the government from allowing a reduction in competition. but we'll see. thanks for the support.
WorldTraveler From , joined Dec 1969, posts, RR: Reply 18, posted (10 years 3 months 4 weeks 11 hours ago) and read 2496 times:
I'm saying that the pricing in most major markets is dictated by low cost carriers and not the network carrier. I'm not saying that there are not growth opportunities for low cost guys. The reason low cost carriers are growing is because they can profitably provide service at their fare levels while the majors cannot and are entering markets previously dominated by the big 6. example: JetBlue's entrance into the JFK-ONT and OAK markets affected AA and UA's ability to command high fares JFK-LAX and SFO, even before America West announced they would fly JFK-SFO and LAX nonstop themselves.
Network carriers will continue to shrink and lose share to the low cost carriers until the big 6 can compete against the "little guys" and the market will no longer support any more carriers. Right now, consumers are saying they want the better value that low cost carriers offer more than they want 6 big, bloated airlines around. Given that 70-80% of US passengers still fly on the big 6 airlines, there are still plenty of passengers that will fly the low cost guys if the big boys let them be taken.
Capt078 From United States of America, joined Jul 2003, 421 posts, RR: 1 Reply 19, posted (10 years 3 months 3 weeks 6 days 15 hours ago) and read 2423 times:
WorldTraveler: i generally agree with you. low-cost-carriers have impacted many of the country's most popular routes, although there are still several "major markets" with little to no lcc price influence. you hit the nail on the head commenting on how lcc carriers can be profitable with lower fares. too often people do not realize that an lcc is successful because their costs are so low, and that is why they offer lower fares, especially for last-minute walk-up travel.
UA744Flagship From , joined Dec 1969, posts, RR: Reply 20, posted (10 years 3 months 3 weeks 6 days 10 hours ago) and read 2364 times:
While United is indeed in a very precarious situation, there is nothing to back up the opinion that United employee labor relations are terrible.
On the contrary, there is much to prove that labor relations have improved, even if morale has declined. For the past couple months, United has reported the highest customer satisfaction levels with customer contact employees in its history.
United was also 2nd best in terms of passenger complaints over this period.
While morale may suck, the remaining employees have changed their attitudes and are really working their arses off to make UAL a quality airline.
DeltaMD11 From United States of America, joined Dec 2002, 1701 posts, RR: 37 Reply 22, posted (10 years 3 months 3 weeks 6 days 6 hours ago) and read 2301 times:
Overall, I agree with most of the stuff that has been said thus far, sans the comments about mergers. I don't see any sort of merger happening in the near future. AA and UA are hurting, but I think they will survive-obviously UA is bungled up with a lot of underlying issues in managament as well as hot and hevay competition from F9 in DEN, AA in ORD, AA and DL in LAX, so on and so forth. While the TWA merger has caused AA's cash-flow diarrhea so-to-speak.
DL is the best-situated out of the US majors right now from what I've been reading and have a very healthy cash-flow for the next 18 months. NW and CO are well-off as well. All three of these airlines have very good management/staff relations, they serve viable markets, and have less competition than UA and AA do (they are the competition really). I'm glad to see that NW and CO are joining SkyTeam (I fly DL, CO, and NW a lot, so this will be healthy for my SkyMiles account). Hopefully NW will encourage KLM to join.
US Airways has rebounded remarkably in a very short time, and have a good outlook. They need to keep on doing whatever they're doing. I do believe, as mentioned above, the US will become the AS of the East in some respects, with some international flights to Europe still.
I believe that Southwest needs an honorable mention though, since technically they are the 6th largest in the United States. Southwest has fared the best out of all of the US majors, and ocntinue to grow. I think a WN/HP codeshare would be very healthy for both Southwest and America West since they serve similar markets, and have competing routes. Instead of trying to bash eachother (in which both airlines have been unsuccessful in doing over the past 20 years), work co-operatively with eachother and get a whole hell of a lot farther than where they are right now.
Just my thoughts....but of course I'm no economist. These are just my impressions/knowledge from reading press releases/magazines...what have you.
Too often we ... enjoy the comfort of opinion without the discomfort of thought. - John Fitzgerald Kennedy
Deltadude8 From United States of America, joined Feb 2000, 569 posts, RR: 4 Reply 23, posted (10 years 3 months 3 weeks 6 days 6 hours ago) and read 2270 times:
Let me just point out what seems to be an obvious point...In order for the Big 6 as a group to continue...
One of the big six is going to have to drop...and right now it looks that UAL will be the one to drop...its to bad that it has to be like that but there is just too much competition right now. I think that once one of the majors drops the others will be able to rebound off of the one that drops.
WGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 37 Reply 24, posted (10 years 3 months 3 weeks 6 days 3 hours ago) and read 2229 times:
I think I should state my decision to include Continental in the list instead of Southwest reflects on the fact that, in addition to the reasons stated above, Continental operates major, long distance international routes and provides system-wide first/business class and VIP lounges, they also operate non-stop transcontinental routes and have subsidiary/affiliated airlines providing connecting service-in short, they are an international network carrier.
Southwest may be technically larger (and indeed, I was aware of this fact) but they do not operate any long-distance international routes and they do not have subsidiary/affiliated airlines providing connecting regional service. Thus, simply stated, whereas Southwest is a larger operation than Continental, they are not a Network Carrier, they are a Low Cost Carrier, and this topic was intended primarily to discuss the health of the Big Six US Network Carriers in the context of each other and there ability to survive, as opposed to comparing and contrasting them with their LCC rivals. So, it comes down to this: though Southwest is larger than Continental, if they were part of this subject it would come down to a comparison of apples and oranges. CO and Southwest are entirely different businesses.
25 Artsyman: Southwest may be technically larger (and indeed, I was aware of this fact) *************** Southwest actually carries more passengers than any of the
26 Capt078: UA744Flagship: please do not interpret suggestions that ual has the worst employee relations as meaning the employees are bad. on the contrary, ual em
27 WGW2707: "Southwest actually carries more passengers than any of the majors, but I agree with you that they shouldn't be included in the list. Continental are
28 TxAgKuwait: I am not going to predict mergers, bankruptcies, liquidations. Instead, I am going to suggest something really radical. Change. To survive, the six bi