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USAToday: Why United Airlines Will Fail Again?  
User currently offlineDouwd20 From United States of America, joined May 2005, 131 posts, RR: 0
Posted (8 years 8 months 3 weeks 20 hours ago) and read 9129 times:

Interesting story in USA Today. The focus is United but a lot of it applies to all the legacy carries.

http://www.usatoday.com/travel/colum...telli/2006-01-30-brancatelli_x.htm

Synopsis:

-United's oil-price projections are fantasy
-United is swimming in debt
-United is mortgaged to the hilt
-United's route network is no longer admirable
-United is less competitive than ever
-United has no capacity to grow
-United's top managers are focused on short-term gains
-United has a looming frequent-flier crisis.
-United's employees are angry

63 replies: All unread, showing first 25:
 
User currently offlineLondonlady71 From United Kingdom, joined Jan 2006, 152 posts, RR: 2
Reply 1, posted (8 years 8 months 3 weeks 20 hours ago) and read 9123 times:

Quoting Douwd20 (Thread starter):
-United's employees are angry

well I'm not I am very happy working for them  Smile


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 2, posted (8 years 8 months 3 weeks 20 hours ago) and read 9054 times:

Joe Brancatelli has ALWAYS hated United, and the legacy airlines in general. Comments like this are expected from a know-ita-all idiot like him. Further, his paper has HATED United Airlines for at least 12 years, if not more. They RAILED against the ESOP even before it started.

Expect to see a similar article from him regarding Delta and Northwest.


User currently offlineKanebear From United States of America, joined May 2002, 953 posts, RR: 1
Reply 3, posted (8 years 8 months 3 weeks 19 hours ago) and read 9033 times:

Quoting StevenUhl777 (Reply 2):
Joe Brancatelli has ALWAYS hated United, and the legacy airlines in general. Comments like this are expected from a know-ita-all idiot like him. Further, his paper has HATED United Airlines for at least 12 years, if not more. They RAILED against the ESOP even before it started.

Expect to see a similar article from him regarding Delta and Northwest.

No, he is pretty no nonsense and is VERY even in his remarks. He's called LCCs to task as well... if you thought what he said about United is bad, you shoulda seen his comments on Indy. He's equal opportunity and gives props as well as bashes when appropriate.


User currently offlineSATX From United States of America, joined Apr 2005, 2840 posts, RR: 7
Reply 4, posted (8 years 8 months 3 weeks 19 hours ago) and read 8990 times:

-United's oil-price projections are fantasy (probably)
-United is swimming in debt  checkmark 
-United is mortgaged to the hilt  checkmark 
-United's route network is no longer admirable ?
-United is less competitive than ever ?
-United has no capacity to grow ?
-United's top managers are focused on short-term gains (probably)
-United has a looming frequent-flier crisis. (possibly)
-United's employees are angry (probably)



Open Season on Consumer Protections is Just Around the Corner...
User currently offlineXFSUgimpLB41X From United States of America, joined Aug 2000, 4211 posts, RR: 37
Reply 5, posted (8 years 8 months 3 weeks 19 hours ago) and read 8945 times:

They are planning on 1.62 a gallon for jet-a.... prices are around 1.90.... I see them in Ch.11 again within a year... or worse.


Chicks dig winglets.
User currently offlineAlphascan From United States of America, joined Nov 2003, 937 posts, RR: 13
Reply 6, posted (8 years 8 months 3 weeks 19 hours ago) and read 8923 times:

Quoting StevenUhl777 (Reply 2):
They RAILED against the ESOP even before it started.

Steven,

Not exactly good evidence for your arguement considering how the ESOP turned out. Better hope they're not right again.

I think Brancatelli went a little over the top in this column in that he didn't focus on any of UA's strengths...but he does have some valid points.



"To he who only has a hammer in his toolbelt, every problem looks like a nail."
User currently offlineRobsawatsky From Canada, joined Dec 2003, 597 posts, RR: 0
Reply 7, posted (8 years 8 months 3 weeks 19 hours ago) and read 8803 times:

If they've just re-organized why would they be "swimming in debt" and "mortgaged to the hilt" now? Doesn't that make it a rather insufficient re-org?

User currently offlineDouwd20 From United States of America, joined May 2005, 131 posts, RR: 0
Reply 8, posted (8 years 8 months 3 weeks 19 hours ago) and read 8769 times:

Quoting Robsawatsky (Reply 7):
If they've just re-organized why would they be "swimming in debt" and "mortgaged to the hilt" now? Doesn't that make it a rather insufficient re-org?

In Ch. 11 you don't necessarily shed all your debt. The exit financing they received is secured by United assets hence the term 'mortgaged to the hilt'.


User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 9, posted (8 years 8 months 3 weeks 19 hours ago) and read 8716 times:

Some of his remarks are just puzzling. Like them or not, United is among the most recognizable brands out there. Their network is comprehensive and enviable. Their P.S. service has done remarkably well by most accounts. The well-heeled, business travelers are flying JFK-SFO and that is where UA has concentrated its premium resources. That they do not offer the same product every elsewhere simply is good business sense.

His points about fuel price assumptions are fair but... I think the WSJ article that came out about 2 weeks is far more credible and compelling than this guy.


User currently offlineJacobcal From United States of America, joined Oct 1999, 197 posts, RR: 1
Reply 10, posted (8 years 8 months 3 weeks 17 hours ago) and read 8481 times:

Wow, great article. Thanks for the post!

JacobCAL


User currently offlineBurnsie28 From United States of America, joined Aug 2004, 7553 posts, RR: 8
Reply 11, posted (8 years 8 months 3 weeks 17 hours ago) and read 8443 times:

That guy makes a few good points, but for the overall i would say he is way off, hes never really been on the right path with a lot of stuff.


"Some People Just Know How To Fly"- Best slogan ever, RIP NW 1926-2009
User currently offlineLuv2fly From United States of America, joined May 2003, 12118 posts, RR: 49
Reply 12, posted (8 years 8 months 3 weeks 17 hours ago) and read 8408 times:
Support Airliners.net - become a First Class Member!

I think he does hit the nail on the head, so to say. Though time will ultimately tell.


You can cut the irony with a knife
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 13, posted (8 years 8 months 3 weeks 17 hours ago) and read 8408 times:

Well, their stock (UAUA) is down 10% today. Not a very auspicious start. So the market is voting "no confidence" at the moment. Better cash in those options at the first opportunity, boys!


"When all is said and done, more will be said than done".
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 14, posted (8 years 8 months 3 weeks 17 hours ago) and read 8360 times:

This is an interesting factoid from the USA Today article:

Quote:
United's top managers are focused on short-term gains. United's top executives recently rewarded themselves with 8% of the new airline's shares. This bonus plan, which The New York Times called "insanity squared," has another intriguing fillip: They vest with head-spinning rapidity. According to court filings, 20% vest after six months and another 20% vest after one year. Then 20% more of the shares vest in each of the next three years. Bottom line: Chief executive Glenn Tilton and his 399 top lieutenants now have a financial incentive to make the kind of short-term, shore-up-the-share-value decisions that are often incompatible with the long-term vitality of an airline.

"Insanity squared"? First time in years I've agreed with anything attributed to the New York Times!  Wink



"When all is said and done, more will be said than done".
User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Reply 15, posted (8 years 8 months 3 weeks 16 hours ago) and read 8321 times:

I really think that UA should introduce a uniform, low-cost, low-fare, quality service across the board. Having all of these different products is dangerous. Here's what I think United should do:

1. Eliminate Ted. Introduce a low-fare, JetBlue style across the board, domestic and international.
2. Make Economy Plus the standard for United. Give the customers something to enjoy at 35-inch pitch, not torture them at 31-inches.
3. Eliminate Business-Class and really spice up the First Class product. Make lie-flat beds the standard on international flights (like Air New Zealand) and offer a lot of amenities.
4. Get new management. Ones that think, "What can I do to make air travel more better and affordable?" instead of "How much money can I suck out of this company?"


User currently offlineTozairport From United States of America, joined Oct 2005, 686 posts, RR: 1
Reply 16, posted (8 years 8 months 3 weeks 16 hours ago) and read 8301 times:

Quoting XFSUgimpLB41X (Reply 5):
They are planning on 1.62 a gallon for jet-a.... prices are around 1.90.... I see them in Ch.11 again within a year... or worse.

True, but fare increases have stuck making the cost of fuel a bit more bearable. Plus UA hedged a bit at $44/barrel which also helps. I see NW, Mesaba, and DL having more troubles than UA.

Quoting Lumberton (Reply 13):
Well, their stock (UAUA) is down 10% today. Not a very auspicious start.

On the surface true. HOWEVER, the stock was expected and widely reported to open at around $15/share. I think that there is a lot of profit taking going on while the market figures out what the true price of the stock should be.

Good ole' USA Today. Yesterday's news tomorrow. They can't even get their Soduku puzzles right (for those of you who tried Tuesday's version).



Meet the new boss, same as the old boss.
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 17, posted (8 years 8 months 3 weeks 16 hours ago) and read 8288 times:

Quoting Iloveboeing (Reply 15):
4. Get new management. Ones that think, "What can I do to make air travel more better and affordable?" instead of "How much money can I suck out of this company?"

Wholeheartedly agree! But how? Obviously, they've sold this to the bankruptcy judge and the creditors, or they would still be languishing in BK. If I were a UA employee, I wouldn't be merely "angry" at all this.



"When all is said and done, more will be said than done".
User currently offlineRwSEA From Netherlands, joined Jan 2005, 3107 posts, RR: 2
Reply 18, posted (8 years 8 months 3 weeks 16 hours ago) and read 8270 times:

Quoting Iloveboeing (Reply 15):
I really think that UA should introduce a uniform, low-cost, low-fare, quality service across the board. Having all of these different products is dangerous. Here's what I think United should do:

1. Eliminate Ted. Introduce a low-fare, JetBlue style across the board, domestic and international.
2. Make Economy Plus the standard for United. Give the customers something to enjoy at 35-inch pitch, not torture them at 31-inches.
3. Eliminate Business-Class and really spice up the First Class product. Make lie-flat beds the standard on international flights (like Air New Zealand) and offer a lot of amenities.
4. Get new management. Ones that think, "What can I do to make air travel more better and affordable?" instead of "How much money can I suck out of this company?"

1. Right, and then alienate UA's entire target market - which is business traffic.

2. AA tried this and people weren't willing to pay for it.

3. So then they would offer first and coach. The price of a ticket would jump from $1,000 in coach to $8k or so in first class. Most businesses will pay for business class, but not for first on international flights. Under your plan, all these business pax would dump UA because they'd be faced with $3-4k in Business on AA/DL/CO and double that for first on UA.

4. Mangement's sole objective is to maximize return for their investors. "Making air travel better and more affordable" is not in their interest unless it increases stock value.


Looks like it's time to go back to the drawing board, kid.


User currently offlineJamake1 From United States of America, joined May 2004, 1016 posts, RR: 2
Reply 19, posted (8 years 8 months 3 weeks 16 hours ago) and read 8270 times:

I think that for the most part, the employees of UAL understand that an industry-wide market correction has taken place and they were merely among the first (as well as US employees) to take a hit on pay and pensions. As far as the management stock options are concerned, I can only say this: Very few individuals possess the skill-set that was required to command a listing, sinking ship the size of United Airlines and steer it out of troubled waters in the way Glenn Tilton and his team have done. It was a formidable task, and as an employee, I personally do not begrudge the stock options or bonuses. Tilton should be rewarded for having positioned UAL to be a competitive powerhouse. Only time will tell, but the fact that UAL was able to obtain $3 billion in exit financing, I think speaks for itself.

Having read the USA Today article, my sense is that the author is not coming from a clearly objective view. The undertones of the article, suggest to me a bias he may have against United and perhaps is using his platform as a journalist to grind his axe, so to speak.

It is important to note that United has emerged with its global route structure intact, unlike the Braniffs, Eastern's, TWA's, and Pan Ams of a decade prior. Asian routes weren't sold off, the Heathrow routes weren't sold off, each of the hubs have been retained.

I personally believe that United has more going for it than the author of the USA Today article suggests, with the wild card continuing to be the price of oil. He neglected to mention that United has been approved for $400 million in capital expenditures to revamp the international 3-class fleet with lie-flat beds in business class, upgraded PTV's, and improved airport automation.

To sum it all up, the author's objectivity seems to me, to be rather skewed.



United's B747-400. "She's a a cruel lover."
User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Reply 20, posted (8 years 8 months 3 weeks 16 hours ago) and read 8261 times:

Quoting Lumberton (Reply 17):
Wholeheartedly agree! But how? Obviously, they've sold this to the bankruptcy judge and the creditors, or they would still be languishing in BK. If I were a UA employee, I wouldn't be merely "angry" at all this.

It's hard to find good management these days. But I believe these airlines would be far more successful if they had management that was focusing on the customer and constantly trying to improve the flying experience (with low fares), rather than having their heads stuck in Wall Street.

I think I good first step would be to get CEO Glenn Tilton out of there. I don't know why he's in there in the first place. The man has no previous airline experience whatsoever.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 21, posted (8 years 8 months 3 weeks 16 hours ago) and read 8261 times:

Quoting Iloveboeing (Reply 15):
1. Eliminate Ted. Introduce a low-fare, JetBlue style across the board, domestic and international.

why? Ted is doing well on its routes, in fact its expanding..something which DL couldn't do with Song.. no 

Quoting Iloveboeing (Reply 15):
2. Make Economy Plus the standard for United. Give the customers something to enjoy at 35-inch pitch, not torture them at 31-inches.

why? not every pax want to pay extra....most want the cheaperst fare possible..some pax want the extra pitch and pay for it, but not the vast majority.

Quoting Iloveboeing (Reply 15):
3. Eliminate Business-Class and really spice up the First Class product. Make lie-flat beds the standard on international flights (like Air New Zealand) and offer a lot of amenities.

why? Business-class sells out much more than First-class...and most Business Class seating is rivaling that of First Class from just a few years ago...

Quoting Iloveboeing (Reply 15):
4. Get new management. Ones that think, "What can I do to make air travel more better and affordable?" instead of "How much money can I suck out of this company?"

ok..I might agree with you on that... Wink

but I still think Tilton has done a great job steering the ship....



"Up the Irons!"
User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Reply 22, posted (8 years 8 months 3 weeks 16 hours ago) and read 8231 times:

I just think that United is in serious danger because I believe they have overestimated the premium market. Yes, it does exist, but I don't think it's as large as they think it is.

Low fares and quality service are here to stay! The legacy carriers must accept this or they'll never succeed. The days of $1,000 R/T from Washington, DC to Charlotte are over!


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 23, posted (8 years 8 months 3 weeks 16 hours ago) and read 8195 times:

Quoting Alphascan (Reply 6):
Steven,

Not exactly good evidence for your arguement considering how the ESOP turned out.

My point was that they boohooed the entire concept before it even began. Hindsight is 20/20, but UAL did very well the first several years, thanks in part to a great economy. There was relative labor peace and a big departure from the turmoil of the Steve Wolf days. Granted, things turned south in '99/00.

Quoting Robsawatsky (Reply 7):
If they've just re-organized why would they be "swimming in debt" and "mortgaged to the hilt" now? Doesn't that make it a rather insufficient re-org?

It was a 100% debt-financing, rather than going to outside investors and offering equity stakes, who in turn could have decided to break up UAL. Instead, four lending banks issued $3 billion in asset-backed collateralized loans.

Quoting Lumberton (Reply 13):
Well, their stock (UAUA) is down 10% today. Not a very auspicious start. So the market is voting "no confidence" at the moment. Better cash in those options at the first opportunity, boys!

This was the market adjusting for the true value, and I wouldn't be surprised if it goes down again tomorrow. The expected price was $15, but it started at $40? I'm scratching my head on that one, too. In addition, the market was rattled by lower productivity data, which could lead lead to inflation down the road. Markets never like hearing/seeing inflationary-related news.

Quoting Iloveboeing (Reply 15):
3. Eliminate Business-Class and really spice up the First Class product.

Hmmm...if anything, they should do the opposite. Business class is where the revenue is, not First. Most people riding in first are either upgrades or employees.


User currently offlineIloveboeing From United States of America, joined Oct 2005, 796 posts, RR: 0
Reply 24, posted (8 years 8 months 3 weeks 16 hours ago) and read 8168 times:

Ok........I change my response. Yes, Business Class is where the revenue is. If they can keep Business Class of good quality and at a reasonable price, then it would be ok.

I really think United should dump the 31-inch pitch, though. I sat in Economy Plus from ORD to HKG, which was nice, but I saw the people in regular economy and I really felt sorry for them. 31-inches is too small. All flights should have 32-inches minimum.


25 Lumberton : Unfortunately, Iloveboeing, when you depend on the capital markets for your life blood, this is where you need to be focused. If you miss earnings ta
26 Jamake1 : J.P. Morgan Chase and Citigroup...
27 Incitatus : I've tried to start a thread on United's ability to stay out of bankruptcy a couple of weeks ago and it got deleted in less than a day. As to why disc
28 StevenUhl777 : E+ is a great product...I flew IAD-FRA on a 744 in E+, 37C. Only problem was that there wasn't IFE at the seat, but instead on the overhead monitor.
29 Iloveboeing : I definately agree.
30 Tango-Bravo : Whether you like it... or whether you don't... they called it the way it happened, did they not? So what? What really matters is whether his points a
31 MaverickM11 : Especially now that they have stock incentives, and the way those are wired, they are geared solely toward short term gains.
32 CTHEWORLD : Closing at 35.89 a share is still way over the 15.00 a share that was forecast. For those of you that can't figure out how it opened at 41.00, it is
33 CTHEWORLD : Yeah, who is this 16-20 y/o genius that thinks he can run an airline anyway. At his age, shouldnt he be outside playing sports and chasing girls, not
34 Db373 : Improving the flying experience, while continuing to offer below industry standard fares is a contradiction in itself, no? What ever happened to the
35 Post contains images ChicagoFlyer : And GE as the 3d member... but they were not the investors, just the guys who will invest some and sell the rest to other banks--running the syndicat
36 Post contains images Halls120 : Which is why United PS is only JFK/SFO-LAX. Really. UA's current R/t fares IAD-CLT range from 187-227. I guess they got your memo. What other nuggets
37 Flyjetstar : Do you, or does anyone have a link to that WSJ article? Thanks
38 Lumberton : Actually, it wasn't Tozairport questioning the success of the IPO, it was me. Let's see how UAUA plays out in the next few weeks. I don't own any, bu
39 FlyDreamliner : UA has been riddled with issues for a long time. Not that other airlines haven't, but that's the nature of the legacy business. Typically they have is
40 Ctbarnes : 1. I agree Ted should be eliminated. It's an industry joke. I would go the other direction however and go for the higher end of the market. Let the p
41 NWDC10 : Time always tell. Robert NWDC10
42 Coronado : A recent round trip a couple weeks on United to Dulles-- I flew out on a E-170 operated by their Republic Shuttle America affiliate from MSP-IAD with
43 Ordpark : Well, let's see...When UA went into Bankruptcy...the media couldn't wait to bury us! Liquidation was just around the corner! The all knowing aviation
44 Ckfred : Some random thoughts. 1. I don't think anyone knows what will happen to the price of oil. There is a professor from the University of Houston who appe
45 777fan : Well, I think we should all just give up and book our next trips on Braniff! Whatever.
46 Post contains images StevenUhl777 : Hindsight really is 20/20, isn't it? Whether you worked for UA or not during those years or not, things went well under Greenwald for the first sever
47 Post contains images MX757 : That's what I was doing at his age. Especially the chasing girls part. You never know Braniff 3 might be getting ready to start-up. Or is it Braniff
48 Post contains links and images Jacobin777 : c'mon mate, at least he's making an effort...when I was his age, I was just playing guitar, going to school/college and chasing girls... as I stated
49 Ctbarnes : Er, no. Not quite so simple. The obsession with market share is what is driving the airlines into bankruptcy. You have to charge what it costs to pro
50 UAL777 : Because it makes money.
51 FlyDeltaJets : I don't think any airlines' employees' are happy except maybe B6
52 UAL777UK : Hmmmm, i think even they might get a bit worried, possibly unhappy if they make more losses as predicted by them in 2006!
53 Jamake1 : I have read through all of these posts and want to add just a few comments. Someone said that United lacks a "visionary" leader. I have to give Tilton
54 BAW716 : It would seem we have another "know it all" airline analyst making prognostications about the demise of UAL. As I said in my other post, let give thes
55 Post contains images Lumberton : I recollect reading that their business model had oil at US$50/bbl. Is this hedged? If so, that should take away much of the uncertainty about this h
56 IceTitan447 : You will always have a 50/50 chance of being right. More than half this forum wrote UAL off 2 1/2 years ago. You'll always have a 50/50 chance of bei
57 Halls120 : I don't criticize his effort. I do question his experience.
58 ChrisNH : I know it's been said before, but we need to let one or more of these legacy carriers simply DIE. I don't want any of these 'Oh! The Humanity!' whines
59 UAL777UK : Okay great........so thats DL and NW out the way then....easy!
60 Hoya : We've had the equivalent of at least one or two legacies dying over the past few years. Both UA and US have shed hundreds of planes. NW, DL, AA, and
61 Alphascan : This is the first I've heard of this. Have any links to evidence? I know that in the late 80's/early 90's the FTC voiced concerns about carriers adve
62 AC7E7 : Maybe you are right, but they will end up taking one or more legacies with them. I wish United well, however they have not done enough to cut costs a
63 Post contains images ZChannel : Amen! I can tell you poor management is not exclusive to just the airline industry...
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