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UAL CEO: Alliances Under Threat  
User currently offlineSingapore_Air From United Kingdom, joined Nov 2000, 13742 posts, RR: 19
Posted (7 years 11 months 1 week 1 day 21 hours ago) and read 7176 times:

UAL head says alliances are threatened

The head of United Airlines yesterday suggested the industry's network of global alliances may be breaking down, prompting the US carrier to examine overseas investments to support its international strategy.

"Air France-KLM and Cathay Pacific are sending signals that the alliance structure is under threat," Mr Tilton told an aviation symposium organised by the Chicago Council on Global Affairs.

He said "something is going to replace the existing alliance structure" if the system continues to be challenged by consolidation in Europe and Asia, and suggested United could seek equity stakes overseas.

More at the Financial Times (subscription)




Singapore Airlines Limited is a Member of Star Alliance - The Airline Network For Earth


Anyone can fly, only the best Soar.
49 replies: All unread, showing first 25:
 
User currently offlineSLCUT2777 From United States of America, joined Dec 2005, 4079 posts, RR: 11
Reply 1, posted (7 years 11 months 1 week 1 day 21 hours ago) and read 7150 times:

How is Star Alliance threatened by this? If any of the big three are under the gun now I'd have to say SkyTeam with both DL and NW still in Chapter 11. Star Alliance with all their players I would have to argue is the most powerful of the three. Is Glenn Tilton becoming paranoid his carrier (UA) now can't survive more than a year outside of court protection?  pessimist   scratchchin   twocents 


DELTA Air Lines; The Only Way To Fly from Salt Lake City; Let the Western Heritage always be with Delta!
User currently offlineClassicLover From Ireland, joined Mar 2004, 4636 posts, RR: 23
Reply 2, posted (7 years 11 months 1 week 1 day 18 hours ago) and read 6956 times:

Quoting Singapore_Air (Thread starter):
"Air France-KLM and Cathay Pacific are sending signals that the alliance structure is under threat," Mr Tilton told an aviation symposium organised by the Chicago Council on Global Affairs.

Really? What kind of signals are these? Have these airlines made any statements?



I do quite enjoy a spot of flying - more so when it's not in Economy!
User currently offlineSINGAPORE_AIR From United Kingdom, joined Nov 2000, 13742 posts, RR: 19
Reply 3, posted (7 years 11 months 1 week 1 day 18 hours ago) and read 6948 times:

He doesn't elaborate. He just says "signals".

Helpful.



Anyone can fly, only the best Soar.
User currently offlineDAL767400ER From , joined Dec 1969, posts, RR:
Reply 4, posted (7 years 11 months 1 week 1 day 10 hours ago) and read 6516 times:

Brilliant talking by Tilton, really  Yeah sure .
Tilton:"AF and CX sen signals that alliances are under threat."
Reporter:"What exactly are those signals?"
Tilton:"I'm not telling you."*inser evil laugh*


User currently offlinePiercey From Sweden, joined Nov 2005, 2233 posts, RR: 1
Reply 5, posted (7 years 11 months 1 week 1 day 10 hours ago) and read 6427 times:

Quoting SLCUT2777 (Reply 1):
How is Star Alliance threatened by this? If any of the big three are under the gun now I'd have to say SkyTeam with both DL and NW still in Chapter 11

If that is your reasoning, I believe you need to remind yourself who *A's South America member is  Wink



Well I believe it all is coming to an end. Oh well, I guess we are gonna pretend.
User currently offlineStitch From United States of America, joined Jul 2005, 31011 posts, RR: 86
Reply 6, posted (7 years 11 months 1 week 1 day 10 hours ago) and read 6390 times:
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Tilton's comments about "(the) system continues to be challenged by consolidation in Europe and Asia" could be informative.

UA is very weak in Europe as it relies on LH and the other European Star partners to handle most of their traffic via LHR and FRA. And while they continue to expand in Asia, they still need NH for intra-Japan and SQ for SE Asia. And LH and SQ are critical to service Africa and India. And with VG in tatters and MX out of the Alliance, that leaves Central and South America very lightly covered.

So UA is very dependent on Star to both bring passengers into their North American network as well as carry North American passengers around the world. And with their domestic competitors like AA, CO, and DL expanding in Europe, Africa, and the Americas, plus all of them and NW starting to slowly expand in UA's stronghold - Asia - I can see where UA feels they need to become more active in controlling their own destiny.

TED's expansion in Central America and the new IAD-FCO service look to be the opening stages...


User currently offlineVonRichtofen From Canada, joined Nov 2000, 4627 posts, RR: 36
Reply 7, posted (7 years 11 months 1 week 1 day 9 hours ago) and read 6349 times:

Quoting Piercey (Reply 5):
If that is your reasoning, I believe you need to remind yourself who *A's South America member is

As sad as it would be, losing RG completely will have a minimal effect on STAR. Losing DL or NW however would have a huge impact on Skyteam


Kris



Word
User currently offlineSLCUT2777 From United States of America, joined Dec 2005, 4079 posts, RR: 11
Reply 8, posted (7 years 11 months 1 week 1 day 9 hours ago) and read 6336 times:

Quoting Piercey (Reply 5):
If that is your reasoning, I believe you need to remind yourself who *A's South America member is

Yes, VG is essentially FUBAR, but the growth areas are China, India and Africa. Who is strongest there?; Star Alliance. For Latin America, OneWorld will hold an edge with "some" competition from SkyTeam and DL.



DELTA Air Lines; The Only Way To Fly from Salt Lake City; Let the Western Heritage always be with Delta!
User currently offlineDutchjet From Netherlands, joined Oct 2000, 7864 posts, RR: 57
Reply 9, posted (7 years 11 months 1 week 1 day 7 hours ago) and read 6107 times:

To be honest, I have no idea what UA's CEO meant by the statement....but one thing is for sure, UA has become too comfortable relying on its alliance partners with respect to longhaul services, especially to Europe, and it is time for UA to re-assert itself in the marketplace. UA is an airline, not a ticketing service for LH and other STAR members, and its necessary and important that UA take more control over it routes, not simply put its codeshare on flights operated by other carriers. Some of UA's recent route announcements are encouraging and seem to indicate UA is moving in the correct direction.

What KL, AF and CX have to do with any of this is beyond me.


User currently offlineBobnwa From United States of America, joined Dec 2000, 6477 posts, RR: 9
Reply 10, posted (7 years 11 months 1 week 1 day 7 hours ago) and read 6092 times:

Quoting Stitch (Reply 6):
plus all of them and NW starting to slowly expand in UA's stronghold - Asia -

I think it may be the other way around. United its slowly expanding in NW's stronghold-Asia!!!!


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 11, posted (7 years 11 months 1 week 1 day 5 hours ago) and read 5943 times:

AF-KL is threatened because all of its US partners are growing to Europe and beyond - and not to CDG or AMS. Not sure what CX is concerned...

This is just one more statement in Tilton's parade trying to find a future for UA. See the post on UA's future. Whether UA is weak in Europe doesn't change the fact that foreign carriers cannot acquire a large enough stake in US airlines to justify their investment. On the other hand, UA is turning in the weakest performance among the US network airlines. It is not going to happen for investors to give UA to acquire stakes in other airlines.


User currently offlineUnitedNRT From United States of America, joined Aug 2006, 284 posts, RR: 9
Reply 12, posted (7 years 11 months 1 week 1 day 5 hours ago) and read 5930 times:

Quoting Bobnwa (Reply 10):
United its slowly expanding in NW's stronghold-Asia!!!!

This is somewhat of a truth, yet United is the strongest US carrier in Asia in terms of ASM and RPM, yet NW carries more passengers than United.

It's the respective stronghold for both carriers.



"...That's a lovely name. My name's Milton; Milton Ettenheim, but my friends call me Bubbles."
User currently offlineATLAaron From United States of America, joined Apr 2006, 1023 posts, RR: 3
Reply 13, posted (7 years 11 months 1 week 1 day 3 hours ago) and read 5740 times:
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United stands as my favorite carrier, however everything I read including this just says to me that they are in trouble.

User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 14, posted (7 years 11 months 1 week 1 day 3 hours ago) and read 5723 times:

Oddly enough, AA has stated that their One World Alliance codesharing alliance is one of their fastest growing revenue segments (IIRC..it was 20%)...


"Up the Irons!"
User currently offlineBaw716 From United States of America, joined Nov 2003, 2028 posts, RR: 27
Reply 15, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 5180 times:

Tilton is sending a signal...

What signal is open to discussion, but one thing I've learned about Tilton: If he says something, he is sending a message. Case in point: Exactly one week after Gordon Bethune was very open about a CO/UA merger being a good thing, Tilton states that UA is ready to "discuss" merging with another airline. Coincidence?

Now, Tilton is saying that the alliance relationships are threatened, citing AF and CX as examples of consolidation...consolidation being the word he uses to state that alliances are under threat. Frankly, these are pretty poor examples if this is the point he is making. AF/KL has actually strengthened SkyTeam, CXs acquision of Dragonair brings one of the largest Asian regional carriers into OneWorld. Unless I'm missing something, what he is saying seems to be rather counterintuitive.

Unless, of course, he is sending a signal...

If UA and CO merge (which is frankly what I think will be proposed at some point), then Star Alliance would be in very deep trouble. SkyTeam would be hurt, because I can't see the US government not intervening to force someone out in the event that a CO/UA merger happen and it goes to SkyTeam.

USAirways isn't large enough to fill the void should UA decide to leave and go the way of SkyTeam should CO be the surviving carrier or UA move to SkyTeam; SkyTeam would be a huge force in the US, since with DL, CO(UA) or NW, it would be game over for Star and OneWorld would have a competitor which could hurt it badly. NW holds the ace, since any CO/UA merger would have to be approved by NW (as I recall the arrangement...please correct me if wrong), and NW would want a CO/UA entity to be in SkyTeam.

We do have to remember that the US market is still the single largest airline market in the world, even though the industry is as screwed up as it is (in the US). Would the DOT allow this? Hmm...depends on who controls Congress in 2008 or beyond.

Of course, what I have just said should be taken as an opinion, since UAs departure from Star would come with significant financial costs to the airline...and Star would have to find another partner in the US to fill UAs shoes (which would be next to impossible at this stage). However, if the costs were spread around between the other members of SkyTeam, who knows?

OK..here's the disclaimer: This is a theory...my theory. It has no basis in fact, yet...just some lining up of public comments that creates an interesting scenario.

Now that I've stirred it up a little, anyone have a comment? (all comments welcome, just don't flame me please...I got hit by a car this week...I've been sufficiently bruised up).

My best to all,
baw716



David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
User currently offlineFCYTravis From United States of America, joined Sep 2005, 1191 posts, RR: 6
Reply 16, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 5103 times:

While UA has huge *volumes* of transatlantic traffic, they have until now completely missed the boat on the "long-thin" trend of non-stop service from the US to more and more European destinations, instead relying almost solely on huge amounts of LH connecting feed through FRA.

I have little doubt that UA is feeling a yield-squeeze because of the CO, DL and US expansion into smaller European markets like BHX, ARN and TXL.

Oh yeah, and why is it that every time people mention airlines expanding into Europe, they somehow forget that US Airways is third in the number of European destinations offered, behind only DL and CO? US is a player.



USAir A321 service now departing for SFO with fuel stops in CAK, COS and RNO. Enjoy your flight.
User currently offlineSydscott From Australia, joined Oct 2003, 3076 posts, RR: 20
Reply 17, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 5091 times:

Quoting Baw716 (Reply 15):
USAirways isn't large enough to fill the void should UA decide to leave and go the way of SkyTeam should CO be the surviving carrier or UA move to SkyTeam; SkyTeam would be a huge force in the US, since with DL, CO(UA) or NW, it would be game over for Star and OneWorld would have a competitor which could hurt it badly. NW holds the ace, since any CO/UA merger would have to be approved by NW (as I recall the arrangement...please correct me if wrong), and NW would want a CO/UA entity to be in SkyTeam.

Why not go the other way?? Surely US joining Skyteam and the merged CO/UA in Star makes more sense. In that way Star gets what it is currently lacking in the Northeast of the US at the moment and that is a major international hub presence in New York. Skyteam gets US which delivers it a large Western US domestic system along with PHL & CLT as a spillover for DL's New York and Atlanta ops plus US can feed Asia flights through Northwest in Detroit.


User currently offlineStitch From United States of America, joined Jul 2005, 31011 posts, RR: 86
Reply 18, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 5058 times:
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Quoting Baw716 (Reply 15):
SkyTeam would be a huge force in the US, since with DL, CO(UA) or NW, it would be game over for Star and OneWorld would have a competitor which could hurt it badly. NW holds the ace, since any CO/UA merger would have to be approved by NW (as I recall the arrangement...please correct me if wrong), and NW would want a CO/UA entity to be in SkyTeam.

Would NW want that? With a combined UA/CO in SkyTeam, that would put pressure on NW where they're strongest - Asia. And then with CO and UA's complimentary route schedules, that could hurt NW's own traffic.

Mind you, a CO/UA Star Alliance member would be a tough competitor for NW, but it would allow NW to better coordinate with DL, if not outright merge with them, and become the single Sky Team member in the US, enjoying all the traffic (much as UA did before US joined Star and still does, even afterwards).


User currently offlineMax Q From United States of America, joined May 2001, 4528 posts, RR: 19
Reply 19, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 5019 times:

I think this, unfortunately is a posturing statement in support of the CO/UA
potential merger.

Hope I am wrong



The best contribution to safety is a competent Pilot.
User currently offlineTockeyhockey From United States of America, joined Feb 2005, 950 posts, RR: 0
Reply 20, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 4892 times:

i don't know what the "signals" are either. but i do know what UA is pushing really hard really fast to turn IAD into a major competitor for european traffic from the US east coast. could this be part of a strategy to reduce their reliance on LH and OS for traffic to europe?

one thing that has never made sense to me is why US and UA are both in it. perhaps one will drop out.


User currently offlinePVG From Hong Kong, joined Dec 2004, 725 posts, RR: 2
Reply 21, posted (7 years 11 months 1 week 1 day 1 hour ago) and read 4893 times:

I read the whole ariticle in the FT, he specifically talks about CX taking an equity stake in CA. Since they belong to 2 different alliances, one of them is going to switch. I'd think that since CX now effectively also controls KA that they would be a very interesting partner for China market access and can name their price. If I were Star Alliance, I'd dump Thai and do the necessary to get CX in the fold, or keep them both if it makes sense.

I think that in the event of a merger with CO, UA/CO would be crazy to leave STAR and stay with SKY. I don't see why they would want to do that.


User currently offlineFCYTravis From United States of America, joined Sep 2005, 1191 posts, RR: 6
Reply 22, posted (7 years 11 months 1 week 1 day ago) and read 4775 times:

Quoting Tockeyhockey (Reply 20):
one thing that has never made sense to me is why US and UA are both in it. perhaps one will drop out.

Because they complement each other's strengths and weaknesses. UA is very weak in the Southeast, Caribbean and Northeast, while US was very weak in the Midwest and West and has no Asian or South American presence.

The HP merger brought US back to the West in a big way, and there's now some significant new head-to-head competition for West Coast connecting traffic. But US is still dependent on UA for Asian access, at least until they get the A332.

Doug Parker has remarked in CrewNews that while UA has the unilateral power to terminate the codeshare and with it, the US Star Alliance membership... he doubted they would, and followed up by saying that even if they did, they would be able to quickly secure another alliance relationship.

You will not see any of the major US airlines "drop out" of alliances entirely, because frequent flyers here now expect internationally-coordinated benefits. If, for example, US was to lose its Star membership and not immediately replace it with OW or ST, there would be a mass exodus of high-revenue Preferred members.

[Edited 2006-10-22 05:42:43]


USAir A321 service now departing for SFO with fuel stops in CAK, COS and RNO. Enjoy your flight.
User currently offlineKanebear From United States of America, joined May 2002, 953 posts, RR: 1
Reply 23, posted (7 years 11 months 1 week 1 day ago) and read 4622 times:

Unless something's changed, a UA/CO merger will need NW's blessing and there's a snowball's chance in hell that's going to happen. NW holds a special class of CO stock that gives them the right to block change of control transactions, etc.

User currently offlineATLAaron From United States of America, joined Apr 2006, 1023 posts, RR: 3
Reply 24, posted (7 years 11 months 1 week 23 hours ago) and read 4599 times:
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Quoting Kanebear (Reply 23):
Unless something's changed, a UA/CO merger will need NW's blessing and there's a snowball's chance in hell that's going to happen. NW holds a special class of CO stock that gives them the right to block change of control transactions, etc.

Would a three way merger simply be too big?

I would think if you throw enough cash in NW's face they would cave.

I am also though confused as to why UA would be setting IAD up if they were looking to merge with CO as CO already has their east coast/transatlantic fortress at EWR.


25 SLCUT2777 : More than likely, and if any of them leave SkyTeam I wouldn't put it past DL. But NW as I recall does have a trump card in that possibility, so the w
26 Kanebear : You'd never get it past the DOJ. Even UA/NW would violate all sorts of anti-trust regulations. UA/CO/NW would combine the two US carriers with NRT hu
27 BAW716 : Kanebear, Snowball's chance in hell? Not sure about that... NW does hold the chip, this much is certain. However, if CO/UA merge, NW will put conditio
28 Bobnwa : United trans-pacific numbers include Australia which is not Asia. Taking those numbers out, I believe NW is larger in all categories.
29 Jacobin777 : With CX being a founder (and integral part) of OneWorld, I doubt they will leave OneWorld for Star Alliance...especially given how strong their relat
30 Stitch : Well that might be the deal-breaker, then. Seeing UA's tightness with LH on trans-Atlantic revenue sharing, I imagine UA does not want to leave Star.
31 UAL777UK : UA IMHO is looking to be the leading player in the merger as opposed to being taken over itself. And assuming that UA does merge, whoever that might b
32 McMax : I think what he may be referring to is CX's acquisition of a 10% share (correct me, if I'm wrong with the actual percentage) of Air China, a soon-to-
33 N1120A : They should act like it I think you mean RG, because VLM has nothing to do with the Star Alliance NW is the carrier most stuck to SkyTeam at this poi
34 Kanebear : So the DOJ is going to allow the second and fifth largest carriers to merge AND allow the second, third, fifth and sixth largest carriers to remain i
35 Post contains images United777atGU : They have a reason to act non-chalant: they're the mature older (brother or sister, your choice) in the Alliance. They know what to do and how to do
36 CHANGYOU : What makes you thing SQ is not involve deeply with Star Alliance? We are a major player in connecting from Europe to Australia and New Zealandvv. We m
37 N1120A : Except that they are one of the younger carriers in the Alliance You mean how to be handed an advantageous situation, and be a quasi-government carri
38 Singapore_Air : It's no joke. SIA doesn't codeshare with UA
39 CHANGYOU : Check on the arrival screen in Changi airport...I was surprised they List SQ21 with UA code on it. And that is a non-stop EWR-SIN leg.
40 N1120A : That was the point, or did you miss the coloquialism? That has to be a mistake. Amadeus doesn't have a UA codeshare listed on that.
41 BAW716 : Kanebear, About the DOJ...I didn't say anything about the DOJ, I spoke about NW. That said, I think you are absolutely right about one thing...the DOJ
42 Cospn : "Unless something's changed, a UA/CO merger will need NW's blessing and there's a snowball's chance in hell that's going to happen. NW holds a special
43 Singapore_Air : It must have been so bad I missed it. Sorry.
44 Bobnwa : They are the second largest US domestic carrier measured in RPK's. That seems fairly significant to me.
45 Post contains images UAL777UK :
46 Nimish : Indeed, while CO, DL, AA have all been starting services to India - UA is happy to rely on the code shares on LH through FRA. Exactly - similar to my
47 Travelin man : THAT is what this is all about. Tilton sees foreign carriers buying each other (with alliance implications, of course), and also knows that UA curren
48 Coronado : I think Mr. Tilton by by suggesting that alliances are perhaps not the best and are 'under threat' , is trying to get people to start discussions on o
49 BAW716 : Coronado, You may have a point...for UA to be saved and stay in Star Alliance, it will need a foreign carrier with lots of money (LH) to come to the r
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