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Will This Be Enough To Save Ual?  
User currently offlineBusinessflyer From Singapore, joined Aug 2001, 288 posts, RR: 0
Posted (11 years 10 months 1 week 4 days 2 hours ago) and read 2183 times:

It has been widely reported that United is in serious financial difficulties and many analysts expected the company to seek Chp 11 protection either this month or next. It was suggested that one of the key difficulties was the impasse between the unions and senior management.

However, the news wires are reporting on a letter written by the United Airlines Union Coalition (including ALPA, IAM, AFA and TWU) in which they propose a labour savings framework. Specifically, the letter states the unions will negotiate and implement a recovery program that will save United five billion dollars in labour cost savings over the next five years and will improve its core annual profitability by $2 or $3 billion.

The letter further states that United has the most committed employees and strongest airline franchise in the world and that the unions "... will not let it fail ..."

Any thoughts. I understand that UAL is reportedly very very close to bankruptcy. Will this be enough to overcome this...?


21 replies: All unread, jump to last
 
User currently offlineUALrampORD From , joined Dec 1969, posts, RR:
Reply 1, posted (11 years 10 months 1 week 4 days 1 hour ago) and read 2148 times:

I think it will. I don't know how the other employees will react to it, but if it keeps my airline from going the way of Eastern or Pan Am, im all for it.

UALrampORD


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4490 posts, RR: 33
Reply 2, posted (11 years 10 months 1 week 4 days 1 hour ago) and read 2143 times:

I don't know. Management wanted $1.5 billion in savings per year over the next six years; the union plan offers $1 billion per year over the next five years. I doubt that management will be able to convince the unions to offer any more. Management will probably need to simply accept this offer, show it to the ATSB, and see what happens.

Jim


User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 3, posted (11 years 10 months 1 week 4 days ago) and read 2125 times:

In one word, NO.

This plan says nothing, gives nothing and is basically something cobbled together from thin air at the last minute because no one could agree on anything concrete.


User currently offlineHlywdCatft From United States of America, joined Jan 2001, 5321 posts, RR: 6
Reply 4, posted (11 years 10 months 1 week 4 days ago) and read 2116 times:

Isnt that what Northwest did a few years back to save it from extinction? Look at them now!

User currently offlineBusinessflyer From Singapore, joined Aug 2001, 288 posts, RR: 0
Reply 5, posted (11 years 10 months 1 week 3 days 18 hours ago) and read 2059 times:

But the difference this time I think, is that a) the ATSB are looking for a financially viable business and if the unions are talking to the management then that looks alot better then if the unions and management are in conflict; and b) the writing clearly is on-the-wall for United and neither side can really afford to "play chicken" with the fate of the company.

My concern is that neither side will be able to move quickly enough to deal with the looming cash calls on the company. I thought they were due to run out of money either this month or next? I was also interested to see just how little money has been given out by the ATSB and the fact that it is reported that some people either in the government or the regulators are increasingly against giving out the cash and loan guarantees. But maybe UAL is just too big to be allowed to go under...?

PS. I wonder what the implications for the Star Alliance would be....


User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 6, posted (11 years 10 months 1 week 3 days 13 hours ago) and read 1976 times:

Unfortunately, I don't think the plan will work. They are expected to lose over a billion again this year and they would still be in the red even if they could save a $1 billion a year right now. Nothing indicates that revenues will improve over the next few years and with a probable war looming, it gets really bleak looking.

The bottom line is that the high-cost, high-fare, hub-and-spoke paradigm is no longer viable for more than 3 or 4 carriers. There are two or three too many and one of them has to go. The market for air transportation is sort of a natural oligopoly. It looks like UA is the closest to edge and will probably be the next to file Chapter 11.

I really like United and hate watching this happend to them.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4490 posts, RR: 33
Reply 7, posted (11 years 10 months 1 week 3 days 11 hours ago) and read 1935 times:

The bottom line is that the high-cost, high-fare, hub-and-spoke paradigm is no longer viable for more than 3 or 4 carriers. There are two or three too many and one of them has to go. The market for air transportation is sort of a natural oligopoly. It looks like UA is the closest to edge and will probably be the next to file Chapter 11.

The past few months, most analysts I've read say that the Cartel-network carriers need to shed another 10-15 percent of their capacity in order to stabilize. A likely loss of US Airways, and further cuts by the other Cartel carriers, especially UA and AA, could probably absorb most of this contraction. I'm not convinced that the USA market can't support 5 network carriers and a strong battery of low-fare carriers.

An Iraq war, like the last time, would be a temporary situation, and Americans are much more used to the idea of heavier aviation security than we were then. Unlike in 1991, those who are less inclined to fly have already stopped flying. Barring another terrorist attack in the US, I don't see such a war having near the impact on air travel the last one did.

Jim


User currently offlineN628AU From United States of America, joined Oct 2000, 343 posts, RR: 0
Reply 8, posted (11 years 10 months 1 week 3 days 8 hours ago) and read 1880 times:

DCA-ROCguy,

Your wish for the demise of US has become almost a fetish with you. The company is on a successful road to restructuring, and as a matter of fact gained additional liquidity today with the higher offer accepted from RSA vs. the orginal TPG offer. Seigel has done an outstadning job getting the labor groups on board. With a significantly increased RJ fleet, and the UAL codeshare, revenues will stand to increase significantly in the next year. This is coupled with costs which will be an estimated 6% below Continental. The rumored introduction of the EMB-170 at Mid-Atlantic Airways will give US a unique competitive advantage in the east with mainline aircraft sized seating, a first class cabin, and stand up room throughout. This will be an advantage to gain back market share from the revenue poaching of Delta Connection and Eagle that has occurred for years.

The interesting thing to watch will be how the other majors react to the changing economic realities of today's marketplace. Will they work to reinvent themselves as US has done, or will they continue to place their heads in sand waiting for better days, with no guarantee when the cash burn will stop?


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4490 posts, RR: 33
Reply 9, posted (11 years 10 months 1 week 3 days 6 hours ago) and read 1821 times:

The interesting thing to watch will be how the other majors react to the changing economic realities of today's marketplace. Will they work to reinvent themselves as US has done, or will they continue to place their heads in sand waiting for better days, with no guarantee when the cash burn will stop?

As I've said on other threads, whatever chance US *does* have for survival rests with Siegel's exceptionally good management. If Siegel can reach a 9-9.5 cent CASM by winter, there's a possibility of US surviving *with the additional liquidity RSA added.* If he achieves it, it will be a feat unique in aviation history. Even Continental needed *a couple* of trips through Chapter 11 to really reinvent itself.

A big problem US has is that they no longer have 100-seat A/C. During the 1970's and 80's, 100-seat a/c were the backbone of their fleet. Many markets that could fill four DC-9's to PIT or PHL each day, struggle to fill four A319's and A320's. US has the problem AA is developing--a big leap from 50 to 125 seats. IF they do get the EMB-170, that will be a big help. That's a "wider cabin" a/c that would be more attractive than EMB-145s or CRJ-200's.

All I can say is, airfares in US-dominated cities had better reflect those lower seat-mile costs, if US wants to keep our business. Their market share in Western New York has dropped precipitously with the arrival of major low-fare carriers. We don't intend to go back to paying more on routes where we have choices.

Jim





User currently offlineN628AU From United States of America, joined Oct 2000, 343 posts, RR: 0
Reply 10, posted (11 years 10 months 1 week 3 days 5 hours ago) and read 1787 times:

Usage of the planned arrival of the EMB-170 will take care of the lack of having a 100 seat aircraft. I agree this is an issue now. The 100 seat aircraft is a dying breed as mainline equipment unfortunately, as a number of factors are combining to make the aircraft unprofitable to operate in most circumstances (AirTran is a notable exception). US used to be very successful in past ventures such as the Florida Shuttle, using aircraft of this size (F28s at the time). I think the planned floor layout of the 170 would have 64 seats (6F 58Y). When demand increases, they could add frequency on these routes, making travel more flexible for higher yield passengers. This will also in turn free up those 737 and A319/320 aircraft to run longer routes to the midwest and west, and strengthen the route network overall.

I have total confidence in Seigel's ability to successfully lead the company through this restructuring. Yes, Continental needed two trips through court to do it, and they almost needed a third. That is when Bethune came aboard, and knowing that a third BK would likely kill the company, he approached the situation in a state of mind that failure was not an option. This is the very same approach Dave has now. He is brutally honest, and has told employees, "you may not always like what I say, but I will always tell you the truth", and thusfar he has done everything he has said. You mentioned if he gets costs in the 9 cent CASM range, it will be an unprecedented turnaround in aviation history. The progress the company has already made is unprecedented, so there is significant reason to believe this will happen. Everyone at US Airways knows what is at stake, and while this could have torn the company apart, it has really only strengthened our resolve, as witnessed by the outstanding performance numbers the company has put up. Could you do me a favor please, and stop trying to put your desire to see US fail into every thread.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4490 posts, RR: 33
Reply 11, posted (11 years 10 months 1 week 3 days 4 hours ago) and read 1753 times:

Everyone at US Airways knows what is at stake, and while this could have torn the company apart, it has really only strengthened our resolve, as witnessed by the outstanding performance numbers the company has put up. Could you do me a favor please, and stop trying to put your desire to see US fail into every thread.

US Airways was germane to this thread, so I mentioned it. You must be seeing my pensees a lot of places I'm not writing any, to make that kind of statement.

The ghost of the Colodny, Schofield, and Wolf years hangs heavy over Upstate New York. US Airways had us by the short hairs during the 1990's and raped us. These CEO's didn't confront US's unions, rationalize US's fleet, or consider the question, "how can we reduce our industry-high costs and offer our paying passengers fairer fares?" No, US just saw a vulnerable region with no Southwest, and decided to gouge. And gouge and gouge.

Upstate's businesses, consumers, and elected officials remember. We still pay excessively high fares compared to other USA medium-size markets on a lot of routes. We expect to see some airfare and service benefit from this lower cost structure if US survives. As I said, the '90s are gone and we are NOT going back, because we have choices now on so many routes.

Jim


User currently offlineUALPHLCS From , joined Dec 1969, posts, RR:
Reply 12, posted (11 years 10 months 1 week 3 days 4 hours ago) and read 1740 times:

I think that the participation of the Unions will be Key to getting the Loan garauntee that will provide UA w/ the cushion it needs to compete if there is a War or a Fare war.

UA only needs this money to refinace the 847 million dollar loan that has come due. If UA doesn't get the loan Ua could use the cash on hand and still have $1.3 billion in the bank. However that is too close to the $750 million level that UA needs for daily expences. If a war started or worse if AA or DL smell blood in the water and start a Fare War UA would not be able to complete.

The Coalition proposal was a signifigant shift in the labor relations of the airline. Eventhough it was not as deep as Management wanted getting ALL the unions to agree to 2/3 of want was desired will be looked on favorably by the Stablization board.


User currently offlineN628AU From United States of America, joined Oct 2000, 343 posts, RR: 0
Reply 13, posted (11 years 10 months 1 week 3 days 4 hours ago) and read 1730 times:

The issue with airfares has more to so with the peculiarities of the airline industry more than anything else. It is both highly regulated (FAA), and subject to free market forces at the same time (fares are highly liquid - someone can charge what the market can bear). During the 90s, the market in upstate NY paid that. The advantage of the frequency and point to point service provided led to that region paying a premium.

I will not go back to the days of Colodny and Schofield, but I will address Wolf. Hindsight is 20/20. Many employees bought into Wolfgang's dream of a global carrier of choice. In hindsight, they never planned on having it around. Parity +1 never worked, and never could, but they figured that it would be United's problem.

As for wanting "fairer fares", fares are too cheap right now for just about the entire industry. Even Southwest has reported recently they are very concerned about falling yields. I do agree that a more rational pricing structure needs to be implemented to return the industry to a more stable footing. The price gap between full fare and excursion fares is ridiculous. I don't really feel paying $2500 to get from LAX to NYC is appropriate to charge a business customer, but nor do I feel paying $200 for the same round trip is an entitlement the general population should feel they should get.


User currently offlineN628AU From United States of America, joined Oct 2000, 343 posts, RR: 0
Reply 14, posted (11 years 10 months 1 week 3 days 3 hours ago) and read 1714 times:

2/3 of what the stabilization board wants will not cut it, you need 100%. US got 85% from what they originally projected from labor, so they are forced to obtain larger amounts of concessions from vendors, suppliers, and lessors. If United requires $9 billion to obtain an ATSB loan, and the unions only give up $5 billion, then an additional $4 billion must come from other sources. As US found out, the lessors are not willing give easily, and that forced US to the Court. If the numbers being thrown about are true, then BK is almost certainly in UAL's future.

User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 15, posted (11 years 10 months 1 week 3 days 1 hour ago) and read 1685 times:

UAL isn't going anywhere. The cities that have huge investments in UAL's infrastructure won't let it happen. Case in point--IND already has the former USPS hub sitting idle. Do they want the UAL overhaul base doing the same?

Any city want to force hundreds of high paying jobs out of their tax base and into the unemployment lines? DEN? ORD? SFO? Do Airbus and Boeing want 700 airplanes back on their doorstep? People made this same argument about TWA and it was probably closer to being a flawed argument at that time--much smaller carrier, fewer airplanes and only one city impacted greatly. Still, TWA stayed alive several years in much worse shape than UAL.

Ch. 11 a possibility? Sure. It may take massive, forced restructuring to make the "necessary" changes(BTW, if UAL doesn't RIF and replace a whole bunch of suits, all the restructuring in the world won't help. TWA missed that opportunity in '92 and paid for it over the next 8 years.). IMO.TC



FL450, M.85
User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4490 posts, RR: 33
Reply 16, posted (11 years 10 months 1 week 3 days ago) and read 1670 times:

The issue with airfares has more to so with the peculiarities of the airline industry more than anything else. It is both highly regulated (FAA), and subject to free market forces at the same time (fares are highly liquid - someone can charge what the market can bear). During the 90s, the market in upstate NY paid that. The advantage of the frequency and point to point service provided led to that region paying a premium.

Abusing the freedom offered by the free market is never a good idea. Consumers and communities have long memories that can cause business problems later. One reason UA-US failed, I think, was that so many Congresscritters in would-be affected states opposed it so vehemently. The hub-state delegations (PA & NC), who supported the thing, didn't even know what hit them. US did UNY substantial injustice, and we fought back.

As for wanting "fairer fares", fares are too cheap right now for just about the entire industry. Even Southwest has reported recently they are very concerned about falling yields. I do agree that a more rational pricing structure needs to be implemented to return the industry to a more stable footing.

Network-carrier capacity will probably have to continue dropping, for the fare situation to stabilize. Southwest, JetBlue, and AirTran are still making money in the current situation, but not a lot, and will profit more robustly once they can inch yields up a little. WN, as I said, might even need to trim capacity a little.

Once the demand and supply curves for Cartel-network seat capacity meet, the situation will stabilize. Unfortunately, it will probably take the loss of one network carrier, and 10 percent additional capacity reductions at the rest, for the situation to normalize. US is showing the way with its bankruptcy cost cuts, even if it does not survive; the others will need, as you say, to go their route to survive.

I lean to thinking the ATSB will accept UA's offer. As UALPHLCS notes, this coalition offer represents a huge stride, given the labor relations of the past four years. And politically, UA has many powerful supporters. UA will need to make capacity cuts, even with a lowered yield-profit bar, to make it all work. Good luck to all employees who may be affected.

Jim


User currently offlineUALPHLCS From , joined Dec 1969, posts, RR:
Reply 17, posted (11 years 10 months 1 week 2 days 12 hours ago) and read 1606 times:

N628AU,

Re-read my post I didn't not say 2/3 of what The Stablization board wanted. I said 2/3's of what management wanted.

The Stablization borad wanted 100% of the unions agreeing to help the carrier. They wanted participation from ALL labor groups. They got it. Management didn't get what they wanted as cuts go. But they always go a bit high anyway, Unions always go a bit low. Getting them onboard an committed to fixing UA was what the Stabilization board demanded, with out the AFA or the IAM UA would get nothing.

Management should be thrilled.

Also bear in mind what I said in the above post UAL could cover all debts without any help at all. However that would leave them vulnerable to predatory pricing by DL and AA domesticlly, and BA and NW on the Atlantic and Pacific routes respectively.

Any Loan would mearly be a cushion that would stregthen UA after the November debt payment. After November barring any wars or further terrorist incidents UA could stregthen and rebuild.

FYI Supposedly a new fare structer is in the works due out in NOV or DEC. Three tiers with three fares each. Simplication is finally coming to the airline industry.

The following is a WAG as to what this supposed fare base would look like. It is based on the opinions of the Ticket agents in PHL. THIS IS NOT THE OFFICALLY WORD FROM UA.

Teir one:Unrestricted tickets
F Class Full fare first
C Class Full fare buisness
A Class Full fare Coach free UG if available

Teir Two: Unrestricted Economy tickets Standby OK, UG OK w/certs, Refund or useable if flight is missed.
Y Class Full fare Coach
B Class Full fare Coach
M Class Discounted coach

Teir three: Restricted tickets
W Class All fares similar to Priceline and Hotwire Opaque Fares, Use it or lose
T Class it Policy, Maybe no MP Accrual.
S Class


Opinions? Comments?



User currently offlineSearpqx From Netherlands, joined Jun 2000, 4343 posts, RR: 10
Reply 18, posted (11 years 10 months 1 week 2 days 11 hours ago) and read 1574 times:

There is an interesting article in Crain's 'Chicago Business' today. It basically says that while the unions agreed to give up a total $1B/year over the next five years, the proposal doesn't say who is giving up what, and that UA management will have to negotiate individually w/ each union to determine their individual amounts. The article doesn't say what/if any mechanism is in place to gain consensus amongst the unions. To my mind that makes it a pretty empty promise, at least from the eyes of someone (ATSB) looking to make sure that the company is going to get the concessions it needs. I'm not saying that the unions aren't sincere, or meant this as an empty offer, but I don't really see where this advances the cause that much.

UALPHLCS - I like your guess, and it seems reasonable to me. Interesting thing though, anybody remember 'Value Pricing'? That was AA's attempt to rationalize the fare structure back in '93. That attempt led to the bloodiest summer of fare wars the industry had seen to date, and lasted less than six months. I realize the dynamics of the industry are very different now, so it has a much greater chance for success. I guess its just a nice for those of us who were involved in bringing 'Value Pricing' about, to see the concept vindicated (10 years later!)

Duane



"The two most common elements in the universe are Hydrogen and stupidity"
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 19, posted (11 years 10 months 1 week 2 days 11 hours ago) and read 1563 times:

This is an interesting twist...they put the burden on management to decide who gives up what. That is really not a recovery plan since no single group has committed itself to anything other than to take an unspecified cut which is part of a sum equalling $1 billion per year. Now the company has to negotiate with each union...this will burn valuable time for United.

User currently offlineUA744Flagship From , joined Dec 1969, posts, RR:
Reply 20, posted (11 years 10 months 1 week 2 days 10 hours ago) and read 1556 times:

UALPHLCS:

Hey! It's EasyPrices!  Smile


User currently offlineDeltaSFO From United States of America, joined Nov 2000, 2488 posts, RR: 22
Reply 21, posted (11 years 10 months 1 week 2 days 9 hours ago) and read 1540 times:

Your wish for the demise of US has become almost a fetish with you. The company is on a successful road to restructuring, and as a matter of fact gained additional liquidity today with the higher offer accepted from RSA vs. the orginal TPG offer. Seigel has done an outstadning job getting the labor groups on board. With a significantly increased RJ fleet, and the UAL codeshare, revenues will stand to increase significantly in the next year. This is coupled with costs which will be an estimated 6% below Continental. The rumored introduction of the EMB-170 at Mid-Atlantic Airways will give US a unique competitive advantage in the east with mainline aircraft sized seating, a first class cabin, and stand up room throughout. This will be an advantage to gain back market share from the revenue poaching of Delta Connection and Eagle that has occurred for years.

The interesting thing to watch will be how the other majors react to the changing economic realities of today's marketplace. Will they work to reinvent themselves as US has done, or will they continue to place their heads in sand waiting for better days, with no guarantee when the cash burn will stop?


Sorry, but I have to side with DCA-ROCguy on this one. I'm not a big fan of companies that get out of financial problems by stiffing their creditors, paying their employees less, and then make it sound like they're "working hard" to "reinvent" themselves. Even you cannot deny that there is some degree of unfairness evident toward airlines that more or less have their financial house in order. In this case, the airline most exposed is Delta, long hailed as one of the most fiscally responsible companies in the industry.

But there's nothing we can do about that.

What really gets me is when Delta starts taking steps to defend its markets and ensure its continued competitiveness, David Siegel resorts to childish, immature name calling. I mean, let's be real here. US Airways goes into Chapter 11, simply walks away from a good chunk of their financial obligations, forms an alliance with United, and talks about entering the Star Alliance, and on top of that, David Siegel expects Delta to simply roll over and let US, with United's aid, eat into Delta's valuable east coast market share?

Unfortunately, the reality is different. There's talk now that negotiations between US and creditors are turning nasty, and may keep the company from emerging from Chapter 11 by Q1 '03 as their Great Fearless Leader, David Siegel predicts. And like it or not, Delta's financial resources, fleet of RJs, and global reach are things that US can only dream of. The DL/NW/CO alliance will be a formidable competitor for UA and US to reckon with. For anybody at US Airways to somehow convince themselves that bankruptcy will solve all their problems is frankly laughable. If, of these two companies, one must die, the one that has been the responsible one will not be the one to go. Of that you can be certain.

Here's to more Delta Connection RJ's at National.... Maybe we can get a 757 or something painted up in a special "Axis of Evil" livery.



It's a new day. Every moment matters. Now, more than ever.
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