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Is This The Cosolidation At Last?  
User currently offlineMD88Captain From United States of America, joined Nov 2001, 1329 posts, RR: 21
Posted (11 years 4 months 3 weeks 1 day 10 hours ago) and read 1760 times:

For many years now the pundits have predicted the consolidation of the US market. All carriers into 3 major carriers has been the common thought. Now UAL looks like Chapter 11 is a given. And this weeks events at US Airways makes it look like that airline is being boiled down not to compete but to liquidate. DL/NWA/CAL may not be merging, but the proposed codeshare moves in that direction. And this week I read that the entire air carrier system may have to be nationalized. Is this the end of the era. Is this the beginning of something new? Will things get better or much worse?

18 replies: All unread, jump to last
 
User currently offline747firstclass From , joined Dec 1969, posts, RR:
Reply 1, posted (11 years 4 months 3 weeks 1 day 10 hours ago) and read 1689 times:

I think the time has come to amend the law prohibiting foreign airlines from owning US airlines. This would bring new money, preserve jobs and bring new insight and managerial skills of airline management. I think the US govt. Is backing themselves into a nasty corner. If UA alone goes under, there goes 100,000 jobs at least and less competition. Meanwhile, if there was a fire sale and parts of UA and/or US were sold, the competition would buy the parts and probably struggle to merge them into their operations, thus creating more havoc in the US airline business. Don't forget these problems are before any possible war with Iraq. Who knows how that will out.
One thing that infuriates me is that there is something that has gotten very little attention during the current woes. That is that if US and UA had not spent so much time and money trying to do their "merger", management might have had time to deal with their respective airlines and have saved some cash too as people like Mr. Wolf would not have gotten their bonus, whether or not the merger was approved. Everyone knew that it would not.
Finally, if the laws permitted more foreign investment in the US airline business, it is entirely possible might have invested in UA and thus have avoided this current crisis. It is time to change the laws.


User currently offlineIAHERJ From United States of America, joined Jun 2001, 677 posts, RR: 7
Reply 2, posted (11 years 4 months 3 weeks 1 day 9 hours ago) and read 1658 times:

All the while NWA and to a lessor extent DAL and CAL are poised to grow over the next 2-5 years and pick up the market share left behind by US and UAL. I think the answer to your question might just be DL, NWA and CAL being the 3 major airlines operating in the U.S. over the next few years. AMWest and Airtran along with Frontier will be merged into the new big 3 fold or forced out of the game. I know Gordon Bethune is a bit outspoken sometimes but he seems to publicly think that DL, NWA and CAL can easily pick up quickly where USair and UAL leave off should either actually cease operations in bankrupsy next year. We all have furloughed employees and aircraft that can be brought out of the desert in a months notice. This is something I do not wish on the employees of either troubled carrier however it is something to think about.


Actually flown: EMB-120 EMB-145 B717 B737 B757 B767
User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4467 posts, RR: 34
Reply 3, posted (11 years 4 months 3 weeks 1 day 8 hours ago) and read 1647 times:

I don't think it will be consolidation, but it will be the loss of one, maybe 2, of the network carriers. NW and CO have CASM's below 10 cents, so they're staying. Despite cash hemhorrages DL and AA still have cash and aren't going anywhere soon. We'll probably get a clearer picture next spring, because we'll probably have a better idea of the long-term fate of UA and US. If we lose one or both of them, that will strengthen the remaining network carriers greatly. The low-fares are going to survive and stay low-fare, and prosper, I think.

I disagree that Siegel is prepping US for chapter 7. He seems to be genuinely trying to save the carrier, and has pulled off some things--like a hat trick on concessions--that I for one didn't think possible. If US survives the winter, they might have a below-10-cent CASM and a still-strong customer base for their reduced network in the East. UA has an excellent route network, if they get the loan guarantee *and* can get their CASM below 10 cents by next summer, they may actually survive.

Then the pressure is on AA and DL who are still over 10 cents--and they have extremely bright CEO's at the helm. But that'll be next year's issue. In any event, it's not likely that we will wind up with just three network carriers.

Jim


User currently offlineSeiple From , joined Dec 1969, posts, RR:
Reply 4, posted (11 years 4 months 3 weeks 1 day 8 hours ago) and read 1644 times:

While I agree that the loss of a carrier or two will just serve to strengthen the remaining majors (and will help out some of the LCCs too.... like Frontier especially, who are probably pissing themselves right now with the UAL situation), I don't think that survival in something as fluid as the airline industry can be put down to a cut-and-dry "below 10-cent CASM" figure.

User currently offlineConcordeBoy From , joined Dec 1969, posts, RR:
Reply 5, posted (11 years 4 months 3 weeks 1 day 8 hours ago) and read 1632 times:

Three airlines with little-to-no competitive presence in Chicago, Washington, San Francisco, and Philadelphia to all-of-a-sudden pick up the market left behind by the world's second largest and the country's 7th largest airlines? MUCH easier said than done. The last thing DL/CO probably want to do is get stuck with a bunch of unwanted Airbuses AGAIN. Especially since CO is now so close to the ultimate streamlining of its fleet.

User currently offlineOzarkD9S From United States of America, joined Oct 2001, 4878 posts, RR: 22
Reply 6, posted (11 years 4 months 3 weeks 1 day 7 hours ago) and read 1618 times:

Here is my armchair analysis:

1) UA emerges from Chapter 11 around 15-20% smaller (mainline). Around 10-15% from the domestic network with 5% coming from international (Latin America to see the biggest loss).
2) US emerges from Chapter 11 around 25-30% smaller (mainline). Nearly 100% of this on the domestic side. RJ's maintain most routes vacated by mainline. US joins STAR and becomes and East Coast SuperRegional.
3) CO/DL/NW alliance approved with domestic restrictions on codesharing where any of the carriers are the only ones on the route (i.e. DTW-ATL).
CO/NW/KL join Skyteam.
4) AA. There's the wild card. Must reduce costs to compete with a reorganized UA/US. AS and possibly HP join AA in a domestic alliance and join oneworld.
5) Southwest. Maintains the status quo.
6) ATA, AirTran and Frontier see the writing on the wall and form their own domestic low-fare alliance. Spirit and JetBlue possibly join later.

So, we're left with essentially 3 "networks", Southwest and the LowFare Alliance and the few holdouts or minor niche carriers (Midwest Express).

In this scenario (not impossible) I wonder about the fate of the Hawaiian carriers. Hawaiian may go for the CO/DL/NW combo or the AA/HP/AS grouping. Aloha will stick with UA, possibly joing STAR. (Hell if TYROLEAN can be a full member of STAR why not Aloha?)

Would love to hear any thoughts on these possibilities....



Next Up: STL-TPA-BWI-PWM-BWI-STL
User currently offlineSTT757 From United States of America, joined Mar 2000, 16693 posts, RR: 51
Reply 7, posted (11 years 4 months 3 weeks 1 day 4 hours ago) and read 1582 times:

UAL and U go under,

UAL:

AA is already well established in ORD, they just switch to larger aircraft to compensate for the growth. They already have cut alot of widebody routes (NRT-SEA, SJC-TPE, SJC-CDG, LAX-CDG, JFK-EZE, JFK-GIG etc) and they could put those extra widebodies to use expanding domestic capacity from ORD. This would also mean STL would essentialy be closed, just like AA has done out West (twice) with Reno air and Air Cal. Also similar to the closings of the Raleigh and Nashville hubs.

CO expands in Denver and LAX (again),

CO and DL somehow split the Heathrow slots (if they could get permission), if not they work something out.

The Narita hub is up for grabs (probably DL or AA).

SFO up for grabs (AA, DL or NWA).

AA already flies trancon (LAX) from IAD, so they may operate a "base" at IAD similar to their present size of operations at JFK.

AA joins Star Alliance.

US Airways:

CO takes LGA and Shuttle

DL takes DCA

NWA takes PHL

Airtrain (and possibly WN) expand from PIT

Either AA or CO take Charlotte.



Eastern Air lines flt # 701, EWR-MCO Boeing 757
User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4467 posts, RR: 34
Reply 8, posted (11 years 4 months 3 weeks 1 day 3 hours ago) and read 1550 times:

While I agree that the loss of a carrier or two will just serve to strengthen the remaining majors (and will help out some of the LCCs too.... like Frontier especially, who are probably pissing themselves right now with the UAL situation), I don't think that survival in something as fluid as the airline industry can be put down to a cut-and-dry "below 10-cent CASM" figure.

10 cents is my own best estimate at a threshold for the majors' survival; it might vary some on either side. They'll probably need to get near 9.5 or a little less for long term stability. But the bottom line is the bottom line--they who can pare their costs the most have the best yield flexibility, and the best likelihood of survival.

Since we all know that there are lots of variables that make the airline business fluid, things that we can't necessarily predict--long term oil prices; terrorism; good or bad management comes aboard at a different carrier; different economic strength in different parts of the country--what better general measure than CASM can one propose?

Jim


User currently offlineRayChuang From United States of America, joined Jun 2000, 7929 posts, RR: 5
Reply 9, posted (11 years 4 months 3 weeks 1 day 3 hours ago) and read 1551 times:

Here's a huge question: if UA goes under, what will be the scramble to replace all the lost transpacific flights?

I could see the following happen:

1. NW purchases 15-20 ex-UA 747-400's and NW becomes the primary transpacific US-based carrier.

2. AA will try to become more important on transpacific routes using 777-200ER's. AA could become the #1 carrier between the US mainland and Hawaii.

3. CO will also try to become more important on transpacific routes from LAX and HNL using a combination of 777-200ER and 767-400ER planes.

4. Foreign airlines will try to fill the gaps caused by the loss of UA's transpacific service. Look for China Eastern (MU) and Air China (CA) to expand services to SFO, JL and NH to expand services to SFO/LAX from Japan, QF to fly more flights between SYD and the US West Coast, KE and OZ to fly more flights between ICN and SFO/LAX, and SQ and/or CX fly more flights between HKG and SFO/LAX. I wouldn't be surprised that SQ replaces UA 805/806 between HKG and SFO with its own flight using a 747-400 until the A380-800 becomes available, then the daytime SQ flight from SFO to HKG switches to the 777-200ER and SQ 1/2 switches to the A388.

Unfortunately, DL's decision to phase out the MD-11 means DL will not be well-positioned to start any service between the USA and Asia due to the lack of 777-200ER's in the DL fleet.


User currently offlineZK-NBT From New Zealand, joined Oct 2000, 5193 posts, RR: 11
Reply 10, posted (11 years 4 months 3 weeks 1 day ago) and read 1512 times:

IF UA goes under and thats a Big IF, since i'm from AKL I am wondering IF their Australia and NZ flights would be replaced. If NZ and QF get together I think they will increase flights! But even so I would think someone else would try and fill the gap, AA already code-share with QF, CO say the yeilds aren't good, DL are losing the MD11 and will be short of capacity, My guess would have to be NW like RayChuang said to pick up 15-20 UA 744's and use them to replace UA's SYD, MEL and AKL flights aswell as several of the other destinations. Surprizing actually that another US carrier doesn't fly down under now the market is there! QF I guess could also return to SFO.

User currently offlineDc10guy From United States of America, joined Feb 2000, 2685 posts, RR: 6
Reply 11, posted (11 years 4 months 3 weeks 23 hours ago) and read 1508 times:

I could see NWA & SWA coming out as big winners if United goes under....


Next time try the old "dirty Sanchez" She'll love it !!!
User currently offlineRayChuang From United States of America, joined Jun 2000, 7929 posts, RR: 5
Reply 12, posted (11 years 4 months 3 weeks 19 hours ago) and read 1480 times:

The more I think about it, it's very likely that if UA goes under NW will pretty much take over all of UA's transpacific routes. NW will grab most of UA's newer 747-400 fleet (around 20-22 planes) and NW will have a big presence at Terminal G at SFO. NW will then turn NRT into a major hub almost as big as JL's hub there.

However, that might not happen, because you know both AA and CO will object to only one US-based airline totally dominating transpacific routes. In that case, expect AA to take over most of the former UA gates at NRT and assigning 777-200ER's and 767-300ER's there, and Terminal G at SFO will be split between NW and AA for transpacific flights in addition to Star Alliance flights from LH, NH and SQ.

It is now that DL is rueing the decision to phase out the MD-11; DL could have become a huge presence on transpacific flights using the MD-11 until they are slowly replaced by more 777-200ER's.


User currently offlineMD88Captain From United States of America, joined Nov 2001, 1329 posts, RR: 21
Reply 13, posted (11 years 4 months 3 weeks 19 hours ago) and read 1478 times:

DAL's MD11's are not going to be gone. In fact, Fred Reid said to a pilot briefing that they will be in "storage, but not deep in storage". He said they would be ready to come out very quickly if needed. For example a CRAF event would probably see them coming out of storage. And (if not sold) they will be available for trans-pacific opportunities.

User currently offlineRayChuang From United States of America, joined Jun 2000, 7929 posts, RR: 5
Reply 14, posted (11 years 4 months 3 weeks 18 hours ago) and read 1462 times:

MD88Captain,

So does that mean the DL MD-11's will be in the same type of flyable storage like some of the UA 747-400 fleet is in now at VCV? One that can be put back into service on short notice? In that case DL could start flying from SFO and LAX to Asian destinations quickly in case UA does shut down.


User currently offlineConcordeBoy From , joined Dec 1969, posts, RR:
Reply 15, posted (11 years 4 months 3 weeks 18 hours ago) and read 1461 times:

DAL's MD11's are not going to be gone. In fact, Fred Reid said to a pilot briefing that they will be in "storage, but not deep in storage". He said they would be ready to come out very quickly if needed. For example a CRAF event would probably see them coming out of storage. And (if not sold) they will be available for trans-pacific opportunities.

By this, I'm sure he's referring to ownly the owned M11s.... but that still leaves the other half of them, which are leased, and likely to be returned to their lessors at a loss for DL.


User currently offlineMD88Captain From United States of America, joined Nov 2001, 1329 posts, RR: 21
Reply 16, posted (11 years 4 months 3 weeks 15 hours ago) and read 1434 times:

Yes. My understanding is that all the MD11's being stored will be availabe on very short notice. DAL's CRAF contract may have something to do with this as well. And I do not think DAL is able to terminate the leases on some of their Md11's. I believe they are parking them and still paying the lease payments like they have been doing with the 737-300G's. But, if they can make a deal to transfer the leases and/or sell the MD11's I am sure they will. The chances of that are not great with the glut of cheap aircraft out there.

User currently offlinePetertenthije From Netherlands, joined Jul 2001, 3309 posts, RR: 12
Reply 17, posted (11 years 4 months 3 weeks 15 hours ago) and read 1422 times:

RAYCHUANG said : "slowly replaced by more 777-200ER's."

Why slowly? If UA indeed went bust, then there will be a large amount of surplus 772ER's. They will make the price of secondhand 772ER's definately go lower.

Does anyone know what Boeing would do with the 777 and Airbus with the A320-series in case UA/US went bust? Would they lower their production or stay the same? Especcially Airbus is in a precarious position as both UA and US use a lot of A320-series.



Attamottamotta!
User currently offlineSTT757 From United States of America, joined Mar 2000, 16693 posts, RR: 51
Reply 18, posted (11 years 4 months 3 weeks 13 hours ago) and read 1393 times:

UAL's Pacific operations would be split up, no way the DOJ would allow NWA to "own" NRT.

UAL has three main gateways to Asia/Pacific:

SFO, LAX and Narita.

Since NWA already has a hub in Narita exclude them, since the Narita hub and it's beyond rights are very valuable expect a bidding war between AA and DL.

I could see a CO hub in LAX, something along the lines of EWR. International flights to NRT, KIX, SYD,Auckland, Melbourne, Hong Kong, Guam, Guatemala City, San Salvador, San Jose, Mexico City, and London.

Since NWA is a major Pratt and Whitney customer NWA picking up a number of UAL's P&W powered 777s to expand from SFO and replace older 747-200s makes sense (to me atleast).

Also DL might be interested in some UAL 777s since they too are a big P&W customer (although the few 777s they did order were Trent powered).




Eastern Air lines flt # 701, EWR-MCO Boeing 757
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