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lindy field
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United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 3:24 am

This article from Airwise:

United Airlines is headed for a turbulent restructuring that will fundamentally alter its flight operations, labor relations and, possibly, top management according according to Crain's Business News.

At best, the nation's second-largest carrier will emerge a much smaller, weaker competitor, probably falling to third place behind Atlanta's Delta Air Lines. At worst, United will join a long line of second-tier airlines that have gone through bankruptcy.

A larger-than-expected loss of USD$525 million reported last week by American Airlines was a bad omen for United, which already was losing much more than its archrival before the September 11 terrorist attacks.

Crain's reported that United parent UAL Corp. will report a third-quarter loss on November 1, probably far higher than the roughly USD$500 million loss Wall Street is expecting. Analysts expect losses for the year to be about USD$2 billion.

American Airlines executives said last week that it is still losing USD$10 million to USD$15 million in cash a day, and advance bookings are below par for November and December.
_______________________________________________

Anyone care to comment?


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donder10
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 3:31 am

sad
 
Jer32382
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 3:44 am

They need to talk to Herb down at SWA. He knows how to do it.
 
IAHERJ
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 3:52 am

What a stupid statement. That's like comparing apples to oranges. They need new leadership but it's a little more in depth than getting a good ole boy from Texas in there.
Actually flown: EMB-120 EMB-145 B717 B737 B757 B767
 
Guest

RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 4:50 am

...is it IAHERJ?

Again, there is only ONE consistently profitable airline, where most of the employees are glad to go work, where the unions are amicable with mgmt., where the customers are loyal, where the per mile seat cost is lower than EVERYONE else...gee and it used to overseen by a guy named Herb.

United is NONE of the above and that IS the problem.

 
LoneStarMike
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 5:36 am

Here's what I find amazing about United's current situation. I read an article the other day that mentioned UA's stock was trading at $73.50 back in May of 1999, which I believe was about the time that Goodwin replaced Greenwald. Back then they were the largest airline and had such a strong balance sheet.

Earlier this year, in January, UA was still at $45.50, yet some 9 months later (as of Friday) they're trading at $13.93. At that price, that makes their current market cap $752 Million. Compare that to WN at 12.20 Billion, AA at 3.060 Billion, DL at 2.94 Billion, NW at 1.108 Billion and CO at 989 Million. It's almost inconceivable that they could go down like that in a little over 2 years.

I also agree, to some extent that trying to compare Southwest to United is like comparing apples to oranges, but there are still a few things that the other airlines could learn from Southwest.

1) KISS - (Keep it simple, stupid). Southwest has been successful in large part because they have kept their operations simple. Southwest flies one type of aircraft. The other carriers have many more. I'm not suggesting that United go with one particular aircraft, but they could maybe reduce the number of different types in their fleets. Southwest may have some 10-12 fare codes on their city pairs, whereas some of the other guys have dozens of different fares for the same city pair that change on a daily basis.

Southwest concentrates on on thing and one thing only and that is providing transportation from point A to B. The other airlines do that, too, but then they try to branch out and go into other things like the hotel and travel industry (Alegis) or on-line booking agencies like Priceline, and Orbitz, or going into the corporate bizjet business (Avolar). It's better to do one thing and do it well than to try to do too many things and wind up doing all of them half-assed.

2) Never try to get too big, too fast, or you'll usually wind up falling on your face. Take it slow and steady. This doesn't just apply to the airline industry, but to other industries as well. Remember after deregulation when Braniff went ape hog wild ordering planes and adding destinations right and left? Look what happened to them. Then look at all the mergers that have gone on. A merges with B and for some time afterwards it's like the right hand doesn't know what the left hand is doing.

Employees at A did things one way and employees at B did things another way and everyone gets confused on how they're supposed to do their jobs now, and the customer gets frustrated because one employee will tell them one thing and another employee will tell them something different and it's just mass confusion all around.

3) Know what your priorities are. Most airlines take the view that their first responsibility is making their shareholders happy, their second responsibility is making their customers happy and their third responsibility is making their employees happy.

At Southwest, it seems as though their first priority is making their employees happy, not necessarily with pay, but in the way they are treated. Happy employees give it their all and seem to go that extra mile to provide good service to the customers. The customers like it (well... most of them  Smile ) and they become loyal customers and give Southwest repeat business and that, in turn makes the sharehoders happy because the price of the stock keeps going up.

4) Save money for a rainy day. Even in the boom times, act like disaster is right around the corner and plan accordingly because you never know what tomorrow might bring. Don't over-extend yourselves, financially speaking.

In conclusion, I sincerely hope that UA can overcome all the obstacles and recover, but it's going to take more than new management, IMHO. It's going to require that employees and management work together as a TEAM and if that is accomplished, then the company can go forward and hopefully better times will soon prevail. But if different employee groups start having work slowdowns, and sickouts, and start threatening to go on strike or start Creating Havoc Around Our System (CHAOS) that's just going to drive more of your customers away and United will continue it's downward spiral.

United was once one of the best and I know if the employees and management put their minds to it they can again be the best. So good luck and get going and I'll get down off my soapbox now.

*This peptalk has been a public service announcement brought to you by

- LoneStarMike Smile

 
PolAir
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 5:40 am

I have ticket booked with UA OMA-ORD-FRA-WAW for next year. I wonder what will happen with my ticket if they go out of business?
 
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lindy field
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 5:47 am

Pol Air,

At least some of the legs of your trip are going to be operated by Star Alliance partners. I don't think you'll have to worry about the Lufthansa leg. I'd be very surprised if UAL went totally out of business; airlines do continue to operate while under bankruptcy protection.

Funny that my post came only hours before news broke about Goodwin's resignation. I'm glad that there's a little good news about United today. What do people know about Goodwin's successor? He's got an enormous challenge ahead of him!

L. Field
 
AerLingus
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 6:13 am

This isn't a bad thing.

As far as I am concerned, keeping United in business is better than it dying all together. I have a lot of respect for the second tier airlines and their service tends to be far superior to that of larger carriers.

With a smaller United, the airline will be forced to take better care of passengers. They will gain a new loyal following and they will be a better financial institution.

This isn't sad. This is great.  Smile
Get your patchouli stink outta my store!
 
Guest

RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 6:18 am

GOODWIN RESIGNS!!! YAY!!!!


You knoww, wouldn't it be nice if CO bought out United, kept all the employees, and ran the corporation well?

I would only wish, it probably won't happen, but if Bethune was in charge the problems would only be a fraction of what they are now. I hear CO is in fantastic shape.

Aloha 737-200!!  Wink/being sarcastic


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RC Pilot
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:02 am

This is somewhat sad. I was plannig to apply for them once i got out of the regional airlines. Not to say they wont be big.

I really like united. Dont know why. i havent even flown with them.

Maby it was their majestic look. or the fact that they were the biggest when i started to like them.

I think that they will pull out of this and become the worlds biggest again. They are one of the oldest and im sure have been through worse than this.

But i dont know for sure. Im just a teenager.

it be really said if they went out of buisiness.

what are second tier airlines. Is Northwest one.

regards
 
cedarjet
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:22 am

What the hell happened? This Goodwin bloke must be some kind of nutter. UA were in such good shape, I'm staggered to see these numbers now. Does anywhere know where the money went? I don't recall them buying ANYTHING except topping up on a few 777s, 757s and 744s, and some Airbus that probably don't even appear on the UA balance sheet at all, knowing the way Airbus sell planes. Getting so big didn't cost that much in the first place - Pan Am took half a century to build the Pacific routes UA bought from them for $500m (AA valued the network at the time at $3b). And speaking of Pan Am, it took them another 20 years to come apart in the spectacular fashion UA have done in 2 years.

Lindy Field, something you said made me giggle: "Pol Air, At least some of the legs of your trip [FRA-WAW] are going to be operated by Star Alliance partners. I don't think you'll have to worry about the Lufthansa leg." No, me neither, unfortunately the journey with United starts in Omaha so if UA aren't there to take Mr Pol Air to Frankfurt, I don't think he's going to care too much if the FRA-WAW flight operates or not.
fly Saha Air 707s daily from Tehran's downtown Mehrabad to Mashhad, Kish Island and Ahwaz
 
Tango-Bravo
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:38 am

Excellent post LoneStarMike. You know whereof you speak and say it well.

Southwest's "secret" of consistent success through good times and bad boils down to having the courage to base all of its decisions, large and small, on "doing the right thing" without wavering. Herb Kelleher indeed has stated that Southwest's priorities begin with their People (i.e. employees) who, if  Smile make their Customers  Smile who then keep coming back to fly with Southwest, which makes their shareholders  Smile

In spite of being at "the bottom of the food chain" Southwest's shareholders have plenty of reason to be  Smile According to an article titled "Smile! It's Recession Time!" by Geoffrey Colvin in the Oct. 29, 2001 edition of Fortune magazine: "...you won't believe this but it's true--Southwest is now worth more than all the other airlines in America combined." As recently as May, 2001, Southwest was worth more than "only" American, United and Continental combined.

The only statement made by LoneStarMike with which I do not concur is Southwest may have some 10-12 fare codes on their city pairs... In Sabre, I rarely see Southwest having more than 6-8 fare codes for any city pair--and certainly nowhere near the outrageous disparities between the high and low end of the coach fare spectrum represented by dozens of fare codes shown by the other majors on most city pairs.

Whether I were an employee of Southwest (I'm not), a Customer (occasionally I am) or shareholder (I'm not) I would respond to those who never cease to grasp at straws in their futile attempts to discredit Southwest or to explain away the real reasons for their success as Liberace did to his critics early in his career: "Well gentlemen, I will be feeling hurt by your comments all the way to the bank."

In spite of Southwest's proven strategy that has consistently produced win-win-win results for its People, Customers and Shareholders for 30 years, the other U.S. majors have remained in a state of denial, with consequences that had begun to be seen months before 9/11 and were hastened by the effects of the tragic events that occurred on the day America was attacked.
 
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lindy field
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:42 am

Cedarjet,

Well, I'm not always logical and I don't always agree with what I think but my message for Pol Air was that his flight will probably fly. I don't think UAL will collapse completely, so he'll probably be able to get out of Omaha o.k. If UAL did collapse, some of its competitors would probably take the high road and honor the UAL tickets. Well, maybe.

In my view, UAL shot itself in the foot in the summer of 2000 with its prolonged labor dispute. The inability of management and labor unions to reach an agreement in an expedient manner alienated a large number of customers and ruined employee morale. Someone else can give a more detailed view.

Lynn D. Field
 
cedarjet
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:48 am

Lindy Field, I meant no disrespect, I agree that UA will probably be around.
fly Saha Air 707s daily from Tehran's downtown Mehrabad to Mashhad, Kish Island and Ahwaz
 
SegmentKing
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:48 am

so you all basicly think United should fly 737s only, charge only 3 or 4 fare bucketes, and kill everything else?

Southwest is an apple.. United is corn. You can't do something at one airline and expect to do it at another. I think you'd have better chances of making your dog talk before United turns into Southwest Airlines...

-n
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
IndianicWorld
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:51 am

Star is dead without United....
 
AirCanadaMan
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 10:52 am

Has anyone else noticed some striking similarities?

It seems that the members of the Star Alliance are slowly dying.

1. Air Canada, losing lots of money, made some BIG mistakes.
2. Ansett/Air New Zealand, we all know the story.
3. Lufthansa, parking a whole bunch of jets.
4. Singapore, restructuring their orders.
4. And Now United.

Now dont get me wrong, I fly Star and I like it a lot, but in time of crisis, it seems that the once most powerfull alliance is failing, miserably!

 
RC Pilot
Posts: 139
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 11:08 am

Are you all sure that united is falling.

I dont think that they have downsised any.

In fact if you go to their site you'll see that they added some more routes. And i think that they are the first to have there entire fleets cockpit doors reinforced.

Im not sure who to believe here. but i think im going to go with the untited site.
 
watewate
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 11:39 am

"It seems that the members of the Star Alliance are slowly dying."

That's an unfair assessment, don't you think? Virtually all other airlines are downsizing at this moment. Even OneWorld carriers, with the understanble exception of Qantas, are cutting capacity much like your so-called 'dying-carriers'. AA, BA, EI and others have cut back in light of the 9-11 incident. They're hardly going down as you suggest.
 
AirCanadaMan
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 12:43 pm

Watewate,
You are entirley right, and I was afraid this kind of thing would be posted as a reply.

From where I sit, it just seemed to me that the carriers of Star are making the financial headlines a lot more than the other alliances, although there is talk of them
Keep in mind I wasnt implying that Star was dying, just some of the key players arent in a healthy condition.

I aplogize if I upset you in anyway.
 
N178UA
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 1:17 pm

Hi All

Seems I am still holding lots of United Assets. If United is going down, I am going down with it!

1 My share of UAL now at rock bottom $13.93 (have some at$40, $50...too much to mention)

2. My United Premier Executive 1K status will be gone if they out of busniess. My 160000 odd miles is in danger also. and my family members all have some mileage from United.

3. Have collect 1:100 Pacmin UAL models, 1:400/500 Herpa and Gemini Jets and Dragon Wings All different United releases throughout all these yrs.

4. Nov 1 is the date UAL Corp boradcast 3Q financial result through web. I think they lost colse to 700m-1 billion

5. I once remember I am so proud flying United, L1011, B747SP, DC-10-10 service out of Asia to US. then the new B744, 772 types. Just don't understand how United turned so bad after 1 yr, (worse than all others even every US major suffered 9-11 attack)

6. If you look at United Traffic reports or ATW magazine, Internationally speaking, United is doing better than ever before the attack. Just domestically lost high yield pax to other majors.

7. I was thinking if United then CEO Jim Goodwin, won't sign a big pay out to its employee, United will go strike last summer, (like Northwest did before). Now I know this deal is hurting UAL, but I am thinking , it will eventually hurt others like AAL or NWA, as now the industry pay level is aiming "United plus 1 %" or more like Delta just paid out that increment.
So won't all other US major suffer eventually because of the United last summer benchmark?

8. If United would sale route right or asset, I will suggest spin off its S. America and Central America routes and rights, they are really not profitable and have strong contenders like AA and CO and newcomers like DL. Better concentrate Asia,(Japan) and Eurpoe, in Asia/Pacific, United still hold a very large market share reflecting in the RPK/RPM and ASM/ASK statistic released by DOT.

Finally, I am not sure what I will feel if United go down just like Swissair did not long ago. But it's gonna be real sad, as all my life been flown on United in and out US. Hope the new CEO, John Creighton brings some light on UA. Above are my personal feelings and thoughts.


United we stand

Sam Chui
For more of myself and my flight reviews visit http://www.SamChui.com
 
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lindy field
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 1:17 pm

Star has perhaps been hit harder than the other alliances, but certainly other airlines are hurting... need I say the word "Qualiflyer?"

However, Aer Lingus, Alitalia, Continental, Delta, Korean, Canada 3000 and others are cutting back as well. These are hard times. I hope that no one got the impression from my posting that I enjoy United's troubles or derive any pleasure from them.


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alexinwa
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RE: United Falling: Major Restructuring Of Airline

Mon Oct 29, 2001 6:19 pm

Alot of great reading and insight in here.

My two cents.

As we look at AA/DL/CO/NW/UA some have changed big time others haven't.

One reason I believe UA is hurting is something that I have said for a while in the posts. It has never made any sense to me for UA to run double or triple flights at the same time. For example SEA-ORD having two flights that leave within 5 mins of each other. I notice that one of the 1st changes they made after 9/11 was this. They cut back on the double flights.

UA got its butt kicked with its sad attempt to match AA's more room with it economy plus.

It's Customer service, which is a reflection of its upper management is in the tank.

Alot of wasted money as far as I can see is the main reason. More A/C then is needed, which means more expense than needed.

DL runs 4 daily non-stops to ATL from SEA. All WIDE-BODY. UA runs still 8 or 9 SEA-ORD flights ALL NARROWBODY. Big exspense difference there. How many seats is UA gaining? Not many. But the exspenses are much much higher. More fuel, crew pay, food, etc.

You mad Bro???
 
imkeww
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RE: United Falling: Major Restructuring Of Airline

Tue Oct 30, 2001 2:36 am

Alexinwa--

Biz travellers prefer frequency. AA followed UA with MRTC, not the other way around! Although, it is to UA's detriment that you didn't know UA was the one who started expanding personal space in economy.

United was doing horrendously prior to 09-11 due to several factors: unreasonable pilot's wages (which made a lot of 744 flying unprofitable), a loss of formerly loyal biz travllers from last year's debacle, and on top of that-- a loss of even more business travellers due to the economy and United's larger reliance on them.
 
DCA-ROCguy
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RE: United Falling: Major Restructuring Of Airline

Tue Oct 30, 2001 3:05 am

The Airwise article only makes clearer the nature of the new business environment since Sept. 11. Simply put, the House of Cards--the high pre-deregulation cost structure of the six Cartel airlines---has to come down. United is simply an egregious example.

The high-cost, high-fare Cartel airlines have been fundamentally vulnerable since deregulation because they depend upon $500-2500 domestic coach fares to feed their voracious cost structures. Every time the economy goes soft, business travelers tell the Cartel where to stuff those fares. (Like they had this year long before Sept. 11.)

And the wider spread of Southwest means that a lot more cities have reasonably-priced air service, or are within a two-hours drive of it. This development has helped air travelers nationwide realize that something better than the Cartel's high fares and poorer service is out there.

United, and probably all of the Cartel carriers, will probably be different creatures two years from now--all still here (except US Airways, which will probably be carved up and sold since DOJ has nixed outright merger). But they'll have smaller planes, and cities that can't support at least 37-seat or so a/c will lose service. From what I read, Federal regulations are making 19-seaters uneconomical. A real shame, since those communities shouldn't lose service because of Federal regs.

Meanwhile, the well-managed low-fare airlines will be much larger and profitable. Pretty much any metro area of 1 million or more will have at least one or two of them. Right now, low-fare air service is very inequitably distributed in the USA. Buffalo has a low-fare feast, Rochester and Syracuse have one low-fare nonstop route (JFK). As the economics of airline travel reduce the Cartel's financial ability to abuse ROC and SYR, the low-fare carriers will probably move into these increasingly fertile financial fields of service.

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
777D
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RE: United Falling: Major Restructuring Of Airline

Tue Oct 30, 2001 3:31 am

I was once married to a f/a who worked for UAL and I read some of the company's and union's propaganda regarding labor issues, wages, and etc and found it all self serving. The unions were/are asking for increases in salary and work rules that did not benefit the flying public. If you increase the salaries from the ramp to ticket agents to pilots someone is going to have to pay for these increases. That means you and me are going to pay!! I have experienced the f/a's on UAL and since I was once married to a f/a I know what they think of the passengers. They believe that if you do not fly UAL someone else will.

With the slump in the economy affecting everyone of us UAL is learning a lesson the hard way. The competition understands the public and as other people have posted perhaps the times have passed UAL.

They were once a proud carrier but things have changed and other carriers have adapted, some better than others and perhaps this will give the Jeteblues and AirTrans of the world a better chance to survive for the long term.

If I had my ways I would like to see UAL sell their Asian routed to DELTA and the their LHR authority to US Airways.....

My two cents

777d


 
sfointern
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RE: United Falling: Major Restructuring Of Airline

Tue Oct 30, 2001 3:42 am

Jim--

The major cartel six's "voracious" cost structures are the result of trying to meet demand for air travel.

Yes, biz fares are exhorbitantly high. And the Reservation Prices of those biz travellers have gone way down... which means airlines must either reduce costs, raise leisure fares, get their planes 100% full, or any combination of those factors.

But that's the way the system has worked. In good times, those fares were what the biz travellers would be willing to pay to assure that they had a seat onboard the airplane. Leisure travellers dealt with restrictions, and possible bumpings, to ensure the lowest possible fare. Leisure travelers are only 'fillers' and discretionary, or so the cartel six had thought.

The mentality behind their cost structure as full-service airlines was that the minority of very high fares subsidized the massive amounts of low fares.

But now, as you've said, WN has been attracting more and more of the cartel's bread and butter. Their fare structure has lent itself to "fair pricing" as the image people see of Southwest. Why bother with a high walk-up fare on a cartel when you can get a lower walk-up on WN? Because WN sets lower expectations, and overdelivers on its promises, pax keep coming back.

It becomes harder and harder for the cartel to remain full service, high-cost oriented. You are already seeing this. Once "frilled" flights are losing their amenities, even in First Class. Biz flares have been slashed to get those loyal biz pax flying again.

United's strategy has been to decrease costs dramatically, by cutting frills, employees, and equipment. In addition, it's trying to fill its planes compeletely full through leisure fare sales. Fares are lower than ever, and there's less capacity, so United is running its planes very full. Like Southwest has been doing, United is just starting to stray away from the "high fare subsidizes low fare" strategy by keeping its planes full and equipment highly utilized.

This maybe the first step, but as we all now, it is very hard to shrink to profitability. United has to set new, different expectations for employees and customers that reflect the current economic reality, and the fact that the 'House of Cards' cost structure will be difficult to maintain for the forseeable future.

Hopefully, some equilibrium point will be reached where United will start growing again. With growth comes profitability. They go hand in hand.

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