flashmeister
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United Still Burning Through $4-5million/day?

Mon May 13, 2002 12:45 am

An article written by John Schmeltzer of the Chicago Tribune is indicating that United is still burning through about 4-5 million dollars per day... and they say that this comes from United lame-duck-CEO Jack Creighton.

I found the article on the wire section of philly.com at http://www.philly.com/mld/philly/business/3240286.htm.

If this is true, this is very serious news for United. While they're winning labor peace, they haven't stemmed the bleeding yet, apparently. I thought that by now, they said that they would be cash-positive. What's the deal?
 
ILUV767
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 5:05 am

First off...

Jack Creighton is fare from being a lame duck CEO. Jack has worked to lower the cash burn from over ten million per day. He has worked to restore employee morale, and has done what he can to insure that the company will stay around. He kept his promise about not taking United to the bankruptcy court. Sadly, as one of the best CEO's of United, he is leaving. He did only take this "unpaid" job as a temporary measure.

Second:
United's cost structure is very high. When operating close to 600 planes a day, and having over 100,000 employees it is expencive. United was hit very hard after 9/11 as well as before that and we are making a recovery.

While I think that concessions are going to have to happen, I do not think that Bankruptcy is an option. I do not think that furloughs are an option any more with the exception to maintence. There is a lot of work that is farmed out to other companies. I see that continuing to happen, and if IAM doesnt agree to concessions, we might see a maintence facility close.

United has gone along way in cost cutting. Most of the cuts are not that noticable, but are there. Passengers still recieve the can, and the movies are free. Food has been reduced on midcons, and most things that could have been cut have been cut.

The big thing that is hurting United is low ticket prices. There is only so much that you can cut to lower costs. The rest has to be made up in ticket prices. The industries yields are quite low at the moment. As a result all airlines are hurting. When ticket prices go up, the airline will start to become more profitable. In the meantime, dont count on many of the cut items comming back. This is true on any carrier.

I L U V 7 6 7
 
deltaflyertoo
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 5:14 am

I think UAL has to stop being everything to everyone. On another thread someone was asking if UAL will reinstate LAX-IAH flights. This would be lame if they did. IMO they need to dump LAX all together. WHat is LAX giving them that SFO isn't? LAX is full of WN, AA is a huge want to be there, it doesn't make sense for UAL. On the same note, UAL should dump IAD, sell a huge chunk, if not all of the 737s and return to their routes of ORD, DEN and SFO only. Bad times, low yields call for extreme measures. The airlines that are doing okay now are the ones who have felt secure in serving certain parts of the country and not everything and everyone. I.E. CO, WN and NW. UAL needs to get a clue from them.

 
flashmeister
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 6:34 am

As a result all airlines are hurting.

Tell that to Southwest, jetBlue, Frontier, etc...

Deltaflyertoo has a good point: United cannot afford to be the dominant carrier in every market it serves anymore. It has to pick and choose. All airlines have come to this at some point, and now is Uniteds' time...

Second, I don't want to hear about cost structure as a justification for such high cash burn. United should be able to control its costs, and if it can't, then it should be prepared to really pay the price. It comes down to corporate stewardship: United has been a poor master of its own destiny, and now that the losses are coming back to bite them, we make excuses. Rubbish.

United is an example of an airline with an outdated business model that needs to realize that some sort of significant change is necessary to thrive in what is in many ways a brand new market... Removing a salad here and an olive there is a start, but nothing compared to what should be done.
 
ord
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 7:17 am

UA is not everything to everybody. They are dominant in their hubs, just the same as AA and DL are in theirs.

LAX is important in that the LA travel market is very different from SFO. That's like saying AA shouldn't have bought TWA because St. Louis is like Chicago. UA has been the #1 airline in LA for a long time, and they should not just give it all up to AA (who would take over). That would be foolish. Also, WN has the LAX short-haul market sewn up. That is why UA scaled back short-haul. WN does not even compete on the lucrative transcon and Pacific flights where UA dominates.

Why sell IAD? That hub is also very lucrative, and UA has a monopoly on the European routes there among US carriers. The area around IAD is very up-and-coming.

UA should keep all its hubs and work through means to cut its costs, which is what will be done with the new CEO. DL and AA have not given up their hubs either. UA is on the right track.

By the way, AA actually lost more money in Q1 than UA did, so it seems AA has just as much work to do in this area as UA.

Of the Big 3, DL is in the best position.
 
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United_fan
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 11:21 am

One needs tp look no farther than TWA and Pan Am selling thier LHR rights. I think that UA is on the right track- I hope.
Champagne For My Real Friends,and Real Pain For My Sham Friends
 
prosa
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 11:28 am

One needs tp look no farther than TWA and Pan Am selling thier LHR rights. I think that UA is on the right track- I hope.

It's my understanding that TWA and especially PanAm were in much worse shape when they sold their LHR rights than UA is in right now. Even so, UA's selling important routes like that would smack of desparation and only make its comeback more difficult.

"Let me think about it" = the coward's way of saying "no"
 
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United_fan
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RE: Prosa

Mon May 13, 2002 11:33 am

That's what I meant.My guess is,IF,UA sold out LAX and AA took it over,it would be even harder and more expensive for UA to get it back.
Champagne For My Real Friends,and Real Pain For My Sham Friends
 
airworthy
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RE: United Still Burning Through $4-5million/day?

Mon May 13, 2002 12:31 pm

Deltaflyertoo,

I was extremely surprised by your comments.

Echoing what ORD said, beefing up at LAX and remaining at IAD made sense for UA in boom times.

Having a large LAX presence does not now, which is why this hub suffered the largest cutbacks. Most of the traffic that fueled UA's growth at LAX in the 90s was the result of California's exports growing exponentially; the LA basin is huge on importing/exporting.

IAD makes perfect sense for UA's European operations. Where else would they put it? It's ideal for connecting people from all over the states. Also, the yields from IAD to many places are phenomenal.

IAD has the most potential of all the United hubs. Once the economy bounces back --along with a rise in the tech industry again-- you'll see wealth grow in the N. Virginia corridor even more, causing an unprecedented growth of traffic at IAD.