ont 737
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UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 1:07 am

As most on this forum know, both AA and UA bought their LHR right from other airlines. (Pan Am, TWA) Does anyone think UA has even *considered* the idea of selling their LHR rights in order to avoid (stall is probably a better word) bankruptcy? If they were in chapter 11 could it be feasible for UA to be forced by the courts to sell the rights in order to pay off some debt? I realize that UA's LHR flights have probably the high yield in their whole system; but would they be able to declare bankruptcy, cut costs (aka downsize), and go through reorganization and still be allowed to hold such a valuable commodity?


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David_itl
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 1:14 am


The only US based airline they could sell them to would be AA under the current Bermuda II restrictions; I doubt they'd be allowed to sell them to a non-US airline (especially BA!). It may become the catalyst for the entire agreement to be redrawn to let other US carriers gain access to LHR.

David
 
ybacpa
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 1:21 am

I am sure they have considered it, if only to do an analysis of the value of the rights. Assuming the yields are good (I honestly think probably aren't as good as some preach), bankruptcy courts would probably not require them to sell the rights, assuming United can come up with another viable alternative.

Personally I expect United to reduce, if not eliminate most 5th freedom routes, or at least suggest this to the courts as their recommended course of action. The problem with this approach is the sale value is probably minimal, so the only significant benefit would come soly from a reduction in capacity.

On the flip side, Heathrow rights are one tangible asset which would cause minimal disruption in service to the rest of the entity. At a minimum, Continental and Delta would be interested, and I would expect Northwest to at least make a bid, if United were to put them on the proverbial block. The big question is how much $$$ it would raise.
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Guest

RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 1:23 am

No way they would sell them to AA, no way they would sell them period. Those routes are UA's pride & joy (aside from the 777s). Besides, if UA sold all of them, they wouldn't give AA a monopoly, so they'd go to someone else.
 
ybacpa
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 1:32 am

UAL1837,
I respectfully have to disagree. As much as those routes truely can be considered UA's pride and joy (as well as BA's, VS's, and AA's), it does offer a quick alternative to raise cash. I'm sure many people thought TWA and PanAm would never give up these marquis rights either, but both were eventually forced to by the realities of the market.
SkyTeam: The alliance for third rate airlines finally getting their act together!
 
northstardc4m
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 2:00 am

UAL1837,
I respectfully have to disagree. As much as those routes truely can be considered UA's pride and joy (as well as BA's, VS's, and AA's), it does offer a quick alternative to raise cash. I'm sure many people thought TWA and PanAm would never give up these marquis rights either, but both were eventually forced to by the realities of the market.


you sound like Carl Ichan... TWA didnt need to sell those routes, Ichan sold them for a pitance (less than the yearly revenue they were providing TWA) and never reinvested a cent on that money in TWA. Those routes are profitable to United, and if United were to sell them it would be like shooting yourself in the foot to save on running shoes. Pan Am was almost forced into giving up its routes to LHR by its creditors (who were beating down the door with overdue payments), but thats a whole different story and far too complex to get into here.
Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.
 
N79969
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 2:03 am

Those are among the very last assets that UA should sell.
 
Arsenal@LHR
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 2:48 am

I would be suprised if UA sold it's LHR routes. Out of UA's european network, routes to LHR are quite healthy year round i assume.
In Arsene we trust!!
 
User avatar
EA CO AS
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 3:11 am

If UA ever were to part with their LHR rights, expect the following:

1. For UA to get to this step, they'd almost assuredly be in the process of Chapter 7 liquidation.

2. DL, NW, and CO would be engaged in a major bidding war.

3. Since the bidding would be part of a Chapter 7 liquidation, this also means UA's Pacific operations would be up for sale. DL would bow out of the LHR bidding in favor of throwing everything they had at acquiring UA's Pacific ops.

4. NW and CO would keep outbidding one another, with NW eventually winning out, but at a steep price.

It's my belief that such a purchase would eventually seem like a huge waste of money, since odds are that an Open Skies agreement will be in place within 2-3 years, allowing all U.S. majors access to LHR.

"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan

Comments made here are my own and are not intended to represent the official position of Alaska Air Group
 
searpqx
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 3:12 am

Something to keep in mind, if memory serves, no carrier has sold off a significant portion of their network and/or flagship routes and survived. Sales like that are desperation measures and only serve to postpone the inevitable. Recent examples include PA (Twice!), EA, BN and TW. UA, being the recipient of both of PA's 'fire sales' probably knows this better than anyone. I don't think you see UA voluntarily shopping the LHR service around, even in bankruptcy court.

Duane
"The two most common elements in the universe are Hydrogen and stupidity"
 
srbmod
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 5:56 am

Braniff sold their Latin American ops to Eastern, who sold them to American.
Eastern sold their Shuttle to Trump, who sold it to USAir(ways).
Delta got their Shuttle by way of Pan Am.

The Heathrow rights are probably the plum of all of UAL's assets. Anybody can have a Pacific and Asian route system; but only a select few get Heathrow rights. I do foresee a cut in UAL's Asian and Oceanic flights, with more of their flights going to codeshares with other Star Alliance partners. If UAL were to sell their LHR slots, the first choice would probably be to a fellow Star Alliance member. I really doubt UAL would sell their LHR routes unless they were in SEVERE financial difficulty. A sale of LHR rights would be the last-ditch move for them if they were teetering on CH 7.
 
Guest

RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 6:12 am

I have refrained from responding to these UAL threads, as I feel I really am not that educated re UAL ops or the American market, period. But, if I may be allowed to offer my opinion, here it is. I too feel that UAL should not dispose of the LHR route rights, or any international route for that matter.
I am thinking here of the former Canadi>n Airlines International, whose pride and joy, not to mention their cash cow, were the Asian routes from YVR.

Here's a scenario. What if United were to focus primarily on long-haul international routes from SFO, ORD and JFK only. Even expand theeir global network and add more flights to Asia, where the economy is, and will make a dramatic comeback. Reduce their domestic services dramatically, and perhaps form an alliance with, for example Southwest, or even JetBlue (who would grow as they would be "feeding" the UAL international hubs. These carriers, as stated, would be providing the essential "feeder service" to the above 3 UAL hubs. SFO could receive the LAX pax loads for international flights. United would continue to operate high yeild domestic routes (JFK-SF0/LAX/ORD; ORD-SFO/LAX/DFW/JFK, etc. Yes, this would vastly reduce the fleet, but perhaps a meaner, leaner, healthier global carrier vs global/domestic outfit would be more logical in these lean times. In short, get a knife and cut loose the excess capacity. The way i see it, there is only one way for UAL to survive, and thrive.....REDUCE and focus on becoming an international force to be reckoned with. Leave the vast majority of the domestic service to the
"American Alliance" partners.

I realize this is overly simplistic, but then again, sometimes the obvious solutions are. Sort of "Can't see the forest for the trees" school of thought.

Again, just my quick thoughts on the matter. Feel free to blast me! LOL.

 
jrlander
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 6:15 am

Would NW want these routes as they currently exist under Bermuda II? They could serve LHR from DTW and MSP (Ber II allows an American carrier to serve MSP-LHR), however CO and Delta would have better market shares in major American cities with LHR rights ( NYC-CO and Delta; BOS-Delta; MIA/FLL- Delta ) Could NW make that much more money from MSP and DTW to London flying into LHR as opposed to LGW? Would a small increase in revenue offset the cost of purchasing the routes?

Personally, I think that if there were sold they would likely go to Delta or possibly Continental.
 
ybacpa
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 6:36 am

Guys- Heathrow rights are an extremely valuable asset, several of you have stated you believe at least two airlines (CO and NW) would have a bidding war over these. This is extremely good incentive to sell this asset. I'll concede the point that the sale of these rights by TWA and PanAm was under different circumstances than UA is under right now, but that doesn't mean it isn't a viable option. Keep in mind all but two US airlines are operating without Heathrow rights (and, argueably, the two in the worst condition are the two that have them...). I'm not Carl Icahn, nor am I suggesting he isn't soly responsible for TWA's demise; I'm suggesting a pre-emptive strike by UA by selling these rights, and restructuring the remains of the airline around the remainder of their network could stop the slow demise. Especially considering EA CO AS's realistic observation:
"It's my belief that such a purchase would eventually seem like a huge waste of money, since odds are that an Open Skies agreement will be in place within 2-3 years, allowing all U.S. majors access to LHR."
If this is true, which I do think it is (maybe over a longer timeline though), dumping these slots now would allow UA to raise a significant amount of capital, while sticking CO/NW/DL/etc. with slots that are, effectively, useless.
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gigneil
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 8:13 am

Allowing US majors access doesn't mean LHR is gonna suddenly grow the slots for them on trees.

N
 
User avatar
EA CO AS
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RE: UA, Possible Bankruptcy, And LHR Rights....

Thu Dec 05, 2002 8:17 am

Canadi>n,

I'm sure you're not the first person to have that idea for UA. On paper it's a great one. If implemented, they'd remain the "Cadillac" of longhaul international carriers. This would also enable them to make money, since their bloated cost structure is geared towards high-yield international travelers and not low-yield domestic travel.

That having been said, it would also reduce them to a shadow of their former selves, and I don't even think their collective bargaining agreements would permit them to shed the domestic system.

Besides, if memory serves, the end result would essentially be what Pan Am was prior to deregulation; a solely international carrier with no domestic feed, dependent upon other carriers getting passengers to their gateway cities.

"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan

Comments made here are my own and are not intended to represent the official position of Alaska Air Group

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