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Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 5:36 am

For some time now, I have had a gut feeling that Aa would be the next major US airline to face liquidation. Dont know why I think that.
Now with teh stories coming out about the trust plans etc. for the AA executives and the FAs at AA outrage about that, it may still be that AA is forced into bankruptcy, as they may withold vote certification.
My question now is that with the extensive code share and anti turst immunity in the US does that give UA an edge over AA, to possibly avoid liquidation? AA has always wanted the same immunity with BA, but we all know that has not happened. So, in this respect is UA better off?

[Edited 2003-04-17 22:37:38]

[Edited 2003-04-17 22:38:22]
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 6:34 am

Without dismissing the trouble UA is in there are several ways UA is in better share that AA.

One is it does have a much stronger partnership with LH than AA and BA. Star is also far more intergrated and extensive than oneworld. Those are indeed advantages. UA's partners are still feeding it passengers and UA is offering routes to its customers that it could not do alone.

AA is also the only US carrier without a domestic partner to fill in the weak areas of its route structure.

UA has a more extensive route network, and its five hubs give it access to some 50% of the total us population. (that stat was from an anylist a few years ago so I'm not 100% on the number. But its far and away more access than AA who is in secondplace with som 30%.

UA was second to the financial markets for DIP financing. The last one to the table gets the least, becasue the banks will be less likely to take the risk later.

UA has more assets and less cash than AA, which is why it was in trouble earlier. Not that AA is close to the same boat as UA UA's assetts can help it while AA has less to sell or fall back on as collateral.

UA seems to be making the effort to change the structure of the airline, while AA seems to be hoping its cash could hold out until the industry thinned out and reduced capacity. That has not materialized, so AA is now behind UA in making htose fundemental changes that airlines need to survive. AS the economy picks up and summer travel comes into play UA has been able to save more money than AA and will benefit from the savings sooner.

Finally MRTC was a reaction to UA's Econ plus, therefore was not as well thought out as UA's product. UA kept the area small so that it would not reduce the amount of revenue the airplane could generate. All things being equal a UA plane with econ plus makes more money per flight than a AA MRTC plane.

Those are just some of the things that UA has over AA, most of these have been beat to death over the past few months in the forum here.

AS I said UA is not out of the woods and these things are not by themselves going to save UA, they will not kill AA either, but they are advantages UA has over AA.

A little less Hooah, and a little more Dooah.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 6:38 am

The Star alliance is very cohesive; but does it have any kind of interpartner "subsidiy" or "loan arrangement" covenants? (I know that there are limitations to foreign ownership of US carriers). Secondly, didn't LH help one of the aother partners a while back in some fashion?

Here's to hoping UA and AA survive.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 6:43 am

AA has always wanted the same immunity with BA, but we all know that has not happened.

The reason for this is that unlike all the rest of the alliances, Neither BA or AA is willing to let anyone else fly into LHR. The reason why DL/AF and CO/NW/KLM and LH/UAL etc is they did not block access to CDG or AMS etc.

When AA / BA wants to play the same game as everyone else, they will get the same results

RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 6:46 am


I'm not sure I really agree with you about Econ+ bringing in more revenue, and I'd like to see what that's based on (aside from theory).

What I do know, is that when given the choice, at equal prices, I would (and several times have) choose MRTC (where my extra legroom would be guarunteed).
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RE: Because Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 7:37 am

Just in your opinion, do you think that not giving any of the LHR slots away is better for AA/BA? I for on wouldn't want to give a slice of a huge market like LHR. What I am saying is this, would AA make more money by having the alliance with BA and giving up slots in LHR or the other, keeping the slots and keeping all the profits or loss to themselves?

To add to what UALPHLCS said, does anybody out there know what a 737-300 on both airlines holds?

I know that UAL is 8-126 on some.

I can see where UAL would benefit from this in two ways, not only do you have to have the status to fly in E-plus but they still offer the service for loyalty.

I have always thought that MRTC is a slap in the face for those elite who only fly AA and cant get that upgrade, they ride with the guys and gals who paid peanuts for their tickets.

with E-plus it keeps the perks for those who fly UAL regularly.

just my opinion.

ual 777 contrail
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 8:06 am

It'd be hard to say... AA never flew the 733. Really the A320 and the MD80 are the closest matches in their fleet.

You know I've always wondered... AA flies mostly 150 seat planes, and so does DL. Why did neither carrier go for a smaller plane?


RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 8:17 am

The A320 Gigneil? haha, no... AA doesn't operate those. The MD-80 seats 124 or something. I think AAs fleet pretty much covers everything.

F100- ~100 (maybe a little bit fewer?)
MD-80- ~125
738- ~150
752- ~156-166
762- ~160 (in 3 class)
763- ~210 (in 2 class)
772- ~230
A300- ~ 250

Ual777Contrail - I'm sure there are many UA frequent fliers who often find themselves without a seat in Econ+. With MRTC, they always get the extra legroom. I've flown in both Econ+ and MRTC, and I personally don't find the difference that significant (don't throw numbers at me, I'm just calling it as I feel it). While "UA keeps the perks for those who fly it regularly", they're going to lose out on those looking for the best value (whose money is just as good as anyones), and I'm not just talking about the el-cheapo tickets.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 8:53 am

AA never flew 733?

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"We must accept finite disappointment, but never lose infinite hope." - Martin Luther King, Jr.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 8:57 am

SJC>SFO - Heh I really meant the A320 in United's fleet vs the MD-80 in AA's fleet. My brain skipped over the 738 cause I was busy talking about the 733.

727Lover- Oh, no shit? Hmm.

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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 11:48 am

Wow UALPHLCS... With respect of course, agent to agent, from your post, us AAer's have just been sitting on our hands. Considering we have American (the includes TW), Eagle, Connection, and Alaska Airlines as a "codeshare" domestic partner. I say we are not far behind UAL in terms of US domestic route coverage. I really have a problem with people on here saying we haven't changed our "structure"... while the revenue management department can make some better adjustments; we've identified almost $2-billion in cost savings from changing the little things like paper weight/design of our ticket jackets to changing aircraft procedures to save on one of those big expenses, fuel. How is MRTC not thought out? Isn't "we did this first, so now you are doing it" what the industry is all about? Northwest lowered weight limits, AA followed. AA raised fares, CO, DL or whomever followed. While we will need to depend on a higher premium due to the fact our main cabin seats less than pre-MRTC days, I often have our elite members declining the use of upgrade points because our cabin does feature more room. I'm not denying that UA may have a few more advantages, however, we haven't been just sitting around waiting for a better revenue environment.

And just to nitpick.. F100- F8/Y79, MD80 F14/Y115, B738 F20/Y114.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 12:14 pm

AA not made fundimental changes and cost cutting???
Besides all the concessions....

1) Depeaking ORD & DFW
2) Parking 14 762's & 28 MD-80's (TWA LLC)
3) Eliminating numerous aircraft fleets and subfleets (post 9/11) MD-11, 727, TWA DC-9, TWA 717, TWA 763
4) Retiring the F-100's by 2004-2005 (already underway)
5) Implementing procedures to taxi on one engine
6) Going to all E-tickets
7) Suspending construction on the new JFK terminal
8) Converting all 763's to 2-class standard configuration
9) Converting all 777's to one standard 3-class configuration

Among other items, there are many more to mention of smaller cost saving measure. Don't forget how many routes were either dropped or turned over to Eagle or Connection. There is only so many operational changes that can be made within the constraints of leases, contracts, and labor agreements.

RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 12:58 pm

Sorry about that AIR757200 =) I think I did pretty well on the rest!
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 1:05 pm

No. Partnership does not matter unless that partner is willing to secure the assets and repay the creditors?

Unfortunately UA is closer to liquidation today, then AA. As AA is not functioning under DIP protection of the the bankruptcy judge. UA is in bankruptcy. Depending on the restructuring, vendors agreements, and other creditor negotiations UA still has a lot of work to do.

Wishing it so does not work now.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 1:10 pm

I never said AA was not making those changes NOW. They sure waite long enough to see it UA would bellyflop and AA (and the rest ) coudl resume life as normal with not FUNDEMENTAL changes.

All those examples of parking planes and seat configurations and suspending construction. Those are not Fundemental changes to the way you operate an airline. With the exception of depeaking the Hubs.

UA is changing who does reciept and dispatch. Flirting with an LCC to take on LCC's as opposed to getting steanrolled by them. And others that I can't think of right now but will add. UA did similar things to all of the cost cutting measures that AA has done. So have all the other airlines.

But when it comes down to the brass tacks, AA and CO especially simply wanted UA to die so they didn't have to make the REALLY big changes that UA has been forced to make. Now they have to make them. UA has a head start that was my point.

Also to clarify my Econ + VS MRTC assertion:

I said all things being equal. So the best way to figure this out is how many rows did UA have to remove vs how many rows did AA remove.

On 737's AA 4 UA 2. (roughly)

Multiply that over the fleet and AA had to remove 2x the seats UA did to give less legroom but give it to everyone. UA gives 2 inches more and has more cheapie seats to sell.

Also it is a rare day that FF who are entitled to ECON+ don't get it. It happens but mostly on oversold flights or flights going 100% full. Many a time those FF members are standing by from a later flight and are happy to be going early. It is a much rarer occurance than those who conplain whould make it appear to be.
A little less Hooah, and a little more Dooah.

RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 1:53 pm

UALPHLCS... I think you overestimate the structural strengths of United. United does have its strengths, but it is not nearly as clear cut as it seems for you.

First of all, on a stand-alone basis, there aren't as many blindspots in AA's domestic network as their are in UA's. Take the east coast, for example, AA has very large operations at Boston and New York (JFK & LGA). In these markets, UA is not even the third largest, domestic or international carrier. In part, because of the market strength that AA has been able to build in these markets, it finally made sense to launch a shuttle service of its own in the Bos/NY/DCA market.

There is at least one major hole in AA's network and that is the southeast. On a stand alone basis, however, it is also a major weakness of United's network. AA is somewhat better off in that it reaches into some of these markets with Eagle from DFW or RDU. Given additional flexibility by its pilots to utilize Eagle, we may see Eagle enter more of these markets. That's a more viable retail option now that Delta has more or less turned most of the southeast over to ASA and Comair. United's only option is to rely on USAir for transfer traffic.

You assume that having access to 50% of the total US population through one's hubs is the optimal network strategy. It is not. The network planners at AA did not design the network to gain access to the most people. They designed it to maximize yields. That is why, for example, one can fly direct from Chicago to some points in the west, such as Tuscon, but one cannot fly direct from LAX to those same points. Even the thinking behind the purchase of the STL hub was directed by this network strategy. STL was not seen as an asset because of its cachement area, but because of its potential to strengthen the east-west connections of the entire network. Some of AA's most profitable routes continue to be its transcon routes (non-stop or connecting through DFW or Chicago). As an east-west connecting hub, St. Louis is better located geographically than DFW or Chicago.

Internationally, both carriers have their strength and weaknesses. UA, of course, has quite an extensive Asia-Pacific network; AA does not. However, this is not as much of a strength as it might have been in the 90's. On cost and quality of service, UA does a poor job of competing against Asian carriers. Carriers such as Cathay, Singapore, Qantas and JAL capture much of the premium traffic in their respective home markets. UA's only edge in these markets used to be connectivity, or the ability to get you from Singapore to Dallas on one ticket. With the advent of codesharing and anti-trust immunity, however, United's edge has almost completely vanished. For instance, Qantas and American, through codeshare, now operate a more extenstive Austral-asian/NorthAmerican network than United. Same will soon be true in Hong Kong, where Cathay wlll soon offer American's passengers access to China and American will offer Cathay's passengers numerous destinations from all of Cathay's gateways.

This, of course, brings me to my next point. Apart from BA, AA gets good feed from all of its oneworld partners and extra-alliance codeshares. AA has been able to expand at LAX in part because of the feed its gets from JAL, Cathay, Qantas, and EVA. Plus, now that AA and BA can codeshare on all beyond routes through their respective hubs, the advantage that LH/UA once had completely disappears. Despite its capacity restraints, LHR (London) is still the most preferred, and thereby largest, transatlantic market. Attribute that to geographic location, cultural affinity, geopolitics, or what you like; but, the fact remains that with this codeshare AA and BA are poised to increase their domination over a market that is already larger and more lucrative than Frankfurt or CDG.

About the asset/cash thing. Prior to 9/11, AA had a much better balance sheet than UA. (AA can thank Bob Crandall for that.) Therefore, it had more assets to hoc before it had to resort to bankruptcy. Even now, there is still more value locked up in AMR than there is in UAL. AMR, afterall, owns both American Eagle and American Airlines.

Finally, I wonder what structural changes you think UA has made. About its only accomplishment so far in bankruptcy has been new contracts with its various unions. Meanwhile, over at AA, they have been busy depeaking their hubs, introducing web-check in, reducing distribution costs even more through the EveryFare program, etc. That is $2 billion in structural costs cuts from all operational initiatives. Add to that the $1.8 billion that AA got from its employees and the yet to be valued concessions that AA is negotiating with its vendors, bankers, et al., and you begin to see that at this point AA is way ahead of United in doing the things that are necessary to survival.

I think in the end both carriers will survive this downturn. But, because of the decisions that AA has made in the past (e.g., the takeover of all of its regional affiliates, international expansion through codeshare, international growth only out of core markets, etc.) and the decisions it is making now (e.g., depeaking of the hubs, creating a consistent product with MRTC and other fleet modifications, etc.), it will end up a much more simple and efficient organization than United.

RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 2:13 pm

That's kind of my point though, UALPHLCS... AA FFs are going to get the extra room every time, whether or not it's sold out.
What your definition of "entitled" is, I'm not sure... but whatever. Any on flights that aren't sold out (the majority of flights), AA is going to sell more "cheapie" seats than UA does because of MRTC... I doubt AAs frequent fliers are going to get upset that the cheapies are getting the same room as them, as long as they aren't getting more, and they're still comfortable... on every flight they take!!
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Fri Apr 18, 2003 2:53 pm

What about Eagle? How financially strong is Eagle relative to the mainline? And could the mainline go into bankruptcy or even liquidation without Eagle?

These would seem to be critical factors since AMR owns Eagle but United does not own Air Wisconsin, etc.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Sat Apr 19, 2003 12:54 am

No, when it is refered to as AA is in financial trouble, it is actually mean that AMR Corporation is in trouble. AA is just a trademark operating under the AMR corporate umbrella.

Companies within the AMR Corporation:

Airline Management Services, Inc.

American Airlines, Inc.
AA 2002 Class C Certificate Corporation
AA 2002 Class D Certificate Corporation I
Getaway Vacations LLC
Admirals Club, Inc. (Massachusetts only)
AEROSAN S.A. (50%)
AEROSAN Airport Services S.A. (50%)
American Airlines Australian Tours, Inc.
American Airlines de Mexico, S.A.
American Airlines de Venezuela, S.A.
American Airlines Holding Company, Inc.
Stockwood Shelf-Co (130) (50/50 AA/AMR)
American Airlines Overseas Finance, N.V.
American Airlines Realty (NYC) Holdings, Inc.
AMR Training Group, Inc.
AMR Ventures III, Inc.
one world Alliance, LLC (33.4%)
one world Management Company Ltd. (33.4%)
Texas Aero Engine Services, L.L.C, dba TAESL (50/50 AA/Rolls-Royce)
TWA Airlines LLC
TWA Stock Holding Company, Inc.
Trans World PARS, Inc.
Worldspan, L.P. (26%)

Americas Ground Services, Inc.
Aerodespachos Colombia, S.A.
Caribbean Dispatch Services, Ltd.
Dispatch Services 93, S.A.
International Ground Services, S.A. de C.V.
Panama Dispatch
Peru Dispatch Company

AMR Aircraft Sales & Leasing Company

AMR Eagle Holding Corporation.
American Eagle Airlines, Inc.
AMR Leasing Corporation
AMR Eagle Maintenance Services Group, Inc.
Aero Perlas (20%)
Eagle Aviation Leasing, Inc.
Eagle Aviation Services, Inc.
Executive Airlines, Inc.

AMR Finance, Inc.

AMR Foreign Sales Corporation, Ltd.

AMR Holding Company, Inc.

AMR Investment Services, Inc.
American Private Equity Management, LLC

Avion Assurance Ltd.

PMA Investment Subsidiary, Inc.

SC Investment, Inc.
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RE: Becasue Of LH, Is UA In Better Shape Than AA?

Sat Apr 19, 2003 9:24 am

UA's route structure is unrivaled. The North east is really UA's only weakness. And that was the whole point of buying US. Now that US is a partner that base is covered. UA's only international weakness is Latin America. UA picked to right partner in LH as a European partner over BA due to the issues that would have arose over UA and Ba's LHR slots. This has been shown to be true because of the problems AA and BA have had.

No airline owned more of its fleet than UA did prior to 9-11. UA was short on cash and long on assets while AA was the oposite. This has been the analysis of Wall Street folks since just after 9-11 and airline viability became a hot topic. Research the WSJ you'll see I'm right.

Interestingly you give a luandry list of things that AA is doing to save money that UA did 6 months ago. UA is seriously considering how they are going to compete with LCC in the future. That involves a possible LCC subidiary of an airline within the airline is still being debated.

UA invented E-tkts. AA pays royalties for the product from UA. E-tkt connectivty sending Invol etkts to other airlines UA's Invention. UA has gone 100% e-tkt first. UA has been working with its vendors for cost savings as well. But these are not fundemental to the airline buisness.

UA is talking about changing the way it structures fares. Possibly selling seats per mile or in a zone. The LCC is a fundemental change to the airline operation.

I've made my position as clear as I can be. All things being equal AA has less capacity per airplane. They sell out faster leaving UA with the opportunity to carrier those extra passengers. Ex: We will use nice round numbers and equipment is not a factor.

PHL-ORD on a friday afternoon pre Seat reconfiguation

UA 100
AA 100

PHL-ORD after
UA 96
AA 88

Both flights go out full UA will make more money per plane. Flight per flight this may not be the case in the real world. But multiplied over the fleet UA has a cost advantage over AA.

As for passengers "entitled" to Econ+ those who are Premier and higher including US and Star and passengers of any status who bought a full coach ticket Y B or M fare.
A little less Hooah, and a little more Dooah.

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