Zone1
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Where Will UA Be In Three Years?

Sun Oct 22, 2006 3:55 am

This isn't a UA bashing thread, I am just wondering where everyone thinks United will be in three years. Will they be stronger or weaker than they are now? Of the major U.S. airlines I feel that United is in the most precarious position. They still have fairly high costs even after bankruptcy. Of course, they have one of the strongest RASMs out there because they do offer a premium product people are willing to pay for. Will they be able to keep this RASM high as their airplanes get older and older? Since they are not allowed to buy any new planes any time soon, will people begin to refrain from flying UA if they have to fly an old 737s, 757s, or 767s?

One thing I am surprised at is the lack of point to point flying they have when other airlines are increasing it. It seems like most cities that UA flies to only have service to their hubs. This can be seen in the recent pull down of most non-hub flights from JFK. The only reason I can think of is because UA has many widely distributed hubs within the country, they really dont need as much point to point flying as an airline such as AA or DL.

With the recent announcement of FCO it is good to see that UA is willing to add more European flights. They already have been increasing frequencies (HKG and ICN) and reinstating flights (TPE) in Asia. Europe seemed to be left out until now.

I think UA's precarious position is also shown by the fact that they hired Goldman Sachs to explore "strategic options"--basically a merger partner. Just this week you have Tilton continuing to lobby for more foreign investment for U.S. airlines. With UA's strong free cash flow post bankruptcy, why is this necessary? I hope this isn't showing Tilton's idea of the future.

United is one of my most favorite airlines, and I have never had any horror stories with them. I usually try to fly them whenever possible because I enjoy their service and Ch. 9, of course! I hope UA is here to stay.
/// U N I T E D
 
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Stitch
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 4:08 am

I would not be surprised one bit if UA was actively trying to find a merger partner. Consolidation is going to have to happen to help smooth the "peaks and troughs" of the past two decades.

UA is more dependent on their partners in Star for service outside of North America and Asia then their domestic competitors are. On the plus side, that dependence allows UA to offer a larger pool of destinations which helps build traffic. A merger would allow them to leverage those connections as well as offer a merger partner more destinations to serve.
 
lijnden
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 4:18 am

I think they will be at about the same level as they are today. They might order some 787's. I think they will focus the next 2-3 years on to how make the current network more profitable. I am not expecting any major changes or take-overs. If major changes are to happen, reasons should be searched on more external issues like fuel prices, terrorism and US-Dollar value.
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bobnwa
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 4:28 am

Quoting Zone1 (Thread starter):
Since they are not allowed to buy any new planes any time soon, will people begin to refrain from flying UA if they have to fly an old 737s, 757s, or 767s?

I disagree, most of the traveling public doesn't know a 737 from a Messerschmidt 109, nor do they care. I am exaggerating of course the the point is valid.
 
N174UA
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 5:01 am

Quoting Zone1 (Thread starter):
With the recent announcement of FCO it is good to see that UA is willing to add more European flights

Technically, IAD-FCO is a restart for UA. They operated it in the early 90's from IAD, and it continued to MXP, then back to IAD.

Quoting Zone1 (Thread starter):
Europe seemed to be left out until now.

Only because other routes to Asia, which you identified, offered higher probabilities of profit. Another issue is market economics...if one player has to leave a market and leaves a hole, such as AZ's decision to discontinue IAD-FCO, and if United can make it profitable, why not? Another thing too is that UA is leveraging (very well) it's relationship with LH and US. US offers flights to Europe to destinations that UA doesn't or won't, and therefore can code/revenue share with US on those flights.

Quoting Zone1 (Thread starter):
I think UA's precarious position is also shown by the fact that they hired Goldman Sachs to explore "strategic options"--basically a merger partner

Every airline, precarious or not, needs to understand the industry and the market very, very carefully. If you don't understand it, and your rival does, you lose....maybe even the company altoghether. Plain and simple. Rather than dedicating their own resources, Goldman specializes in industry analysis, and in a larger sense game theory, which is basically the idea of anticipating your rival's best response to a variety of possible scenarios. I for one hope Goldman doesn't come back and say "you should pursue US again".

Quoting Lijnden (Reply 2):
I think they will focus the next 2-3 years on to how make the current network more profitable. I am not expecting any major changes or take-overs

 checkmark  For now, yes. Though the industry landscape (US and EU) will change dramatically if EU-US is finally implemented. It's been agreed to in principle, but the EU won't implement it due to two issues not in the agreement, but related: 25% ownership cap and the ability of foreign execs. to play a significant role in the decision making processes at US airlines.

Quoting Bobnwa (Reply 3):
I disagree, most of the traveling public doesn't know a 737 from a Messerschmidt 109, nor do they care. I am exaggerating of course the the point is valid.

 checkmark  The flying public is very price sensitive for flights, and if they get that $99 fare on a 20 year old 737, it's fine with them. A lot of business travelers don't particularly care for the 757, but again...they too are much more price sensitive than in the past, so it's unlikely to affect a buy/no buy decision.
 
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Stitch
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 6:38 am

Quoting N174UA (Reply 4):
(Europe was left out o)nly because other routes to Asia, which you identified, offered higher probabilities of profit.

Yet UA's Asian operations provided the least amount of year-on-year profit growth due to the long stage-lengths and the consequent lower aircraft utilization ratio. That does not discount the fact that Asia is indeed profitable for UA, but UA could find a p.s. style 757 service to Europe and Latin America from beyond their hubs could provide significant profit growth, even against all the competition already present.
 
Zone1
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 7:29 am

Quoting Bobnwa (Reply 3):
I disagree, most of the traveling public doesn't know a 737 from a Messerschmidt 109, nor do they care. I am exaggerating of course the the point is valid.

But it isn't the mainstream flying public that is keeping UA's RASM so high. It is the 1Ks and UGS members. These people pay for a quality product, which UA delivers. The question is, will this quality product erode because UA can't purchase new aircraft, and will their high RASM also erode as a result.

Quoting N174UA (Reply 4):
I for one hope Goldman doesn't come back and say "you should pursue US again".

I hope so too. I hope that they come back and give them more ideas on how to increase operational efficiency. Maybe some more European cities can come out of it.

Quoting Stitch (Reply 5):
Yet UA's Asian operations provided the least amount of year-on-year profit growth due to the long stage-lengths and the consequent lower aircraft utilization ratio.

This is seen in WorldTraveler's post a couple of days ago about how each of the major carriers did last quarter according to the DOT. UA's Asian operations did not make money hand over fist, as some people think it does.
/// U N I T E D
 
worldtraveler
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 8:01 am

UA's future depends a great deal on how strong the economy remains. They have been able to get by with high costs because they can get relatively high revenues. In an economic downturn, revenues fall while costs do not. UA will be in a world of hurt if the economy starts failing

The good news for UA is that their creditors put them on a very short leash - virtually no capital spending (in contrast to DL, US, and NW in the five years after their BKs) so they don't have huge non-operating expenses in the future.

They are also probably the most vulnerable if Virgin America starts up - and it is likely they will. UA also face challenges as every other US airline expands into Asia. As has been mentioned, UA does make a small profit to Asia but it should be much higher given the exposure and position they have there.

The best thing that could happen to UA is to be acquired but it likely will not happen unless someone can put together a pre-packaged bankruptcy that reduces their debt levels - most of which balloon by about 2012, IIRC.

While lots of people would like to see UA as an acquirer, that is not likely to happen unless UA's operating performance becomes at least average for the industry - something that is not likely to happen since they have the industry's highest costs.

UA is not on the verge of failure but in an industry where most other airlines have successfully restructured their finances and operations over the past 5 years, UA stands out as very vulnerable.

I would be surprised if UA will be here in 10 years, and possibly 5.
 
jacobin777
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 8:53 am

Quoting WorldTraveler (Reply 7):
They are also probably the most vulnerable if Virgin America starts up - and it is likely they will. UA also face challenges as every other US airline expands into Asia. As has been mentioned, UA does make a small profit to Asia but it should be much higher given the exposure and position they have there.

However, UA has been increasing its IAD hub, and it has great 5th freedom rights out of Japan which other carriers (besides NW) do not have...

Finally, its the one of the top two dominant carrier @ ORD, which is basically impossible to enter for a large-scale operation.....

ORD will be UA/AA for a long time to come....

Cheers..
"Up the Irons!"
 
atlaaron
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 9:11 am

Quoting Bobnwa (Reply 3):
disagree, most of the traveling public doesn't know a 737 from a Messerschmidt 109, nor do they care. I am exaggerating of course the the point is valid.

Agreed and I don't think the 1k's care either. The only people who REALLY care about the aircraft are all of us loons on here.

Quoting N174UA (Reply 4):
A lot of business travelers don't particularly care for the 757

Why is that? I for one always think they seem cramped, but I still love the 757.

Quoting N174UA (Reply 4):
Goldman specializes in industry analysis, and in a larger sense game theory, which is basically the idea of anticipating your rival's best response to a variety of possible scenarios. I for one hope Goldman doesn't come back and say "you should pursue US again".

Investment banks like to recommend mergers though because it means big $$ for them. If a merger fails it is no big loss to them as long as they do not hold a lot of stock in the combined company. At that point they will have already collected their high fees.
 
halls120
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 9:18 am

Quoting ATLAaron (Reply 9):
Quoting N174UA (Reply 4):A lot of business travelers don't particularly care for the 757
Why is that? I for one always think they seem cramped, but I still love the 757.

I like the 757. It has more F seats than the 320 or 733/5, meaning more chance of an upgrade.
"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself." Mark Twain, a Biography
 
Bicoastal
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:00 am

UA will merge or be acquired. Every executive has repeated that mantra publicly. With the present administration in Washington, they have a two year window to make it happen. Barring a merger, no new airplanes until its debt to equity improves....likely an order in 2008 but no deliveries for a few more years. Most expansion and new point to point service will be done by United Express regional partners. IAM union contract expires in 2009. Expect a bloodbath as the company tries to eliminate union employees at many stations in favor of contractors. Customer service and ramp employees are in for major changes/cuts. A downturn in the economy or other outside disaster will force the company back to Chapter 11 bankruptcy.

....just a few things in my crystal ball.

[Edited 2006-10-22 03:25:40]
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supa7E7
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:03 am

UA is a great body in search of a new brain.
"Who's to say spaceships aren't fine art?" - Phil Lesh
 
United767
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:14 am

Quoting Bicoastal (Reply 11):
Customer service and ramp employees are in for major changes/cuts.

You cant get blood from a turnip.

Quoting Bicoastal (Reply 11):
Expect a bloodbath as the company tries to eliminate union employees at many stations in favor of contractors.

I agree, but in this case the blood will be spilling from managment, as the workers who have taken so much pay and benefit cuts already will not stand for it.
I wish UA flew mainline to MYR, that way you wouldn't be stuck in a smelly Saturn for 12 hours.
 
Zone1
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:25 am

Quoting ATLAaron (Reply 9):

Why is that? I for one always think they seem cramped, but I still love the 757.

The 757 is a great plane. Nothing beats a 757 take off!

Quoting WorldTraveler (Reply 7):
that reduces their debt levels - most of which balloon by about 2012, IIRC.

Hopefully they will be using their large free cash flow right now to pay off debt, so this doesn't happen.

Quoting ATLAaron (Reply 9):
Agreed and I don't think the 1k's care either. The only people who REALLY care about the aircraft are all of us loons on here.

This may be true, but they will have to do some refurbishing of these cabins at some point. The 767s already are in need of new first class seats. If they don't upgrade the cabins then they might lose 1k's.
/// U N I T E D
 
atlaaron
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:28 am

Quoting Zone1 (Reply 14):
If they don't upgrade the cabins then they might lose 1k's.

The reason I do not think that will happen is because if they go somewhere else like AA, they won't have all of their perks. The traveler would have to start all over.
 
Bicoastal
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:29 am

Quoting United767 (Reply 13):
You cant get blood from a turnip

Sure you can. It's called, "hire AirServe, Swissport, Menzies, DGS, TIMCO, PrimeFlight or any other contractor that submits a bid....regardless of quality and ability to speak English."
Airliners.net has many forums. It has spell check and search functions. Use them before posting!
 
jacobin777
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:41 am

Quoting Zone1 (Reply 14):
The 757 is a great plane. Nothing beats a 757 take off!

The 757 rocks!!.. bigthumbsup 

"Up the Irons!"
 
planecrazy2
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:44 am

Quoting ATLAaron (Reply 15):
The reason I do not think that will happen is because if they go somewhere else like AA, they won't have all of their perks. The traveler would have to start all over.

What if they get comped to at least mid tier? Sure it might not be what they had as a 1K but it's nowhere near starting all over. Not that I would want to see any UA flyer go to the DAARK side... crying 
United Airlines - Worldwide Service
 
Zone1
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 10:53 am

Quoting ATLAaron (Reply 15):

The reason I do not think that will happen is because if they go somewhere else like AA, they won't have all of their perks.

Not necessarily. I know AA has a program where if you sign up you will get elite status if you fly 5,000 miles in 90 days. If you fly 10,000 miles you get Platinum status. This isn't too hard for your average 1k flyer. You can read about it here: http://money.cnn.com/2006/07/05/pf/goodlife.fortune/index.htm
/// U N I T E D
 
N174UA
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 11:04 am

Quoting Stitch (Reply 5):
Yet UA's Asian operations provided the least amount of year-on-year profit growth due to the long stage-lengths and the consequent lower aircraft utilization ratio. That does not discount the fact that Asia is indeed profitable for UA

See the portion in bold. This is all that matters to UA right now, post Ch. 11.

Quoting Stitch (Reply 5):
but UA could find a p.s. style 757 service to Europe and Latin America from beyond their hubs could provide significant profit growth, even against all the competition already present.

See my reply to Zone1 below...

Quoting Zone1 (Reply 6):
I hope so too. I hope that they come back and give them more ideas on how to increase operational efficiency. Maybe some more European cities can come out of it.

Depends on a.) the future profitability prospects on such routes and b.) aircraft availability. Again, if UA can leverage the US/LH partnership, then they can still win even though their own metal isn't on the route. Absent of internal confidential data, I don't see the IAD-FCO route working out long term.

Quoting ATLAaron (Reply 9):
Why is that? I for one always think they seem cramped

yes...I believe that's the common perception, and hence the dislike.

Quoting Bicoastal (Reply 11):
IAM union contract expires in 2009. Expect a bloodbath as the company tries to eliminate union employees at many stations in favor of contractors.

Correct me if I'm wrong, but the F/A AND the Pilots contract expire then, too. Hmm....think I'd rather spend a day at the dentist.  Yeah sure

Quoting Zone1 (Reply 14):
The 757 is a great plane. Nothing beats a 757 take off!

Don't get me wrong...I love that airplane, you'll never here me complain about it. But my understanding is that travelling businesspeople feel cramped in it...maybe they're used to being on a widebody, and the -57 is a narrowbody, I don't know.
 
gigneil
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 11:20 am

Quoting Zone1 (Reply 19):
I know AA has a program where if you sign up you will get elite status if you fly 5,000 miles in 90 days. If you fly 10,000 miles you get Platinum status.

I never heard of that... 5000 miles is just one JFK-SFO roundtrip.

NS
 
United767
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 11:40 am

Quoting Bicoastal (Reply 16):
Sure you can. It's called, "hire AirServe, Swissport, Menzies, DGS, TIMCO, PrimeFlight or any other contractor that submits a bid....regardless of quality and ability to speak English."

LOL, your right about the english part.
I wish UA flew mainline to MYR, that way you wouldn't be stuck in a smelly Saturn for 12 hours.
 
atlaaron
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 1:27 pm

Quoting Gigneil (Reply 21):
I never heard of that... 5000 miles is just one JFK-SFO roundtrip.

You are correct and I believe Zone1 to be incorrect. Copied and pasted from the link Zone1 provided.

"It works like this: If you know you will be making a bunch of trips in the next three months, sign up before you begin. Free enrollment starts on the 1st or 16th of the month and lasts 90 days.

During that time you need to earn 5,000 points or 16 segments for Gold status, and twice that for Platinum. (Super discounted tickets earn half a point per mile flown, regular coach tickets earn one point and full-fare coach, business and first class earn 1.5 points per mile.)"

Points not miles.
 
Zone1
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 2:12 pm

Quoting ATLAaron (Reply 23):

During that time you need to earn 5,000 points or 16 segments for Gold status, and twice that for Platinum. (Super discounted tickets earn half a point per mile flown, regular coach tickets earn one point and full-fare coach, business and first class earn 1.5 points per mile.)"

I guess it works just like the usual AA elite qualifying point system. I should have specifically said that since unlike other airlines you don't get an EQP for every mile you fly on some tickets with AA. I'm glad DL did away with that when they did.

Quoting N174UA (Reply 20):
But my understanding is that travelling businesspeople feel cramped in it.

It feels cramped in the way back sometimes, but up in E+ it's awesome! It's great to sit in row 8/9--infinite leg room. I also feel that the 757 first class cabin is very nice. People usually don't walk by you since boarding is usually done from the second door. A lav and galley also separates the two cabins. These features make for a nice secluded flying experience up front.

[Edited 2006-10-22 07:13:20]
/// U N I T E D
 
QF108
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 4:59 pm

Im really hoping UA continue to head in the right direction. Having tried several different US carriers, UA is my preffered option, Ch.9 is the real clincher.

My question is are they intending to run extra LAX/SFO-SYD services this Australian summer as they did last year with the flight operating 3 days each week from both US ports. It was great seeing 3 UA 744's on the ramp in SYD.

Mark
Blessed are the Cheesemakers !
 
UAL777UK
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 6:15 pm

Quoting QF108 (Reply 25):
My question is are they intending to run extra LAX/SFO-SYD services this Australian summer as they did last year with the flight operating 3 days each week from both US ports. It was great seeing 3 UA 744's on the ramp in SYD.

And boy would i love to see one of them offering a continuing service to AKL. In my dreams!
 
MEACEDAR
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 7:58 pm

What if they merge with a "mediocre" airline, like Southwest JetBlue, or when Virgin America starts up. Would that help them in the future?
 
hiflyer
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RE: Where Will UA Be In Three Years?

Sun Oct 22, 2006 8:59 pm

First off...Goldman Sachs is about acquisition/consolidation....not selling UA. Tilton wants UA larger with the least cost. The billions of bucks in tax credits from the chapt 11 makes it a no brainer.

Someone mentioned Virgin America...UAL has been so unconcerned about them that they even let them lease space in their SFO mtc center when an ex UAL prez was consulting for them. CO seems to be having the biggest fit about VA...and VA seems to be targeting more of B6 travel than legacy....and we all have seen how the air is slowly starting to come out of the balloon at B6 lately....although I still say that give the average business traveler (male between 25-55) peanuts, beer, and a remote control for tv that has live sports that they have it knocked!! grin.

UA has had LUV come into to DEN without much impact...F9 is seeing more of a hit. IAD has B6 and LUV coming in sniffing at the spoils left by Indy Air but IAD is a big intl connecting airport and those two do not 'connect'....do not offer preminum class service/alliance benefits...and will be fighting over the point to point traffic plus LUV will be fighting themselves over at BWI....a very interesting situation in itself.

Bicoastal is correct the contracts come due in 2009...however the political climate change that appears to be coming may dampen the ability of carriers to throw off contracts left and right significantly compared to what they had been able to do. In fact I could easily see any acquisition by UA have a requirement that they reabsorb their cast off pensions in some fashion...especially if there ends up to be a change in political party control in both the White House and Congress.
 
jjeff
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RE: Where Will UA Be In Three Years?

Mon Oct 23, 2006 3:07 am

Quoting Halls120 (Reply 10):
I like the 757. It has more F seats than the 320 or 733/5, meaning more chance of an upgrade.

Me too. Same reason. (And I am a 1K.)