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pu
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UA Should Purchase OO

Sun Sep 20, 2015 1:36 am

In view of the pilot shortage and the fact that both AA and DL have their own airline-within-an-airline prong of attack against high cost union contracts, I submit United should purchase SkyWest.

The benefits to UA:

* more control, grooming and indoctrination of future pilots
* locks in SkyWest's services for United / defensively prevents OO from too much AA/DL/AS influence
* obtains competent mid-level management and frontline staff already delivering reliable airline services and ground support
* allows more UA ownership of the customer experience from start to finish
* gets an interesting monopoly or near monopoly of ground support services in some western airports
* provides a built-in "B-track" of employment similar to Delta's Ready Reserve concept
* current market cap of SKYWW ~870M means it could probably be purchased for maybe half cash and half stock...a bargain.
* OO stakeholders (employees/stockholders/customers) graduate to the more stable world of US legacies and away from topsy-turvy regional life


Bring on the downside, the cons, and so forth......




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32andBelow
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:04 am

But why? Every regional pilot in the country will go to whichever major offers them a class agreement or not.
 
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:04 am

Well when purchasing Skywest you also get ExpressJet and well I just dont think United really wants that now.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:11 am

Quoting n6238p (Reply 2):

Why would you say that?
 
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:11 am

Wouldn't Republic be a cheaper and potentially more lucrative long term acquisition?
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n6238p
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:16 am

Quoting flight152 (Reply 3):
Why would you say that?

Well for one thing, ExpressJet doesn't even have the L-XJT and L-ASA sides merged yet. They're both union pilot groups and SKW isn't. Hundreds upon hundreds of 50 seaters over there and they provide a great amount of lift for Delta and American along withwhat SKW does for the big three + Alaska. Go figure out how United gets SKW and XJT out of all those contracts and planes. United is still having a hard time figuring out their own stuff as it is.

Bad bad idea.
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bigb
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:18 am

If i remember correctly, UA is not a big fan of flows. UA wouldn't want Skywest.
 
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:32 am

Quoting 32andBelow (Reply 1):
But why? Every regional pilot in the country will go to whichever major offers them a class agreement or not.

Look at what's happening at AA. They are, according to AA, about to be hiring almost exclusively from Envoy and Piedmont. This is from their published projections. Guess where a lot of young pilots want to go now? Envoy and Piedmont! Guess what that means for the wages Envoy and Piedmont can pay since they already have the guaranteed flow to AA?

Parker has already come to grips with the pilot shortage and what this means for his costs - having a slightly fictional "other" airline within his control is a cute way to control pilot salaries.

Quoting northwestEWR (Reply 4):
Wouldn't Republic be a cheaper and potentially more lucrative long term acquisition?

I don't know, would it?
I kind of thought OO was a bit more of a necessity to UA's route system and Republic more of just-another-regional-vendor. Please spell it out if Republic is a better option.

Quoting n6238p (Reply 5):
Bad bad idea.

Remember the contortions UA went through to put itself in a position to merge/acquire CO? Remember the coordination between NW and DL before their official merger was announced?

SkyWest probably already wants to give ExpressJet the Comair treatment anyway. Once this issue is solved, or on the path to resolution, do you still think it is a bad bad idea?

Quoting bigb (Reply 6):

If i remember correctly, UA is not a big fan of flows. UA wouldn't want Skywest.
UA has for about a decade been the last to join the party where legacy trends are concerned.

I think having a nominally-independent sub-airline which can use its flow to mainline to justify lower wages is exactly the way for UA to cope with a potential inflationary pressure on pilot salaries caused by the pilot shortage.



Pu.

[Edited 2015-09-19 19:34:38]
 
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:36 am

Quoting pu (Reply 7):
Guess where a lot of young pilots want to go now? Envoy and Piedmont!

All the guys I go to school with are running to Skywest and Expressjet. I actually know of about a dozen guys who got hired there. I haven't even heard the words Envoy or Piedmont.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:38 am

Quoting pu (Reply 7):
I don't know, would it?
I kind of thought OO was a bit more of a necessity to UA's route system and Republic more of just-another-regional-vendor. Please spell it out if Republic is a better option.

40 E170s in service, with 50 E175s on order. Republic's no small part of UA's regional flying. That said, Republic also has huge operations for AA and DL. With RAH's current challenges I could potentially see their United flying being spun off elsewhere, but I'm not sure I see the entire company being acquired by the likes of UA.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:39 am

I see no need, and no benefit. Its cheaper to rent the capacity as you want it then own the cow.


Remember CO had a wholly owned - ExpressJet. The institutional knowledge of how that ended and the financial liability large RJ fleet ended up being is still around.

Quoting pu (Reply 7):
I don't know, would it?

You can buy all RAH shares today for $167mil. SKW cost is near $900mil.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:44 am

Quoting jetblueguy22 (Reply 8):

While I'm happy to have your anectdotal evidence, my anectdotal evidence is that Piedmont and Envoy get more than enough qualified applicants by paying less, offering low or no sign-on bonuses and in general offering a lower Quality of Life than SkyWest.

The AA nonrev benefits (same boarding priority as AA mainline employees also based on check-in time instead of seniority) and the flow to AA is a big form of compensation which allows a lot of good pilots to take less money and lower QOL for the short term. Parker is doing this for a reason.

United should do the same.





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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:46 am

Quoting LAXintl (Reply 10):
and no benefit.

Leveraging down pilot costs is the benefit.

Many pilots will take less pay now for an assured mainline spot later. Why do you think Parker and Anderson are doing it?





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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:51 am

At the end of 2014 Skywest had the following number of aircraft assigned:

UA: 425 (225 being ERJ135/145)
DL: 239
AA: 29
US: 15

The 225 planes above expire soon, so it is more realistic to talk about the same number of airplanes with UA/DL. This means half of the revenue would disappear for the shareholders, so either a purchase by an airline will cost much more than it should to compensate or shareholders are not getting a fair value in a purchase agreement by one airline.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:58 am

Quoting ytib (Reply 13):
This means half of the revenue would disappear for the shareholders,

Why?

UA already pays DL and AA to ground handle some stations (through DGS and Envoy/Piedmont), DL has hired MQ in the past for LAX flying, and anyway would DL to be able to transfer so much capacity to itself or someone else without in effect buying the portion of OO that serves DL?

Just as UA is finally catching on to the groundhandling game in UGE, it will soon have little choice but to buy or create its own regional.






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RE: UA Should Purchase OO

Sun Sep 20, 2015 3:06 am

Quoting pu (Reply 12):
Leveraging down pilot costs is the benefit.

Nope. You'll be stuck with a pilot group and have to pay them whatever they leverage from you.

The CPA model is much cleaner. You put a RFP out, carriers bid, you pick the winner. When you dont want the flying any longer, end the contract. No messy employees, aircraft ownership debt, or being stuck with something you no longer want.

Quoting pu (Reply 12):
Many pilots will take less pay now for an assured mainline spot later. Why do you think Parker and Anderson are doing it?

Parker and Anderson are tired of the regional ownership game, not doubling down. If AA would have had its way, Envoy would have been divested ages ago.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 3:17 am

It seems you only view this from point of benefit Skywest employee, but fail to see the real negatives for United as an enterprise and its balance sheet.

Wholly owned regional is something the industry is moving away from. Both AA and DL have had significant issues and AA especially continues to have issues with its wholly owned carriers. Its very expensive and financial burden to own aircraft and employees. If AMR could have had its way, Envoy would have been divested years ago, or gone the way of Comair.

As someone mentioned the customer-vendor relationship with CPA model is much cleaner for the major carrier balance sheets and ultimately much more flexible being able to adapt to market forces without being stuck with employees and planes.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 3:19 am

Quoting LAXintl (Reply 15):
Nope. You'll be stuck with a pilot group and have to pay them whatever they leverage from you.

You're forgetting that a UA seniority number and mainline-equivalent benefits are a form of pay. Stand alone OO can't offer this, so it's pilot pay will always be higher.

Quoting LAXintl (Reply 15):
The CPA model is much cleaner. You put a RFP out, carriers bid, you pick the winner. When you dont want the flying any longer, end the contract. No messy employees, aircraft ownership debt, or being stuck with something you no longer want.

In the days of pilots tending bar because there wasn't enough work, I would agree with you. Today we have 2 of AA's regional carriers unable to meet their contracted requirements and AA is looking to insource flying back to Envoy.

Quoting LAXintl (Reply 15):
Parker and Anderson are tired of the regional ownership game, not doubling down. If AA would have had its way, Envoy would have been divested ages ago.

If they were tired of the regional ownership game they could give them the Comair Treatment. Instead, DL paid millions to acquire Pinnacle. Parker's not winding down Envoy and Piedmont, they are winding up.

Read this and get back to me:
http://www.bizjournals.com/memphis/b...acle-bankruptcy-delta-bailout.html

....the legacies want to control costs of goods sold and "capacity discipline" on the regional level just as they do on the mainline level.







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RE: UA Should Purchase OO

Sun Sep 20, 2015 3:23 am

Quoting pu (Reply 17):
You're forgetting that a UA seniority number and mainline-equivalent benefits are a form of pay. Stand alone OO can't offer this, so it's pilot pay will always be higher.

...Are there wholly-owned regionals that offer a mainline seniority number??

Quoting pu (Reply 17):
If they were tired of the regional ownership game they could give them the Comair Treatment. Instead, DL paid millions to acquire Pinnacle. Parker's not winding down Envoy and Piedmont, they are winding up.

Delta has certainly invested in Endeavor and turned it into a very well-run powerhouse of a regional airline.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 3:26 am

Quoting mercure1 (Reply 16):
If AMR could have had its way, Envoy would have been divested years ago, or gone the way of Comair.

What is keeping AA from sending Envoy the way of Comair?

(except the fact that it is Parker's on-the-record intention to own regionals as a way to control capacity, costs and especially to address the pilot shortage)






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RE: UA Should Purchase OO

Sun Sep 20, 2015 3:44 am

Quoting flyDTW1992 (Reply 18):
...Are there wholly-owned regionals that offer a mainline seniority number??

As I understand things they are guaranteed no-interview flow to mainline. But I think it stops short of a seniority number. Look, I very much admit that a promise to be hired by AA or DL or UA in 3-5 years is like a promise from me to hire you to clean my car in 3-5 years.

But its a promise pilots are willing to take in exchange for lower actual dollars in pay.

Quoting flyDTW1992 (Reply 18):
Delta has certainly invested in Endeavor and turned it into a very well-run powerhouse of a regional airline.

It so obvious - read everything Anderson says about returning flying to Delta and insourcing. The tables have turned once again and sub-contractors are falling out of favour. Parker and Anderson want 3 and only 3 airlines of any kind offering network services. They seek to close capacity discipline even tighter. United must acquire a regional like OO or risk getting squeezed out of regional access by DL and AA.





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RE: UA Should Purchase OO

Sun Sep 20, 2015 5:05 am

It seems like you've already made your decision up and ignore others input.

If the day comes you become the head of United you can ask your board to approve such a deal, but for now and as people tell you its not something very viable or needed. For UA's sake they dont need to venture into such quicksand.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 5:21 am

Quoting mercure1 (Reply 21):

Why such hostility?

I am not ignoring "others input," I am actively seeking debate and engaging everyone I can.

Can we at least agree that DL and AA are better managed than UA?
....and that if Anderson and Parker want an in-house regional it suggests this is a viable consideration for United?




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RE: UA Should Purchase OO

Sun Sep 20, 2015 6:11 am

UA is having a hard enough time managing its mainline business; I can't imagine it successfully acquiring a regional carrier at this time.

That being said, United has created United Ground Express. I haven't seen any numbers, but I can only imagine they did this for one of two reasons: they are currently paying contractors more than they could do it for themselves (unlikely), or they see this as a way to get the unions out of their hubs. The Chicago ramp contract is up within the next year or two as I understand, and that would be a perfect time to transition all the Express handling to the new (lower paying) company.

I don't see any apparent benefit in United owning a regional airline. They are currently doing a good job of pitting the regionals against themselves to get the work done by the lowest bidder. Once you bring another company under your umbrella they expect you to share more of your money with them. Right now United writes a check for a set amount and goes about their day.

Some people spoke of pilots accepting lower pay if guaranteed a spot at United. I'd be interested to know how pilot pay stacks up at Skywest or Republic whether you're flying under the AA or DL contracts vs UA. I'd wager a guess that the United guys aren't getting paid any more than the others. but maybe I'm wrong. If they really are getting paid more then perhaps there could be a little savings in this department.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 6:54 am

Quoting Green12324 (Reply 23):
They are currently doing a good job of pitting the regionals against themselves to get the work done by the lowest bidder

This is true of the pre-consolidation world.

It's also true of a world with a pilot surplus and before the baby-boomer retirees are sent home by mandatory retirement.


Gone are the days when there are more than enough pilots to staff a dozen regionals. There aren't enough pilots right now to staff all the regionals and the problem gets worse every year. No one is going to be able to drop Air Wisconsin and sign up SkyWest anymore. The regionals are consolidating, some are dwindling, some will die. Soon UA will be left with two or even one subcontractor to choose from - perhaps only OO or RAH .....who will then charge outrageous fees to UA that AA and DL won't pay because they have their own regionals. Yet OO will have a lock on the only planes and pilots.

UA must buy a regional or be held hostage by a regional..... Parker and Anderson are refusing to let the pilot shortage give the regionals a favorable bargaining advantage. It's like an oil shortage and OO controls all the oil.




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RE: UA Should Purchase OO

Sun Sep 20, 2015 7:27 am

You have a point about being held hostage by a regional in the future.

I think that early in the merger US/AA were trying to wind down Envoy. Envoy was a liability considering the high costs associated with having a monopoly on all AA's regional flying. Even if United owns its own regional airline they will still face labor groups that demand more and more based on the leverage of attracting new pilots. Just because Envoy was owned by American doesn't mean Parker was calling all the shots, he still had to threaten Envoy with outsourcing the flying in order to force concessions.

I do see the value in having slightly more authority by owning the airline, but I think United will still face most of the same problems. Plus once the pilot shortage is over (I'm not sure how long that will be) and we go back to lowest bidder system United will be faced with the problem American had with Envoy. Either way United needs to prepare for higher costs associated with regional flying, but I'm not sure if it would really solve their problem to own a regional airline.

Thoughts?
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RE: UA Should Purchase OO

Sun Sep 20, 2015 7:57 am

Quoting Green12324 (Reply 25):
You have a point about being held hostage by a regional in the future.

Thanks!

Whether you agree or not that UA should buy a regional, it's gratifying to see you recognize the relative bargaining position of OO versus UA changes quite a bit in the reality of a pilot shortage.

Quoting Green12324 (Reply 25):
think that early in the merger US/AA were trying to wind down Envoy

Agreed.

...and DL unplugged Comair. Then, (I think DL was first) an epiphany occurred in the mind of Richard Anderson when he realised the cheap cost of outsourced flying was a direct result of having too many pilots around.

....also a more favorable fuel environment and better 'industry wide capacity discipline' noticeably reduces the traditional downside of owning your own regional. Then Richard and Doug met for drinks and agreed to implement the same approach to regional flying. United, as usual, ignored the memo until years later.

Quoting Green12324 (Reply 25):
Even if United owns its own regional airline they will still face labor groups that demand more and more based on the leverage of attracting new pilots

Agreed.

There is no easy way to deal with the pilot shortage. But the legacies can offer an alternative to increased salaries through wholly owned subsidiaries in the form of a promised place at mainline and certain other noncash benefits - like mainline equivalent nonrev privileges.

Quoting Green12324 (Reply 25):
Either way United needs to prepare for higher costs associated with regional flying, but I'm not sure if it would really solve their problem to own a regional airline.

AA and DL are bringing more and more flying in- house over the long term through their regional step children. Maybe they even intend to switch most domestic flying away from expensive mainline pilots?. UA can do the same or try it's luck getting competitive bids from the one or two remaining vendors who have the resources to meet United's requirements.


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RE: UA Should Purchase OO

Sun Sep 20, 2015 8:19 am

Quoting pu (Reply 26):
Maybe they even intend to switch most domestic flying away from expensive mainline pilots?

Not at DL they don't. Anderson has focused for a while now and bringing more flying mainline. Look at how many 717s are now operating routes that were previously CR9s and E170s. Not to mention the intent to purchase E190s which are even smaller (slightly) than the the 717s.

At DL they're definitely interested in consolidating Connection operations, between moving routes to small mainline aircraft, reducing fleets, and getting rid of 50 seaters. What remains to be seen is how they'll be able to reduce the number of contractors down to 2-4.

I think if Anderson had his way they'd have 250 717s and E190s as entry-level mainline jets, and a very very small connection fleet (1 or 2 carriers flying maybe 100 aircraft total) operating only the most vital thinner spoke routes from the large hubs.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 8:49 am

Quoting flyDTW1992 (Reply 27):
Not at DL they don't. Anderson has focused for a while now and bringing more flying mainline.


He also acquired a large regional airline and is growing it.

Better to have some built-in flexibility and modulate flying between a regional airline you control and a mainline airline you control, as conditions dictate. DL saw the need to own an entry level pilot employer - and enjoys the bargaining power of a young and hungry "B plan" (Endeavor) pilot group always biting at the heels of the mainline workgroup.

Quoting flyDTW1992 (Reply 27):
think if Anderson had his way they'd have 250 717s and E190s as entry-level mainline jets, and a very very small connection fleet (1 or 2 carriers flying maybe 100 aircraft total) operating only the most vital thinner spoke routes from the large hubs.

Maybe you're right but DL's mainline pilot union will cause costs not demanded by younger pilots in a wholly owned regional. Also, btw, the retirement of 50 seaters is not nearly so compelling and money-saving these days. An all-RJ hub like MEM hub would be profitable in today's fuel market and I doubt the big 717 purchase would've come from DL with sub $50/bbl oil.

It used to be increased mainline pilot costs on a 717 were justified by the CRJ's fuel inefficiency, but today there's no longer such a clear business case to upgauge.







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RE: UA Should Purchase OO

Sun Sep 20, 2015 9:31 am

Quoting pu (Reply 28):
He also acquired a large regional airline and is growing it.

That's not true, Pinnacle was operating well over 100 CR2s before it was acquired, fleet has been dropped to under 100 CR9s and a small fleet of CR2s.

Quoting pu (Reply 28):
Better to have some built-in flexibility and modulate flying between a regional airline you control and a mainline airline you control, as conditions dictate. DL saw the need to own an entry level pilot employer - and enjoys the bargaining power of a young and hungry "B plan" (Endeavor) pilot group always biting at the heels of the mainline workgroup.
Quoting pu (Reply 28):
Maybe you're right but DL's mainline pilot union will cause costs not demanded by younger pilots in a wholly owned regional. Also, btw, the retirement of 50 seaters is not nearly so compelling and money-saving these days. An all-RJ hub like MEM hub would be profitable in today's fuel market and I doubt the big 717 purchase would've come from DL with sub $50/bbl oil.

It used to be increased mainline pilot costs on a 717 were justified by the CRJ's fuel inefficiency, but today there's no longer such a clear business case to upgauge.

I don't necessarily disagree with you there.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 10:09 am

Quoting flyDTW1992 (Reply 29):
That's not true, Pinnacle was operating well over 100 CR2s before it was acquired, fleet has been dropped to under 100 CR9s and a small fleet of CR2s.

I see 81CR9s and 40 CR2s. With about 50% more capacity in a CR9 v CR2 it seems to me this is growing the airline versus Pinnacle's lift capacity at the time of bankruptcy. Maybe no pilot growth but an overall increase in the amount of seats Endeavor is flying for Delta.

Quoting flyDTW1992 (Reply 29):

I don't necessarily disagree with you there.

Thanks!

If I had to boil it all down to one talking point I'd ask, "Who believes UA mgmt is likely to be right and both DL and AA mgmt likely to be wrong where the business case of an in-house regional is concerned?"





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RE: UA Should Purchase OO

Sun Sep 20, 2015 12:37 pm

Quoting pu (Thread starter):
Bring on the downside, the cons, and so forth......

Continental Airlines owned Continental Express/Expressjet before, there were problems. But might be worth looking into again.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 1:34 pm

Quoting flyDTW1992 (Reply 29):

I am pretty sure the only reason Endevour was acquired by DL was due to the bankruptcy and impending liquidating of the airline. Right now, endeavor has the highest cost of pilots in the industry considering every pilot recipes a retention bonus of $20,000/yr in addition to their other wages and benifites. Personally I don't think DL likes owning endeavor.

OO on the other hand is a non-Union airline, that probably leaves the second UA acquires the airline. If UA did acquire OO, I think they would buy the airline from Skywest Inc. and leave Expressjet behind possibly with all the non UA contracts. But UA has better potential canidates and would t buy a regional airline.
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RE: UA Should Purchase OO

Sun Sep 20, 2015 1:45 pm

Quoting pu (Reply 30):
I see 81CR9s and 40 CR2s. With about 50% more capacity in a CR9 v CR2 it seems to me this is growing the airline versus Pinnacle's lift capacity at the time of bankruptcy. Maybe no pilot growth but an overall increase in the amount of seats Endeavor is flying for Delta.

They have 28 CRJs and 81 CR9s right now. About 102 CRJs have been parked, a few transferred. Even with the some 40 additional 900s since Delta purchased them they have lost seats.
 
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:52 pm

This rumor has been going around XJT for a while now... With Skywest Inc. running 70% of UAX flights, one could imagine they would look at that, but probably won't.
 
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RE: UA Should Purchase OO

Sun Sep 20, 2015 2:57 pm

Quoting Green12324 (Reply 23):
That being said, United has created United Ground Express. I haven't seen any numbers, but I can only imagine they did this for one of two reasons: they are currently paying contractors more than they could do it for themselves (unlikely), or they see this as a way to get the unions out of their hubs. The Chicago ramp contract is up within the next year or two as I understand, and that would be a perfect time to transition all the Express handling to the new (lower paying) company.

Not to go off topic, but Express in ORD; IAH; and EWR is protected till '18. We will fight to keep that. Hell, we gave up a whole lot, and have nothing else left to give. The goal is to restore the cuts in the stations that took them and protect whatever is left.

UGE was created to keep the money "in house" so to speak since many stations are being handled by DGS and Envoy. Giving money to your direct competitors. Plus there is a hodgepodge of vendors and the quality has been up and down. Inconsistent to say the least. So UGE is there to try to maintain some quality controls or standards in these stations. It is not supposed to infringe upon our contract.

Just wanted to put that out there.

Quoting Green12324 (Reply 23):
UA is having a hard enough time managing its mainline business; I can't imagine it successfully acquiring a regional carrier at this time.

You are correct on that one. The mainline house has to be straightened out first........And with the experience of owning ExpressJet, it is much better to keep status quo, since SkyWest is the most stable regional out there. And the point of having a union / non-union workforce at SkyWest / ASA has to be dealt with before all else. And the 50 seaters will be wound down. Didn't SkyWest recently place an order for more 175's? Will they go directly to the SkyWest pilots? Or the ASA/ExpressJet pilots get in on this as well? And Mesa is flying the ones that UA purchased.
A comment from an Ex CON: Work Hard.....Fly Standby!
 
jayunited
Posts: 2291
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RE: UA Should Purchase OO

Sun Sep 20, 2015 4:05 pm

Quoting pu (Reply 7):
UA has for about a decade been the last to join the party where legacy trends are concerned.

I think having a nominally-independent sub-airline which can use its flow to mainline to justify lower wages is exactly the way for UA to cope with a potential inflationary pressure on pilot salaries caused by the pilot shortage.

What trend are you talking about? If I remember correctly AA not to long ago was looking for a buyer for Envoy and if a buyer was to show up today AA probably would sell Envoy in a heart beat.

I think UA has taken the appropriate steps to deal with the pilot shortage first and foremost they have reduce the number of UAX carriers from (and correct me if I'm wrong) 14-16 carriers down to 9 and UA used both OO and EV for the bulk of all UAX flights. I think UA has examined both AA and DL's regional operations and decided the right path is to own the regional jet like the E170/175 and allow a carrier like YV and I think OO might be operating some UA owned E-jets as well. This seems to be the approach UA is taking and I think its the right approach. UA pays for the aircraft and the fuel but each carrier has to deal with all employee cost.

Quoting pu (Reply 28):
Better to have some built-in flexibility and modulate flying between a regional airline you control and a mainline airline you control, as conditions dictate. DL saw the need to own an entry level pilot employer - and enjoys the bargaining power of a young and hungry "B plan" (Endeavor) pilot group always biting at the heels of the mainline workgroup.

I notice you keep bringing up this "B" plan so my question to you is simply this do wholly owned subsidiary regional carriers have a lower employee cost when compared to other regional carriers that are stand alone? If you can prove that wholly owned regional carriers employees cost are in fact lower than their counterparts then you probably are correct it might be better for UA to buy a regional carrier.
 
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pu
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RE: UA Should Purchase OO

Sun Sep 20, 2015 5:59 pm

Quoting web500sjc (Reply 32):
considering every pilot recipes a retention bonus of $20,000/yr in addition to their other wages and benifites.

Good information, thanks.

Quoting web500sjc (Reply 32):
Personally I don't think DL likes owning endeavor

They could spin it off to their shareholders, give it the Comair treatment etc. Why don't they?

Quoting web500sjc (Reply 32):
OO on the other hand is a non-Union airline, that probably leaves the second UA acquires the airline.

I agree that is a very relevant consideration.

However, the big rise of the regionals was largely driven by mainline's efforts to circumvent their own mainline union contracts. If they could get away with paying a new hire $20/hour do you think we would have such big regional flying?

Obviously despite unions at many regionals they have traditionally kept their pilot costs low...and I doubt if OO's pilot costs are lower than anyone's despite their lack of union.

BUT, one of my big points is that the pilot shortage means the traditional cost advantage of regionals is about to change. UA will have to pay the higher cost of pilots PLUS the premium the likes of OO will be able to demand since they are developing a monopoly or duopoly of nonAA/nonDL regional lift capability and entry level pilots.

Lets put it this way: pilot costs will definitely go up, agreed? Since this eliminates one of the big selling points of using regionals, OO will have no cost advantage as a separate entity versus UA owning OO itself.

Quoting C767P (Reply 33):
They have 28 CRJs and 81 CR9s right now. About 102 CRJs have been parked, a few transferred. Even with the some 40 additional 900s since Delta purchased them they have lost seats.

Thanks for the info.

Quoting bhmdiversion (Reply 34):

This rumor has been going around XJT for a while now..

It's on airline pilot forums and in the media - slightly.

Quoting bhmdiversion (Reply 34):
one could imagine they would look at that, but probably won't.

Well I consider it something of a validiation of my sanity that someone else admits they might look at it.!

Quoting T5towbar (Reply 35):
The mainline house has to be straightened out first

I see problems at UA for sure, and this need to be addressed. If DL buys OO first, then what?

Quoting jayunited (Reply 36):
I think UA has examined both AA and DL's regional operations and decided the right path is to own the regional jet like the E170/175 and allow a carrier like YV and I think OO might be operating some UA owned E-jets as well.

I might have less confidence that UA's mgmt can make a decision better than DL's or AA's about in-house regionals.

Quoting jayunited (Reply 36):
I notice you keep bringing up this "B" plan so my question to you is simply this do wholly owned subsidiary regional carriers have a lower employee cost when compared to other regional carriers that are stand alone? If you can prove that wholly owned regional carriers employees cost are in fact lower than their counterparts then you probably are correct it might be better for UA to buy a regional carrier.

Good point, I don't know the answer.





Pu.
 
INFINITI329
Posts: 2471
Joined: Mon Jul 02, 2012 12:53 am

RE: UA Should Purchase OO

Sun Sep 20, 2015 6:28 pm

Quoting LAXintl (Reply 15):
Parker and Anderson are tired of the regional ownership game, not doubling down. If AA would have had its way, Envoy would have been divested ages ago.

Not really, DL got rid of Comair only to go acquire Pinnacle/Endeavor

Quoting web500sjc (Reply 32):
. Personally I don't think DL likes owning endeavor.

It is DLs ship, they control everything if it something they dont like they can change it with the snap of a finger

[Edited 2015-09-20 11:35:46]

UA is lucky it that the majority of their flying is with stable airline group. but the question is how long will that last


[Edited 2015-09-20 11:39:03]
 
Alias1024
Posts: 2545
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RE: UA Should Purchase OO

Sun Sep 20, 2015 7:24 pm

Quoting pu (Reply 37):
They could spin it off to their shareholders, give it the Comair treatment etc. Why don't they?

Because nobody has the ability to quickly add 100+ aircraft and their associated crew to their fleet. It's simply too big to shut down right now. It has to be slowly shrunk. That's also why you don't spin it off. It's useless as a spinoff without a CPA and that CPA would preclude them from shrinking Endeavor as able. You spin it off and you have to give them cash for operations and get locked into a long term contract. Why do that if you want to reduce regional feed?

The reason AA has Envoy is because nobody else wanted it. They tried to sell it for years. Now they've extracted a concessionary contract that will still result in a shrinking fleet but that lower cost reduces the desire to unload Envoy. I'm sure they still would if a decent offer were on the table, but again who wants to buy a shrinking airline?
It is a mistake to think you can solve any major problems with just potatoes.
 
pjc747
Posts: 155
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RE: UA Should Purchase OO

Sun Sep 20, 2015 7:53 pm

Fair or not, all I have to say is: Anti-Trust. This would give United far too much control, for regulators' purposes, over commuter planes and the ability of other airlines to operate them.
 
oosnowrat
Posts: 175
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RE: UA Should Purchase OO

Sun Sep 20, 2015 7:54 pm

UA would be better off investing in a seat or two on OO's board.

[Edited 2015-09-20 12:59:18]
 
dc10lover
Posts: 1535
Joined: Mon Dec 29, 2014 6:11 pm

RE: UA Should Purchase OO

Sun Sep 20, 2015 8:04 pm

"The SkyWest United agreement ends on December 31, 2015"

http://en.wikipedia.org/wiki/SkyWest_Airlines

I wonder what will happen.
Why endure the nightmare and congestion of LAX when BUR, LGB, ONT & SNA is so much easier to fly in and out of. Same with OAK & SJC when it comes to SFO.
 
TUSDawg23
Posts: 267
Joined: Sun May 30, 2010 2:43 am

RE: UA Should Purchase OO

Sun Sep 20, 2015 8:26 pm

The majors are not having a hard time attracting pilots, it's the regionals that are. This is why you see large signing bonuses and even certain regionals partnering with colleges and flight schools to offer some tuition reimbursement. The majors have no incentive to do any of these things because they get a steady stream of pilots.

Flight training in other parts of the world is very expensive and difficult to accomplish which is why some foreign airlines have ab-initio programs. Many of them send their pilots to the US because this is one of the best training environments in the world from a cost and weather perspective.

If UA is ever worried about new pilots, they will also enact signing bonuses, but it's far too costly to have to acquire and deal with the headaches of owning a regional.
 
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pu
Topic Author
Posts: 1364
Joined: Sat Dec 03, 2011 1:08 am

RE: UA Should Purchase OO

Sun Sep 20, 2015 9:16 pm

Quoting Alias1024 (Reply 39):
Because nobody has the ability to quickly add 100+ aircraft and their associated crew to their fleet.

You think this explains why DL does not want to own Endeavor?

To me it explains perfectly why DL decided to buy Endeavor and why UA would be wise to make a similar move:

....because nobody has the ability to provide United's capacity besides OO.
....competition between regionals is dwindling, the pilot shortage is assuring that.
....OO is almost to the point of blackmailing UA into whatever it wants....
....likewise DL or AA could acquire OO just to put the screws to UA. In fact, maybe Parker and Anderson would pull a merger between SkyWest/Piedmont/Endeavor and nicely enforce capacity discipline even further. (capacity discipline as in UA is denied capacity)

Quoting oosnowrat (Reply 41):
UA would be better off investing in a seat or two on OO's board.

Thats a good point. That of course implies significant ownership. It would provide needed influence, tame potential OO greed and defend against AA and DL.

Quoting TUSdawg23 (Reply 43):
If UA is ever worried about new pilots, they will also enact signing bonuses, but it's far too costly to have to acquire and deal with the headaches of owning a regional

Yet DL doesn't think its far to costly.....







Pu.
 
Alias1024
Posts: 2545
Joined: Mon Oct 25, 2004 11:13 am

RE: UA Should Purchase OO

Sun Sep 20, 2015 9:54 pm

Quoting pu (Reply 44):
You think this explains why DL does not want to own Endeavor?

To me it explains perfectly why DL decided to buy Endeavor and why UA would be wise to make a similar move:

It doesn't explain why DL doesn't want to own Endeavor. Other posters have already covered how it's much cleaner for the majors if they contract the lift.

It explains why DL felt they HAD to buy Endeavor. They were faced with the potential of a liquidation and seeing 100+ aircraft worth of feed parked literally overnight. No orderly drawdown, just gone. It would have been an operational nightmare that no regional could have even remotely helped DL cover. I don't think DL wanted to buy Endeavor, however there weren't any better options at the time.
It is a mistake to think you can solve any major problems with just potatoes.
 
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jaybird
Posts: 364
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RE: UA Should Purchase OO

Sun Sep 20, 2015 10:36 pm

United has more than enough work to do in their own house. They should get their house back in shape before they tackle anything else. The need to integrate their employees, settle contracts, fix their PSS, and make customer service a priority.

Our company uses United as our primary carrier. A good flight on United is when the experience is neutral - ground staff and/or inflight staff don't erupt and become combative with their customers. Yes, there are good employees, but there are still alot of pmUA and pmCO employees, on the ground and in the air, who are still behaving as they are working for their old company and are not happy about the merger. For awhile it looked as if the situation was getting better - but since spring it's just been getting worse.

I'm not sure exactly what the issue with Shares is (not capable of handling the volume or?) but the issues between Shares and Sabre have been growing. I shouldn't have to go on united.com after I've booked and ticketed someone in Sabre to see if the itinerary is correct - or if it's still holding segments that were cancelled before the itinerary was ticketed. I shouldn't have to go on united.com to verify that the passengers are holding seat assignments because the status is still showing as "requested" in Sabre.

Buy another carrier and take on their issues? No .. they don't need the distraction.
 
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pu
Topic Author
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RE: UA Should Purchase OO

Sun Sep 20, 2015 11:27 pm

DL's phenomenal stock price performance would probably convince OO's major shareholders to let go of their shares in return for DL stock and no cash. Does anyone know if OO has a major institutional investor or hedge fund with a big block of shares?....because they love these kinds of deals.

Pu's plan B: Delta should buy SkyWest.
...and just run it completely separate at arms length like it does DGS: no integration
...Or merge Endeavor and OO, getting control of both.
...to insource more flying and raise the rates on UA
...better yet the DL pilots retirement fund could by OO....


In my view there's too much cash swishing around the majors righg now. Some debt needs to decrease but a few hundred mil for OO seems a bargain....




Pu.
 
N1120A
Posts: 26502
Joined: Sun Dec 14, 2003 5:40 pm

RE: UA Should Purchase OO

Sun Sep 20, 2015 11:57 pm

Quoting n6238p (Reply 5):

Well for one thing, ExpressJet doesn't even have the L-XJT and L-ASA sides merged yet. They're both union pilot groups and SKW isn't.

It isn't as if United doesn't have experience with union pilots.

Quoting bigb (Reply 6):
If i remember correctly, UA is not a big fan of flows.

Didn't CO do flows from ExpressJet?

Quoting LAXintl (Reply 10):
Remember CO had a wholly owned - ExpressJet. The institutional knowledge of how that ended and the financial liability large RJ fleet ended up being is still around.

50 seat RJs that were always a change in oil prices away from being a disaster.

Quoting CALTECH (Reply 31):

Continental Airlines owned Continental Express/Expressjet before, there were problems. But might be worth looking into again.

The limited fleet was the biggest issue. CO had an extremely restrictive scope clause.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
N505fx
Posts: 328
Joined: Sat Aug 09, 2008 3:02 am

RE: UA Should Purchase OO

Mon Sep 21, 2015 1:43 am

The education system in the US is a mess, young kids coming out of high school and college these days are pretty much screwed. I think there is a HUGE opportunity for an ab initio program and the associated goodwill and PR value built around UA or someone partnering with ERAU, UND or FlightSafety to grow and groom their own.

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