Ted In The Post-atsb World

[JetClipper]

Many posters (including yours truly) have speculated that, should UAL have received the ATSB-backed loan, they would have used some of the funds to intensify their battles with LCCs, a la Ted. Now that United will be forced to seek capital through othe venues, will this have any effect on Ted?

 

[FA4UA]

i keep reading from many "analysts" out there that United might spin off Ted. I always laugh at this since it's one thing that is making money at United! Why would we cut something that is making money??

I would expect TED to grow more with Mexican destinations and then over the next few years we should expect to see further growth to cities like MSY and along the west coast (Former Shuttle Routes).

I'm a firm believer that TED will not take over the majority of flying... It makes sense for the leisure markets and it has been well received by the public. Business fliers want the traditional product for non-leisure markets.

my two cents...
FA4UA

 

[tinpadro]

Actually I belive TED will be fine. However in order for it to be a total success at least in the short term, is for many employees to lose their jobs and have TED a completely new subsidiary with a new wage scale. Any employee let go may have first crack at those jobs but you will be starting from square one. There will be no seniority crossover to TED. That way it truly is a LCC. For REZ people this may mean further outsourcing so that TED has dedicated low wages to support it. For mainline you can shrink that more and bring in more UAX. Mainline can then offer a premium product but for once have premium items like Economy PLUS with Laptop power. Red Carpet club memberships as standard for Premier EXECs and higher. Possibly having fares with no change fee since you pay more. TED flights can have a 100 change fee. I believe a little creavity can work here. I believe the mainline needs much more premium for the price and unfortunately there is no good way to do all this so it may happen somehow rather quickly through the Court so we don't hear the "we will perish speech" if we don't do this.

Just my two cents. Not a technical analysis just one possible scenario.
B)

 

[FWAAA]

My guess? TED will be booTED from the property pronto. Soon, people will forget TED.

TED was a silly distraction for UAL executives who should have been focusing on fixing what ails UAL, not playing around with "cool marketing buzz." Their failure to get the loan guaranty speaks volumes about their waste of time and money on TED.

Let's hope UAL can pull out of this nosedive before it's too late.

 

[FA4UA]

FWAAA, your talking apples and oranges.

TED is a profitable operation that is reaching a segment of the flying public UAL has never had success in: leisure travellers. The leisure market is supposed to be the fastest growing segment in commercial aviation, especially when you look at all the wealthy Baby Boomers heading towards retirement. This is a viable business opportunity and it was a responsible move (in my opinion) that United adapted to changing market demands. We're making money with TED... what's the problem?

The argument remains about whether or not UA should have recieved the ATSB loan gaurantee. I've never been convinced that we should have received it. It would have been nice to have Unlce Sam as a cosigner for lower APR's on our debt, but at the same time the liberatarian in me cringes.

To connect TED and the ATSB decision in the way which you have, isn't really grounded on fact. United had a seperate design, launch and operating team for TED and it didn't really distract Tilton and company. The first thing Tilton did when he came to UA was realign the VP positions to better focus on thier given tasks. This was one segment of that. TED in no way prevented Tilton from being our ATSB cheerleader, nor Jake Brace.

Just my two centavos

FA4UA

 

[JetClipper]

I am having a difficult time understanding various posters’ assertions that Ted is profitable. The fact that Ted is flying historically low-yield routes using crews being paid mainline wages (albeit with marginally higher productivity) makes me dubious of these claims at best.

I suppose it could come down to how Ted’s “operating costsâ€￾ are calculated. From what I understand, mainline personnel are servicing Ted flights on the ground; how are these costs being allocated to Ted (if at all)? If, on the other hand, they simply are subtracting aircraft, fuel, and crew costs from the revenues collected on a particular flight, then of course Ted is profitable (virtually any airline would be if that were the case).

Does anyone care to enlighten me?

 

[coolflyingfool]

If UA should fail, and I hope they don't, I believe the last flight operated will probably be a TED flight. Ted will grow old here, and will live long and prosper. Just my thoughts.....

 

[SVQLBA]

I am having a difficult time understanding various posters’ assertions that Ted is profitable. The fact that Ted is flying historically low-yield routes using crews being paid mainline wages (albeit with marginally higher productivity) makes me dubious of these claims at best.

I suppose it could come down to how Ted’s “operating costsâ€￾ are calculated. From what I understand, mainline personnel are servicing Ted flights on the ground; how are these costs being allocated to Ted (if at all)? If, on the other hand, they simply are subtracting aircraft, fuel, and crew costs from the revenues collected on a particular flight, then of course Ted is profitable (virtually any airline would be if that were the case).

Does anyone care to enlighten me?

Everyone's missing the impact of the simplified pricing system. Surprise, surprise, even UA is replicating what SW and B6 have known for a long time -- flatten and simplify the fare structure and average yields have actually gone up. It's a bit clunky, but surf through the web site to the Ted fare display and see how different it is to the regular UAL fare display. None of the renta-mouths (Boyd) have picked up on te importance of the price structure.

Combine that with the productivity measures mentioned, plus double the ratio of bookings made through the web, plus increase aircraft utilization by over an hour a day, and now you've turned routes which were perennial loss makers into profitable routes.

 

[iflyjetz]

SVQLBA, you forgot to include the additional seats added on Ted aircraft. From 138 to 156. That lowers the CASM by greater than 10% vice mainline aircraft. Shorter turn times give aircraft more productivity, also lowering CASM.

 

[Busdrvr]

SVQLBA, you forgot to include the additional seats added on Ted aircraft. From 138 to 156. That lowers the CASM by greater than 10% vice mainline aircraft. Shorter turn times give aircraft more productivity, also lowering CASM.

And you forgot the higher LF!! running around 90% for Ted. 80% LF on a mainline 320 = 110 Pax, while 90% on Ted = 140 pax.

 

[The Gopher]

I am having a difficult time understanding various posters’ assertions that Ted is profitable.

Ted's financials cannot fully capture all associated costs inherent in running the operation. Do Ted's "costs" fully capture things like insurance, facilities maintenance, and crew training? I doubt it, as those costs are probably already bundled in UAL corp's operations. Point: Ted's costs are not fully reflected in terms of an airline.

Now as far as spinning off Ted, I think it may not be as good as it's talked about. Think about the economy of scale that Ted allows UAL to exercise... mainline staff on the ground, on the airside it is basically the same as a mainline A320 (except for unloading the tail first since they are tail-heavy on arrival).

One thing for sure: I hear the phrase "Portfolio of Products" one more time I;m gonna yak.

 

[SVQLBA]

Ted's financials cannot fully capture all associated costs inherent in running the operation. Do Ted's "costs" fully capture things like insurance, facilities maintenance, and crew training? I doubt it, as those costs are probably already bundled in UAL corp's operations. Point: Ted's costs are not fully reflected in terms of an airline.

Insurance: exactly the same if it was a mainline flight (therefore less on a per ASM basis as a Ted A320 generates more ASMs per flight and per day due to higher utilization)
Facilities maintenance: unchanged, therefore, again, goes down on a per ASM basis
Crew training: again, unchanged, and goes down on a per ASM basis. (I think I'm right in saying crew scheduling is follow-the-plane for Ted but I could be wrong on that one)

Whether these costs are "fully reflected" in Ted or not, they are at worst unchanged compared to a mainline A320 flight and on a per ASM basis much better. Whether you allocate the costs directly to Ted or capture them at a higher level, the profitability of Ted is still better on all the routes it serves than it was for the old mainline.

You can always play an allocation game on things like facilities cost to make something profitable or unprofitable. That doesn't alter the fact that financial performance of the Tedified (!) routes is much better than they were as mainline.

iflyjetz: point well taken -- thought that had been mentioned earlier in the thread.

Bottom line: Boyd and co are very uninformed about Ted, key differences, and actual performance (not that UA has given many details to the press)

 

[KCFlyer]

Everyone's missing the impact of the simplified pricing system. Surprise, surprise, even UA is replicating what SW and B6 have known for a long time -- flatten and simplify the fare structure and average yields have actually gone up. It's a bit clunky, but surf through the web site to the Ted fare display and see how different it is to the regular UAL fare display. None of the renta-mouths (Boyd) have picked up on te importance of the price structure.

They may not have picked it up, but it seems to me that had UAL decided to implement an across the board simplified fare structure for mainline operations, and dispensed with the costs involved with starting up an airline within an airline, they would have seen the same impact...average yields would have gone up. Without repainting airplanes. Without marketing costs to tout the "new" airline. Without the labor to retrofit seats into the Ted aircraft. IMHO, that would have reinforced business traveller loyalty while at the same time capturing the elusive leisure traveller. Just my opinon. I hope for only the best for UAL and it's employees. I find the "dancing on the grave" posts to be repulsive.

 

[Winglet]

Well, I guess so. If you only want to count high traffic routes that are allocated to Ted, well, it probably looks ok. But, when you add in the loser routes and average everything together, what's changed???? Nothing, it seems to me. If UAL wants to be like a JB or SW, they're going to have to drop the routes that don't do very very well. This Ted thing is just smoke and mirrors, and Boyd knows it as well.

 

[767jetz]

The fact that Ted is flying historically low-yield routes using crews being paid mainline wages...

Does anyone care to enlighten me?

I don't understand why people keep missing the point here.

UA is not paying "mainline wages" to fly Ted.
It would be more accurate to say that mainline flights are being flown by crews at Ted wages. This includes the enitre 737 and A320 fleets.