UA On Its Own...Is it Possible?
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ZMAN777
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Okay....I'll bite. Looks like investors voted yesterday in their confidence in each airline the following way:
UAUA up 1.79% closing @ $8.54
LCC down 8.33% closing @ $3.96
UAUA, like several of the other legacies, can and most probably will survive on it's own but I predict it won't come without some, possibly great, sacrifice on all fronts. Let's face it, oil at/close to $130/bbl isn't sustainable with the CURRENT fleet/route structure intact. Not only for UAL, but most other carriers as well. The big hurdle for not only airline managements (UAL as well as all others) but also for union leadership is how to MANAGE EXPECTATIONS of their employees/membership. Please let me know if I'm wrong here.
No one wants to hear...."sorry but we've got to cut back x number of flights/employees, etc. to survive". Union leadership will blame management for "not managing/forseeing" this happening. Typical. Ususally for membership consumption but having no real basis in fact. Those of us at UAL may be thankful (in a twisted sort of way) for oil reaching the heights it has. Otherwise our CEO/BOD may have well gone ahead and opted to actually merge with LCC. Most of those reading these posts with an objective mindset will agree that that would, most likely, be a dismal failure in the longrun.
There is going to be a lot of "rough road" ahead. WHQ won't finalize fleet plans/cutbacks till sometime well into the summer schedule, waiting instead to see what direction future bookings/revenues look like. I'll predict here that should fuel stay in the neighborhood of where it is today there will be a lot of "pruning" at ALL carriers with those holding decent cash positions the best able to ride out the storm. Unfortunately there will be losses amongst the legacies and some of the second tier carriers. We pretty much know who is most at risk. Needless to say, UAL is not immune from significant downsizing, domestically at least. A very pressing question is how the regional feed carriers will survive the downturn with their fleets intact. Some simply won't! That being said, it goes without saying that a lot of service to outlying cities will be cut back severely and may, at best, see limited service.
To be sure, this is all pure speculation at this point although I feel fairly well grounded in sound rationale. I welcome your views.
Cheers,
Z B)
UAUA up 1.79% closing @ $8.54
LCC down 8.33% closing @ $3.96
UAUA, like several of the other legacies, can and most probably will survive on it's own but I predict it won't come without some, possibly great, sacrifice on all fronts. Let's face it, oil at/close to $130/bbl isn't sustainable with the CURRENT fleet/route structure intact. Not only for UAL, but most other carriers as well. The big hurdle for not only airline managements (UAL as well as all others) but also for union leadership is how to MANAGE EXPECTATIONS of their employees/membership. Please let me know if I'm wrong here.
No one wants to hear...."sorry but we've got to cut back x number of flights/employees, etc. to survive". Union leadership will blame management for "not managing/forseeing" this happening. Typical. Ususally for membership consumption but having no real basis in fact. Those of us at UAL may be thankful (in a twisted sort of way) for oil reaching the heights it has. Otherwise our CEO/BOD may have well gone ahead and opted to actually merge with LCC. Most of those reading these posts with an objective mindset will agree that that would, most likely, be a dismal failure in the longrun.
There is going to be a lot of "rough road" ahead. WHQ won't finalize fleet plans/cutbacks till sometime well into the summer schedule, waiting instead to see what direction future bookings/revenues look like. I'll predict here that should fuel stay in the neighborhood of where it is today there will be a lot of "pruning" at ALL carriers with those holding decent cash positions the best able to ride out the storm. Unfortunately there will be losses amongst the legacies and some of the second tier carriers. We pretty much know who is most at risk. Needless to say, UAL is not immune from significant downsizing, domestically at least. A very pressing question is how the regional feed carriers will survive the downturn with their fleets intact. Some simply won't! That being said, it goes without saying that a lot of service to outlying cities will be cut back severely and may, at best, see limited service.
To be sure, this is all pure speculation at this point although I feel fairly well grounded in sound rationale. I welcome your views.
Cheers,
Z B)
ohcaptainron
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Every airline is at risk in this environment.
UA will have to pull down marginal capacity, rationalize its workforce, execute an alliance with CAL, re-evaluate its regional partnerships etc. Pull down costs across the board. Many of these issues should have been addressed in the BK process.
Recognize its employees are not the enemy.
Tilton will have to embrace the failure of his management team to execute in every area including the failed ATSB process, failed BK strategy, failed 1113 negotiations, recently, the misguided
$250 million shareholder incentives which actually cost $750 million in liquidly. Failed fuel hedging strategy.
He will also need to take ownership of the failed negotiations between DAL, CAL, LCC.
Frankly, his baggage exceeds his value to the company. Then of course there is the compensation issue.
On the plus side, UA has 3.8 billion in cash, renegotiated credit facilities, 3.0 billion in unencumbered assets,
plus several high value assets/business, that will likely be monetized, SFO maintenance center/$1.5b/ Frequent Flyer Program/$3.0-6.0b/
Training Center/$1.5B/ according to some independent valuations.
So UA has its work cut out, but with the possible exception of LUV, every airline is looking at future that is at least as precarious as UA, and in most cases much more so.
UA will have to pull down marginal capacity, rationalize its workforce, execute an alliance with CAL, re-evaluate its regional partnerships etc. Pull down costs across the board. Many of these issues should have been addressed in the BK process.
Recognize its employees are not the enemy.
Tilton will have to embrace the failure of his management team to execute in every area including the failed ATSB process, failed BK strategy, failed 1113 negotiations, recently, the misguided
$250 million shareholder incentives which actually cost $750 million in liquidly. Failed fuel hedging strategy.
He will also need to take ownership of the failed negotiations between DAL, CAL, LCC.
Frankly, his baggage exceeds his value to the company. Then of course there is the compensation issue.
On the plus side, UA has 3.8 billion in cash, renegotiated credit facilities, 3.0 billion in unencumbered assets,
plus several high value assets/business, that will likely be monetized, SFO maintenance center/$1.5b/ Frequent Flyer Program/$3.0-6.0b/
Training Center/$1.5B/ according to some independent valuations.
So UA has its work cut out, but with the possible exception of LUV, every airline is looking at future that is at least as precarious as UA, and in most cases much more so.
Unfortunately, I see massive furloughs, shrinking and another trip to the bankruptcy court if oil stays anywhere near current levels.
I was surprised UA didn't cut more than it did, both in route structure and employee compensation, during the first visit to BK. I was hoping UA could get away with it, but that doesn't look likely any more.
I was surprised UA didn't cut more than it did, both in route structure and employee compensation, during the first visit to BK. I was hoping UA could get away with it, but that doesn't look likely any more.
767jetz
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According to this article : S&P Picks, apparently they think an alliance between Co and UA will be very beneficial to CO. So I imagine the same is true for United.
"Upgrade reflects lower oil costs, share pullback and unconfirmed reports in the WSJ that CAL is near alliance with United Airlines, which we think could provide many advantages of a merger without integration headaches and labor disruption."
"Upgrade reflects lower oil costs, share pullback and unconfirmed reports in the WSJ that CAL is near alliance with United Airlines, which we think could provide many advantages of a merger without integration headaches and labor disruption."
FrugalFlyerv2.0
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Scanning the pages of the Globe and Mail today, I came across the story that Robert Milton of ACE, will be soon exiting with a humble payout. I'm wondering what you UAL folks would think of Milton taking over UAL for Tilton? To me it seems that Milton would be great for UAL shareholders if he could do what he did at AC.
Comments anyone?
Globe and Mail Story (Milton leaving ACE)
__________________
Montreal-based ACE was created in October, 2004, after Air Canada emerged from bankruptcy protection - an 18-month process that shaved wages, slashed long-term debt, chopped plane lease payments and protected the pension plan.
ACE shareholders have reaped stellar gains even as many major foreign carriers are teetering on the brink of collapse amid skyrocketing oil prices.
ACE, which began as a $2-billion holding company, is now valued at $6.5-billion: ACE ($1.2-billion), Air Canada ($876-million), customer loyalty program Aeroplan Income Fund ($3.5-billion) and regional carrier Jazz Air Income Fund ($918-million).
Comments anyone?
Globe and Mail Story (Milton leaving ACE)
__________________
Montreal-based ACE was created in October, 2004, after Air Canada emerged from bankruptcy protection - an 18-month process that shaved wages, slashed long-term debt, chopped plane lease payments and protected the pension plan.
ACE shareholders have reaped stellar gains even as many major foreign carriers are teetering on the brink of collapse amid skyrocketing oil prices.
ACE, which began as a $2-billion holding company, is now valued at $6.5-billion: ACE ($1.2-billion), Air Canada ($876-million), customer loyalty program Aeroplan Income Fund ($3.5-billion) and regional carrier Jazz Air Income Fund ($918-million).
whatkindoffreshhell
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CO does not need UA and the folks in IAH know it. No value added.
UAUA's BOD does not have the balls to do what needs to be done.
(except payout $250mil of cash that they don't have just to temporarily satisfy their hedge-fund owners)
UAUA's BOD does not have the balls to do what needs to be done.
(except payout $250mil of cash that they don't have just to temporarily satisfy their hedge-fund owners)
767jetz
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No one said CO needs UA. But your opinion of "no value added" is not shared by analysts.
There is a large benefit to both airlines in dollars and cents, without the risks of merger integration.
jimntx
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I saw something today that said that UA would reduce domestic capacity by approx. 9%. I would provide the link, but I can't find it again. Wish I could there was some other info there as well.
You gonna credit Holly for that?? <_< www.planebuzz.com
CubsFanJohn
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I think that UA needs a top to bottom Management House Cleaning sort of like a Spring Cleaning many years too late.
whatkindoffreshhell
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And if I was so inclined I could find more 'analysts' to support my position of no value added.
All this wasted energy by the UA crowd to find a dance partner instead of focusing on their own appearance is sickening.
If you are that good and pretty then the numbers (and crowds) will flock to you.
CO does not need UA. Face reality.
eolesen
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NewHampshire Black Bears
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Zman777,
I disagree with you most of the time,................BUT,,,,,,,,,this time you "nailed it" !!
There is a REAL, though invisable "line" that spells the difference for some carriers "dying", which in turn lets the others "live", even in HARD Oil times !
Question is, where will that line fall(on which failed carrier)
Not picking on USAir, but they are the logical choice to drop first, among the big "6".
Logic tells me that the Biggest carriers would be the last to "drop", only because they have more options.
So following THAT logic, if the..."line"..dictates that of the 7 carriers, ..3.5..make it, I'd have to rank the survivors (who will look a WHOLE LOT DIFFERENT, than they do today, with the exception of WN), as....,
1. WN
2. AA
3. UA,
and the .5(1/2) being DL which would come at the HUGE EXPENSE of NW,.............................Which is EXACTLY why BIG RED should do everything in their power to STAY AWAY from DL !!!!!!!!!!!!!!!!!!!!!!!!!
Then again, the "line up" could be,
1. WN
2. AA
3.UA
3a. CO
I can't prove my theory, but I bet I'm VERY VERY close !
I disagree with you most of the time,................BUT,,,,,,,,,this time you "nailed it" !!
There is a REAL, though invisable "line" that spells the difference for some carriers "dying", which in turn lets the others "live", even in HARD Oil times !
Question is, where will that line fall(on which failed carrier)
Not picking on USAir, but they are the logical choice to drop first, among the big "6".
Logic tells me that the Biggest carriers would be the last to "drop", only because they have more options.
So following THAT logic, if the..."line"..dictates that of the 7 carriers, ..3.5..make it, I'd have to rank the survivors (who will look a WHOLE LOT DIFFERENT, than they do today, with the exception of WN), as....,
1. WN
2. AA
3. UA,
and the .5(1/2) being DL which would come at the HUGE EXPENSE of NW,.............................Which is EXACTLY why BIG RED should do everything in their power to STAY AWAY from DL !!!!!!!!!!!!!!!!!!!!!!!!!
Then again, the "line up" could be,
1. WN
2. AA
3.UA
3a. CO
I can't prove my theory, but I bet I'm VERY VERY close !
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