ACA - Regional Carrier Plans Bargain Airline

Regional Carrier Plans Bargain Airline

Atlantic Coast to Reject Offer of New United Airlines Contract

WASHINGTON (Post) - Atlantic Coast Airlines plans to sever its 14-year bond with United Airlines and become a low-fare airline that could increase competition for price-conscious travelers in the Washington region.

Complete Story: [url="http://www.washingtonpost.com/wp-dyn/articles/A51336-2003Jul26.html"]http://www.washingtonpost.com/wp-dyn/artic...-2003Jul26.html[/URL]

Chip asks: UAL and ACA recently reached an agreement to continue their business relationship until December 31, however, UAL now has a choice. Under bankruptcy court rules, UAL can either accept ACA's existing contract or get out of it with a judge's approval. If UAL does not elect to pay the current fee, the airline must sever the relationship and try to find more IAD feed in addition to TSA. How will this news effect UAL's IAD hub, the new business plan, the POR, and the DIP revenue and cash flow targets after December 31?


In addition, the Washington Post wrote an independent ACA would probably force lower fares and competition with US Airways, particularly in mid-size markets.


Best regards,

Chip
 
Without ACA as a feeder for IAD this could very well be a problem for UAL. I think this would leave UAL with three immediately visible options, one find another regional feeder, two use their "vision" of a LCC as a feeder, or three finally push for the merger again. Again their arrogance and disdain for anything "right" shows itself.

"Someone stole the handle and the train..."
 
"If UAL does not elect to pay the current fee, the airline must sever the relationship and try to find more IAD feed in addition to TSA. How will this news effect UAL's IAD hub, the new business plan, the POR, and the DIP revenue and cash flow targets after December 31?"

UAL has until DEC, so no worries. Air Willy and Skywest would gladly add more RJ's to IAD (as would "mid atlantic"). It will be good ridance to get rid of the worst customer service airline I've ever experienced. It's laughable that they think they can operate an airline of RJ's with a CASM around 15-16 cents a mile and survive on the east coast. When the stock TANKS they'll likely come groveling back.
 
Well the market loves the idea so far....Stock Down 16%. And that's with some folks hoping they'll work out a deal with ual before Dec.
 
----------------
On 7/28/2003 8:32:30 AM Busdrvr wrote: UAL has until DEC, so no worries. Air Willy and Skywest would gladly add more RJ's to IAD (as would "mid atlantic"). It will be good ridance to get rid of the worst customer service airline I've ever experienced. It's laughable that they think they can operate an airline of RJ's with a CASM around 15-16 cents a mile and survive on the east coast. When the stock TANKS they'll likely come groveling back.
----------------​

ACAI (Atlantic Coast Airlines) is currently trading down ~15%.

As for who will replace ACAI, I don't think that UAL will bring in Air Willy or Skywest. UAL pays a fee per departure to its regional partners, and I don't think that UAL makes money on very many of those flights. I expect to see UAL give all the feed to its * partner, U. U can either fly those routes with mainline or WO aircraft. While UAL wouldn't get any revenue on this arrangement, UAL would not be losing money, which is what is currently transpiring with their ACAI contract. It is even possible for UAL to gain revenue from U by charging fees to U for use of UAL gates at IAD.

ACAI's future is murky at best. I don't think that they have any gates to operate from (they use UAL's gates), so how do they propose to operate?
 
It has come to my attention that US Airways' management intends to talk to Atlantic Coast management about a potential code share relationship, although its unclear if a deal could be worked out. Potential obstalces could be J4J and the amount of money Atlantic Coast would demand, which was a problem for United Airlines.

Best regards,

Chip
 
----------------
On 7/28/2003 7:31:18 AM aircraft_artificer wrote:

Without ACA as a feeder for IAD this could very well be a problem for UAL.

"Someone stole the handle and the train..."

----------------​

Nah, no fears......we're gonna use US Air as our feeder. Rev up those RJ's boys.
 
----------------
On 7/28/2003 9:10:28 AM iflyjetz wrote:

----------------

ACAI's future is murky at best. I don't think that they have any gates to operate from (they use UAL's gates), so how do they propose to operate?

----------------​

Actually, I believe it's United that is going to be hurting in this area. As far as I'm aware, ACAI controls many gates at IAD. In fact, UAL uses some of the the ACA controlled gates for their own service. I've attached a link to a Reuters news article with this information. I'm fully aware that the news organizations are not always accurate, however, I believe that the information pertaining to who controls the gates at IAD is pretty dead on. ACA has a pretty large infrastructure in place at IAD of their own and wouldn't lose much in that respect.

biz.yahoo.com/rb/030728/airlines_atlanticcoast_ual_2.html
 
----------------
On 7/28/2003 11:12:38 AM Cart Pusher wrote:
Actually, I believe it's United that is going to be hurting in this area. As far as I'm aware, ACAI controls many gates at IAD. In fact, UAL uses some of the the ACA controlled gates for their own service. I've attached a link to a Reuters news article with this information. I'm fully aware that the news organizations are not always accurate, however, I believe that the information pertaining to who controls the gates at IAD is pretty dead on. ACA has a pretty large infrastructure in place at IAD of their own and wouldn't lose much in that respect.

biz.yahoo.com/rb/030728/airlines_atlanticcoast_ual_2.html

----------------​

Cartpusher, thanks for the correction. I made an assumption, and you know what they say about making assumptions.
From the verbage of the article, it sounded like ACA owns ALL of UAL's gates at IAD. I'd find that hard to believe. Here's the sentance from the cited article: "Atlantic Coast derives about 85 percent of its revenue from United, but it controls the gates United uses at Washington Dulles International Airport. "

ACAI is currently trading down ~25%; looks like Wall Street's determined that ACAI is going to lose out when the breakup's complete.
 
Here's my prediction: Mid-Atlantic (the new US wholly-owned) will eventually be up and running, but out of IAD instead of PIT, as the UA Express carrier out of IAD.

Chip what a surprise you are concentrating on the potential negative effect on UA about ACA going it alone. Of course you have ignored the impact to U. What will be the effect on U to have yet ANOTHER low-cost carrier (assuming ACA can pull it off) plying largely the same East Coast markets as U?
 
Looks as if the market is skeptical at this point - indeed the risk is steep, especially when you consider loosing 85% of your steady state revenue and trading that in for a largely speculative business. The market prefers a "sure thing" to an unknown (startup), and is discounting it appropriatly. They claim they have the financing lined up to buy Boeing or Airbus aircraft for the new operation.

One the other hand, this will bring in additonal LCC competiton in the East Coast - probably will have a receptive customer audience! It is a very gutsy move. Could they be the next Jet Blue?