Airtran At It Again!

[WorldTraveler]

Busdrvr,
The amount the ATSB has to loan UAL, if any, has to be what it takes for UAL to make it in the current business environment and doesn't have any relation to what UAL made or lost in the past. In the 2 1/2 years since 9/11, LCC's have grown dramatically and have pushed down the fares legacy airlines can expect to receive. That is why traffic for all airlines is approaching pre-9/11 levels. LCC's are carrying a much higher percentage of traffic at the fares they want to charge. Although UAL has narrowed its losses dramatically, it still cannot run a profitable operation and the attack on revenue that it is going to happen this summer will only prove that United Airlines cannot cut costs fast enough to overcome the deterioration in revenues.
Let's not forget that United Airlines and its employees have had an acrimonius relationship for much of the period since deregulation and the company was dramatically weakened by the actions of its pilots in the summer of 2000. Absent that little spat, UAL might not be in bankruptcy today. It's amazing how the troops have all been rallied now that death (or at least a dramatic downsizing) is possible; as a taxpayer, I simply do not want to bail UAL out when other carriers who managed to run their business better before 9/11 don't face the same crisis UAL does today. I'm sorry to keep bringing history up but it does very much explain why UAL Corp. is where it is today.
Given that the Wall Street Journal and USAToday (the two largest circulating newspapers in America if I am correct) believe it is time for the marketplace to sort out the winners and losers in the airline industry and not the government, the support for UAL's ATSB is shrinking by the day. The question is not whether UAL's domestic capacity can be redistributed among other carriers because there is no doubt that it can. The issue the government has to face is how to redistribute United's international system among the remaining carriers who cannot afford to buy much at the present. There is no doubt that the remaining five network carriers and probably a few of the LCC's would love to have a piece of United's network.
I suspect if UAL were denied an ATSB loan they would survive but they would have to choose what they want to get sell off to get out of bankruptcy. We could debate who would want what but AA, CO, DL, and NW have all stated in the past that they would like parts of United Airlines. UAL's creditors are most interested in looking for someone to take over their liabilities, something any of these 4 carriers are capable of doing as long as they get a decent revenue stream.

 

[Fly]

So, let me understand this: YOU want hands OFF by the government (for helping United) BUT you want hands ON to help all the others buy up our pieces? ummmm, NO. choose......either it's hands off or hands on. Time for the government to let the airlines sort it out? OK, then stop controlling the legacies ability to price as they feel fit.

 

[WorldTraveler]

I didn't say the government should help the other airlines buy what's left of United. I said the government's only responsibility is to make sure the valuable route authorities which United holds are served. You'll recall that international route authorities are awarded to airlines by the government. In the absence of United's ability to sell its assets, the government would be forced to award the routes to remaining airlines. As I said, however, the chances of that happening are remote because the remaining legacy airlines will pull out every stop to figure out a way to acquire pieces of United (remember that the other legacy airlines still have access to the capital markets).

 

[ual777fan]

There was a loan GUARANTEE program established to help airlines severly effected by 9/11 attacks. The conditions were that United would have to cut cost and have a viable business model. United has proven that on those counts. The program has been established and because United meets the criteria laid out, they should be able to access the guarantees.

United has turned around there business and should be rewarded for it.

 

[Dizel8]

But the effects of 9/11 are mostly gone, that is other than security hassles. People are not avoiding UAL because the terrorist used UAL planes.

UAL's problem now, is the lower over all fares coupled with higher cost structure vs the competetion. That is a marketplace issue, not a 9/11 issue.

Yes, UAL apllied for the loan, but are the conditions the loan were established for still a factor? I would say no, unless the loan was established to save UAL from competetion and a bad economy.

Do I blame UAL form wanting it? Nope, if I could get a lower interest rate mortgage, I would be all over it and that appears to be what UAL is wanting. Not many people are willing to loan UAL money, unless the interest rate outweighs the inherent risk, but they will loan at a lower rate, if the ATSB guarantees a return.
CITI and JP Morgan stands to lose a lot of money, if UAL fails due to their investments there, but stands to reap huge rewards, if the ATSB backs their loan.

If there was wide held beliefs, that UAL was a great investment, then UAL would not need the ATSB backing, lenders would stand in line to invest, but as it is, such is not the case.

 

[Fly]

BUT.....the loan guarantee was available to EVERYONE....not just a few. Considering that there was a date that all interested parties must apply, and considering that United did, in fact, apply before that date, and considering that the ATSB rejected the application but did leave the door open for them to re-apply if they were able to show a viable business plan, then it is reasonable for United to expect this application be looked upon favorably by the ATSB. United jumped through all the hoops that they placed out there for them...now it's time for ATSB to do the right thing.

World - Seriously....if the government thought that United was not going to make it, why would they then go and award Vietnam this week? I really believe that United is going to get the loan BUT I think that the ATSB is going to tell them that the amount has to be less. We shall see.

 

[WorldTraveler]

Fly,
I haven't said that the ATSB won't give the loan to UAL, only that they shouldn't. As for Vietnam, what other airlines applied for service using their own equipment? Since Japan will not allow 5th freedom traffic to Vietnam through Japan, this happened because UAL is able to provide it through HKG. Given that United is the only airline that has service beyond an Asian destination beyond NRT, they were a shoo-in. And I don't slight them for getting it. It is an opportunity that no other US carrier could take advantage of and the US government is interested in developing trade through any company capable of meeting the government's requirements. United is still a valid, operating airline at this point.

 

[nwa_dc10]

the STATE of MINN had to bail them out of with a loan

That was then, this is now.

But since you are so enamored with UAL's 400's, it should be pointed out that UAL flew 45% MORE international RPM's (and took back substantial Pacific market share) than NWA in Mar, so they NEED more big iron. UAL's Pac market is also more DIRECT flights than NWA, so UAL can't put an A320 on a Hong Kong run.

Yes, but while UAL was flying mostly-empty widebodies into Asia during the SARS crisis, NWA was adjusting capacity to match demand by placing the aforementioned A320s on certain routes. Now, which is a better idea?

Back to the "paying for parked jets" game. FWIW, UAL ISN'T paying for most of them, OTOH DYK that as of Jan 1, NWA had 4 757's, 4 A320's, 2 DC-10's, and 10 747-200's "temporarily" parked? That means they were STILL being paid for.

Yes, I was aware of that. However, all of these airplanes were due for major maintenance when the Iraq war hit, so NWA decided it was better to park them and avoid those costs for the time being. The incoming A320s and 757s had already been paid for, and won't need any significant maintenance for the foreseeable future.

You got a lot of Nerve DC-10. UAL got drug to this BY NWA, CAL, AND AMR. UAL wanted and got pay rates that (when TOTAL contract costs are considered) MATCHED the ones set by the afore mentioned groups. Then to top it off, when UAL agreed to pay rates and benefits HIGHER than those groups, with the help of a loan, YOUR CEO's with YOUR APPROVAL launched a lobbying effort to stop it.. Do you think that some of UAL's market share in the hands of an even lower paying company would be good or bad? What a disgusting and uninformed thing to even insinuate.

So, somehow the outrageous UA 2000 Pilot contract, the "Summer from Hell," the USAirways merger plan, Avolar, and God knows what else are the rest of the industry's fault?

Either way, the marketplace needs to decide who gets UA's market share, not the government. If UA gets to keep or expand their share, fine, but it has to be because they can consistently make a profit by offering a service the public wants at a price they're willing to pay.

 

[Fly]

but it has to be because they can consistently make a profit by offering a service the public wants at a price they're willing to pay.

Exactly!!! THAT is the issue. This is probably the most ACCURATE statement I've ever read.

 

[Busdrvr]

I know it would be counter to any argument you've tried to put up so far, but in the future, try to come up with a statistic or two that in some way gives credibility to an otherwise ludicrous statement. For example, you said:


"Yes, but while UAL was flying mostly-empty widebodies into Asia during the SARS crisis, NWA was adjusting capacity to match demand by placing the aforementioned A320s on certain routes. Now, which is a better idea?"

Actually a closer look at mar 2003 ASM vs 2004 (from which the data was cited) indicates that UAL had a 70.5% LF in 2003. Not great but NOT "mostly empty". Please review second grade rounding for information concerning when something is "mostly empty" or "mostly full". But we we're talking about market share this year right? I'd think now that SARs and the war are less of an issue, NWA would be adding back all that service YOY. But wait, they actually cut back PAC ASM's by 13.5%. UAL, while in BK cut back by 4.3%. What will the excuse be next time?

"That was then, this is now"

Just so we know the consistancy and unbiased nature of your argument, you are contending that government intervention on behalf of NWA (which surely damged UAL) was perfectly fine in the past, but now that it's not NWA on the ropes, things are differant? FWIW, be VERY careful what you wish for. AFAIK, NWA still has a balloon payment of OVER one billion due in 2005, and is one of the most, if not the most leveraged airline around. With a new UAL with very low costs and very low debt emerging, you just may be need'n the government in a year or two...

"The incoming A320s and 757s had already been paid for,"

I'm sorry, but that's simply not true. NWA DID have a commitment to take delivery and had DEPOSITS down on the jets, but they certainly weren't "paid for", heck, they still aren't. Might be tough to understand, but please look at your companies 2002 and 2003 annual reports for more information concerning new debt in those years to finance the purchase of those unneeded jets.

"So, somehow the outrageous UA 2000 Pilot contract, the "Summer from Hell," the USAirways merger plan, Avolar, and God knows what else are the rest of the industry's fault?"


RTFP, never said anything of the sort. I merely pointed out that NWA, CAL, and AMR were leading the charge to the bottom LOOOOONNNG before UASL went BK, and giddly helped lobby for lower UAL contracts with the ATSB ("we think UAL's labnor costs are too high" code for airline employees make too much...) UAL's groups merely snagged the bar set by those airlines. Heck, AMR promptly UNDERCUT (NOT MATCHED, UNDERCUT) UAL's contracts before the ink was even dry, yet you could even suggest that UAL is pulling down the industry? real rich 🙄

 

[nwa_dc10]

RTFP, never said anything of the sort. I merely pointed out that NWA, CAL, and AMR were leading the charge to the bottom LOOOOONNNG before UASL went BK, and giddly helped lobby for lower UAL contracts with the ATSB ("we think UAL's labnor costs are too high" code for airline employees make too much...) UAL's groups merely snagged the bar set by those airlines. Heck, AMR promptly UNDERCUT (NOT MATCHED, UNDERCUT) UAL's contracts before the ink was even dry, yet you could even suggest that UAL is pulling down the industry? real rich

Oh-kay, I think I understand now. UAL is in the mess it's in because the rest of the industry didn't keep up with their outrageous labor contracts; did I get it right this time?

If so, I suppose you're one of those people who think the industry's problems will be solved when the JetBlues and Frontiers of the world are finally unionized, and their workers make "decent" wages. Then, no one will have a cost advantage, and UAL's shiny new planes, excellent customer service, etc. will allow it to reign supreme once again.

I hate to break it to you, but that's not going to happen in time to save UAL, if ever. Either you get your costs down to the point where you can make money in today's revenue environment or you don't. Based on the most recent financial results, UAL isn't there yet, even with it's supposedly "more competitive" labor agreements ("operating" profits don't count unless you don't need the things you're paying rent on, i.e. airplanes and gates, to run the business).

So there it is in black and white; should a company that claims to have restructured itself, yet still can't make money, get a government-backed loan to help them wipe-out years of mismanagement? I say "absolutely not;" and evidently I'm not alone.

 

[Fly]

Yes, but my little poll says we get the loan. so there 😛 😀

 

[Busdrvr]

"Oh-kay, I think I understand now. UAL is in the mess it's in because the rest of the industry didn't keep up with their outrageous labor contracts; did I get it right this time?"

:blink: Are you honestly that slow? YOU claim UAL is dragging down the rest of the industry. That has NOTHING to do with the loan. Yes, some of UAL's issues were caused by industry leading wages. DUH. But I find it comical that you, in your vast intellect seem to think that something that happened a YEAR before 911 and had a MUCH smaller effect on revenue and pax miles than 911, somehow is the root of all the problems and 911 is just a distant memery. I also notice you still fail to acknowledge that NWA would have been BK without government help.

"Based on the most recent financial results, UAL isn't there yet, even with it's supposedly "more competitive" labor agreements ("operating" profits don't count unless you don't need the things you're paying rent on, i.e. airplanes and gates, to run the business)."

What?! Hey einstein, rents are part of operating results.... 🙄 . Your credibility increases by the second... BTW, UAL's costs aren't done going down. there is still the issue of 175 more leases, lower employee costs due to new pension assumptions and kicking ACA to the curb.

 

[herkav8r]

I find it hard to believe that no one has brought up the fact that United actually made a profit in March. I guess the business plan is starting to work. Did any other "legacy carriers" make money in March?

I also think I read somewhere that United is starting to take some market share back from Frontier. Things are looking up.

 

[v1rotate]

Busdrvr,

I can only assume that you're taking some pretty powerful stuff for high blood pressure. Geez! Chill out a little! You're gonna blow a pipe!!

v1