Financial Analysis

[mweiss]

Crazy,

763s fill a pretty nice gap between the 321s and the 777s. Kinda hard to get rid of those without either running too many empties or leaving too much revenue on the table. And if you do keep the 763s, you can keep the 757s as well, due to sufficient similarity.

I sure would agree with you about dumping the 737s, though. Maybe the 747s as well, though I'm not familiar enough with UA's Pacific loads to answer that.

I don't think dumping SFO makes much sense. They have a pretty strong position there, and the transpac SFO market is huge.

 

[BoeingBoy]

mweiss,

Maybe ITRADE will represent me pro bono!!!

Jim

 

[USA320Pilot]

Boy has this thread gotten off topic.

Regards,

USA320Pilot

 

[Fly]

I believe it would be difficult to justify dropping the 47 in the Pacific market. The loads are normally full and people seem to certainly enjoy the fact that they are simply on a "747". The few times it has been a light load, the upper deck remains filled to capacity (they LOVE the upper deck) It must be the novelty of it all.

I agree that the 37 should be dumped and replaced by the A319/320. Anyone else hear the rumor that UAL has been approached by Airbus to replace some planes with the "super sweet" deal that JetBlue recieved? Now that WOULD be interesting.

 

[usfliboi]

Right! Delta is whom I hope our airlines follow by example. :blink: :unsure:

right and yesterdays announcement that delta losses would be well above the 400 million mar this quarter makes you want to go buy their stock !

 

[ITRADE]

Replace 747s with 777s?

No way. There are certain routes that a two engined 777 simply cannot touch. That and I like the 747 (upper deck) a lot more than the 777.

 

[avek00]

Yes, catering to the business traveler made UA gobs of money in the late 90s. Now it's costing them gobs of money.

I'd consider an A332/333 order that would allow the company to trim (but not necessarily eliminate) the 777/763 fleet

Oh, yeah. They sure need another type in the fleet.

Finally, I would fully de-hub IAD in favor of a narrow O&D transcon operation, with the IAD assets being redeployed in markets ex-ORD and ex-DEN where United can regain market share from the likes of AA and F9.

Oh, so the problem in DEN is insufficient capacity? You don't beat the LCCs by throwing more metal on the routes. You beat them by having low enough costs to compete. Keeping the same cost structure while flooding the routes is the classic "lose money on every sale, but make it up in volume" strategy.

1. During the 2000 SFH and subsequent upheavals, United lost a boatload of premium traffic, much of which NEVER came back, even after the company's operational performance improved. The ideas that I suggested have the goal of finally bringing some of those people back.

2. While cost control is undoubtedly important, the bottom line is that neither UA (nor US, for that matter) will ever be able to successfully compete against the likes of WN and B6 on costs alone. The key to beating the LCCs is to offer a differentiated product that people will actually pay for. Mind you, this doesn't necessarily mean offering caviar and champagne, but rather things like a superior schedule, etc. Airlines that have successfully beaten LCC competitors, like DL/B6 in ATL and CO/TZ on EWR-SFO, have used this approach.

3. While introducing another fleet type is usually an undesirable option, it could actually pay off bigtime for United. The bottom line is that the airline has no use for ~135 744/777/763s - that was acceptable when the Star Alliance did not exist, but not now. The 330 family would deliver significant capacity and mission flexibility that the current longhaul fleet will never attain.

 

[funguy2]

Getting back to the topic... For the very immediate short term, Profit/Loss is less important than cash flow. While profits need to come (and the quicker the better), an airline can survive on cash flow for a while. You may recall that TWA tried to outlive its "Karibu" agreement with Carl Ichan by managing cash flow. They managed to survive almost 10 years, with consistent losses, by managing cash flow. If US Airways can stabilize its cash flow, then they can work on profitability. That is why the cash burn rate is so important. Are the other measures important, yeah. But once the company runs out of money, its RASM, CASM, Load Factor, and all that doesn't matter if it can't pay for fuel.

Avek00: While I don't agree with all of your specific UAL assertions, I do agree that UAL could do a better job. However, I think Bear96 hit the nail on the head. UAL has further to fall than USAirways does, at this point at least.

 

[Just Plane Crazy]

Replace 747s with 777s?

No way. There are certain routes that a two engined 777 simply cannot touch. That and I like the 747 (upper deck) a lot more than the 777.

I agree with you on flying on a B744. The upper deck is just the nicest place to be on a flight.

In regard to the routes, I have to disagree with you. For a while UA shifted all lot of B777 to the pacific routes. And with the new B777ER or LR they are able to fly the B747 routes. Only problem are the SYD ones in the winter.

UA also canceled some flights in order to fill up one B744 and not have two 1/2 full ones. So by having B777 they could bring back some routs or flights they caned. (at least that would bring some crews back into active duty )

 

[Just Plane Crazy]

3. While introducing another fleet type is usually an undesirable option, it could actually pay off bigtime for United. The bottom line is that the airline has no use for ~135 744/777/763s - that was acceptable when the Star Alliance did not exist, but not now. The 330 family would deliver significant capacity and mission flexibility that the current longhaul fleet will never attain.

I agree with you on this point (as I have stated it earlier in the thread)

But I also would like to mention to look at the members of Star and what aircrafts they have. To have a common fleet concept will save a lot of money and they could interchange, co-purchase and drive overall cost down.

A330 are in service with LH, US, SA, TG, SQ ....
B777 are in service with UA, SQ and ?
B747 are in service with LH, SA, TG, SQ (and will be replaced with either A340 or A380), UA, NZ, ...

This is just something to think about. :unsure:

 

[mweiss]

1. During the 2000 SFH and subsequent upheavals, United lost a boatload of premium traffic, much of which NEVER came back, even after the company's operational performance improved. The ideas that I suggested have the goal of finally bringing some of those people back.

Unfortunately, it comes very late. Most of this market segment ceased to exist altogether. There's nothing wrong with targeting the remainder of that market segment, but UA has waaay too many ASMs to support that small a demand.

2. While cost control is undoubtedly important, the bottom line is that neither UA (nor US, for that matter) will ever be able to successfully compete against the likes of WN and B6 on costs alone. The key to beating the LCCs is to offer a differentiated product that people will actually pay for.

That's true to a limited extent. First of all, B6 is well on the road to doing the differentiating themselves (the "Target" to WN's "Wal-Mart").

One possibility is for UA to become the "Nordstrom." I think the idea has merit, but let's recall that there are 4,000 Wal-Marts and only 149 Nordstroms in the world. If Nordstrom opened up another 3,800 stores, they'd be out of business in a year. There just ain't enough customers to support that many stores! UA is Wal-Mart in size; they need to shrink to Nordstrom size to be able to be profitable in that market segment.

The huge unanswered question (and I don't know if anyone has the data to be able to answer this one) is whether an airline that is Nordstrom-sized will have enough reach to be able to draw enough Nordstrom customers to be profitable.

Mind you, this doesn't necessarily mean offering caviar and champagne, but rather things like a superior schedule, etc. Airlines that have successfully beaten LCC competitors, like DL/B6 in ATL and CO/TZ on EWR-SFO, have used this approach.

That approach, necessarily, is short-term. Eventually, B6 and TZ will grow big enough that there won't be a schedule superior enough to make the difference.

 

[javaboy]

did you subtract any payments to the DC plan? that would account for a perceived higher cash burn rate. not to mention some cash may have gone from un to restricted again seemingly to increase the burn rate.

i tend to focus more on how many people got on the airplanes and how much did UAIR charge them for that.

according to latest available figures (FEB 04)
3.1 million people rode on UAIR or if you will about 107,000 per day. (29 days)

now just to verify average ticket price.

 

[BoeingBoy]

javaboy,

From the 4th quarter report, it appears that revenue per passenger is $117.34. That's total passenger revenue divided by total passengers.

Jim

 

[BillLumbergh]

While this topic was US Airways based, it was essentially captured and turned into an analysis on United's operations.

There's a lot of good info here on United, and I'd actually like to keep this one going, but I am going to move it to the United forum.

Hopefully, there were be people there to post follow-ups.

Sorry, 320, but this one was successfully hijacked....

 

[colorado_cowboy]

BTW whos is in bk and may never come out?

BTW who just came out of bk and is headed toward liquidation?