Lhr & Asia:what Are They Worth?

[JFK777]

Given credit for airlines is almost non existent LHR & Asia could be worth very little. Delta is atmost in BK Court. Usair is going Ch 22. CAL would be interested in both. Nw would love LHR, they already have NRT. AA has LHR but already has many routes to NRT from JFK, ORD, LAX and others.

LHR has 2 buyers & Asia has 2 also, but how much financing is there available for route acquisitions? Interest rates may be low but not for this type of risk. UA's South America routes are worth very little since it no longer has a Miami gateway. Dulles and ORD work for UA to EZE & GRU but not for any other airline. I see LHR worth only about $200 million & Asia about $400 million. Any buyer would probably have to take on the existing operators fleet and employees given the huge number of airplanes and employees already trained and ready to go. Whatever outcome any international route sales have for UA they should only be a last resort.

 

[WorldTraveler]

It is not likely that UA will need to sell any assets next week and this industry can change dramatically in the time it takes for them to figure out how much money they can get from other sources. Asset sales will be the last step in bridging the gap between cash needed to get out of bankruptcy and available cash.

UA's Asian routes just went down in value today since the US and China announced enough new routes to allow just about every major US airline the opportunity to fly to China, just as they can largely do to Japan. The US has open or liberal skies to S. Korea, Taiwan, Singapore, and Thailand. The primary value UA has in their Pacific operation is current market position and the intra-Asia rights which are unique in the industry, but are not worth the billions UA needs. As I recall, UA paid Pan Am $750 million for the routes and authorities acquired in 1984 or '85; United has built the Pacific routes but the increased size is offset by increased market access by other US airlines and the longer range of aircraft like the 777 that makes hubbing at NRT less necessary.

The US and EU are trying to hammer out an Open Skies agreement that will open LHR making it unlikely that any US airline will fork over much money for routes that could become available by route application rather than asset acquisition in the near future.

 

[G4G5]

$400 mill for Asia?

What are you smoking? The current value of the USAir Shuttle is over $300 mill

This should not even be a topic of discussion. UAL is not going to sell anything anytime soon. Let's try to remember that the summer cash flow is about to begin.

 

[JFK777]

Worldtraveler,

The value of UA's LHR franchise is that it has traffic rights from very large and desirable cities. How much is Delta going to increase its London traffic if it switched its CVG & ATL service from LGW to LHR? Not much. DL will probably get traffic rights from JFK to LHR if EU & the USA have an Open Skies. UA's value is in the rights from LAX, SFO, IAD, ORD and JFK, its the unique value of having the biggest cities. The only cities UA doesn't fly from in the top are BOS and Miami.

 

[boeing787]

Don't worry how much they are worth. They aren't for sale.

 

[JungleClone]

All things being equal, because of barriers to entry, LHR and NRT value is very high. Unfortunately, given the current state of the airline industry, "high" value is relative. I'm not so sure that is the route we need to go. At least not yet. All anyone need do is remember Pan Am and TWA, and what happened to those carriers when they sold off the crown jewels in a cash grab. I remember when I was at TWA and we sold off the LHR routes to AA. I can still recall pulling that Newsgram off the printer. It just completely sapped the morale of everyone and marked the beginning of the end. The one part of UA's network that it can still leverage is the international routes. As yet, there is no low-cost competition, even though it's only a matter of time before that happens. My view is that if we conclusively fail to get the loan, you'll see alot more stations going from mainline or mixed mainline/UAX to all UAX. Marginal routes will also be put down. And if they make a push to lower labor costs once again, you could see more of the domestic system converted to TED. Just my view. But I don't expect LHR or NRT slots to be sold off until we have absolutely no choice.

 

[lpbrian]

I agree. Even if a new deal is worked out with the EU, LHR will still be a slot controlled airport. I also feel that the poor health of potential buyers of NRT and LHR operations will not be an obstacle. Assets purchased can always be leveraged, with assets used as collateral, I would think. DAL could always sell Comair in any case.

 

[JFK777]

I was at JFK yesterday taking a JetBlue flight to Florida, at Terminal 6. Terminal 7 is the United & British Airways terminal; there was a UA 777 going to LHR at 6:45pm plus another 763 later,for two daily flights from JFK - LHR. What Value does JFK-LHR bring to UA?

UA's main LHR cities are IAD, ORD, SFO & LAX, JFK is a minor gateway for UA to Europe. BA, AA & Virgin are the big 3 duking it out for the market share. UA is not really a player since the other have up to 6 flights daily. WHY does UA operate this route? How about selling the JFK-London route to Delta and using the slots for other servoce from LHR. Or sell the slots to an airline authorized to fly to LHR( this could be an airline from any country). I just don't think ua is too competitive in the JFK -LHR market, I could be wrong and the one 777 flight daily could make tons of money.

 

[whlinder]

The Star Alliance needs to have someone fly LHR-JFK. UA has to since no one else can.

 

[SVQLBA]

The Star Alliance needs to have someone fly LHR-JFK. UA has to since no one else can.

JFK-LHR is also essential for CVAs UA has with NYC-Based companies. Without it, they'd be completely uncompetitive in NYC.

 

[WorldTraveler]

Also, the JFKLHR route can't be separated from the other LHR rights. Under the current treaty, UA can sell all of their LHR rights but only two US and two British airlines can serve LHR. As mentioned, there are efforts by the EU and US to negotiate a new treaty that will allow more carriers into LHR. You are probably right in that DL probably won't gain any/much additional business because they serve LHR from ATL or CVG but DL can't serve NYC-LON (LGW included) under the present treaty. DL's market position in NYC is bound to increase if they had LON service, regardless of the airport.

JFK777,
why did/do you fly JetBlue? (marketing preferences type question)

 

[Cosmo]

... DL can't serve NYC-LON (LGW included) under the present treaty.

WorldTraveler:

I don't believe that is correct. A few years ago, DL served BOS-LGW at a time when both AA and UA were serving BOS-LHR. Wouldn't the same conditions apply for JFK-LGW service by DL, especially since the JFK-London market is substantially larger than BOS-London?

That said, if DL started offering JFK-LGW service, it would be at a real handicap by being the only JFK-London carrier, including several foreign ones, not able to serve LHR. IMHO, that's why DL is not currently operating in the JFK-London market.