If UA doesn't have some management change then they are headed for BK7. Now that they have open skies with London the only asset of value is the Pacific Rim. While getting rid of the 737-5 and 737-3 makes sense, the grounding of 6 747's doesn't add up to the 'wonderful world of growth in the international market place.' Therefore, I see UA bleeding slowly for a few years as they downsize to number 6 or 7 in terms of ranking, much like TWA did in the past.
As for a major going out before United, well that could change United's fortunes, only if managment were to change. When you have constant battles within you can't take care of the problems from without. I would guess that even though fuel is up, winter related losses should be excluded. The writedown of the assets they are going to ground, the early termination fees for breaking leases, I don't know if they have enough time to include them into the actual assessment of the quarter without delaying financials so they can cook (work) the books.
Now I would venture to guess that they may accrue the tentative charges for all those changes into the quarter, but they don't have to be accurate. Special items, 6-747's and the whole 737 fleet with parts will write down something close to the write down of the 727s and DC10's after 9/11 which IIRC was in the range of $1billion.
The Sept 11 write down was as follows,
Aircraft grounding and impairment $788
Reduction in force $217
Early termination fees $181
Discontinued capital projects $107
Miscellaneous $20
total $1,313,000,000.00
So, you figure a reduction, only lasting a longer peroid of time, (thru the end of 2009 odd timing....but that's another story....)you will have some increased costs and some lower costs. Plus the 737's are much older but still have value outside of the United States whereas the 727's were at the end of the rope, (India, China, Africa, South America) so $1billion is a fair writedown of assets.
Now on a quarter operating loss....you have fuel up over $1 a gallon and United already stated fuel will add $9 billion in costs but the luggage thing will only bring in an additional $275million, you are still looking for an offset of 8.725 billion over four quarters. But airfares are up which will offset some of the increase, but traffic is down. So, why don't we not split hairs and call it an operating loss of $2billion for the quarter and $1billion in special writedowns, thus a net loss of $1billion for the quatrer.
What else would explain the fall from $41.14 on 2/1/08 a share to $3.86 on 7/3/08?
