State Of United

Chinook

Member
Oct 30, 2003
15
0
Hello,
In conversations I've had recently with several members of UAL management, I get the feeling the company is moving forward with a business plan that does not include a merger with USAirways. Both people I spoke to said emphatically that a merger is not being discussed or on the table. Our expansion plans for Mexico and especially in the Caribbean seem to show we want to expand our network internally. I think UAL would like to strengthen the code share with US, but both fellows said they are worried about the survival of US. Of course UAL is not in a position to acquire anything from US while in BK. I personally think the codeshare with US is a very good thing.
Some other items of interest from these conversations:
1. The seat mile cost of TED will get down into the mid 7 cent range, and will be lower than Frontier (believe it or not). Although planned initially for up to 40 planes, it will eventually become much bigger. Look for an announcement about some new Mexico (not New Mexico) destinations soon. That answers the question about the departure of Mexicana from Star.
2. Total system seat mile costs will end up in the mid 8 cents per mile, almost a penny below the nearest network style carrier. We will be the “category killerâ€￾.
3. Widebody lease negotiations are going well, and we may end up with more widebody jets than people expect.
4. Both American and Delta have some significant financial obligations coming to bear on them in '04 and 05', and UAL management is keenly aware of this, and will take advantage of these difficulties with their competitors.
5. I've noticed some of the best adverts. and marketing at United in many, many, years. I really am seeing some good programs, and that is very encouraging. I think some of these new managers are starting to do some real good. With a few exceptions, there has been a good turnover in some of the upper ranks.
6. Our good performance of late is very important to the bankers, and they like what they see.
7. I was told by a VP that USAir didn't meet any DIP goals, and had to exit early to avoid getting called on exit financing, also potential difficulties with the credit card clearing house were brought up. It was this fellow’s opinion that they were not able to use the process to full advantage. UAL is really using the process well, and keep in mind that most of the "5 problems to solve before exiting" are really desirable by-products of being in Ch. 11. Sure, we have leases to settle, but that’s the point. Look at the great outcome of the Denver gate situation. We wouldn't have gotten that with an early exit. Also, exiting at the end of spring is right on target for an 18 mos. exit. When we went it the time frame was 18-24 mos. in CH 11. Also, make no mistake, UAL was in serious trouble this Spring.

Take this for what you will, but I can say in the last 2-3 weeks the mood at UAL has really shifted, and management and employees are quite bullish about the company. There is an excitment in the air now about our future. The tide is starting to turn. Sure, these managers aren't going to tell me negative stuff, but I don't think they are just making up good news either. Of course, one can’t help but see synergy between US and UAL, and there could probably be an instant solution to the ACA problem with some combination of the companies. But too much points to the fact that at this point a merger is too hot of a potato to handle, and probably will not be a factor for a long time.
I wish the best for everybody. Happy Holidays.
Chinook
 
Chinook, thanks for the info. Here's my take on all of this:
1. Ted isn't designed to make a profit. It's designed to contain LCCs. UAL management will tinker with the numbers so that it doesn't look like predatory pricing. After the LCCs have been contained, Ted will go the way of Shuttle by United.
2. This is part of the reason why I believe Ted will eventually disappear, only to be replaced by UAL mainline. The costs at mainline will be low enough that UAL will be able to get revenue premiums with mainline vs Ted at little additional cost.
3. Sounds great. I haven't been following the status of lease negotions lately. I had thought that almost all of them were completed. Do you know how many more are left to negotiate?
4. I think that UAL will go after LCCs before other legacy carriers. UAL will cut side deals with them to contain LCCs (ie Song at Delta, Arpey seriously considering an LCC at AMR) before ever going after them head to head. Too little to gain from attacking another legacy carrier vs attacking the LCCs.
5. I still don't see much UAL advertising, but then again, I'm currently living in an AMR hub city. I'll see what they've got in DEN this weekend.
6. That's good news. I think that Tilton plans to get exit financing from the banks. If he can get ATSB loan guarantees, that'd be a plus (lower rates), but I don't expect to see UAL pay loanshark rates without an ATSB loan guarantee.
7. U has more than enough cash to weather the storm for quite a while (somewhere around $1.9 bil). U will have no problems getting to next summer's travel season; as long as next summer is on par or better than last summer, U won't be in trouble anytime soon. (But yes, U did not take full advantage of the chap 11 process due to reasons you've cited).

I don't expect to see a U/UAL merger ever. More likely is one is fragmented (if one disappears; my bet is that both survive) and some pieces are bought by the other, along with other carriers buying pieces of the fragmented company.
 
Well, UA has at least one good card - Asia. I've taken at least two lengthy asian trips in the past month or so and the flights have been packed, packed, packed. Not a single seat open in either F or C class - and there was not an insignificant number of passengers who were on paid, revenue fares.
 
I heard from a source today that as far as ACA goes, as of the last few days it looks less likely that the LCC plan will happen, and more likely MESA will be successful in appealing to the share holders.
 
iflyjetz said:
3. Sounds great. I haven't been following the status of lease negotions lately. I had thought that almost all of them were completed. Do you know how many more are left to negotiate?
About a week I heard there are 174 aircraft leases to be settled yet. The more challenging part is these leases are represented by just over 100 lenders. Oh yeah, most of these 174 are narrow body aircraft.
 
Sorry, but Ted is here to stay.

Through two industry downturns, the LCC model has proved to be the msot sustainable and consistantly profitable.

If the McKinsey "beta" business plan had any worth to it...it was in its acknowledgement that LCCs are the most 'rugged' form of airline in any business environment.

Ted is not simply there to keep Frontier in check.

Ted enables United to finally serve the plethora of leisure destinations south of the border...perhaps creating one of the first successful transborder LCCs (HP being the first with its Mexico service)... and finally bringing much needed LCC service to the Caribbean.
 
To add:

Basically, Ted is United's growth platform.

Mainling will still be there to capture yield premiums during boom cycles of the economy and in markets where United has dominance that lets it "squeeze every penny" out of high-yield travelers.

Make no mistake though--in the event of any premium markets becoming eroded by competition, Ted will take over.
 
Chinook said:
I get the feeling the company is moving forward with a business plan that does not include a merger with USAirways.

I have never understood the reasons for a US merger, although it continues to be discussed on the US board. What do they have that UAL needs? Even their shuttle is losing money. This was a terrible idea at $60 a share; and it's still a bad idea at today's price.
 
US Air people love the idea of a merger. UAL people don't. Let's see . . . .does this sound like a AA - TWA deal?
 
Winglet said:
US Air people love the idea of a merger. UAL people don't. Let's see . . . .does this sound like a AA - TWA deal?
You know, as a US Airways employee, please...oh please tell me who on the US Airways boards has said they want a merger with UAL? Who says we love the idea of a merger? Please quote what has been said. I really want to know because that is the biggest single lie out here on the airline boards. Again, many here on the UAL forum continue to think that Mr. Chip Munn speaks for the entire company known as US Airways. This is so short sighted.

I promise you......90% of the US Airways employees do NOT want any merger with your company. Your employees made it completely clear the last attempt how they felt. If the hostility many of you showed towards the US employees during that merger attempt is an indication as to how we would be treated after a possible merger, then NO THANK YOU. You may have your 747-400's, your 777's, your Pacific operation and TED.

I have read on more than one occassions that your employees would rather see the airline go to Chapter 7 then to merge with US. (FLY) And you really think we are getting goose bumps of excitement over the rumors of another merger attempt? I don't think so.
 
firstamendment said:
You know, as a US Airways employee, please...oh please tell me who on the US Airways boards has said they want a merger with UAL? Who says we love the idea of a merger? Please quote what has been said. I really want to know because that is the biggest single lie out here on the airline boards. Again, many here on the UAL forum continue to think that Mr. Chip Munn speaks for the entire company known as US Airways. This is so short sighted.

I promise you......90% of the US Airways employees do NOT want any merger with your company. Your employees made it completely clear the last attempt how they felt. If the hostility many of you showed towards the US employees during that merger attempt is an indication as to how we would be treated after a possible merger, then NO THANK YOU. You may have your 747-400's, your 777's, your Pacific operation and TED.

I have read on more than one occassions that your employees would rather see the airline go to Chapter 7 then to merge with US. (FLY) And you really think we are getting goose bumps of excitement over the rumors of another merger attempt? I don't think so.
United people don't even like United people, so don't take it too personally. The other contention is just the industry itself. From our Railway Labor Act to merger laws this industry is just about as screwed up at anything operating out there. Fences, protectionism, senority etc, etc. I screamed against the merger as loud as anyone. But it was not because I didn't like anyone from US.
 
firstamendment,

I think most of us realize that it is a small percentage of US employees like "you-know-who", who want to merge with UA to save their own butt at the expense of others. And those few people do not save their "screwing" for just the UA employees. They would do it to their own co-workers if it meant saving their careers.

Unfortunately, they are also the most vocal, so they are the ones we direct our rebuttals toward.
 
All I know is this...

I am a former US employee (left approx. 5 years ago), and I have since moved on to other opportunities where I travel frequently. I am currently a US CP and a UAL prem. Exec.

During the summer of 2001, as a passenger, I witnessed UAL employees harassing US employees on numerous occasions. It got to the point where I saw a US flight crew threatened at SFO on a Saturday afternoon by a UAL crew, a moment I won't soon forget. Folks may think I am biased toward US because I am an ex-employee, but that is simply not true. I love flying UAL, and I love their people and servie.

However, first ammendment is correct. I am 100% sure that the majority of folks at BOTH carriers do not want a merger. It is also accurate that UAL employees were not fair in the summer of 2001. Nobody can tell me any different, and I sincerley hope that a merger does not occur between (as Chip would say) the Chicago-based carrier and the Arlington-based carrier.
 
767jetz said:
firstamendment,

I think most of us realize that it is a small percentage of US employees like "you-know-who", who want to merge with UA to save their own butt at the expense of others. And those few people do not save their "screwing" for just the UA employees. They would do it to their own co-workers if it meant saving their careers.

Unfortunately, they are also the most vocal, so they are the ones we direct our rebuttals toward.
Thanks...hey, I just wanted the merger to go thru so my parents could fly from GSO-MCI-ORD-LGA where all their kids live. Going east to go west is tiring for my beloved retired parents.
 
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