This Is Why U And Ual Will Not Have A Transaction

[Fly]

US Airways and United have cut their unit costs, but because of breathtaking future LCC expansion, both airlines must cut their unit costs further if they expect to survive. Management cannot cut labor cuts fast enough to match LCC unit costs, therefore, the only practical way to obtain a competitive cost structure appears to be with U liquidating and UAL picking up the pieces after WN annihilates U.

Whether its Southwest in Phailadelphia, Frontier in Denver, or JetBlue in another key hub, the fact is LCC's will double in size in the next 3 years and could triple in size by the end of the decade. Fortunately, 737's run out of gas and fall into ponds, so we still have a little hope that there is a future for international carriers.

Regards,

Fly

Southwest Goes for the Jugular In Challenging US Air in Philly

By SCOTT MCCARTNEY
Wall Street Journal

NEW YORK (Wall Street Journal) - [story edited due to copyright. Please feel free to post a link, but refrain from posting copyright materials. Thanks.]

Like many wars, this one will be long and drawn out. The airline industry is evolving. But remember the day that Southwest said it would invade Philadelphia. It may mark a significant turning point. No truer words have been typed.

 

[Doc]

What are you smoking.....

 

[PhillyFlyGuy]

I believe that US will stand and fight it's turf in PHL. It will be a very bloody battle that is a given. This is a first that WN is going after a major airlines hub however I believe it won't be the only airline they go after. It is a matter of time before other hub and spoke airlines will be attacked. We are ALL at risk. The LCC's have declared war.

I have seen a lot of tit for tat between UA and US employees on this board. Myself being a US employee I have never wished for UA to sink in bankruptcy court and for the pieces to be picked up by other airlines. I hope that UA survives and becomes successful.

The employees at US are great people. We DO CARE about our airline and customers. Just like every airline we have a few bad apples. For the most part every airline employee in this industry have been beaten up by management with consessions and have been asked to change.

I just hate to see people throw stones that stand behind glass houses.

Good luck to us all in this industry.......we are going to need it. One day at a time.

 

[USA320Pilot]

Fly:

Thanks for cut and pasting my comments from the US Airways board and putting them on the United board. I believe it's a compliment to have people plagiarize my work and not be original.

Regardless, let’s put things in perspective.

US Airways had a $37 million operating loss and United a $19 million operating profit in the third quarter. That’s a net difference of $56 million. United has about three times more revenue than US Airways and is not paying all of its bills, primarily the debt at the UCT airports of Los Angeles, San Francisco, Denver, Chicago, plus the money owed to the Port Authority of NY and NJ. In fact, United has not paid these airport authorities since last April according to S&P. How bad would have United’s results have been if it had meet all of its financial obligations?

United has stemmed its bleeding, but according to the Denver Post “although United said its planes are booked more fully and at higher fares than last year, analysts predict a fourth-quarter loss in the range of $400 million to $500 million, not including bankruptcy costs.â€￾

Jeffrey Stanley, manager of economic analysis and regulatory affairs at United, speaking at The Future of the Airline Industry conference at Washington University in St. Louis on October 31 said, "A series of events changed the competitive landscape of the airline industry, including the Sept. 11, 2001 attacks, a sluggish economy and the outbreak of severe acute respiratory syndrome, or SARS, Stanley said. Those factors have helped the growth of low-cost carriers," he said.

Those carriers face plenty of issues, he said, including security, international aviation and air traffic management. But the most important challenges they face are the change in the industry's competitive environment and getting the federal government to recognize it, Stanley said.

"If things stay the way the are now, there will be several Chapter 7 (bankruptcy liquidations) down the road, and that's not good for anyone," he said. The most feasible solution to the situation is consolidation in the domestic airline industry, he said.

Without a corporate combination between the two companies to remove fixed costs, it appears both airlines could liquidate. Therefore, the decision appears to be integrate or die!

Regards,

Chip

 

[737nCH11]

Chip,

I don't think UAL is on Deathwatch anymore, however the same can't be said for U. I'm not slamming your company, but after doing some research and talking to my friends at U things seem pretty grim.

I wish nothing but the best for you guys (my former flight instructor is a U pilot), but I think if Dave asks for more givebacks it will be the final nail in the coffin.

Good luck to all of us!

737

 

[USA320Pilot]

737nCH11:

It's far to early to write off US Airways.

At the end of the third quarter the company had about $1.4 billion in unrestricted cash and $2.0 in billion total cash.

There's more going on here than meets the eye and I understand Bronner is said to be willing to integrate the companies if United can successfully resolve its enormous challenges and US Airways can meet the ATSB minimum cash on hand requirements. The business opportunity of the combined carrier is significant with major potential cost carve outs and "S" curve economics, which would dramatically improve revenue. Bronner needs to protect his investments in US Airways and his United EETC's, thus his interest.

That's why Stanley said, "If things stay the way the are now, there will be several Chapter 7 (bankruptcy liquidations) down the road, and that's not good for anyone. The most feasible solution to the situation is consolidation in the domestic airline industry."

737nCH11, Stanley was talking about both of our companies, just like Siegel was during his speech at the Washington Aero Club last week.

Both of our employee groups are being set up and I believe we will be surprised at what occurs in the future.

Regards,

Chip

 

[737nCH11]

Chip, my man,

I have said all along that the UAL/U merger wasn't dead. I agree that it will be interesting to see how this all plays out. If it keeps everyone employed that would be a great thing. The danger is in further demoralizing two already p1ssed off work groups.

 

[USA320Pilot]

737nCH11:

I agree about the employee group(s) sentiment -- I wish we could get beyond that. I have seen United EF&A's year 2000 economic analysis of the combined business entity and it's compellling.

Regards,

Chip

 

[Busdrvr]

Fly:


Regardless, let’s put things in perspective.

US Airways had a $37 million operating loss and United a $19 million operating profit in the third quarter. That’s a net difference of $56 million. United has about three times more revenue than US Airways and is not paying all of its bills, primarily the debt at the UCT airports of Los Angeles, San Francisco, Denver, Chicago, plus the money owed to the Port Authority of NY and NJ. In fact, United has not paid these airport authorities since last April according to S&P. How bad would have United’s results have been if it had meet all of its financial obligations?


Regards,

Chip

Chip, WHY DO YOU INSIST ON PASSING FALSE ACCOUNTING INFORMATION!!! YOU HAVE BEEN TOLD REPEATEDLY THAT UAL HAS TO INCLUDE ALL EXPENSES, PAID OR UNPAID, ON IT'S BALANCE SHEET UNTIL THEY ARE RESOLVED. YOU KNOW THIS, SO YOU MUST BE THROWING AROUND HALF TRUTHS INTENTIONALLY TO DISTORT THE REAL SITUATION!!!. OK, done yelling. ALL lease payments (gates and jets) show up at FULL cost up until the day we come to a revised agreement. If anything, the 3Q numbers grossly UNDERSTATED UAL actual profit. The 19 million operating PROFIT also include 71 MILLION in "special" items, ie, the accelerated depreciation of the 767-200's. This has ABSOLUTELY no bearing on the "real profit" at UAL. It's part of the game to get your coveted 7% ror. This depreciation will now NOT be part of future results. that's why they are taking as much as they can get away with in BK. It is comical that now you are wishing for UAL to "combine" to save your hide......

 

[USA320Pilot]

Busdrvr said:

Your shouting is interesting, especially since the Denver Post reported that analysts are calling for United to lose between $400 to $500 million this quarter and that does not include bankruptcy costs.

Furthermore, the operational profit/loss differences between the two companies were not that different and could dramatically change this quarter with United having such a larger revenue base.

Busdrvr, all emotion aside, I believe that will get the creditors committee and DIP financiers attention.

In regard to your emotional comments, I am not wishing for UAL to "combine" to save my hide. My information is what's being discussed between the companies because both airlines are at risk of liquidating -- plain and simple.

It appears the thinking in WHQ and CCY is either to integrate or die.

Regards,

Chip

 

[Busdrvr]

As usual chip, you ducked the truth. You refuse to acknowledge that you CONTINUE to report blatantly false information as the truth (despite knowing better). Yes or no chip, are ALL non-renegotiated expense, paid or not, included in the operating results? I think there is a BIG diff in a 90 million PROFIT and ANY loss. but now you're quoting that international reputable business journal "The Denver Post" . Worst case for Q4 is an operating loss (EBIDTAR PROFIT) of 150 million. Whats your track record, and whats mine?

 

[USA320Pilot]

Busdrvr:

I am not an accountant, I did not study in-depth UA's Q3 report, and I do make mistakes. If I did here, I apologize.

Regardless, US Airways chief executive officer Dave Siegel and Jeffrey Stanley, manager of economic analysis and regulatory affairs at United, both made comments last week regarding consolidation -- indicating the only true way to obtain enough cost cuts for our two companies to survive by creating economies of scale and significant additional incremental revenue. The cost gap between legacy carriers and the LCC's is to great to compete, unless something dramatic occurs because cuts in labor expense cannot do it alone.

United had a net loss over $300 million last quarter, which was the largest loss in the industry, and US Airways was not much better at $90 million. Both companies continue to lose money and are facing problems going forward, unless something changes.

Let me give you an example of how economies of scale are currently being implemented between our companies, which could provide enormous savings going forward.

On October 1 US Airways moved its operation from Seattle's South Terminal to the North Terminal where United is located. US Airways took custody of two of United's gates, N10 and N11. The logistic benefits are visibily evident, but one of the keys is that United lowered its Seattle lease expense by divesting of two of its gates to US Airways.

With consolidation, you could have millions of dollars in cost cuts (like the one just implemented in Seattle), improved productivity, and a better passenger experience.

In addition, United's EF&A department conducted an analysis prior to the last merger attempt and said the combined business entity would generate between $1.6 to $1.9 billion per year in additional revenue. Post September 11 and in today's environment that number would be lower, but it could easily be $1.2 billion.

Will something occur? I believe so, but before it does United's pension problem must be addressed, the UCT airport municipal bond litigation must be resolved, United must reach agreement on or reject aircraft EETC's, and the Dulles/ACA/Mesa fiasco must be resolved. In addition, US Airways must maintain a minimum cash balance to satisfy the ATSB, which holds a gun to the head of the loan guarantee recipients to force airlines to perform -- one way or another.

Busdrvr, we are in a New World and both of our companies are at risk.

That's why Siegel told the Washington Aero Club last week that there may be corporate combinations between network airlines. "Again, I don't have all the answers, but I do sense that increased cooperation, coordination, and potentially consolidation between and among network airlines must be another source of strength through enhanced efficiencies, in both marketing and operations," Siegel said.

Interestingly, a few days later Stanley in a speech said, "If things stay the way the are now, there will be several (not one or two, but several) Chapter 7 (bankruptcy liquidations) down the road, and that's not good for anyone. The most feasible solution to the situation is consolidation in the domestic airline industry," he said.

Considering US Airways and United are considered the two weakest legacy carriers and the only ones to file for bankruptcy, whom do you think Stanley was referring to when he talked about liquidations?

Regards,

Chip

 

[737nCH11]

Once again, let's not be overly dramatic and say that UAL must consolidate or die.

The merger makes sense in the fact that there is little overlap of routes, some compatible equipment, etc. It made sense in 2000, but not at $60+ a share with an inept CEO at the helm. Not to sound mean because I wouldn't wish this on anyone, but if UAL could pick and choose which assets it could take from U it might be worth looking at. UAL doesn't need a hub in PHL and PIT because they have ORD and IAD. CLT might be OK, but once again it is close to IAD. What does U have that UAL really needs? DCA and LGA slots? They were prepared to give those away in 2000. Just curious.

 

[Fly]

It may sound good on paper, but the labor groups will send the airline to Ch 7 first. There will not be a merger, at least not in the next few crucial years. Labor has lost too much already (on both sides) and they won't allow themselves to lose more.

Chip mentions that before this "dream merger" occurs, the pension issue must be addressed. Answer this? How would U pilots react if they were forced to merge with UAL, but somehow the UAL pilots were able to retain their pension? Would the U pilots fight to get theirs back (they should)? Would the UAL pilots fight to keep theirs (they would)? This is not a question of whether UAL will retain the pensions (I am going with the assumption here that they do......no, I'm not delusional, this is just a rhetorical question) but how these two groups could possibly coexist. This is only one issue of the many that would occur.

I believe that management sees a merger as a possible path to avoid Ch 7 but they are wise enough to see that in reality (because of the labor problem) a merger is actually the quickest way to Ch 7. The only people who prosper in a merger are senior, the junior people lose their jobs either way, so what's the motivation for them to not strike? Regardless of whether the strike is legal, it would mark the end of the airline(s). Neither airline can afford the public reaction. If ANY group walks, we may as well close the doors forever.

Like my Mom always said: Be careful what you wish for. Good Luck to everyone! We're going to need it.

 

[firstamendment]

It may sound good on paper, but the labor groups will send the airline to Ch 7 first. There will not be a merger, at least not in the next few crucial years. Labor has lost too much already (on both sides) and they won't allow themselves to lose more.

Chip mentions that before this "dream merger" occurs, the pension issue must be addressed. Answer this? How would U pilots react if they were forced to merge with UAL, but somehow the UAL pilots were able to retain their pension? Would the U pilots fight to get theirs back (they should)? Would the UAL pilots fight to keep theirs (they would)? This is not a question of whether UAL will retain the pensions (I am going with the assumption here that they do......no, I'm not delusional, this is just a rhetorical question) but how these two groups could possibly coexist. This is only one issue of the many that would occur.

I believe that management sees a merger as a possible path to avoid Ch 7 but they are wise enough to see that in reality (because of the labor problem) a merger is actually the quickest way to Ch 7. The only people who prosper in a merger are senior, the junior people lose their jobs either way, so what's the motivation for them to not strike? Regardless of whether the strike is legal, it would mark the end of the airline(s). Neither airline can afford the public reaction. If ANY group walks, we may as well close the doors forever.

Like my Mom always said: Be careful what you wish for. Good Luck to everyone! We're going to need it.

Fly

You are vastly turning into the Chip of United. Seems here lately you are bit obsessed with the US boards. Do you have a secret crush on Chip?. Talk about a "united" team.