This Is Why Us & Ua Will Have

[USA320Pilot]

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 some sort of corporate transaction between the business partners.

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.

Regards,

Chip

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.

 

[cavalier]

the only practical way to obtain a competitive cost structure appears to be with some sort of corporate transaction between the business partners.

corporate transaction over and over again!



At the doctor office this afternoon I was reading why people make up and believe in conspiracy theories, or believe in future events that will supposedly and absolutely happen in such a way. The long and short of it was they are mentality ill and in need of help.

This in no slam. I read this in a medical journal because it was interesting especially when I come home and read more of this crap. lol

 

[USA320Pilot]

Cav:

Did the Doctor or Nurse twist your arm to read my postings? If not, why don't you save the time on the internet and "chill out"?

There is nothing conspiratorial about US Airways and United executives both discussing in speeches last week the need for network carriers to consolidate to create economies of scale to survive the LCC assault.

Without some sort of a corporate transaction, both US Airways and United will likely not survive.

Chip

 

[cavalier]

Cav:

Did the Doctor or Nurse twist your arm to read my postings?

Chip

Chip, you FLOOD the boards with this crap and have been forever! What do expect when your track record is ZERO? LOL

 

[ClueByFour]

UA has held done fine in SFO (in proximity to OAK and SJC, and for a time LUVs SFO ops), ORD (with a new MDW sporting both LUV and ATA), IAD (with BWI), and LAX (virtually surrounded by LUV). They did this largely due to the extensive international route structure, relatively long stage length, and the Star affiliation.

U has run from the entire west coast, Florida, and BWI.

UA will have lower costs (probably lower than U) after exiting bankruptcy. Why assume the debt and higher costs of U? Assuming that UA emerges, the correct play is to garner the revenue advantage via the codeshare, and wait for Bronner to want out.

 

[USA320Pilot]

Cav:

Just one more point...

I find strategic analysis interesting and debate interesting, versus bitching about what some perceive as "myopic management" or just plan ranting.

Again, if you do not like my postings do not read them -- it's really quit simple.

Regards,

Chip

 

[737nCH11]

Jeezum Crow!!! Not unlike the Enegizer Bunny, this UCT crap just keeps going and going and going..........

It is entertaining though.

 

[USA320Pilot]

Clue:

I agree with much of what you said, but UA has significant problems and if any one of them are not satisfactorily resolved there could be a Chapter 7 liquidation. The pension, UCT airport municipal bond litigation and potential eviction, the NPC credit card processing agreement, the aircraft EETC problems, and the Dulles/ACA/Mesa issues could sink the company.

Regardless, UA’s cost structure will be too high at 9.6 cents (and so will US’s at 9.9 cents when the additional POR cuts are implemented) and it appears there must be consolidation “Sâ€￾ curve revenue gains and economies of scale to compete long-term.

Moreover, on October 30, the Denver Post wrote “the fourth quarter, when air travel slows and operating costs rise, is likely to be tougher for United and other major carriers. 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."

The question is not whether or not there will be a deal, but what form will it be? The marketplace reality is both companies need one another to survive because neither airline can sustain these type of loses.

Regards,

Chip

 

[Chinook]

Chip, others;
As for network carriers vs the LCC, I'm curious what you all think about Delta Airlines. I know they have high pilot costs (and pressure is on to lower them), what about their overall cost structure? It seems they also would be quite vulnerable to the LCC invasion. The same argument that makes UA and U seem so fragile in the new world order of airlines would also apply to Delta, I'd think. Just curious what you all feel.
I understand the benefits of a potential linkup between UAL and U, but I also have to believe Mr. Tilton is quite wary of the reaction from labor. I wonder if strengthing the code share and Star integration isn't the way to go, at least at first. I have no doubt than in a number of years there will simply be a "Star Airlines", as global consoldidation becomes legal.
Cheers

 

[funguy2]

Chip:

Please name one merger that resulted in immediate Cost Savings for the surviving entity.

Is it the multiple fleet types which provide cost savings? Or the multiple engine types?

Are cost savings realized when the resulting merged carriers furloughs the least senior folks when it eliminates duplicative service (like the PIT hub)? Seems to me that this practice would raise the average labor cost, not lower it

Are cost savings realized when repainting hundreds of aircraft? Or does it come from decorating clubs? Or buying new letterhead? Or any other aspect of combining the brand?

Are cost savings realized when dealing with multiple vendors? I.e. Express Carriers? The mergers US/UA could have up to 13 Express carriers:

Piedmont
Allegheny
PSA
Mesa
Air Midwest
Chautauqua
TransStates
Colgan
Shuttle America
Air Wisconsin
SkyWest
Mid Atlantic
Atlantic Coast (maybe)

Maybe there are cost savings while the surviving company management learns the other companies core business? Probably not, this will involve duplication of people and resources, as well as taking people away from their primary pre-merger duties

Do merged airlines eventually reach a cost-savings point... yes they do. Does either US or UA have that kind of time? No.

I am kind of hoping that the UCT actually happens... I would love to hear what you would talk about then, because I can't recall a post of yours in the past several years which has not either addressed or defended something about the UCT.

The fact is neither company has the resources to pull off any kind of massive transaction. That seems unlikely to change any time soon. Will there be a shakeout in the airline industry... Yes there will... Time will tell...

 

[delldude]

.

Southwest's decision to attack Philadelphia sets up a battle that could be the last stand for US Airways,  Large-jet domestic service has been cut back in Philadelphia as US Air has gotten smaller and shifted more flying to commuter affiliates. Last year, the number of mainline domestic flights fell 7.8% at Philadelphia International Airport, and so far this year, mainline domestic flying is down another 7.9%. . Bottom line, the Philly airport can handle a big jump in passengers.

More importantly, people flying into and out of Philadelphia are paying among the highest fares in the country . An unrestricted coach ticket from Philly to Los Angeles on US Air costs $2,550. . It's hard to understand how airlines can keep selling their product that way when Southwest is charging $598 round-trip to Los Angeles from Baltimore.
US Air gets 25% of its revenue in Philadelphia, which makes the City of Brotherly Love the biggest single component in US Air's network. A significant hit there, and there are few places left to which the carrier can retreat and still survive.

It took several years for US Air to officially shed the notion that it had a hub in Baltimore. US Air had 45% of Baltimore traffic a decade ago and now has only 5%. Southwest has more than 47% of the passengers at Baltimore.

AHHH,the sky is falling....the sky is falling....giving away cities at an attempt to "return to profitability by downsizing"...looks like its biting you in the donkey davey....all i can say is,you get what you pay for.and now i suppose it will be our burden to take it in the shorts for the good of the airline...due once again to management's continuing lack of worthy direction and demonstration of any seeming sense of leadership.
anyone in CCY stop and take any courses in modern warfare?you 'cede ground and the enemy gains....duh,i was only a boy scout and i can see the writing on the wall.....GIVE 'EM AN INCH AND THEY TAKE A MILE.....READ IT AND WEEP DAVE.

 

[cavalier]

Cav:

Just one more point...

I find strategic analysis interesting and debate interesting, versus bitching about what some perceive as "myopic management" or just plan ranting.

Again, if you do not like my postings do not read them -- it's really quit simple.

Regards,

Chip

Ok Chip, I'll leave you alone and let you play nicely with your fantasies without interference from this end. Happy Delusions.

Tell flyonthewall I said…Hey

Happy trails…..Cav

 

[TailSpin]

Chip said:

"I find strategic analysis interesting and debate interesting"

My reply:

So do I. I can't understand for the life me why Chip continues to be bashed on this board. I can't find anyone else here that goes through the effort to research and analyze the information regarding US Airways and the industry. Maybe some of you are jealous of his ability to express himself clearly. Or maybe it's his tenacity. My goodness, leave the guy alone and get a life people.

Ronald Reagan was quoted as saying " trust, but verify". The opinions expressed by Chip are just that, opinions. Doesn't it make sense to anyone that his research and opinions make for good discussion and debate.

This board should be used for entertainment purposes. Not bashing others for giving an opinion.

 

[Hula Girl]

I believe it is called shooting the messenger.

 

[ClueByFour]

Clue:

I agree with much of what you said, but UA has significant problems and if any one of them are not satisfactorily resolved there could be a Chapter 7 liquidation. The pension, UCT airport municipal bond litigation and potential eviction, the NPC credit card processing agreement, the aircraft EETC problems, and the Dulles/ACA/Mesa issues could sink the company.

Of those problems, only the airport issue and the pension are a big deal. The rest (EETC paper, credit cards, etc) will work themselves out (Mesa is certainly seeing to their part).

The airport issue will not be an issue in DEN, for many of the same reasons that PIT faces--the costs are high enough that nobody but Frontier will hub there, and Frontier won't take all of UA's gates. SFO will cave due to the UA employee factor in the Bay area. Dulles, in the grander scheme of things, is a nonfactor. ORD is tough, but I believe that UA's political lobby will see to it that the problem is fixed.

Regarding the pilot pension issue--one of two things will come to pass: either legislative or regulatory relief will come to pass, or the pilot pension will meet the same ugly fate as U--in fact, it is distinctly possible that the UA pilots will be less likely to shut 'er down with that gun to the proverbial head, by virtue of a more junior workforce than U has.

For these reasons, I believe that UA will emerge. Quite frankly, I think you are seeing UA take so long in Chapter 11 for two reasons: it's sheer size, and the unwillingness to sell the place down the river to somebody like Bronner (I'm personally of the belief that U would now be on a much better path had Bonderman been in the driver's seat--and I'll bet if you asked Austin Dave he would agree).