[P]
[BLOCKQUOTE][BR]----------------[BR]On 10/24/2002 1:08:19 PM Busdrvr wrote:
[P]we'd lose 0 per flight if we just quit flying...[/P]
[P]----------------[/P]
[P]Funny, I've been thinking about that scenario for several months now. Actually, there would still be costs if you just stop flying, so you'd lose more than just zero. But the question is, would you still lose $7 million a day, if you let everyone go except a skeleton staff in the WHQ and res offices, reduced payroll to practically nothing, reduced fuel to essentially nothing (now your two biggest cost factors are out the window), and the other cost savings which would be available by shutting down? That versus the continued fixed costs which would go on regardless of whether you're flying or not, such as leases, insurance, accounting, rents, and the like.[/P]
[P]The questions in such logic are at least twofold:[/P]
[P]1) If you're in business to run an airline and presumably to make a profit, what is the rationale for shutting things down, at least on an interim basis? [/P]
[P]I suppose the answer is that if you cannot run an airline that does make a profit and the [STRONG]losses are so horrific that it threatens the very survival of the company[/STRONG], then maybe a temporary ceasation of operations would be the fastest short-term path toward preserving capital. Remember, AirTran, then ValueJet, suffered through just such a shutdown, survived and came back to prosper. And theirs was over SAFETY, a sure fire way to spook passengers.[/P]
[P]2) If such a radical option were to be seriously considered, wouldn't that result in an unrecoverable surrender of market share to competitors? [/P]
[P]Not necessarily. All the majors, except Southwest and Alaska have made and are planning additional deep cuts in capacity. Once you park those aircraft in the desert or return them to lessors, and furlough or lay off the corresponding number of employees who were needed to support those aircraft and their additional flying, it's no simple proposition to just turn on a dime and return them to service and call back employees and generate new capacity to fill in the vacuum created by UAL having vacated over 20% of the market. It would take weeks if not months, and it would require a tremendous gamble on the part of those carriers that United is NOT coming back. If United were to resume operations about the time the others had made a fairly irrevocable decision to try and capture United's market share with a sudden and significant increase in capacity, the result on those carriers could be disastrous. Suddenly the void in market share which had been created overnight, would recede almost as rapidly. In addition, the low cost carriers, jetBlue, Southwest, Frontier, etc, would hardly be in a position to respond and exploit the situation at least in the near term, because they don't have planes in the desert and layed off employees to call back! Their capacity is finite and being used. They'd have to hire and train, buy aircraft, etc. It would take them a year to even have a negligible effect.[/P]
[P]Finally, what is the message such a move would send to the industry? We've clearly seen that a preponderance of passengers are loyal to price, not carriers. What is given away can clearly be regained--just look at the ease with which jetBlue has been able to generate 85% load factors in brand new markets, competing with established carriers.[/P]
[P]What would the message be to the government? OK ATSB, have it your way. We're just going to shut down, create an overnight 20% plus vacancy in market share and let you deal with the resulting turmoil.[/P]
[P]If a numbers crunch were to indicate that United would indeed lose less money shutting down than flying, that should be a viable option on the table. I'm not suggesting a permanent shutdown, but maybe through the 1st quarter, when the cash burn has nowhere to go but even worse than it is now. Of course this says nothing about the terrible effects on almost 100,000 employees, but it would sure be better than going belly-up and possibly liquidating, leaving no company to return to. In addition, with the looming war possibility in Iraq, and United's obligations and sizable contribution to the reserve fleet, how long would the government allow United to sit idle? Not to mention the shear caos the whole scenario would have on our air transportation system. United is too big for the repercussions not to be felt, and in a big way. [/P][/BLOCKQUOTE]
[P][/P]
I must apologize for jumping down your throat. I was - I admit - in response mode.
