767jetz
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Excerpt from United Pilot's MEC update. June 6th, 2008. (Note: the UAL MEC Chairman is a member of the Board of Directors.):
"Recent reports of United Airlines’ impending demise are greatly exaggerated. The media pundits, financial analysts, and rival airline executives predicting another bankruptcy for United are the same people who predicted that United would never exit Chapter 11 bankruptcy, consistently miss earnings predictions, and praised the US Airways/America West merger announcement. Reporters are constantly hyperventilating as they report on leaks from “someone close to merger negotiations.†No one seems to care that they are invariably wrong.
Our competitors would like United to fail. Why? Because United generates an annual revenue of $17 billion. That is $17 billion that would otherwise be available to everyone else (see Figure 1).
The financial analysts insist that capacity reduction is the only solution that will save the airline industry, hence their calls for mergers, consolidations, capacity reductions and airline shut-downs. In MBA classrooms that may be true: reduced capacity results in reduced supply which allows for improved revenue control (supply versus demand). In the real world, however, capacity reduction is immediately filled either by start-up airlines or increased service by other airlines. One needs look no further than comments from Southwest Airlines in response to the most recent round of potential United-US Airways merger talks: CEO Gary Kelly said he welcomed the prospect of the combined carrier cutting back flights so that Southwest could quickly move in.
United Airlines is the sleeping giant of the US airline industry. United has the ability to generate $17 billion per year due to its revenue management. Adjusting for stage length, United was the leader in 2007 for Revenue per Available Seat Mile (RASM). This means United was able to charge more for its seats last year than any of its U.S. competitors (see figure 2). United also has a massive route structure that is touted by industry analysts as the strongest of any U.S. airline. It carries nearly 12 million passengers per year to international destinations throughout the world. It is a founding member of the Star Alliance. Its 55,000 employees worldwide are the best in the industry.
United’s cash reserve and unencumbered assets are well above industry average (see figure 3). This allowed United to restructure its current loan covenants to provide flexibility for its financial future."
Moral of the story: Don't believe every rant you read in the news, particularly those that are obviously biased against one airline in an environment where all airlines are at risk to one degree or another. These are usually no more than wishful thinking by someone who would benefit directly from their speculations coming true.
The real story is told by watching the cash flow and paying attention to the investors who control the money (ie: JP Morgan and and a few others.) Everything else is manipulation of data to support a particular opinion.
"Recent reports of United Airlines’ impending demise are greatly exaggerated. The media pundits, financial analysts, and rival airline executives predicting another bankruptcy for United are the same people who predicted that United would never exit Chapter 11 bankruptcy, consistently miss earnings predictions, and praised the US Airways/America West merger announcement. Reporters are constantly hyperventilating as they report on leaks from “someone close to merger negotiations.†No one seems to care that they are invariably wrong.
Our competitors would like United to fail. Why? Because United generates an annual revenue of $17 billion. That is $17 billion that would otherwise be available to everyone else (see Figure 1).
The financial analysts insist that capacity reduction is the only solution that will save the airline industry, hence their calls for mergers, consolidations, capacity reductions and airline shut-downs. In MBA classrooms that may be true: reduced capacity results in reduced supply which allows for improved revenue control (supply versus demand). In the real world, however, capacity reduction is immediately filled either by start-up airlines or increased service by other airlines. One needs look no further than comments from Southwest Airlines in response to the most recent round of potential United-US Airways merger talks: CEO Gary Kelly said he welcomed the prospect of the combined carrier cutting back flights so that Southwest could quickly move in.
United Airlines is the sleeping giant of the US airline industry. United has the ability to generate $17 billion per year due to its revenue management. Adjusting for stage length, United was the leader in 2007 for Revenue per Available Seat Mile (RASM). This means United was able to charge more for its seats last year than any of its U.S. competitors (see figure 2). United also has a massive route structure that is touted by industry analysts as the strongest of any U.S. airline. It carries nearly 12 million passengers per year to international destinations throughout the world. It is a founding member of the Star Alliance. Its 55,000 employees worldwide are the best in the industry.
United’s cash reserve and unencumbered assets are well above industry average (see figure 3). This allowed United to restructure its current loan covenants to provide flexibility for its financial future."
Moral of the story: Don't believe every rant you read in the news, particularly those that are obviously biased against one airline in an environment where all airlines are at risk to one degree or another. These are usually no more than wishful thinking by someone who would benefit directly from their speculations coming true.
The real story is told by watching the cash flow and paying attention to the investors who control the money (ie: JP Morgan and and a few others.) Everything else is manipulation of data to support a particular opinion.
