luvthe9
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UAL needs more cost cuts!
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Dave
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Ummm, no....United, like every other airline, needs the price of oil to come back down to earth.
For now, the company, which slashed costs by $7 billion a year, has a competitive edge in the industry, these analysts say. But restructurings by rivals Delta Air Lines and Northwest Airlines under Chapter 11 of the bankruptcy code could make UAL's savings seem less impressive.
Delta aims to cut costs and increase revenue by $3 billion annually, while Northwest seeks savings of $2.5 billion a year. Cost-cutting is vital in the airline industry where stiff competition often forces carriers to sell tickets at a loss.
"United's cost advantage is slowly diminishing as other bankruptcies move ahead with new cost-cutting plans," DePaul University transportation expert Joe Schwieterman said of the No. 2 U.S. airline.
He said that perception has contributed to a slump in UAL stock since its February launch on Nasdaq. Shares in the company have shed over 20 percent since then, compared with a nearly 3 percent drop in the Amex airlines index .
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Perception and current cost advantage? How is that bad? NWA and DL have yet to exit so one does not know for sure what the companies will look like at exit.
If UAL, NWA and DL have cost advantages amongst them then where does that leave AA? Could this article not have been titled, AA needs additional cost cuts? Have not AA and UAL said they are still looking to cut cost?
JungleClone
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Well, when you're foolish enough to bake $50 a barrel oil into your Plan of Reorganization, I'd say that the need for further cost cuts is inevitable. BOHICA!
coolflyingfool
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How about instead of slashing more costs, UAL tries to generate more revenue. A wierd concept for some, I know. just my thoughts.......
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Unfortunately, if they try to come to the employees again, they'll have to file bk again.
hp_fa
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The new BK rules that took effect last year may make that unattractive. Remember, DL and NW filed just in time to get the old rules.
casual rat
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Maybe they should slash some incidental managerial positions and staff. The 'generate more revenue' idea, while intriguing, goes against what the current regime understands. Of course, spending millions of dollars on a new headquarters location--you know, to save money, is a sound business strategy.
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Unattractive for whom?!? The employees are already some of the lowest paid in the entire industry. If they (meaning management) want more paycutes, then THEY better file. Looks like management all took away enormous sums of $$$ after the exit in February. Perhaps if they'd return a little of that, things would turn around.
"Unlike major airlines that attempt direct competition directly with low-cost carriers like Southwest Airlines and JetBlue Airways , UAL courts passengers willing to pay more for in-flight perks such as food, drink and leg room."
What do they advertise? Come fly us we serve food.............but it'll cost you.
What do they advertise? Come fly us we serve food.............but it'll cost you.
The "unattractiveness" of the bankruptcy code after the 2005 changes became effective is vastly oversold, IMO.
True, companies won't have years and years to decide whether to reject leases (IIRC, 7 month time limit on that) and their execs won't be allowed to take huge retention bonuses, but a company hell-bent on beating more wage concessions from its employees can do it even with the new rules in place.
In the unlikely event that UAL pulls a USAir and files again in the near future, it just won't be able to do another three year odyssey in Ch 11 like the first time.
IMO, airline employees have been beaten enough for concessions. Revenue is the problem, not wages.
coolflyingfool
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I wanted UAL to try and generate more revenue and not slash in other areas, but I think pulling out of MDW is a good move. With only 5 flights at MDW, it did not generate much revenue and probably lost money on a weekly basis. MDW-IAD was downgraded from TED to the RJ's so loads must have been low. Good move, now let's generate more revenue!!
Unfortunately, since that appears unlikely to happen, the options are (1) cutting more costs or (2) BK#2.
You left out my favorite option:
(3) Increase revenue by consolidating with another legacy airline (or two), thereby allowing UA to fire its least profitable customers and concentrate instead on the highest-yielding customers.
The pool of passengers willing to pay more is smaller than it used to be, but it hasn't dried up completely. UA (along with the other legacies) simply doesn't have quite enough of them. If the six legacies combined into two or three, each might just have enough higher-yielding pax to survive a while.
