United And The Atsb

[Busdrvr]

"Such a comparison is irrelevant, since AirTran's costs are so much lower than UAL's (and, therefore, it will continue to make a profit even if it's RASM growth doesn't keep pace with United's)."

I'll agree it's irrelevent, however, AT RASM DECLINED. If it continues to DECLINE, the profit will go away. AT carries essentially NO cargo, so any objective evaluation MUST consider the added revenue from cargo. Additionally, AT leases essentially it's ENTIRE fleet. they don't enjoy a huge margin between profitablity and positive cash flow.

 

[Cosmo]

So perhaps we should look at the comparison of the United and AirTran operating RASMs during the first quarter of 2004 as a better indicator of the revenue side of the profitability equation. United's operating RASM (ORASM) was 9.55¢, up by 6.5% compared with the first quarter of 2003, while AirTran's ORASM was 8.63¢, down by 4.1% in the same year-over-year comparison. This is a difference of 0.92¢ in United's favor, and if current trends continue the disparity will become even greater.

Let's remember that United's CASM doesn't have to be below AirTran's CASM for United to be profitable; United's CASM simply needs to be less than its own ORASM. And given current trends, it doesn't take a rocket scientist to see that United's ORASM should be at least 10.0¢ in the third quarter of this year while United's CASM should be no higher than 9.8¢ at that point (down from 10.18¢ in the first quarter). Even with these very conservative assumptions about United's ORASM and CASM in the third quarter, this would translate into an operating profit of about $75 million. In reality, I believe that United's ORASM and CASM will be better than the numbers shown above and thus United's actual operating profit in the third quarter will be substantially bigger. JMHO.

 

[Fly]

So, United's gonna have a bigger ORASM huh? Can it have a multiple ORASM? Whoaaaaa 😉

:wub:

 

[WorldTraveler]

"For instance, a passenger wanting to go from CLT to PDX now can fly US Airways to ORD or DEN and then connect on United to PDX. Prior to the code-share, this passenger likely flew American online over DFW or ORD, Delta online over ATL or CVG, Northwest online over MSP, or even United online over ORD. Will the code-share attract all of the CLT-PDX passengers? Of course not, but it is now one more option for passengers to consider, especially the US Airways frequent fliers that want to keep accruing Dividend Miles. And for those passengers that do opt for the code-share, it is new revenue for US Airways on the flights it operates, in some cases at United's expense. So, yes, it's fair to say that United is "funneling" money to US Airways through the code-share agreement. "

What you have described is exactly what should be happening in the codesharing relationship between UA and US. This, however, is not what multiple media sources are reporting is actually occurring. United is undercutting USAirways fares on O&D's that are served completely by USAirways in O&D's that United does not serve and will not be able to serve without a significant expansion of United's own service. While United and USAirways do not have antitrust immunity, it would seem that there is some moral obligation to not screw your partner. It is also interesting that the Continental/Delta/Northwest codeshare does not allow codesharing on the nonstop O&D (ie. CO and NW cannot put their code on DL's LAXMCO service) and the DOT REQUIRES that CO, DL, and NW all match each other's fares. Funny how the pricing is so different between the CO/DL/NW alliance and the UA/US alliance and is being dictated by the government. Wanna guess which alliance will last longer?

 

[Busdrvr]

"United is undercutting USAirways fares on O&D's that are served completely by USAirways in O&D's that United does not serve and will not be able to serve without a significant expansion of United's own service."

Actually, U selling tickets on UAL at a price lower than UAL's is a constant gripe on the UAL side of the fence. In any case, the DAL, NWA, CAL alliance (also known as the Antique Aircraft Road Show) will implode when the financial situations at NWA and DAL reach critical mass (1.5 years from now).

 

[Bigsky]

. In any case, the DAL, NWA, CAL alliance (also known as the Antique Aircraft Road Show) will implode when the financial situations at NWA and DAL reach critical mass (1.5 years from now). undefined

Antique road show? Are you referring once again to NW's paid for DC-9s. You are right Busdriver, I guess it would have been a better move for NW to go out and place huge orders on aircraft that they could not afford so that NW could be in bankruptcy and begging for money from the gov't like UA. Can you say "pathetic". I think if NW would have ordered about 70 or so B777s that would have done it or maybe they should have gone out and ordered 40 or so 747-400s and fly them domestically or park them in the desert(makes for a nice static display, but doesn't pay the bills). NW, CO and DL are the strongest, financially speaking, of the legacy carriers and with NW, CO, KLM joining Skyteam, it will create the largest of the global alliances. Good luck.

bigsky

 

[Fly]

NW, CO and DL are the strongest, financially speaking, of the legacy carriers

Isn't that an oxymoron? If ten men have a nickel and the eleventh has a dime....it doesn't make him rich.

 

[Busdrvr]

Hmmm, so NWA just decided that they wanted to fionance all the new jet orders instead of paying cash? seems like when you have to finance a huge order, you apparently don't have the money for them. You might want to read the annual report. But a few points. UAL has the number of 400's thatthey have because NWA ordered them AND COULDN'T PAY FOR THEM. The whole DC-9 debacle was because they COULDN'T GET FINANCING ON NEW JETS. If the 9 was so wonderful, why isn't NWA buying all the used ones up at the firesale prices? BECAUSE THEY AREN'T ECONOMICAL. This is something a nonaviator wouldn't understand Sky, but 9's are horribly fuel inefficient. The operating cost per ASM of the bus is MUCH lower (that's why all the new airlines AREN'T buying 9's. But might I suggest that you look at NWA's annual report and note the years in which HUGE debt payments are due. Then do some research and find out for yourself that many of the 9's ARE approaching the point that they WILL be parked. Then give us your best ideas on how to continue to finance new jet purchases while also paying back HUGE amounts of previous debt.

 

[Bigsky]

It's more like surviving a grizzly bear attack. I don't have to run faster than the bear, I just have to run faster than you. NW/CO/DL are all out in front with U/UA bringing up the rear with their walkers or, in this case, their crawlers. cheers

 

[Busdrvr]

"1991 DECEMBER: The Legislative Commission on Planning and Fiscal Policy approves, by a vote of 11-7, an $838 million financial assistance package for Northwest. The package consists of a loan of $270 million from the Metropolitan Airports Commission and more than $500 million in construction financing for maintenance bases in Duluth and Hibbing. The construction bonds are delayed by a lawsuit."

Which airline was it that had to grovel to the state of Minn for it's survival in 1991?

"I don't have to run faster than the bear, I just have to run faster than you. NW/CO/DL are all out in front with U/UA bringing up the rear with their walkers or, in this case, their crawlers"

And that's where you are just flat wrong. Have you actually looked through any of NWA's financials? ATA nearly went BK a few months ago while simultaneously reporting a PROFIT. Why? LIQUIDITY. NWA is hoarding cash for a reason!! Be afraid, be very afraid

 

[Bigsky]

NW did buy a bunch of used DC-9 in the late 90's from TWA. And I agree they are not efficient jets. You can flight plan it to burn 6000 pounds per hour. But high lease payments typically offset the high fuel costs.

I have read the financial reports of NW and UA. It is no rosy picture for either but it must be noted that UA is in a far worse predicament. All the legacy carriers are drowning, however NW is closer to the surface.


bigsky

 

[Bigsky]

BTW, Busdriver, my whole point was not to suggest that NW is in the black and they are tripping over dollar bills but rather to suggest that NW has made some good financial decisions in the recent past that have kept the company all long way from BK. The corporate culture in the pre 9-11 era for UA was how can we top American? or how can we dominant every market? When AA surpassed UA as the worlds largest carrier, their was nothing but outrage at UA. Their focus should have been how to set themselves up to be a successful company in every financial environment instead of who's #1 in terms of RPKs. So they choose the latter and went off on a huge shopping spree as well as a quest to buy US. Denied, and when financial times went south UA was hit the hardest.

cheers

bigsky

 

[Fly]

Actually, United WAS the biggest airline when they announced the plans to merge with US. After that, American decided to acquire TWA. Then the U/US deal was denied but the AA/TWA was approved, thus making AA the biggest airline.

BTW, for all the years that United was the #1 airline....I don't recall reading that fact in every single news article about United, as you do now. I don't think United was quite as enthralled with #1 as AA is. I honestly do not think it was quite "outrage" as you seem to believe. IMHO

 

[Busdrvr]

"BTW, for all the years that United was the #1 airline....I don't recall reading that fact in every single news article about United, as you do now. I don't think United was quite as enthralled with #1 as AA is."

A Capt related a story to me that he had Dutta onboard and told the crew he invisioned UAL being the worlds third largest carrier. A very young F/A was very excited of the prospect until the Captn explained UAL was number 1 at the time....

 

[Bigsky]

BTW, for all the years that United was the #1 airline....I don't recall reading that fact in every single news article about United, as you do now. I don't think United was quite as enthralled with #1 as AA is. I honestly do not think it was quite "outrage" as you seem to believe. IMHO

Just an "outsider looking in" observation. In any case, I would certainly hope for UAs success to some degree as they are an ALPA carrier. Just back to my original point regarding Busdriver subtle DC-9 bash. If you ever have flown the nine you'd understand why it's been around for a while. It's an over built aircraft with the highest dispatch reliabilitiy in the NW fleet. The interiors are all fairlly new and unless you in the last row or two it's not actually a bad ride. I would take it over an RJ any day.

BTW, what thread is this?

cheers

bigsky