United And The Atsb

[NewHampshire Black Bears]

So if UALl is denied the ATSB loan it's the result of who had the biggest political hammer. AMR's hometown is Dallas, Texas after all...But obvious and blatant.
And if things are as you say in your post why isn't UAL shouting this from the rooftops (and the NY Times editorial page)?

United will Stand!

"Dumbya", is too "preoccupied" right now, to "play favorites" in the US commercial aviation "tug-of-war".

DELETED

NH/BB's

 

[avek00]

avek00:

Before you go making such an assumption, remember that these other carrier forecasts had better be pretty close to the guidance they recently gave in their conference calls with the Wall Street analysts. Otherwise, some of these folks could find themselves in BIG trouble with the SEC, accused of telling the public one thing while actually believing something else. I imagine the SEC would not find such "Enron-style" shenanigans very amusing.

In addition, United has been able to achieve load factor and yield growth in excess of the industry average in recent months (and keep in mind that United will benefit disproportionately compared to the other carriers -- except Northwest -- from the strong rebound in Transpacific traffic and yields that we're seeing now). So if the other carriers' submittals to the ATSB merely show a continuation of those trends, it shouldn't cause the ATSB any heartburn.

1. The airlines can very easily give "conservative" financial projections *cough*fuzzy math*cough* without contradicting the information previously given in conference calls, etc.

2. United's "impressive" growth is, more than anything else, an outcome of the fact that it had fallen the furthest of all of the majors over the past four years. Despite the gains, UA's passenger RASM is STILL below that of AirTran's, for example. Until United's numbers (costs AND revenues) grow to the point of actually being competitive with its peers, a loan guarantee is simply not going to happen, period.

 

[Fly]

Unless you are one of the three board members Avek, then that is simply YOUR wish...not necessarily the truth. United met the ATSB criteria, I believe they'll get the loan. 😉

 

[WorldTraveler]

WorldTraveler:

"Remember that the operating carrier gets the revenue on a code-share flight, so whatever United charges for flights on US Airways metal goes to that carrier. And since the assumption is that these passengers are new to US Airways (which is, after all, the main rationale for the code-share), United is indeed helping to "funnel" new revenues to US Airways -- although perhaps not quite as much as US Airways would like to receive."

With that kind of view of partnerships, it's no wonder half of the Star Alliance is in financial turmoil. That is not cooperation - it's abuse of the worst kind. The revenues are not new to US - it's the same revenues they used to carry but now are carrying for far less complements of UA. UA's plan is clear: get an ATSB loan, kill US, and run away with their assets. It won't work.

CaptRon,
Your cash forecasts are a bit elevated. You forgot to include the $750 million pension payment UAL has to make this year and you also forget to mention that UAL still has obligations on terminals which have not been paid. You can also be assured that the creditors are not going to let UAL screw them and then keep a $4 billion bank account.

 

[UnitedChicago]

who is this avek guy? does he work for an airline?

he's inching up to a certain U captain's level.

 

[Borescope]

Unless you are one of the three board members Avek, then that is simply YOUR wish...not necessarily the truth.

Then why did you post a poll if the only ones that matter are the 3 in DC??? If we don't get the money, so what, there's alway's someone who needs a wrench turner.

 

[Fly]

Because Avek wrote this: "a loan guarantee is simply not going to happen, period. " which implys that this is a know FACT.

Whereas I wrote this: "I believe they'll get the loan. " which implys OPINION.

Do you see the difference?

BTW, not everyone is "wrench turner"

 

[Borescope]

Are you "fish Bait" like your picture????

 

[Fly]

"fish bait"? :unsure:

 

[Cosmo]

1. The airlines can very easily give "conservative" financial projections *cough*fuzzy math*cough* without contradicting the information previously given in conference calls, etc.

*cough*SEC Enforcement Division*cough*

No, you're wrong about the other carriers' ability to give the ATSB financial projections that differed materially from what they publicly announced only a few weeks ago. The SEC has very stringent rules prohibiting such actions, and I would guess that no airline CFO wants to have his picture on TV doing a "perp walk" in handcuffs. Do you think another major carrier could tell the ATSB that "Our 2004 revenues are actually forecast to be $1 billion less than we told Wall Street three weeks ago, but we didn't tell that to the analysts because we didn't want our stock to tank" and then retain any credibility? And do you seriously believe that the ATSB members and their staff are so stupid that they would not see through such a blatant attempt to manipulate them?

2. United's "impressive" growth is, more than anything else, an outcome of the fact that it had fallen the furthest of all of the majors over the past four years. Despite the gains, UA's passenger RASM is STILL below that of AirTran's, for example. Until United's numbers (costs AND revenues) grow to the point of actually being competitive with its peers, a loan guarantee is simply not going to happen, period.

You talk about United needing to be competitive with its peers and then you make a comparison between United and AirTran. AirTran's operation is hardly a peer of United's, inasmuch as United's year-over-year growth alone in quarterly passenger revenues ($385 million) exceeded AirTran's total quarterly passenger revenues ($234 million). But fine, if that's what you want to see, let's take a look at some first quarter 2004 comparisons (source: each carrier's press release detailing its financial results).

Passenger RASM: United - 8.40¢, AirTran - 8.34¢

Year-Over-Year Percent Change in Passenger RASM: United - 14.1%, AirTran - (4.5%)

Average Passenger Haul: United - 1,646 miles, AirTran - 644 miles

Passenger Load Factor: United - 75.3%, AirTran - 68.5%

So United had a better RASM than AirTran in the first quarter despite carrying its average passenger 2.5 times as far as AirTran did, making your statement that "UA's passenger RASM is STILL below that of AirTran's" simply wrong. And before you say "What about yields?", United's was indeed lower than AirTran's (11.09¢ vs. 12.17¢) during the first quarter. However, United's year-over-year change in yield is dramatically better tha AirTran's (9.2% vs. -5.5%), showing a better trend. Moreover, there's that pesky average passenger haul difference again, so when adjusted for distance, United's yield may be as good as, or even better than, AirTran's.

As for United being competitive with its peers (the network majors), a look at each carriers' reported first quarter 2004 CASM (from each carrier's respective press release) will show that United is indeed competitive, recording the third lowest CASM out of the six carriers:

American - 9.49¢
Continental - 9.76
United - 10.18¢
Northwest - 10.23¢
Delta - 10.71¢
US Airways - 11.68¢

In addition, United's CASM is continuing to trend downward, as more cost reductions and new international long-haul flying get factored into the carrier's results in coming quarters.

But don't let any facts get in the way of a good rant!

 

[Cosmo]

That is not cooperation - it's abuse of the worst kind. The revenues are not new to US - it's the same revenues they used to carry but now are carrying for far less complements of UA.

That's simply not true, at least in the vast majority of cases. And it's certainly not true in cases where a passenger is going to a destination that US Airways doesn't serve. 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.

 

[Busdrvr]

Cos, I was hoping you'd weigh in on this one. Looking at YOY operating RASM, I looked at 7 carriers. interesting trends

Jblu 6.85 -7.9%
Air Tran 8.34 -4.5% (pax only)
ATA 6.94 -1.8%
USair 10.62 2.0% (mainline only)
AWA 7.84 2.8%
SWA 8.07 3.9%
UAL 9.55 6.5% (pax only 8.40 14.1%)

I wonder if Airtran's will plummet WHEN (not if) DAL lowers it's costs and gets aggressive.

 

[SVQLBA]

In addition, United has been able to achieve load factor and yield growth in excess of the industry average in recent months (and keep in mind that United will benefit disproportionately compared to the other carriers -- except Northwest -- from the strong rebound in Transpacific traffic and yields that we're seeing now). So if the other carriers' submittals to the ATSB merely show a continuation of those trends, it shouldn't cause the ATSB any heartburn.

Aaah, but there's the $64M question -- are recent RASM improvements a bounce back to pre-SARS levels, but soon to resume the hsitorical downward trend, or is it truly a trend?

Most external observes would say the RASM improvement is a bounce-back, not a trend that can be extrapolated out for the next 6 years. A lot of the bounceback has been due to the high-load factors -- there's almost no room for that to improve further.

It would be interesting to know what RASM trend is baked into the ATSB filing.

 

[Busdrvr]

"Aaah, but there's the $64M question -- are recent RASM improvements a bounce back to pre-SARS levels, but soon to resume the hsitorical downward trend, or is it truly a trend?"

Some of it is undoubtedly a bouncecack from SARs AND the fear of BK. However, I think it's important to not the industry wide trends where the larger carriers seem to be getting a bump while the smaller the carrier, the more likely it would seem that they had a RASM DECLINE YOY. Some of it I think can be attributed to the economic turnaround, and the advantage network carriers have appeared to have had during the "good years"

 

[JetClipper]

Passenger RASM: United - 8.40¢, AirTran - 8.34¢

Year-Over-Year Percent Change in Passenger RASM: United - 14.1%, AirTran - (4.5%)

Yes, but how much of this improvement is due to

1. The fact that UAL had just declared bankruptcy in December 2002, and

2. Every airline flying the Pacific last year was practically "buying" traffic due to SARS and the Iraq war

So United had a better RASM than AirTran in the first quarter despite carrying its average passenger 2.5 times as far as AirTran did, making your statement that "UA's passenger RASM is STILL below that of AirTran's" simply wrong. And before you say "What about yields?", United's was indeed lower than AirTran's (11.09¢ vs. 12.17¢) during the first quarter. However, United's year-over-year change in yield is dramatically better tha AirTran's (9.2% vs. -5.5%), showing a better trend. Moreover, there's that pesky average passenger haul difference again, so when adjusted for distance, United's yield may be as good as, or even better than, AirTran's.

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).