US business parter UA plans to return to basics, Business blueprint presented to creditors

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Busdrvr said: Did you include average stage length in your analysis? What time period was covered by AVMARK''s yield study?

Analyst says: Do not shoot the messenger; Chip is only reporting the numbers. Complain to AVMARK if you do not like how their data portrays UAL. As I said before, UAL is a sinking ship! There are not any financial analyses that can make the UAL numbers look good.

Yea, buy 3 get 1 free is a great offer for the "average" consumer. Buy 3 EXPENSIVE business type fares and we will give you a "free" ticket that it impossible to use with the airlines shrinking this class of service inventories. You can save money by using HP versus this offer.

Chip said: During the first four months of this year the carrier lost more money than any airline in the world, when it did not have to pay all of its bills.

Busdrvr: Why is UAL still losing around 10 MILLION dollars per day?

Busdrvr said: And that is different from which airlines? Of course (with one of the highest load factors of all the majors) filling seats ISN’T a problem.

Analyst says: The difference is that UAL is in CHAPTER 11. At their current rate, they will never emerge. You should know that a “highâ€￾ load factor does not translate to profits. I have not checked lately, but I think that UAL is still operating with about a 95%-97% break-even load factor percentage.

Busdrvr, you keep on talking about “labor factorâ€￾, while is it vital to an airline; there are many other factors in making money. When UAL starts showing profits, then you can discuss how the “highâ€￾ load factors were key to this success. It is great that UAL is adding 10% capacity, but you should not compare that with any other airline. Each company has its own problems and adjusts its capacity based on their particular situation.

Busdrvr said: You had to go to a loan shark to get dip financing. You can rest easy that UAL WILL have plenty of money to exit.

Analyst says: It does not matter where US gets its money. It is in the bank and that is all that matters. Who is giving UAL money to exit from Chapter 11? I believe that Chip is correct that many employees are in denial. IF UAL emerges from BK, then and only then can you start to compare whom did it better. UAL is a LONG WAY from emerging from BK.
 
"Busdrvr: Why is UAL still losing around 10 MILLION dollars per day?"

WE AREN''T! What''s your source?

"Complain to AVMARK if you do not like how their data portrays UAL."

If I quote a source to back up my position, I should be PREPARED to defend that source.

"I have not checked lately, but I think that UAL is still operating with about a 95%-97% break-even load factor percentage"

AGAIN. You are using the 1st Q numbers THAT DID NOT REFLECT LABOR COST REDUCTIONS, LEASE RATE REDUCTIONS, VENDOR CONCESSIONS, MILD REVENUE RECOVERY, OR THE 216 ADDED FLIGHTS.

Are you really an analyst or do you just play one on TV?
 
Chip:

It''s no use fighting with the UAers. While things might be quieting down in China, UAL SARS is still alive and well within the rank and file. Remember, many of these people continue to think that UAL has unlimited access to cash, and can simply "wait out the storm" indefinitely.

If they (and their leadership) don''t see the light post haste, you will end up commanding the very 777s (or heck, maybe even 744s) that they obsessively believe you want to take from them.
 
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On 6/14/2003 9:59:32 PM avek00 wrote:

"Remember, many of these people continue to think that UAL has unlimited access to cash, and can simply "wait out the storm" indefinitely."

Silly us. i guess that''s why we accepted over 2.4 BILLION in annually paycuts and work rule changes. Then the silly company went out and negotiated approx 700 MILLION in other cost cuts. So silly us, OVER three billion in annual cost savings (which were NOT accounted for in the first quarter numbers), and the addition of over 200 flights by july, and we think we are on the road to recovery.

"If they (and their leadership) don''t see the light post haste, you will end up commanding the very 777s (or heck, maybe even 744s) that they obsessively believe you want to take from them."

You are behind on the news, UAL may actually give back 777''s now and keep all the 400''s. What "light" is it we should see? The light that says we need to reduce costs? The light that says we need to increase revenue (by adding back flights maybe?)? The light that says we should try to be the best airline in the country operationally? (like we have been for the last year). Rest assured if UAL''s 777''s and 747''s go ANYWERE, it won''t be U.

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Cosmo:

Cosmo asked: "While correctly noting that United's May 2003 Pacific RPMs "plummeted" by 47% compared to the previous May, a much larger drop than was seen by Northwest, do you believe that United's greater exposure to the main SARS-affected countries (due to more nonstop flights from the U.S. to places like Beijing, Shanghai, Hong Kong and Taipei) might be the cause?"

Chip answers: Cosmo, there is no question was another bad break for UA and it seems like the company cannot get a break – but, the problem is time is running out, the airline continues to hemorrhage, and its bankruptcy financing has stringent requirements, which could force a fragmentation or liquidation. In addition, I believe the RASM problem is due to premium and leisure passengers booking away from the company due to the formal reorganization, the previous fare cut (which likely helped boost load factor where the company is carrying more passengers and losing more money with the effort), fall out from the Iraqi War.


Cosmo asked: "Don't you think that United might have done a better job than Northwest of matching Pacific capacity (ASMs) to Pacific traffic (RPMs) in May, since United's capacity dropped by 85% of its traffic while Northwest's capacity declined by only 50% of its capacity?"

Chip answers: Maybe, but that’s a difficult number to determine. The NW exposure is less because the company’s Pacific focus is around NRT (Tokyo), which has less SARS exposure. What should be concerning to those parties interested in UA’s success is that for the first 60-days of bankruptcy the company did not pay its aircraft lease expense and during Q1 the airline had temporary wage reductions, similar in scope to the recently ratified agreements in place, and the airline lost over $1.3 billion in Q1 and nearly $400 million in April. With the UA having the worst Yield RPM in the industry coupled with SARS, there should be significant concern with WHQ and the rank-and-file.

Cosmo asked: "Don't you think that without the SARS-induced traffic declines seen by many carriers in May, mostly in the Pacific, United's 13.8% drop in system RPMs would have been less than US Airways' 11.9% decrease?

Chip answers: Maybe, but that’s not the issue. US has sufficient liquidity in the medium-term and S&P airline and credit analyst Phil Baggley just reported US "has adequate liquidity (with the May 16 federal aid will be close to $2 billion at the end of Q2), whereas UA does not. The issue is UA is bleeding, is in bankruptcy, its business plan is uncertain, and the company has to be cash flow positive in four months. Moreover, it appears UA is about to announce another setback because industry September bookings look bleak. In addition, to traditional post Labor Day seasonal traffic declines, passengers are not booking travel around the September 11 terrorist attack anniversary, which could not come at a worse time for UA.

Cosmo asked: "How did US Airways' Pacific results in May compare with those of United or Northwest? Oh, wait -- US Airways doesn't have a Pacific operation, so there's nothing to compare."

Chip answers: The positive news for US is that it has no Pacific exposure. In fact, I’m thankful for that because I would not boast about a company flying the Pacific Rim, with SARS having a more dramatic effect on the world’s airlines that the Iraqi War. I’m glad we do not fly in the Pacific because UA’s exposure to SARS could be one of the final nails in UA’s coffin.

Cosmo asked: "Are you concerned that US Airways' domestic RPMs in May declined by 15.0% while United's domestic RPMs dropped by only 0.8%? Should US Airways' code-sharing business partner United be concerned by this comparison?"

Chip answers: Nobody likes a decline, but US’ financial position is much stronger than UA’s to weather the downturn. I have not seen these numbers, but I will assume they are correct. US has developed a business plan endorsed by its creditors, the company has received the federal loan guarantee, exit financing, and an equity plan sponsor. I believe its three-point business plan of improving liquidity, reducing costs, and increasing revenues puts the company significantly farther ahead of the rest of the industry’s restructuring.

Cosmo asked: "Are you concerned that US Airways' system load factor in May declined by 0.1 percentage points to 73.5% while United's system load factor increased by 4.0 percentage points to 77.2%? Should US Airways' code-sharing business partner United be concerned by this comparison?"

Chip answers: No, in fact this is encouraging. US has removed 30 percent of its ASMs. which coincides with the pre-September 11 industry wide reduction in revenue. All of the other airlines have held on to much more of their capacity and as such are losing more money because they have more supply than demand – clearly a failure of Econ 101. For example, UA is adding back capacity in June and July and although you have to evaluate this on a route by route basis, does it make sense to add capacity that could lose more money when virtually everybody says ticket prices will not rise until more capacity is taken out of the system? Could this be another management blunder.

Cosmo asked: "Regarding the airline yield numbers you quoted from an Avmark report, what time period do they cover? Perhaps more importantly, are those yield numbers adjusted for the variation in each airline's average stage length to make it a meaningful comparison?"

Chip answers: The report was recently released, but I do not have the exact date immediately available.

Cosmo, what’s interesting to me is that UA employees and others visit the US board and normally weigh in on only UA discussions. Why is that? I have not visited the UA board in maybe 7 or 8 months and have not posted on the forum in a long time. The issue here is not US, but the fact UA is in the worst financial shape of any major airline, the clock is ticking, and if something is not done soon to change the airline’s fortunes, the Chicago-based carrier may see itself fragmented or liquidated. Moreover, US could become UA’s savior by acquiring UA assets, where UA can remain an independent business entity, and keeping the revenue within the alliance umbrella, especially since the US chairman of the board (who controls $25 billion in assets) has publicly said on three occasions he is interested in acquiring UA assets, if it makes sense for US.

Best regards,

Chip
 
Just one more point...

On June 9, Mike Boyd of the Boyd Group wrote, "United's buy-three-get-one-free promotion has sparked a response by other carriers. Revenue dilution issues aside, it was a gutsy if maybe somewhat clumsy move by UA, with the clear intent to grab other airlines' core business travelers. With the match by American, Northwest, and possibly others, the promotion will likely be neutral at best in diverting passenger loyalty."

Chip's comment: UA might be seeking to boost receipts because it knows it's going to violate DIP financing requirements in a few months. However, Boyd did add "maybe the program won't be all that dilutive, because the 'free' ticket has enough disclaimers, conditions and requirements to sound like a jive-talk book interview with Hillary Clinton." Meanwhile, with reports now surfacing passengers are booking away from the airlines around September 11, due to terrorist attack anniversary fears, it appears U.S. airlines have another financial hurdle that could not come at a worse time for UA.

Regardless, Mike Boyd discusses further revenue dilution for the carrier AVMARK says has the worst network carrier Yield RPM. Moreover, Boyd said the move was gutsy if maybe somewhat clumsy, further supporting the comments I made weeks ago that UA's revenue was "lagging its peers".

Best regards,

Chip
 
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On 6/14/2003 10:26:20 PM Busdrvr wrote:


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On 6/14/2003 9:59:32 PM avek00 wrote:

"Remember, many of these people continue to think that UAL has unlimited access to cash, and can simply "wait out the storm" indefinitely."

Silly us. i guess that''s why we accepted over 2.4 BILLION in annually paycuts and work rule changes. Then the silly company went out and negotiated approx 700 MILLION in other cost cuts. So silly us, OVER three billion in annual cost savings (which were NOT accounted for in the first quarter numbers), and the addition of over 200 flights by july, and we think we are on the road to recovery.

"If they (and their leadership) don''t see the light post haste, you will end up commanding the very 777s (or heck, maybe even 744s) that they obsessively believe you want to take from them."

You are behind on the news, UAL may actually give back 777''s now and keep all the 400''s. What "light" is it we should see? The light that says we need to reduce costs? The light that says we need to increase revenue (by adding back flights maybe?)? The light that says we should try to be the best airline in the country operationally? (like we have been for the last year). Rest assured if UAL''s 777''s and 747''s go ANYWERE, it won''t be U.

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At least no one will dare call you a quitter
 
Why is UAL still losing around 10 MILLION dollars per day?

... Actual figures range from 7 to 9 million a day depending on what newspaper article. I would like to know where these people/reporters get their figures from, because 7 is sure different from 9.

... Actual cost savings from employee groups at UAL are 2.56b a year which translates to apx. 212m cost savings a month, which translates to apx. 6.8m a day in a 31 day month. Now I am going to take the golden mean of loss from the newspaper reports and say that UAL lost 8m a day. Just with employee group give backs UAL is projected to loose 1.2m a day. Remember new aircraft lease agreements, craf flying (which UAL did the majority of the flying with 5 flights a day) reduction in force (including management,) and other cost savings ARE NOT included in these figures. It is just employee group give backs.

Also think about operating loss and taxes. Think about how you do your taxes in year. Think about your write offs, and now take that to a grand scale.

...You all need to stop looking at Q1, and start focusing on Q2, because none of these savings were in effect in that quarter. In addition, WHO and the CDC have stated that SARS is on the outs which should help reboost profits in the affected areas. The war in Iraq is on the mend, and gas prices (although high) are not near the levels of 39$ per barrel during the war.

So for as much bad news that is out there, you also have to look at the good stuff and equal that into the equation.
2.gif
 
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On 6/15/2003 12:22:11 AM Chip Munn wrote:


Cosmo, what’s interesting to me is that UA employees and others visit the US board and normally weigh in on only UA discussions. Why is that?

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Ummm, maybe because you started this thread by specifically ASKING some of us a question? Maybe you should go back and read your own postings.

And for the record I weigh in wherever I feel like it--UA, U, or any other forum. But is it really that difficult to figure out that UA employees weigh in on UA discussions because we work for UA and so have a natural interest on those dicussions?
 
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On 6/13/2003 10:56:35 AM PineyBob wrote:

Bear96,
You have to ask yourself a question. Why is that there is a pool of people, customers (like me) and Chip (airline employee) that have such a large and cumbersome axe to grind? Perhaps there is a reason for the rancor and almost childlike glee some of us take in the prospect of urinating on United''s grave?

Ask yourself why United has the reputation it does in certain circles good and bad!...

Given that I have had exactly the same number of complaints in 19 segments with UA as I have in 340 segments with US, tell me Bear96 which airline would you be a fan of??

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PineyBob,

What airline you travel is of no concern to me, since in a couple of months I will be out of the airline industry. But if UA consistently provides a poor product and so customers choose to fly a competitor and UA eventually disappears, so be it. That''s the reality of the marketplace. Conversely, I have many passengers on UA who tell me how terrible U and other airlines are compared to UA. Whatever.

However I DO find this "large and cumbersome axe-grinding" rather curious. If you don''t like a particular airline, fly someone else. Or any other service you receive from any other business-- dry cleaners, bank, grocery store, wherever-- if you don''t like the service and/or product offered, walk across the street (or terminal) to a competitor. No problemo.

I continue to maintain, though, that holding grudges for years about past wrongs, real or perceived, from ex-employees or customers, and spouting them to whomever will listen, is weird and ultimately unhealthy for that individual. And probably creates a self-fulfilling prophecy.
 
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On 6/15/2003 12:45:04 AM Chip Munn wrote:


Just one more point...

On June 9, Mike Boyd of the Boyd Group wrote, "United''s buy-three-get-one-free promotion has sparked a response by other carriers. Revenue dilution issues aside, it was a gutsy if maybe somewhat clumsy move by UA, with the clear intent to grab other airlines'' core business travelers. With the match by American, Northwest, and possibly others, the promotion will likely be neutral at best in diverting passenger loyalty."
 
Chip''s comment: UA might be seeking to boost receipts because it knows it''s going to violate DIP financing requirements in a few months.  However, Boyd did add "maybe the program won''t be all that dilutive, because the ''free'' ticket has enough disclaimers, conditions and requirements to sound like a jive-talk book interview with Hillary Clinton." Meanwhile, with reports now surfacing passengers are booking away from the airlines around September 11, due to terrorist attack anniversary fears, it appears U.S. airlines have another financial hurdle that could not come at a worse time for UA.
 
Regardless, Mike Boyd discusses further revenue dilution for the carrier AVMARK says has the worst network carrier Yield RPM. Moreover, Boyd said the move was gutsy if maybe somewhat clumsy, further supporting the comments I made weeks ago that UA''s revenue was "lagging its peers". 

Best regards,

Chip  


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And this is the SAME Mike Boyd, airline anaylst, that stated on Fred Hansburger Live, last week, that Siegel was a "man of his word". LOL...all they way home.
 
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On 6/14/2003 7:18:43 PM Analyst wrote:

Busdrvr said: You had to go to a loan shark to get dip financing. You can rest easy that UAL WILL have plenty of money to exit.

Analyst says: It does not matter where US gets its money. It is in the bank and that is all that matters. Who is giving UAL money to exit from Chapter 11? I believe that Chip is correct that many employees are in denial. IF UAL emerges from BK, then and only then can you start to compare whom did it better. UAL is a LONG WAY from emerging from BK.




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Analyst,

UAL is a long way from emerging from BK (which is a luxury and gives them leverage to survive and succeed to have this protection in this kind of economy), because that is the way UAL wants it. I have spoken to U mangement AND SIEGEL HIMSELF SAID IN THE PIT CREW ROOM IN JANUARY, THAT U does not have the "luxury" of staying put in BK because of the "credit card" contracts that exprire on March 31 or they would stay. SOOOOOOOOOOOOOOO,

If U could have stayed in BK, they most certaintly would have. UAL has the advantage from a business stance to be protected in BK. They can also make better deals in BK than out of BK with labor, vendors, leassors, airport contracts etc., etc, etc,.

UAL WILL SURVIVE,and I am speaking as an employee of U. Not only will they survive, but they will burn U in the dust on the way out...WHY? Cause their mangagement team knows the business and their employees are on board to make it happen. The Government will make sure of it as well. Hell, UAL had an opportunity to take an additonal "war deferral" from their employees, AND CANCELLED IT.
 
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On 6/15/2003 8:58:05 AM Bear96 wrote:

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On 6/13/2003 10:56:35 AM PineyBob wrote:

Bear96,
You have to ask yourself a question. Why is that there is a pool of people, customers (like me) and Chip (airline employee) that have such a large and cumbersome axe to grind? Perhaps there is a reason for the rancor and almost childlike glee some of us take in the prospect of urinating on United''s grave?

Ask yourself why United has the reputation it does in certain circles good and bad!...

Given that I have had exactly the same number of complaints in 19 segments with UA as I have in 340 segments with US, tell me Bear96 which airline would you be a fan of??

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PineyBob,

What airline you travel is of no concern to me, since in a couple of months I will be out of the airline industry. But if UA consistently provides a poor product and so customers choose to fly a competitor and UA eventually disappears, so be it. That''s the reality of the marketplace. Conversely, I have many passengers on UA who tell me how terrible U and other airlines are compared to UA. Whatever.

However I DO find this "large and cumbersome axe-grinding" rather curious. If you don''t like a particular airline, fly someone else. Or any other service you receive from any other business-- dry cleaners, bank, grocery store, wherever-- if you don''t like the service and/or product offered, walk across the street (or terminal) to a competitor. No problemo.

I continue to maintain, though, that holding grudges for years about past wrongs, real or perceived, from ex-employees or customers, and spouting them to whomever will listen, is weird and ultimately unhealthy for that individual. And probably creates a self-fulfilling prophecy.

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Geez PineyBob....it seems that many people on these boards think the same about you as I do.....something to be said there, don''t you think?
 
Busdrvr:

For United''s sake, I hope that the company would NOT ditch its 777s in favor of keeping the 744 fleet.
 
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On 6/15/2003 5:09:02 PM avek00 wrote:

Busdrvr:

For United's sake, I hope that the company would NOT ditch its 777s in favor of keeping the 744 fleet.

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And why is that? You prefer riding a motorcycle without a helmet? You base jump? You think 180 minute ETOPS is fun? UAL now plans to keep the 400's (4 engines, better cargo ability) because THEY ARE NOW CHEAPER TO OPERATE (plus they GO FASTER, make a trip to SYD SHORTER). WHY WOULD THEY CHOOSE THE MORE EXPENSIVE OPTION?
 
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