Originally Posted by
berge7f9
What is wrong with United Airlines today?
I read a great article a few weeks ago about United and their fleet utilization. United has historically had a very low fleet utilization. They were able to get away with this in the 90's. Not anymore. In the last 6 months, United launched an initiative to use their fleet more. They expected to increase their capacity by 6% without adding a single airplane! It was a good idea. But it was not without its problems...
Did anyone else notice a crazy winter this year?? I spent the majority of my time between San Francisco and Denver (United's most profitable and United's 2nd largest hubs, respectivley), and it was the worst winter in Denver I had ever experienced. Chicago and Dulles had major problems (February). Couple this with a fleet that is being used more than ever before, and you will understand United's abismal numbers for ontime percentage and completion factor. First quarter 07 numbers were horrible.
United is trying to "right size" their fleet. It is a process. First quarter numbers were bad. Expect better 2nd and 3rd quarter numbers to be more in line with the rest of the industry.
That was only part of the reason. Accounting is VERY tricky. Example. When UAL exited bankruptcy, they had a $23 BILLION dollar profit. Obviously that was all on paper. This happens from time to time. You have to sometimes read in between the lines. At the end of last year, UAL switched to deferred revenue accounting for its frequent flier program, which resulted in $107 million less in passenger revenue than would have been recorded under the previous method. That was all due to accounting.
Maybe some info that looks a little better. Despite higher fuel costs, United's lowered operating costs and improved cash flow. The company cut its costs per average seat mile, a key industry barometer, by 4.3 percent from the first quarter of 2006 while operating cash flow increased 38 percent to $626 million.
Fleet utilization, terrible 1st quarter weather (exaserbated by the extensive fleet utilization), and accounting were the culprits. I don't think there is much to worry about. Fitch ratings uped United's ranking from "stable" to "positive" just this afternoon. UAL does not have a big problem.
Where do you think UAL will be in 5, 10 years? And most of all, what will happen to the aircraft, people, and local communities of (SFO, LAX, ORD, DEN, IAD) who would have much to lose if the company folds?
UAL will probably be right about where it is today. Strong internationally. Domestic flights to feed the interationals. The second largest airline in the world. SFO, LAX, DEN, ORD, and IAD will still be UAL hubs...
I have mentioned this before. The days of legacy carriers folding is over for the time being. Each of these carriers have very lucrative frequent flier credit cards. United's Mileage Plus is the most profitable of them all. Banks (who have lots of money $$$) will not let these go away. You saw these banks pump BILLIONS of dollars into these legacy carriers after 9/11. All six legacy airlines will be around in 15 years (mergers don't count, these are good).
What are the chances of a merger with another carrier?
Good. Hopefully! Just when we all thought there was about to be a turnaround in the industry, 1st quarter 07 results for ALL airlines showed weaker than expected revenue.
There is still too much capacity!!! It would be good to see some mergers. I am very disappointed that Midwest keeps fighting an AirTran merger against Midwest's best interests. Hopefully enough of Midwest's shareholders are smart enough to elect AirTran's candidates to the Midwest board in June!