United Airlines will be part of industry consolidation one way or another

July 13, 12:35 PM, Chicago Examiner
United Airlines continues to be a troubled company. The Chicago-based airline stock is trading at levels indicating bankruptcy is once again likely. With air travel down due to the economic recession United Airlines finds itself in danger of running out of cash. Cash is exactly what United needs right now with more than $1.5 billion in debt due early next year. Some experts are publicly stating that United Airlines can survive until the middle of next year unless the economy drastically improves.
So United Airlines is on a trek to failure unless dramatic changes are made. If the economy takes off and business travel rises to previous levels and fuel prices do not rise substantially United will be okay. If this does not happen as described they won’t be okay. So with the economic situation of today, United needs a strategy to solve their core issues assuming there will be no economic recovery. The drastic changes that are required for United Airlines to move beyond their current woes is to bring in new leadership that is capable of orchestrating a merger and relieving the company from its excessive debt burden.
United Airlines needs to face the reality that Tilton is not the right CEO for the company. In fact, he may have been the right leader to be at the helm during 2007 when oil prices surged and jet fuel reached historic levels, but when his level of expertise was most crucially needed he failed the company. Being a former oil man, Tilton should have better handled the commodity issues of 2007. He should have had a strategy to hedge oil futures to protect the company from the dynamic shifts in the market. This was Tilton’s initial strategic failure and it is still hindering the company today.
According to Mo Garfinkile, CEO of Virginia-based GCW Consulting LLC, who has advised Mr.Tilton and United "the game plan now is to survive." Now the company is headed once again into bankruptcy and if it lands there again it will be a prime candidate for being liquidated and most likely will not survive. With the drop in air traffic and strong competitors like Southwest Airlines expanding into the traditional business route and offering lower-priced options, the airline industry will squeeze the weaker players out. The industry is in need of consolidation and if business leaders don’t do it through mergers the market will do it through bankruptcy and liquidation. United Airlines will be part of the industry consolidation but they may not survive it.

 

Cal will get the asia flights.

 

When Tilton took over way back when, I thought it was because no one else wanted the job. Was there a better candidate willing to be CEO?

 

IF, and I sincerely hope this does NOT happen, this were to happen, who would the bidders be? More importantly who would be the Ron Allen of the group? Grossly overbidding for minor assets while completely ignoring assets that would add value to the airline. Who would play Crandall and Wolfe, devilishly inflating bidding prices? History is always doomed to repeat itself. But, once again, I play what if with the hope this never happens. There are too many good people who Tilton has screwed over at United. I wish them the best so we can get back to good old fashioned gentleman's rivalry.
Burn Notice

 

Isn't this true of several carriers? Truly brilliant analysis by the reporter.

A new CEO does not reduce the debt burden. Not sure what business school this reporter attended but I suspect he has been getting his knowledge from Lenny Dykstra


Fuel Hedging? So every major carrier and pretty much minor carrier got the fuel hedging wrong. Including the governments around the globe. However, Tilton was supposed to be able to know this was going to happen? I don't carer for Tilton as much as the next person but there were no carriers that hit the nail on the head with hedging. Even the SWA crowd got it wrong.
Southwest?

Southwest and lower fares?

There is very little insight or research devoted to this writing. If I didn't know better I would suspect that this was created by the MEC Chairman at UAL. He has never included facts or research into his diatribes and has little or no credibility remaining. The IF's in this article are huge and you can IF things to oblivion. UAL faces some serious challenges but it is industry wide and not alone.

 

Everyone was convinced United was a goner a few years ago. That didn't happen.

United is based in Obama's home town. Thousands of jobs at stake, as well as political capital. Can you imagine the embarrassment of this huge airline failing in Obama's back yard, long after he promised unemployment wouldn't go above 9%? Look for the "too big to fail" platitude to be rolled out again.

Look for either a bailout, "stimulus" money, or re-regulation. At the very least, a government backed loan at cheap interest rates.

United will survive.

 

Our government is so dirty, I tend to think that all of your points might be right on target. Sad that it has come to this in a "free" market economy. Communist China has less of a "grip" on their market than the USA. Sad.

 

The bidders would be so numerous you couldn't count them. The liquidation fire sale would bring in huge amounts of money, which is another reason it's actually in some ways to some people quite attractive. UAL is in a hopeless financial tailspin and the only way they wont hit the ground now is a fantastic recovery and pull out by next summer.

For them, the wind has to shift 180 degrees and blow strong. A partial shift in direction or a complete shift with only a light breeze wont do it. I think that is why the analysts are all starting to talk like one now........it's undenyable.

The outside chance is a white night willing to grab the stick, kick opposite rudder and risk their own survival in an attempt to pull out....... of course right now, their isn't anyone else in the cockpit.

The thought that they are "too big to fail" has some merit, but what is "faliure" ?

This industry is extremely unhealthy and UAL's financials wont be saved by simply buying more time. That's throwing good money after bad and I think the taxpayers are fed up with this. Additionally, O adding to a staggering defecit by throwing more cash in this direction would probably hurt him more then allowing the marketplace to correct its problems. Most of the carmakers could recover from BK and re-emerge stronger, but UAL is so screwed up, it's a completely different animal. Like the car makers UAL would have to agree to pay most of any bailout money back and by next summer barring a miricle, they likely wont be able to pay their employees or even AFFORD BK. O wouldn't be blamed for UAL's collapse and he could easily dodge that bullet backyard or not. The thought it is the governements job to bail out every badly run corporation simply because jobs are lost is one of the more dysfunctional byproducts of this horribly managed U.S. economy.

I think it quite possible UAL could survive as perhaps a 65% smaller carrier, perdominantly International and Far East, provided the deal involved new buyes for that segment willing to keep the UAL name which DOES have value.

 

I don't think I EVER heard Obama saying unemployment would go above 9%. What I did hear him say is that the road to recovery would be long, and that we should expect unemployment numbers to be high even after the economy begins to recover.

 

All brilliant points- being showcased for the last six years. I guess the whole industry will also fold, since the industry has not been profitable since inception/Wright Brothers/deregulation.

An airline can operate with losses the same way the feds do. How did Continental come through TWO bk, how does US Air continue to operate, how do the financial fundamentals of the legacies compare?

These grumblings are mostly rhetoric and a fun "pile on." Plus, they set the stage for more labor sacrifices to live to fight another day.

Carpe Diem