Aviation Week Tilton Quote
 

September 6, 2010 issue:

In regards to the UAL-CAL merger:

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In separate testimony, United Chairman Glenn Tilton also “warns of catastrophe should the merger fail.”

“United’s domestic passenger share decreased from approximately 15% in 1998 to approximately 11% at the end of the third quarter of 2009. United’s global revenue ranking fell from second to sixth over the same period. If United remains a stand-alone entity, the company expects its ability to sustain sufficient profitability and to return a reasonable return on capital base across the economic cycle to continue to be at risk.”

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Why would a CEO say this, considering all of the amazing things the UAL-CAL combo will bring to the market?

Were his lips moving when he said this?

Good point.

I think there are several reasons why he would say this. First off I'll mention vanity. He has his name written all over this merger. In fact, I remember a UAL friend tell me in 2003 about a merger with CAL (My CAL friend laughed and said NFW).That was the sole purpose in UAL hiring him...BK then merger. So.. this is his baby and he wants to be known as the wizard behind the successful iconic deal. He shot off his flare gun to get all parties (who have a stake) attention and get behind this merger because if you don't.....

Secondly, he does have a point. With DAL now the size they are they are attracting many business accounts with good revenue. The network size sells. While both CAL and UAL are relatively healthy without a comparable network size it is more difficult to attract the desirable revenue traffic. I actually believe CAL would a bit more vulnerable because EUR is more competitive (CAL-lesser yields) while UAL's has dominance in the pacific where yields are greater. Plus UAL domestic hub network has been repeatedly stated by analysts as one of the best. Well, more so before they started their right sizing some years back.

From a business standpoint it is an excellent merger. You sure as heck didn't want to be the odd man out after NW/DL. AA and USAIR are not in an enviable position to compete domestically much less globally with the new up and coming (think Emirates, et al.) air carriers.

Is this opinion or are you basing this on fact?

You obviously did NOT read the statement.

Great points, all.

FWIW, CAL has publicly stated that Star Alliance traffic is already double that experienced at the peak with DAL/NWA in Skyteam.

So yes, the "network" does matter--clearly the route systems of UAL/CAL are far more complementary than CAL/DAL/NWA and it shows on the bottom line.

Uh, the statement only refers to UAL remaining alone. I don't read anywhere that is says CAL has a problem attracting desirable revenue traffic. For the 3rd quarter alone, CAL's revenue was up 19.2%. So, obviously the statement refers to UAL, so again the question, by lumping CAL into this statement, is this a factual argument or opinion based only?

And UAL's revenue for Q3 was up 21.7%. But thats not the point.

What Tilton is saying is not that UAL can't be profitable as a stand alone carrier, but that it can't make the rate of return desired, when compared to a merged UAL/CAL competing with the new Delta.

DC