It's about time
 

Wall Street is FINALLY waking up about our failed management:


At United Continental Holdings (NYSE: UAL ) , it's clear that the buck stops nowhere. Last week, the struggling U.S. legacy carrier reported a huge adjusted loss of $489 million for Q1. Meanwhile, its top competitors -- including Delta Air Lines (NYSE: DAL ) and American Airlines (NASDAQ: AAL ) -- each earned hundreds of millions of dollars.

United executives rolled out a new wave of excuses to explain away both the poor Q1 performance and weak guidance for Q2. To some extent, I'm sure they are right that overlapping systems from United and Continental, high growth by other carriers in Asia, and the pilot shortage at regional airlines are causing big headaches. However, at some point, the management team has to be held accountable for performance. United Continental is already two years past the biggest integration milestones, yet it continues to lose ground vis-a-vis every other major airline. It's time for the Board of Directors to step up and replace all of United's top executives and see if a new management team can do better.

Falling behind -- way behind
In early 2012, just over a year after the United-Continental merger closed, the integration process seemed to be in fairly good shape. United reported a solid $1.3 billion pre-tax profit for 2011, driven primarily by a 9.2% unit revenue increase: the best among the legacy carriers.

Since then, United's relative performance within the airline industry has declined rapidly. Last year, United's pre-tax adjusted profit totaled $1.1 billion: down about $200 million from 2011. In the same span of time, Delta Air Lines improved its pre-tax adjusted profit from $1.2 billion to a stunning $2.7 billion. Analysts now expect Delta to earn nearly $4 billion this year before taxes. Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.

United Airlines Needs to Clean House
By Adam Levine-Weinberg | More Articles | Save For Later
April 26, 2014 | Comments (0)

At United Continental Holdings (NYSE: UAL ) , it's clear that the buck stops nowhere. Last week, the struggling U.S. legacy carrier reported a huge adjusted loss of $489 million for Q1. Meanwhile, its top competitors -- including Delta Air Lines (NYSE: DAL ) and American Airlines (NASDAQ: AAL ) -- each earned hundreds of millions of dollars.

United executives rolled out a new wave of excuses to explain away both the poor Q1 performance and weak guidance for Q2. To some extent, I'm sure they are right that overlapping systems from United and Continental, high growth by other carriers in Asia, and the pilot shortage at regional airlines are causing big headaches.


United Airlines has come up with lots of excuses for its terrible performance.

However, at some point, the management team has to be held accountable for performance. United Continental is already two years past the biggest integration milestones, yet it continues to lose ground vis-a-vis every other major airline. It's time for the Board of Directors to step up and replace all of United's top executives and see if a new management team can do better.

Falling behind -- way behind
In early 2012, just over a year after the United-Continental merger closed, the integration process seemed to be in fairly good shape. United reported a solid $1.3 billion pre-tax profit for 2011, driven primarily by a 9.2% unit revenue increase: the best among the legacy carriers.

Since then, United's relative performance within the airline industry has declined rapidly. Last year, United's pre-tax adjusted profit totaled $1.1 billion: down about $200 million from 2011. In the same span of time, Delta Air Lines improved its pre-tax adjusted profit from $1.2 billion to a stunning $2.7 billion. Analysts now expect Delta to earn nearly $4 billion this year before taxes.


Delta Air Lines is on pace to post pre-tax earnings of nearly $4 billion this year.

American Airlines has also reported steady margin growth recently, and it improved its Q1 pre-tax margin by 3.6 percentage points. The company appears to be well-positioned for strong margin growth through the rest of 2014, too. American is projecting a 4%-6% increase in unit revenue for Q2.

Meanwhile, United is still floundering. The company's Q2 guidance calls for a meager 1%-3% unit revenue increase, with a large chunk of that gain attributable to the calendar shift of Easter from Q1 to Q2 this year. That would produce very modest profit improvement for United this quarter.

It's not getting better
As I have written previously, most airline analysts have been far too kind to United Continental in the past year or so. With the airline industry showing rapid profit growth, many analysts have assumed that United is bound to follow the rising tide. However, based on the combative tone of United's recent conference call, it appears that even formerly strident bulls are having second thoughts about United.

Most of the initiatives that United executives have raised as "fixes" for its unit revenue problems are very minor in nature. For example, United is optimizing its revenue management system, working to boost ancillary revenue, changing flight schedules in Houston and Denver, more actively matching aircraft size to demand, and cutting some flights in Tokyo.

However, United faces significant structural problems that will get worse -- not better -- as time goes on. First, United's hub in Newark is one of the company's crown jewels, but the recent Delta-Virgin Atlantic joint venture has left United as a distant third in the New York-London market: the most important international business travel market.


American Airlines is expanding in Asia, putting pressure on United. (Photo: American Airlines.)
Second, competitors like American and Delta are working to close the gap with United for Asia service. Both airlines are starting two new U.S.-Asia flights in June. Combined with the long-term growth trajectory of several Chinese airlines, this will keep up the pressure on United's transpacific routes.

Third, United's highly profitable transcontinental routes from JFK Airport in New York to Los Angeles and San Francisco are about to get a whole lot more competitive. All things considered, Q2 could very well be the easiest quarter of the year for United -- yet it will still post subpar results.

Time for some pink slips
The airline industry is a cyclical business, and it's pretty clear that we are approaching the high point of the cycle. Industry conditions are about as favorable today as they ever have been, yet United is still barely profitable, with a pre-tax margin of less than 3% for the last 12 months. In a year or two, the industry "tide" will probably start flowing the other way, dramatically ratcheting up the pressure on United's earnings.

Airline integrations are tough, and the United management team may have been dealt a bad hand in terms of other headwinds like route-specific competitive capacity increases.

However, the fact remains that United's management team isn't getting the job done. By now, United should be gaining ground on the rest of the industry in terms of margin performance. Instead, it is falling even further behind.

With several airlines having merged in the last few years, there are plenty of experienced airline executives who are out of the industry right now. It's time to give another group of leaders a chance to run United Airlines. It would be hard for them to do any worse than the current management team.

It's about time
 

Couldn't agree more. I for one, am tired of the excuses.

Didnt you just start at UAL? Tired of it already?

He caught on faster than Wall Street.

That's a sobering article. I feel a "blame labor" period is inevitable. The tracking of individual captains' fuel efficiency is just the start.

Nothing wrong with demanding accountability in my opinion.

There's no doubt at all that they will try to lay the blame on us and come to us for concessions. They have nothing to offer but excuses. Hopefully the Board wakes up. I, for one, will be giving them absolutely nothing.

Bring back the pins! : Jeff's gotta go

Haha, sure did. Maybe "tired" isn't the right phrase. Don't misunderstand though, I'm very happy to be here. But it's the same old excuses, just a different airline. Like a previous poster said, I believe that management just needs to be held accountable, just as I am held accountable for my actions and performance.

The writer of this article has been consistently beating the drum warning investors that UAL's financial outlook was poor for at least a year. An article that he wrote last summer really got me concerned that he might be right. Another one he wrote last fall convinced me that he was right and made a quick turn around seem doubtful. The assumption being made by investors was that UAL would get its act together, so the stock kept drifting higher. This writer looked at the data and correctly concluded that big problems were being overlooked or ignored. I posted the two previously mentioned articles on this forum and they were slammed in classic shoot the messenger style. Look at where we are now.

More than a few people have been saying these very things after watching Smisek in action his first six months on the job. He cannot manage, lead, inspire, or innovate- all he and his ilk can do is focus on costs. He has no vision, operational experience, or respect from the very people he thinks he is smarter than and he is rapidly losing the respect of Wall Street and the BOD. Unfortunately, this whole process is coming two years too late for this company.

He said "labor is not required for this merger" so labor obliged him and stayed out of it in the most important way possible, enthusiasm. There's a difference between obeying rules and following leaders. Obeying rules is a min effort endeavor, following leaders is a whole-hearted one. Not only did they not solicit our buy-in, but they deliberately renounced it in the opening conference call. Now they can't figure out why they can't push a wet noodle onto the monkey holding the straw that broke the camel's back whose nose is under the tent.

Very well said!

I think you put into words what ails United better than any other commentator, MEC rep, or employee. Now I only hope people who have the power to affect change are actually starting to pay attention, and although the original article cited for this thread came from an online blogger with minimal following I am happy to see that more mainstream media is also beginning to ask the same questions:

Should Jeff Smisek be worried?: United Airlines releases grim first quarter results?

And take a look at the last two paragraphs of this article. Looks like the heat is on for sure. . . .


United Air ramps up promises of improvement despite a glaring 1Q2014 loss; management under fire

. . . . and fascinatingly enough as United winds down operations in Seattle and LAX Delta seems to think there might actually be good business there. Gosh really?

As UCH shrinks to profitability I wouldn't be surprised if they retreat to IAH/EWR/SFO. As for the others.............

Let's start with ALPA pins FIRST.

Yeah.....that will fix everything.

Crew planning states growing a LAX 756 base is one of their top priorities...do u have some overall numbers showing we r shrinking LAX over the last couple if years? It appeared to grow w new 737:756 bases?

Isn't there another way to show unity besides advertising for a corrupt organization? A lot of people have been screwed over big time by ALPA (not talking about SLI) and would prefer not to cheerlead for that group.

I would like to show my support for all our (deserving) pilots.

One question - who are the (deserving) pilots you speak of?

"They kind of speak for themselves … When ignorant folks want to advertise their ignorance, you don't have to do anything, you just let them talk."

Barack Obama

Now there is a quote YOU can relate to!! :p

So - we can take it that you're anti-ALPA along with mrmak2. You do know that we are one airline now and being anti-LUAL will do you NO GOOD.

anyone think this will gain traction? I'd imagine once the BOD sees the pilots turning on the CEO, change won't be far away

Exclusive: United Airlines Newark-Based Pilot Leaders Call for CEO's Ouster - TheStreet

I imagine the more the pilots complain, the more likely he stays. That's what has happened historically anyway.:mad:

Look what it has taken to unseat a CEO: Strike, ESOP, Ch. 11, Merger....

good point. One would think that loosing money in this climate and now loosing labor support would be enough...

Was the moron looking in the mirror when he said that, or talking about Biden???

Or type.

(Why do posts need ten characters anyway?)

Non-scabs.

I want to know what Jay H. has been telling the UAL BOD in their meetings.

Oh, that there is funny. I imagine the BOD barely tolerates his presence. We lost our say when the ESOP sunset/BK disintegrated the super majority voting right.

I've always thought it would be wise of us to VERY CAREFULLY choose who from ALPA sits on the BOD. It doesn't necessarily need to be the MC. The right person with the right traits/personality and strategy could prove far more beneficial/influential than what we have seen thus far.

True, but still a full BOD member.

Come on guys, calm down and ride the wave as our Leader suggests in this week's Jeff's Journal.


"I talked to an employee at the ORD CEO Exchange last week who started at Delta before their merger and “rode the wave” to their success. He’s at United today because he sees that same turnaround happening here and wants to be a part of that again. Every dog has its day in the sun, and it’s Delta’s day today. Our turn will come."

:confused:

Btw that's the last time I will read Jeff's Journal.

I choose my companies like my stock. Buy high and sell low. Remind me why we are in a turnaround position and how did we get here?

At least he recognizes that UAL is a dog. Or is that, what'z up Dawg!?