United Mileage Plus (Pre-Merger) - This is an airline in trouble!

United: Losses may exceed its share of bailout

WASHINGTON (AP) — United Airlines said financial losses stemming from the terror attacks and the subsequent grounding of its fleet probably will be greater than the company's share of aid coming from a federal bailout package. United received $390 million of an expected $800 million as part of the government's $15 billion airline industry financial aid package, the company's parent UAL Corp. said in a filing to the Securities and Exchange Commission on Friday.

The same SEC filing reads:
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">At this point, United is unable to estimate the impact on it of the events of September 11, 2001 and their consequences and the sufficiency of its financial resources to absorb that impact. However, given the magnitude of these unprecedented events and the possible subsequent effects, United expects that the adverse impact to its financial condition, its operations and its prospects will be material.</font>

And this does not seem to take into account the law suites they may face. According to an industry publication I recently saw, some analysts think that several of the major US airlines are likely to file for bankruptcy as they run out of cash on hand.

I had heard a report on the radio that Boeing had issued a statement that said their financial analysis indicated that even with the bailout, several of the major airlines would be forced into bankruptcy within 30 to 90 days!

Gulp. I hope they are wrong.

If the #2 carrier with ~20-25% market share got $800MM of an anticipated $15B package (5% of the total), where the hell did the rest of it go?

Mike

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Mikey likes it:
If the #2 carrier with ~20-25% market share got $800MM of an anticipated $15B package (5% of the total), where the hell did the rest of it go?

Mike</font>

I believe they were counting just the cash portion of the bailout, that totals $5B, not $15B, for the airline industry.

I've pointed this out on various boards on this forum when this topic come up, but the smoking gun for the airlines' demise is in their own hands. Six, six!, full-fare/business fare increases from late 1999 through 2000 did nothing but discourage their most profitable segment from increasing, or even maintaining, travel. 9/11 was, pardon the cliche, the nail in the coffin.

Sorry to seem so preachy, but it's all very discouraging.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by dcpremex:
And this does not seem to take into account the law suites they may face.</font>

Congress passed a law capping any liability retroactively to $100m (per airline per accident).

There's lots of advantages of crafting an aura of terminality (including the ability to cram service reductions and layoffs), so they're milking this to the hilt.

http://www.ual.com/site/primaryPR/0,10026,1528_932,00.html

Note that the load factor for Sep 11 - 30 was 53%, and that revenue passenger miles were off 31.5% for all of Sep. Surprisingly, the year to date numbers (load down 1.3 percentage points and RPM down 3.1 points) aren't nearly as bad as I would have thought (based on the reduced travel caused by the economic downturn). Cargo looks to be off percipitously(while costs {fuel, labor} are up).

It seems to be gospel among employees who write to me about goodwinmustgo.com that UAL has blown it in the cargo business due to unreliability.

I'd put something about it on the site, but I have no personal experience about it...

when the majority of your most profitable customers don't like you, and the majority of your employees are disheartened and discouraged, how long can your business continue?

I believe that the formula for the distribution of $5 Billion was based upon available revenue seat miles for some period prior to 9/01. Further, the act contains a provision that grants can be no larger than demonstrated losses from events related to 9/11. So UA could hardly issue a release, "UA Gets Great Windfall - Grant To Increase E.P.S."

I hate to say it, but the only salvation here is probably a round of mergers to get down to 2-3 major carriers. The airlines are in essentially the same position as the freight railroads, except this is all happening much, much faster. Actually they are in a worse situation, as RR's have actually had some level of growth in the 80-90's though most of the growth was in low margin products.

BTW (and I am not breaking my security suggestion here) - although there are a hell of a lot of lines at airports, there don't seem to be a lot of people actually on planes from what I have seen in the last week. Will see next week on EWR/SFO commute.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by richard:
when the majority of your most profitable customers don't like you, and the majority of your employees are disheartened and discouraged, how long can your business continue? </font>

While working on my Masters thesis at CAL in the early 90's I got to hear Gorbachav speak about the demise of communism in the USSR. It was remarkably similar to your post!!!

I am working very closely with the cargo industry and can only confirm kokonutz' observation.
UA totally neglected the cargo potential in its business, albeit on certain routes it has some loads from postal services. On a scale of 1-10 (10 being best) LH, KL, SR (yes!), CX, SQ are in the 8 - 10 range, while UA would be a 2 - 3.

while - until now - I did accumulate much more miles than spend (somehow 'imitating' Punkis reitrement-saving-policies) I am currently rethinking my fFrequentFlier-policies for nex year - 'burned' by the recent bankrupcies of AN and SR.

I might start to give up (jan-1-2002) my plans to 'make' 1K with UA every second year (every other year 'only' PremEx) and rely solely on my Lufthansa status (just confirmed Senator in 2001 until feb-2204) for the immediate future - and spend UA miles (I have a balance of about 500'000 in my account right now) for free international first class tickets (mainly flying Star-partner airlines like LH, SQ, TG) in 2002.

Not an unwise thing to do Rudi.

Personally, while I continue to purchase new tickets and continue to fly as a revenue passenger on United, I have to admit that I too have begun to "burn" some miles that normally I wouldn't have done.

This for 2 reasons:

1. To take advantage of the current Award Sale.

2. To minimize my exposure to loss in the event the unthinkable happens (it's happened to me in the past too, Rudi).

At least this way, if the unthinkable does happen, I will "feel" that I have gotten a bit more usage of my miles before "it" happened.

This does not really effect my retirement "bank" of miles. That continues to grow almost daily by continuing to fly. I'm just going to "level out" the maximum of my banked miles for awhile by enjoying some hard earned Award travel.