RNE

Jeff is betting on Kettles. And I think he's right.

Embittered Premiers can pine for UA's financial demise, but it won't happen. The Alliance carriers and Southwest are here to stay throughout the century.

RNE, opining that HVFs are not as V as they think they are.

seagar

Curious then, based on your comments above...for the ten years during and after bankruptcy, I flew UAL all over the world and never ran into the maintenance issues/delays we are now seeing post merger. Is it really the case of pmUA not addressing needed maintenance or is it COdbaUA policies and lack of current investment causing the problems. Or maybe it's overworking the fleet and not understanding a larger network?

username

I am really worried about UA's future and my "relationship" with it given I am probably 2 years away from MM.

From my perspective, it seems UA is cutting too much. Being PHX based travelling to the Southeast, UA is simply not competitive. I think UA has given up PHX. Even PHX-ORD, UA's schedule is terrible and frequency is bad. It seems UA is giving up the PHX market. When US leaves *A, what do I do?

When I book my flights, US, AA and DL come up cheaper a lot of the time - this has been the case for years but the difference seems to get bigger and bigger. For now, I can fly US and credit to UA but what about next year when US leaves *A?

The strange thing is that UA planes are nearly 100% full a lot of the time and US seems not so much. So, US is doing OK with lower load factor and lower yield? (Or, UA has too many nonrevs?) What is UA trying to maximize?

I know I live in a well served low yield market so the situation is different. However, if UA wants to stay in this market and keep its customers, showing it is retreating does not give me any confidence - especially at this juncture when US is about to leave *A. The problem for us elites is that we probably move our business in 25K chunks and they add up.

130 fsw

No, not my experience at all during 1K BIS intl since March 2012.

spin88

Your post both shows UAs current strategy,and its potential problems.

UA has dramatically cut domestic capacity, but certain markets where the yeilds were evidently lower have taken more of those cuts. SEA and PHX and PDX are examples of this. All used to get all (or mostly) mainline service to UA hubs. SFO to each was mainline, and LAX was mostly mainline.

The new management wants to increase yields. So they put a smaller plane on the flight. Instead of having to sell 120 or 138 seats, they now only have to sell 50 or 66, they sell out the seats for more, and yield goes up. However, the RJs need a higher load factor to be profitable, so you have to nearly sell them out.

Planes are packed for a while. But then the elites who are in those cities (or where there is competition going to those cities) start to look around, don't want to fly a packed RJ. The PHX fliers start to look at SW or US, the PDX/SEA fliers switch to AS and take AA or DL. And the SFO/LAX based people look at flying another airline to avoid the crj-200/700. [U]They are then lost to the system [/U]overall. Those who are just looking at the flights (and have no lock in) avoid UA. Revenue falls, PRASM and yield starts to fall as well.

I think UA has begin to enter this spiral, as the profitable elites leave, then your yield goes down, despite the capacity cuts. Soon your "network" is no longer a selling point, and your yield is down.

It is also notable that DL has adopted 180 degrees the opposite of UAs strategy. They are getting rid of many RJs (which are expensive to operate) and upgaging. They assume that they will get more of the premium passengers this way, and can then compete on price for the rest. They then get a higher yield and as full of a plane.

Time will tell who is correct.

travelinmanS

There is a lot of logic in your post and I personally feel that Delta has adopted the correct strategy. I don't think, however, that UA will fail or has entered a death spiral. The current makeup of the airline industry in the US is very near an oligopoly and I think that all 3 majors will be able to maintain strong positions in the future. I believe we might have finally reached the point, due to lack of competition, that airlines are a good investment. I may be wrong, and we may need only 2 or even 1 major legacy airline in the US for that to happen but with only 3 majors now playing ball, I think the pump is primed for some good profits in the future for all 3.

SFO777

Umm, there will be 4 majors after the AA/US merger. Count 'em.

fastair

3 Intl network majors, each with their corresponding Intl alliance, plus 1 LCC hybrid without a network and very limited reach outside of mainstream America, in addition to (2) othr rapidly growing corporations that many of you fly on under vaious names, but may not realize that most of those carriers are only (2) unique corporations that have grown exponentialy over the past decade, filling in for "Too big for their britches" Atlantic Coast (aka, we'll tak what you have been paying us over the past few years at little to no risk, and start up a direct competitor to you and name it 'Independance Air')

Don't overlook the Skywest/Expressjet/ASA consortium (single ownership known as Skywest Inc) and the Republic Airways Holdings Corporation, which owns all of Chautauqua Airlines, Frontier Airlines, Republic Airlines and Shuttle America (as well as the rmains of Midwest Express) under 1 corporate umbrella. Sure, they pimp themselves out to many of the other carriers, but control over that much of the regional marketplace is not a small thing or something to be forgotten. Imagine what those last two could do to the majors if they wanted to. Eating competitors to remove them from competition has happened at a very rapid pace for the two major regional corporations, and a dualopoly is 1/2 the competition of a triopoly and 1/3 of that of the "big boys" if you include the Southwest/Valuejet partnership as competition for the mainlin carriers.

RNE

What I said yesterday and years ago. Look it up.

RNE, a seer.

SFO777

At least someone from AKC can be trusted to keep his word.

EWR764

For a really rough idea, think about it like this. If you own a car, your manufacturer may suggest an interval of 3-5,000 miles as the 'recommended' spacing between oil changes. If you take your car to the shop every time and shell out $50-75 for an oil change, those numbers add up quickly if you're doing a lot of driving. In theory, you could stretch out those intervals, say to 7,500-10,000 miles, save some money, and still have a car that runs well for the purpose you intend. Ten years later, the cumulative result of deferring maintenance and running dirty oil through the engine is greater wear and a reduced lifespan. So, in year 11, with 250k miles on the car, especially if you change your driving habits and start driving further, longer, you may well run into problems with your engine requiring costly repairs.

Of course, United kept its airplanes in safe and airworthy conditions at all times, no question about that. Maintenance staff and aircrews would never sign off or accept an airplane that wasn't fit to fly. Further, I have no anti-United bias when I make this point. All I am trying to illustrate is that it was common practice to defer maintenance on a number of non-essential items (but once that can affect reliability in the long-term) during the lean post-9/11 years at United. After the merger, when the company attempted to increase productivity with certain fleets, there was a commensurate drop in schedule reliability. To rectify these issues, the company is investing money in getting these birds caught up on any open maintenance items and carrying out preventive work to ensure that they can provide reliable service for some time to come.

I think most people at United are happy to see this investment. Flight attendants I have spoken to on 'refreshed' 757s are proud of the fact that the airplanes look, feel and smell cleaner. MX personnel are happy to be correcting a lot of issues 'behind the scenes' that have gone unresolved in these fleets for a while. It's a good thing all around.

channa

While this is certainly part of it, this was also clouded with being around the same timeframe as the SHARES downgrade, which increased requirements for ground staff dispatching planes. Also, around the same time they started aggressively running UA planes through CO hubs and vice versa, which creates not just possible maintenance issues, but also crew and scheduling, as only UA crew can operate UA planes, and CO crew CO planes.

Even today, after having addressed some of the issues, PLUS increasing the turn times on the aircraft, UA still has some of the poorest ON TIME in the industry. They even went so far as to bonus themselves against a flat target (80%) rather than a ranking, so that even though trail DL and US, they still can bonus themselves for their below-average performance.

We can certainly blame one aircraft or fleet if we want, but the fact of the matter is that PMUA had industry-leading ON TIME until various optimizations were eliminated, such as the boarding process and PSS. Heck, they're still boarding by row (coded as boarding group) which has been proven to be slower than window, middle, aisle (which was the PMUA methodology).

andrewwm

There are two things here. One is on-time versus dispatch reliability. I.e. was the plane late vs. was the flight canceled due to MX.

On-time took a hit from the PSS cutover, no question. However, only pmUA flights took a big hit on dispatch reliability post-merger, which would support EW764's contention.

Second, if you go back through pmUA's financials, every single year from 2001 onward pmUA recorded lower capex spending than they booked as a loss due to depreciation - a growing or stable company should record capex >= depreciation. That meant that Tilton was basically depreciating out the airline, running down its capital stock. No new planes, minimum upgrades necessary to stay competitive, (new biz seats, but no wifi, no upgrade of Y cabins, no refurbs of clubs), etc. etc. etc.

This strategy fits exactly with one that EWR764 described of deferring maintenance to keep quarterly expenses as low as possible.

It's interesting the collective amnesia on this forum about how much of a cheapskate Tilton was.

channa

If you're referring to cancellations, the PMUA flights took a cancellation hit because of the aggressive scheduling imposed on them. PMUA did not schedule in this manner previously. PMUA made their older planes work by padding the schedules and having greater cushions between flights.

If you stack everything up the way CO did, if anything goes wrong, that has a domino effect on downline flights. That's the reason that the PMUA flights got hit with more cancellations. Nothing changed with the planes, other than an attempted increase in utilization that they could not sustain when their cushions were taken away.

And that's a reflection of the CO bias -- that they think they know how to run everything better. Just like so many things they ignored or threw out during the merger process, this was yet another piece of business knowledge they ignored and had to re-learn for themselves.


In fairness, PMUA did refurb many of their clubs. The PMUA design (white tables, 4 x outlets per pair of chairs) were all installed within a couple years or so of the merger close.

That said, it's no secret that Tilton was out to sell the whole house, and he was doing the bare minimum to keep competitive (as you point out, upgrade biz cabins, but not Y cabins).

Along the same lines, Tilton knew who his bread and butter was, which is why he worked hard to keep his core customer assets happy and was not despised by his frequent customers. That's something this management team either hasn't realized (or has realized and not admitted, or has realized too late). Hence the lower guidance which is the topic of this thread.

andrewwm

Yeah I guess they didn't realize that you needed inflated block times and extra spares to deal with the fact that the fleet was beat up and run-down [pmUA business practices], so they scheduled the planes as if maintenance were current.

A forgivable mistake in my opinion. And if I were running a business I would definitely pick the pmCO standard of keeping the fleet well-oiled and in good operating form so one can get high utilization rather than fly around a fleet of beaters that have to be babied all the time.

Haha...whooo. Gotta take a breath there from laughing so hard. I think it was de rigueur in the pmUA forum to post about crew interactions when wearing the FT gear standard "Glen's Gotta Go" bracelets.

How time makes memories so rose-colored.

Now, if you want to say that Smisek is more despised by certain pmUA elites, then I'll grant you that. But to pretend that Glen wasn't despised is rewriting history.