FlyWorld

The same is true for me. And I am very curious to see if this strategy is profitable. I need to book 1 TATL and 1 TPAC soon. I have almost $2,000 worth of vouchers from service failures. But, even with the vouchers, UA is more expensive than other direct options. I would like to use the vouchers and put the miles toward some level of status, but at these prices, I am on the verge of walking away completely! And, once that happens, there will be no reason to come back.

spin88

Then you have to assume that anything you say will be taken with a grain or several of salt, and an assumption that what you say is simply an assertion (unless backed up with numbers/analysis as others have done in response to your several posts.)

With that, welcome to FT, we look forward to your posting ANALYSIS to back up your defense of UAL's "savvy" management.

I specifically challenged you to explain how this analysis has not been a cheerleader or more importantly WRONG about UA at nearly every stage in the game. I posted a years worth of his predictions/statements showing he has been mostly flat out wrong (and where he was not wrong that UA would go up, UA underperformed everyone else). Saying he is an "independent analyst" (something we all know is not true in the sense most folks would see as independent, he is part of the investment/banking community which overall and overtime have massively buy oriented recommendations and are there to support investment banking) is not an answer to his accuracy, or my basic comment that a cheerleader for increased fees and for UAs approach was not exactly an unbiased source.

Simply saying something trite like "no analyst is perfect" does not count as refuting my basic point.


First, you have a string of posts pointing out your view that UAs management team in SPECIFIC was savvy. Unlike a song and dance pitch made orally , on a discussion board what you actually say is written down...

As you yourself pointed out COs management team was very experienced. They also had a string of mergers as examples of what worked and did not work.

Had CO management been intelligent ("savvy") they would have learned (1) from TWA/AA, that cutting FF benefits dramatically will drive away high value connecting (non-hub traffic). AA lost most of the high value TWA traffic as a result of how they integrated the FF programs, and in particular getting rid of TWAs upgrade rules. (2) from HP/US they would have learned that having labor agreements hammered out early, when everyone was not embittered by the merger process itself, was key, and that choosing the cheapest computer system (in specific a system called SHARES) does not work well and causes massive disruption (3) From HP/US, and their crashing yields, they would have learned that dramatic cuts in on-board service levels and the FF program (specifically upgrades) will drive away high value traffic. (4) Then from Delta they should have learned (a) that early cross fleeting impacts operational performance, (b) that increasing service levels helped to offset any cuts in the FF program, (c) that early labor agreements makes the integration run smoothly, and (d) that working to standardize product at a higher level attracts traffic.

Amazingly, UAs management ignored every single one of these lessons learned. Rather than improving on what happened before (and avoiding the mistakes) they repeated every single mistake from past mergers and did none of the things that had worked well before. I don't call that "savvy" I call that pig headed and stupid. And oh, they also did not solicited any customer input before implementing their plan, nor proactive respond when issues arose. I call that pig headed. They acted like a monopoly business that could tell their customers to pound sand. This merger will be a case study in business schools of what not to do for years to come.

Doug Parker has repeatedly noted that he will not be making the same mistakes.


So, you are the type of banker that does not look beyond the top line number? In this very thread, and earlier ones many many people have looked in some depth at the Q4 and Q1 numbers in light of (a) comps, (b) one time events, (c) the synergies UA should be getting on the revenue side ($200M a quarter), and (d) capacity cuts. When looked at other than on a superficial level UAs numbers are horrible.

The street has enough folks who will look a little deeper that UAL has continued to trail other airlines, and until UA shows REAL increases in yield (considering comps and the build in merger synergies) compaired to its peers, and does so without outsized cuts in capacity, I will continue to say - and correctly - that UALs revenue performance sucks.

come on, hope this is not they type of analysis you give your banking clients. As you yourself pointed out, CO had a very experienced management team. What they lacked was judgment, and any ability to do new things/try new things. What they were was arrogant, and ignored the experiences of prior airline mergers.

You keep saying this,and people keep pointing out that you are missing 5/6 of the picture. First, FF programs mostly drive traffic from elites Almost all of the elite traffic will be part of the program of their home country. American carriers FF programs will only really help them with American based customers who are elite. [Although some ammount of traffic is driven by people choosing the airline to collect miles, unless the fare is way out of line, that is not usually the high value traffic.] However, these are a very important part of the business and are most of the higher fares.

So why would American based fliers not fly foreign airlines which have mostly higher service levels? Well a large part of it is FF programs, and with UA either GPUs, access to better seats, or going for GS status. other than this, a FF program is not a driver of business.

But absent that driver why would anyone chose UA? Yes, on some routing, UA is still competitive (facing some Chinese airlines, or second teir airlines, or when the competition does not have good Business/F seats) but much of the remaining traffic is moored only by the FF program. As people start to see that GPUs have less use (more like DLs SWUs) and GS has been watered down and become a give away to managed corporate accounts, there is less and less reason to fly UA internationally. Comparative yeilds then fall.

At this point, UA still has a great network (although Dl is rapidly catching up) but other than this it has become a commodity carrier competing on price. As DLs network surpasses UAs, UA loses access to USs network and the SE coverage gets spotty, and US/AA integrate, shortly UAL will find itself with the worst network of the big three, and they will need something else to compete on.

So far I have seen nothing to show that the "savvy" management team has any answer other than to keep shrinking the airline, as they lose more and more high value passengers, to try to keep yields from falling.

If you disagree with this competitive assessment, post your own, we all look forward to reading it.

EWR764

These points are beyond dispute, but the highly contentious nature of the UA/CO labor situation before, during and after the merger (primarily on the UA side pre-merger) made the possibility of pre-merger labor accord essentially moot. The only possibility, in retrospect, would have been if both companies used the 2008-2010 period to bring the workgroups into some harmony to streamline the integration process, but the course UA took regarding aggressive cost cutting and pilot layoffs meant the UAL MEC would never agree to such a plan. Tilton's pre-merger cost reduction campaign was a success, and he most certainly improved the airline's prospects dramatically, but some of the steps he took, albeit necessary at the time, stirred up a hornet's nest with labor. Plus, the prospect of a UA-US merger was real almost up until the day the UA-CO deal was announced, so pre-merger agreement similar to DL/NW or AA/US would have been challenging.

Any suggestion that UA somehow missed an opportunity before the merger to quickly resolve labor disputes that have dragged on for years post-merger is pure revisionism, in my book.

BearX220

Here's a few:

"Oblivious." "Arrogant." "Obstinate." "Targeting mediocrity." "Taking customers for granted." "Vindictive toward HVFs."

Parker is not only a student of history (and his own errors with US/HP), but he sees an opportunity here. New AA can be the only HVF-friendly major with a comprehensive network and a useful FFP. He can have the best value prop in the field. He's already got a secret weapon in the people of US, which is a much-improved operation compared to five years ago. As I have posted before, I now fly more US segments than UA segments, and get treated better on US as a crossover elite / nobody than as a Plat on UA, especially during irrops.

I think spin88 has buried the lede; this is the crucial point out of all this; UA's management has diluted their own position to the point where they have to compete on price. As any MBA school teaches, that's the last position you want for yourself, because a competitor can always come in a dollar lower. Commodity carrier is right.

fly18725

You are the one who is combing media reports to copy-and-paste selective quotes from an analyst's to support your conclusions.

I am not going to debate the independence of analysts with you: that's a serious legal issue far outside my scope.

Here is what I originally said, "While no one may like the current management teams at United or other major carriers as a customer, they are among the most experienced and savvy at running a business than any other management team since Crandall left AA."

You continue to selectively revise history to suit your agenda.

AA did not lose most of the high-value TW traffic because of upgrade changes. AA's yield erosion after the TW acquisition was driven initially by a weakening economy and then 9/11.

HP/US's domestic yields haven't crashed, relative to their peers, since the merger.

What I call pig headed is the assumption that because UA couldn't avoid the issues encountered in previous mergers, UA's management must have ignored every single lesson learned.

There is no depth to the analysis found in this thread.

For what its worth, the only airline that has recently managed to increase yields without outsized cuts in capacity is Alaska. You continue to ignore basic facts, like how DL's yield growth is the result of very aggressive capacity reductions.

You're ignoring the basic fact that when presented with the opportunity to choose between US-based and foreign carriers, more America-based fliers pick the foreign carrier than the US carrier.

FlyingNut724

I think this is the most important point. UA has touted two things as being its advantages over competitors: the 787 and its network. I notice that UA is not hyping these items as much as it used to. These leaves it to compete on price.

UA-NYC

Any basis in this "fact"? I'd hazard a guess it's the other way around. Inertia would likely take most casual flyers (i.e., not FTers) to "my local airline" over "that exotic sounding foreign one", given a similar price level.

fly18725

My statement is based on O&D traffic data. Any casual observer could look at routes where US and foreign carriers directly compete, like NYC-LHR/CDG/FRA or LAX-NRT/HKG/SYD, to see that foreign carriers have a significantly larger share of the market than their US peers. On European routes, the foreign carrier likely has higher costs too.

AAExPlat

I am not a genius, but I do work in the securities industry. I am almost certain that fly18725 posting as he currently is would be considered problematic by the regulators (if thy found out). If I were him, I'd be done here.

FWAAA

I disagree. AA increased its mainline yield by 4.5% in 2012 compared to 2011 on 1.1% less capacity; much of that capacity reduction was due to its pilot work action and excessive sick calls throughout 2012. I wouldn't characterize 1.1% as "outsized cuts in capacity." Here is AA's year-end results:

http://hub.aa.com/en/nr/pressrelease...h-quarter-2011

As a result of the slight reduction in capacity, AA increased its mainline PRASM by 5.6% in 2012.

How did UA perform in 2012 compared to 2011? Mainline yield up 0.6% on 1.4% reduction in capacity. Mainline PRASM up 0.8%. During 2012, AA overtook UA on mainline yield and PRASM.

UA-NYC

Feel free to post some actual data / links here, and then we'll talk

fly18725

The term banker has broad meaning, and is inclusive of merchant and investment banking services. My comments are my personal opinion and do not include proprietary customer data.

Your threat is taken under advisement.

FWAAA

I think the desirability of foreign carriers is dependent on their location and reputation.

For example, Cathay Pacific dominates traffic between North America and Hong Kong, but that's due to their hub at HKG and their reputation as a first-world airline with a better quality than UA or DL. Compare the CX market share between HKG and N America to the mainland Chinese carriers between USA and mainland China. Among USA-orginating traffic, UA, DL and AA own that market - very few Americans are choosing to fly the Chinese carriers across the Pacific. The DOT has mentioned in its route cases the overwhelming preference of Americans to fly domestic USA-based airlines to China compared to Chinese carriers.

SQ is a very high-quality airline and many rational travelers choose it ahead of any other choice. No surprise there.

Similarly, QF dominates the USA-Australia market compared to UA. Doesn't hurt that Australia-originating traffic is very strong compared to USA-originating traffic. Virgin Australia and Delta have made small inroads but QF still dominates.

Europe? Many European airlines are high quality and preferred over USA-based choices, but "buy American" rules have historically helped the domestic carriers.

UA-NYC

Yup - look at NYC-CDG. AF runs the A380 (and has a number of flights per day) - but there are 3 US carriers running that route, vs. one from France. Can make the same argument for AMS, FRA, etc.

halls120

I was wondering the very same thing.