COSPILOT

And the Mai Tai's.

XLR26

And all of the seats.

pharmalady

The press release that somebody forgot to send out:

The Board of Directors of United Continental Holdings, Inc. is pleased to announce that it has voted to outsource Jeff Smisek's performance evaluation to his mother.

goalie

Where his mother promptly disowned him

sogboulder

When I first saw this, I though you said "drowned".

FlyWorld

That's an excellent analysis.

The new baggage enforcement will help with punishing customers to death by a thousand cuts. They ought to be able to collect at least $100 or so per flight in extra bag-check fees as a result of this policy. That means they now need only $412 per flight. I'm sure they can raise prices on some flights. They can also "give away" fewer upgrades to "over-entitled" elites. That ought to be worth at least $200 per flight. So, now they need only $212 per flight.

Thinking it through on a per-flight basis - how can they screw customers out of an extra $512 per flight - makes this seem doable if they focus on petty RyanAir style punishments and inducements. Which, is exactly what we see them doing.

They may very well get to the $1 billion.

But, at what price?

I used to say that $mi$ek was aspiring to convert COdbaUA into the RyanAir of America. People said I was full of hyperbole. Now, it's looking closer to the truth.

freshairborne

I tried…I really tried…to buy a couple of tickets for my wife and I on United for an upcoming vacation. They were almost double what I ended up paying. I am a loyal employee, but I'm not that loyal.

FAB

CApreppie

It is the sign of desperation when you only resort to cutting costs instead of innovation. So many examples in every industry where that strategy just leads to the end. He and his cadre of yes-executives need to go.

UnitedFlyGuy

I'm loyal as well but almost every fare is double than most of the competitors. I can't afford that. I just always go with the lowest price for my family.

spin88

I have posted this same figure elsewhere. But what is stunning a about it, is that UAL has underperformed estimates since Jeff took over, yet this Forward P/E (which looks at anticipated earnings in 2014) is based upon an assumption that DL will make as much in 2014 as it make in 2013, but UAL's profit will DOUBLE.

The markets are just being ridiculous. I can't explain it. UAL is not going to magically double its profits next year, the estimates will come down over time (as they have the entire time Jeff has been in charge) and the stock is badly overvalued at this point.

Some interesting articles (including a rant by Joe B...[know UA hater] on how out of touch UAL management is. They think they have created an airline that everyone just has to fly, can't figure out why revenue is lagging.

FWAAA, I ran the numbers comparing DL's performance to UAL's since Jeff took over (last two years performance):

Delta 3Q 2011-2013

Revenue up 6.8% (from 9.81B to 10.49B)
Operating income up 81.3% (from $860M to $1.56B)

Yield up 7.2% (from 15.72 c/mi to 16.85 c/mi)
PRASM up 6.9% (from 13.54 c/mi to 14.48 c/mi)
CASM down ( 1.3%) (from 14.16 c/mi to 13.97 c/mi)

UAL 3Q 2011-13 (UAL used sUA numbers in its 2011 3Q 10Q for yield/PRASM, sCO's yield was slight higher while sUA's PRASM slightly higher, so it should balance out)

Revenue was up .6% (from 10.17B to 10.23B)
Operating income was down 45% (from $935M to $510M)

yield was down ( .3%) (from 16 c/mi to 15.96 c/mi)
PRASM was down (.3%) (from 13.75 c/mi to 13.71 c/mi)
CASM was up 5.4% (from 14.18 c/mi to $14.94 c/mi)

So, had UAL had Delta's yield growth, it would have had another $736M in revenue in 3Q 2013 ( 6.9% + .3% = 7.2% x 10.23B )

Had UAL had Delta's CASM control (for example not adding extra staffing for SHARES) it would have saved $651M in expenses in 3Q 2013 ( 6.7% x 9.72B in operating expenses)

So there are major revenue and cost problems. But UAL has already cut passenger facing costs dramatically (food, drink, blankets, pillows, now FF program) and revenue has fallen. The issue is not that UAL spends to much on passenger facing costs (I think they spend too little), but that they have inefficiencies due to SHARES and resulting high staffing costs, and very high aircraft costs with so many expensive RJs, and new AC costs.

However, I expect the cuts will be more passenger facing cuts (expect hold/line times to go up dramatically, they will further cut catering, although its hard to believe they can get much more out of that stone) and a further effort to squeeze incremental revenue out of passengers. The net result will be lower customer satisfaction and a further loss of revenues.

The great sucking sound you hear is UAL going down the drain...

tods27

But you are talking about raising revenue, while the UA management talked about cost savings. Just think what taking $512 of service out of flights would mean... No more movies (ala US)? Decreased beverage selections? Mandated "no full can" policies? No free headphones (bring yer own, beotch!)?

Obviously, the cuts need to come from somewhere...

davewho??

Fascinating analysis.

JNelson113

So now that the evidence is overwhelming that Jeff and co are running United into the ground, how long until the board HAS to get a new management team? How many more false promises will be accepted?

FlyWorld

You're right.

I don't understand where the cuts can come from.

This is the worst and most poorly performing and most hated airline in the country.

What's left to cut? Really. This is not hyperbolic nor rhetorical. I'm not aware of any benefits that I'm receiving as a customer that could further be cut to yield $1 billion in cost savings without crossing a line that would then bring us into comparison with such airlines as Ukraine International, Turkmenistan Airlines, or Syrianair.

We're at the point where RyanAir is starting to look good by comparison.

Further, I thought the big win for Jeff was the 787. How's he supposed to acquire and pay for those shiny new planes while also cutting $1 billion a year in expenses?

Have you studied the board? The board is staffed with his cronies. Most of them are from CO and/or Houston.

Nothing will change from this board.

We won't see change until they start posting massive losses and/or the stock tanks. Unless one of those things happens, Jeff stays in office and takes home $10,000,000 a year while he's cutting $1,000,000,000 a year.

STS-134

$512 per flight? Good luck finding that. The more UA cuts, the less desirable its product becomes compared to its competitors, and the less people are willing to pay for it. If fares drop by just $5, then that would "lose" UA $500 million, right (assuming increasing fares by $10 would "gain" UA $1 billion, all else being equal).

But the problem is, not everything else remains the same. UA does have competitors, even though Jeff doesn't believe it does. And just a few pax defecting to its competitors would force UA to lower prices in order to fill seats, and the spiral of death continues.

Agreed. THIS board isn't going to change things. The INVESTORS are going to have to change things, first by kicking out the board, and then having the new board kick out Smisek.