Is Ch11 unavoidable for UA next year?
Dec 14, 2013, 7:11 pm
#46
Join Date: Jun 2008
Posts: 4,187
Except for demanding FFers, there isn't a great deal of difference between UA and other "premium" domestic carriers - viz. AA/US, AS, DL, HI, & WN/FL. Yes, I intentionally list each of these as a "premium" carrier.
These carriers will steal customers back and forth among one another, but unless one of them ponies up some real capital to expand their fleets and networks, I don't see any of them (including UA) significantly growing their market share.
UA is far from providing the service which the LCCs - viz. G4, & NK (and possibly soon, F9).
The challenge is not the LCCs, it is the new middle in the airline industry - B6, SY, and VX. These airlines have lower costs yet provide excellent service. As they grow, and they will, UA and the other premium carriers will face some bleed, but that bleed will not be systemwide. UA will profit off those who willing to pay premiums for nonstop service ex-hubs and for those who travel between second tier cities which can only be served by airlines with developed networks.
Don't expect a Ch11, but do expect a continued decline in FF benefits and domestic perks. It may be contra to the wishes of the FF, but if the largest carriers can keep filling their seats, I wouldn't be too surprised to see a complete re-engineering of FF programs (read no credit for domestic flights) and a significant decline in F/C space on domestic aircraft. All the airlines need to do is to realize that they will all still make profit while racing to the bottom. It won't happen today or next year, but a decade or two from now... perhaps.
Dec 14, 2013, 7:21 pm
#47
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Time shall tell.
"Chief among the problems, according to Smisek, was ticket demand prediction forecasting that was way off the mark. During the third quarter of 2013, United apparently put a large number of low-yield advance purchase tickets into its reservations system that were snapped up early, leaving insufficient inventory available for close-in purchase of high-yield tickets typically bought by business and other last-minute travelers. The problem actually boosted airplane load factors, but significantly depressed yield."
People get upset at me for being so harsh towards UA's RM poor hiring practices but seriously, when your airline already has the worst products among major U.S. carriers, the least it can do is to hire skilled professionals who know how to forecast.
Time shall tell.
"Chief among the problems, according to Smisek, was ticket demand prediction forecasting that was way off the mark. During the third quarter of 2013, United apparently put a large number of low-yield advance purchase tickets into its reservations system that were snapped up early, leaving insufficient inventory available for close-in purchase of high-yield tickets typically bought by business and other last-minute travelers. The problem actually boosted airplane load factors, but significantly depressed yield."
People get upset at me for being so harsh towards UA's RM poor hiring practices but seriously, when your airline already has the worst products among major U.S. carriers, the least it can do is to hire skilled professionals who know how to forecast.
Dec 14, 2013, 7:28 pm
#48
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I seriously doubt that United will declare bankruptcy (regardless of Chapter or Channel) in 2014. That was, I believe, the extent of the OP's question.
Beyond that, don't many U.S. airlines have a long history of financial ups and downs - making a billion this year, then losing the same next?
Dec 14, 2013, 7:56 pm
#49
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The way I understand bankruptcy, doesn't a company have to be in some kind of financial trouble to be in it?
UA isn't. It's profitable. Its stock price is up. It has money in the bank.
Many of us find the product, the total UA experience, and management's attitude toward customers, intolerable. That doesn't lead to bankruptcy.
Not only in the estimation of this board but according to objective, quantitative measures from DOT to the University of Wichita's AQR study, UA offers a bad product - in some regards the worst air travel product in the country.
That doesn't lead to bankruptcy either. The world is full of companies selling bad products or treating customers poorly, from Sbarro to Comcast to Best Buy to whomever brews Iron City beer, that aren't going bankrupt.
On that basis alone this thread's premise is insane.
Well, go check out the BA forum sometime. I don't know which is worse, reflexive anger and criticism or slavish Stockholm syndrome. I tend to think the latter.
UA isn't. It's profitable. Its stock price is up. It has money in the bank.
Many of us find the product, the total UA experience, and management's attitude toward customers, intolerable. That doesn't lead to bankruptcy.
Not only in the estimation of this board but according to objective, quantitative measures from DOT to the University of Wichita's AQR study, UA offers a bad product - in some regards the worst air travel product in the country.
That doesn't lead to bankruptcy either. The world is full of companies selling bad products or treating customers poorly, from Sbarro to Comcast to Best Buy to whomever brews Iron City beer, that aren't going bankrupt.
On that basis alone this thread's premise is insane.
Well, go check out the BA forum sometime. I don't know which is worse, reflexive anger and criticism or slavish Stockholm syndrome. I tend to think the latter.
Dec 14, 2013, 8:05 pm
#50
Join Date: Sep 2004
Location: Chicago
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Posts: 681
I think a chapter 7 is more likely or a slow death by asset sale a la Pan Am or TWA. UA made it through Chapter 11 by keeping HVF sitting in its F/C cabin and a truly world class IT system that let them, no offense to AO, jettison human capital costs through automation, and the strength of their ASian network sure kept the cash flow going.
CO needs 4:1 UA of their surly staff to try to run this craptaculur operation on Eastern's antiquated 1980s IT platform. Everywhere you look they have more inefficiencies than can be humanly possible for a "business" operating in the 21st century on a 1980s IT platform
I see Smisek selling Pacific to a strengthened AA/US so he can raise the capital needed to pay for all his new planes as cash flow from HVF and corporate contracts disappear. Let's not forget the US government needs to shrink...so that gravy train will end and flights to ME are no longer needed to fly troops over there on inflated gov't tickets. Inexcusable that gov't employees, including congressmen, are not flying on the lowest non refundable economy fare; always.
I'm sure the folks on here love the UDUs and TODs, but each one of those mean a pmUA F-buyer / HVF is flying someone else with a passable Premium cabin/service like AA or DL. CO never understood premium, so don't expect a sudden revelation anytime soon.
I think WN buys the LatAM via HOU; service to third tier EU cities goes away and absorbed through everyone else's hub; AA takes over T1 at ORD; EWR is given over to domestic LCCs like Midway; WN/Frontier split DEN; AA wins LAX and DL takes over SFO with a VS/VA JV; IAD becomes a white elephant. The global airline industry will need someone to go out and my bet is on COua. Laker couldn't make a global LCC work and neither will the PeopleExpress HouCrew.
CO bought time from its impending visit to Chapter 11 by merging with UA, but when this should be the world's dominant airline based on pmUA customer base and premium service standards, and is instead rolling out a plan to cut another $2b because they are so far off their projections after driving away the UA 'sugar daddies;' you know something is rotting with the massive capex outlays that lie ahead. Heck they still don't even have wi fi on their planes...it's an absolute joke.
unfortunately if UA goes into Chapter 11, there won't be enough core customers, you know the 1P and 2P who spend $10-25k annually, to prop up his abomination so chapter 7 is only logical conclusion.
CO should've done a Chapter 7 20 years ago so the real airlines could have made it through the 2000s. This time I don't see where the lifeline comes from. US government will live with the Big 3 and let the VA, B9, Frontier, and AS pick up the slack and parse out UA key international routes to strengthen real airlines like AA, DL and WN.
sometimes marrying the pretty [airhead] chearleader results in a costly, messy divorce. Sad that the pmUA 'kids' will be the ones that suffer the most in this one.
CO needs 4:1 UA of their surly staff to try to run this craptaculur operation on Eastern's antiquated 1980s IT platform. Everywhere you look they have more inefficiencies than can be humanly possible for a "business" operating in the 21st century on a 1980s IT platform
I see Smisek selling Pacific to a strengthened AA/US so he can raise the capital needed to pay for all his new planes as cash flow from HVF and corporate contracts disappear. Let's not forget the US government needs to shrink...so that gravy train will end and flights to ME are no longer needed to fly troops over there on inflated gov't tickets. Inexcusable that gov't employees, including congressmen, are not flying on the lowest non refundable economy fare; always.
I'm sure the folks on here love the UDUs and TODs, but each one of those mean a pmUA F-buyer / HVF is flying someone else with a passable Premium cabin/service like AA or DL. CO never understood premium, so don't expect a sudden revelation anytime soon.
I think WN buys the LatAM via HOU; service to third tier EU cities goes away and absorbed through everyone else's hub; AA takes over T1 at ORD; EWR is given over to domestic LCCs like Midway; WN/Frontier split DEN; AA wins LAX and DL takes over SFO with a VS/VA JV; IAD becomes a white elephant. The global airline industry will need someone to go out and my bet is on COua. Laker couldn't make a global LCC work and neither will the PeopleExpress HouCrew.
CO bought time from its impending visit to Chapter 11 by merging with UA, but when this should be the world's dominant airline based on pmUA customer base and premium service standards, and is instead rolling out a plan to cut another $2b because they are so far off their projections after driving away the UA 'sugar daddies;' you know something is rotting with the massive capex outlays that lie ahead. Heck they still don't even have wi fi on their planes...it's an absolute joke.
unfortunately if UA goes into Chapter 11, there won't be enough core customers, you know the 1P and 2P who spend $10-25k annually, to prop up his abomination so chapter 7 is only logical conclusion.
CO should've done a Chapter 7 20 years ago so the real airlines could have made it through the 2000s. This time I don't see where the lifeline comes from. US government will live with the Big 3 and let the VA, B9, Frontier, and AS pick up the slack and parse out UA key international routes to strengthen real airlines like AA, DL and WN.
sometimes marrying the pretty [airhead] chearleader results in a costly, messy divorce. Sad that the pmUA 'kids' will be the ones that suffer the most in this one.
Dec 14, 2013, 8:06 pm
#51
Join Date: Feb 2003
Location: PHL
Programs: UA Plat, 2MM
Posts: 1,860
Like many I hope 2014 is the year to be rid of Jeff.
However, the questions seems to be, will UA be able to win back the herds of Elites who have left (after 18 yrs as 1K, I am now AA Platinum).
Once you have lost the Elites and corporate contracts it is very difficult, takes a very long time and tons of effort to win them back. I think because of the radical change in UA a very important business principle has been destroyed - Trust. Corporations and individuals look for a trust in a relationship and once that is gone, it takes a lot to rebuild that. Even with Jeff gone I do not think the herds (including myself) will be rushing back to UA. Once you get comfortable and use to something else ( like AA) you really are not looking to go back. That relationship is something of the past.
The only thing which might help UA to recoup the lost Elites is if Parker is really dumb enough to take the new AA down the destructive path that Jeff did to UA. If he has any sense he will learn from this business disaster and work very,very, very hard to avoid any of the pitfalls of Jeff. It is a TREMENDOUS opportunity for Parker to cater up to the former UA Elites. One companies disaster can be the gift to another company. Parker has a great opportunity here.
Elites will not rush back to UA. Trust is broken and the Board of Directors of UA have no one to blame but themselves.
However, the questions seems to be, will UA be able to win back the herds of Elites who have left (after 18 yrs as 1K, I am now AA Platinum).
Once you have lost the Elites and corporate contracts it is very difficult, takes a very long time and tons of effort to win them back. I think because of the radical change in UA a very important business principle has been destroyed - Trust. Corporations and individuals look for a trust in a relationship and once that is gone, it takes a lot to rebuild that. Even with Jeff gone I do not think the herds (including myself) will be rushing back to UA. Once you get comfortable and use to something else ( like AA) you really are not looking to go back. That relationship is something of the past.
The only thing which might help UA to recoup the lost Elites is if Parker is really dumb enough to take the new AA down the destructive path that Jeff did to UA. If he has any sense he will learn from this business disaster and work very,very, very hard to avoid any of the pitfalls of Jeff. It is a TREMENDOUS opportunity for Parker to cater up to the former UA Elites. One companies disaster can be the gift to another company. Parker has a great opportunity here.
Elites will not rush back to UA. Trust is broken and the Board of Directors of UA have no one to blame but themselves.
Dec 14, 2013, 8:16 pm
#52
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Last edited by cblaisd; Dec 14, 2013 at 8:22 pm
Dec 14, 2013, 8:49 pm
#54
Join Date: Sep 2004
Location: Chicago
Programs: UA1MM*GL/1K, AA, BnVy PlatL, HH Silver,
Posts: 681
Like many I hope 2014 is the year to be rid of Jeff.
However, the questions seems to be, will UA be able to win back the herds of Elites who have left (after 18 yrs as 1K, I am now AA Platinum).
Once you have lost the Elites and corporate contracts it is very difficult, takes a very long time and tons of effort to win them back. I think because of the radical change in UA a very important business principle has been destroyed - Trust. Corporations and individuals look for a trust in a relationship and once that is gone, it takes a lot to rebuild that. Even with Jeff gone I do not think the herds (including myself) will be rushing back to UA. Once you get comfortable and use to something else ( like AA) you really are not looking to go back. That relationship is something of the past.
The only thing which might help UA to recoup the lost Elites is if Parker is really dumb enough to take the new AA down the destructive path that Jeff did to UA. If he has any sense he will learn from this business disaster and work very,very, very hard to avoid any of the pitfalls of Jeff. It is a TREMENDOUS opportunity for Parker to cater up to the former UA Elites. One companies disaster can be the gift to another company. Parker has a great opportunity here.
Elites will not rush back to UA. Trust is broken and the Board of Directors of UA have no one to blame but themselves.
However, the questions seems to be, will UA be able to win back the herds of Elites who have left (after 18 yrs as 1K, I am now AA Platinum).
Once you have lost the Elites and corporate contracts it is very difficult, takes a very long time and tons of effort to win them back. I think because of the radical change in UA a very important business principle has been destroyed - Trust. Corporations and individuals look for a trust in a relationship and once that is gone, it takes a lot to rebuild that. Even with Jeff gone I do not think the herds (including myself) will be rushing back to UA. Once you get comfortable and use to something else ( like AA) you really are not looking to go back. That relationship is something of the past.
The only thing which might help UA to recoup the lost Elites is if Parker is really dumb enough to take the new AA down the destructive path that Jeff did to UA. If he has any sense he will learn from this business disaster and work very,very, very hard to avoid any of the pitfalls of Jeff. It is a TREMENDOUS opportunity for Parker to cater up to the former UA Elites. One companies disaster can be the gift to another company. Parker has a great opportunity here.
Elites will not rush back to UA. Trust is broken and the Board of Directors of UA have no one to blame but themselves.
He's got my $s for now.
When all three were standalone US was already miles ahead of CO based on some of my USA *A special routings involving all three. I'll never forget the CO F FA that walks up and barks/shouts "CHICKEN OR BEEF" before we took off. apparently that was his attempt at asking a meal choice of an F paying customer which CO never had before they joined *A. No pleasantries, not Mr mike1968, tonight our meal choices are... Just a Jersey shore meat head barking chicken or beef. The kicker was their chicken was actually a fish and this was pre merger. They then promptly disappeared per CO F service play book after their Half- a attempt at a meal service. so sad UA didn't merge with US and let CO fester.
How in the world they didn't upgrade that mess to UA standards in beyond comprehension,
Dec 14, 2013, 9:12 pm
#55
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Who cares if they 11 or not? They're a vendor, no more and no less.
When it suits my interests, they earn my business, but I have no more loyalty to them than I do bathroom tissue.
Check that. I do prefer Charmin.
When it suits my interests, they earn my business, but I have no more loyalty to them than I do bathroom tissue.
Check that. I do prefer Charmin.
Dec 14, 2013, 9:23 pm
#56
Join Date: Sep 2013
Posts: 20
Something very unfortunate financially would have to happen for UA to enter CH 11 next year. Bankruptcy is not a tool to address frequent flyer-alienating decisions or redesign cabins. It is a tool to restructure burdensome debt that is keeping the business for being solvent. UA's finances are in order - though trailing its peers - which means no judge would allow a CH 11 filing.
UA's woes are not financial. The airline simply has two faces: the one the passenger sees and the one its leadership sees. Leadership sees a merged United that serves more cities than ever, has a very competitive hard product on international flights and dominant hubs in IAH, SFO, EWR and IAD. It believes that operational challenges are behind them and every day things get better. Because of this vantage point they believe they don't need to offer as many incentives to gain/retain frequent flyers (we just want to fly United).
Of course, as we know first-hand, the actual UA experience leaves a lot to be desired. Yes, the network is expanded but as a passenger I could always get where I needed to go. Just because PMUA didn't fly to Quito, Ecuador, didn't mean I couldn't get there. I just flew another airline. Yes, the lie-flat hard product is competitive but the horrible soft product devalues it. Yes, there are people who are "hub captive" but the majority of passengers don't live in that environment. When choosing between other carriers with Wi-Fi, better on-time records, lower fees, lower fares, better service, and mainline aircraft, people will weigh their options and without a strong loyalty program to incent them they will defect. Unfortunately for UA another trip to the courts won't fix this problem. Only a new management point of view will...
UA's woes are not financial. The airline simply has two faces: the one the passenger sees and the one its leadership sees. Leadership sees a merged United that serves more cities than ever, has a very competitive hard product on international flights and dominant hubs in IAH, SFO, EWR and IAD. It believes that operational challenges are behind them and every day things get better. Because of this vantage point they believe they don't need to offer as many incentives to gain/retain frequent flyers (we just want to fly United).
Of course, as we know first-hand, the actual UA experience leaves a lot to be desired. Yes, the network is expanded but as a passenger I could always get where I needed to go. Just because PMUA didn't fly to Quito, Ecuador, didn't mean I couldn't get there. I just flew another airline. Yes, the lie-flat hard product is competitive but the horrible soft product devalues it. Yes, there are people who are "hub captive" but the majority of passengers don't live in that environment. When choosing between other carriers with Wi-Fi, better on-time records, lower fees, lower fares, better service, and mainline aircraft, people will weigh their options and without a strong loyalty program to incent them they will defect. Unfortunately for UA another trip to the courts won't fix this problem. Only a new management point of view will...
Last edited by iluv2fly; Dec 14, 2013 at 9:36 pm Reason: merge
Dec 14, 2013, 9:36 pm
#57
Join Date: Feb 2008
Location: Independent! But mostly BKK, BCN, SFO, PDX, SEA...
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Posts: 1,060
The way I understand bankruptcy, doesn't a company have to be in some kind of financial trouble to be in it?
UA isn't. It's profitable. Its stock price is up. It has money in the bank.
Many of us find the product, the total UA experience, and management's attitude toward customers, intolerable. That doesn't lead to bankruptcy.
Not only in the estimation of this board but according to objective, quantitative measures from DOT to the University of Wichita's AQR study, UA offers a bad product - in some regards the worst air travel product in the country.
That doesn't lead to bankruptcy either. The world is full of companies selling bad products or treating customers poorly, from Sbarro to Comcast to Best Buy to whomever brews Iron City beer, that aren't going bankrupt.
On that basis alone this thread's premise is insane.
UA isn't. It's profitable. Its stock price is up. It has money in the bank.
Many of us find the product, the total UA experience, and management's attitude toward customers, intolerable. That doesn't lead to bankruptcy.
Not only in the estimation of this board but according to objective, quantitative measures from DOT to the University of Wichita's AQR study, UA offers a bad product - in some regards the worst air travel product in the country.
That doesn't lead to bankruptcy either. The world is full of companies selling bad products or treating customers poorly, from Sbarro to Comcast to Best Buy to whomever brews Iron City beer, that aren't going bankrupt.
On that basis alone this thread's premise is insane.
As much as I wish it would (and I'm admitting straight up that I'm being bitter and biased - I think they suck and there's no place in the world for airlines like them) United will not go BK any time soon, nor will they be in any financial trouble. They have become too big to fail, and now with virtually no competition, they will soak their hub-captive fliers for every penny they can get and provide the least amount of service they can, except to GS. They literally have become the Comcast of airlines.
Maybe Smisek knew what he was doing all along...Wall Street sure seems to think so!
Dec 14, 2013, 9:36 pm
#58
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Dec 14, 2013, 9:53 pm
#59
Join Date: Sep 2010
Location: San Francisco Bay Area
Posts: 5,825
People that think you are a D-A, yes, but not upset with you.
If you had wanted to be objective, which I do not think you wanted to be, you would have posed the question in a less inflammatory way.
"Possible that UA could enter bankruptcy in 2014? What are the financial metrics that could cause a BK?"
Then you could have followed that with the metrics/results that you believe could cause UA to consider BK.
The only metric I think I saw you post was 'My company took away $35M in business'. Which, if true, could definitely have hurt UA. But not to the point of BK in 2014.
So, there is my answer: No, chances are far below 1% that UA will enter BK in 2014. Not going to happen.
As consolidation hits us all over the head, I would bet that it is much, much more likely that UA has a $75 stock price one year from now than that there is even a whisper of BK.
Is it time to start think about buying DJT?
Nah, crazy idea...
Dow Jones Transportation Average
Dow Jones Indices: DJT - Dec 13 4:32 PM ET
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Dec 14, 2013, 10:11 pm
#60
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Join Date: Apr 2001
Location: PSM
Posts: 69,232
If you start with assumptions like this - despite claims of being objective - it is quite easy to draw ridiculous conclusions. The company is nowhere close to being at an all-time low.