United and it operating costs
Mar 18, 2004, 6:49 pm
#1
Original Poster
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United and it operating costs
Having just recently become a united flyer, I try to be optimistic about the airline's financial future. However, I was surprised about its operating costs shown in a chart in the NY Times business section today (in a story on AA). While the majors have similar costs per seat mile, united still has the second highest. In addition, AA seems to have made greater cost reductions and they are not under bankruptcy protection. I wonder what this means for ua's future.
Mar 18, 2004, 7:16 pm
#2
Join Date: Mar 2000
Location: NYC
Programs: UA 1K 2MM; SPG LT Platinum
Posts: 392
I wondered about this too - it's particularly odd in light of the fact that the article makes reference to UA saving $500 million more than AA in wages. If you add in lease savings and so on, you've gotta think UA should have a lower CASM than AA. Perhaps the figures include the losses/special charges that UA has made that are due to bankruptcy? That would possibly explain the discrepancy, and then I imagine that if you ignored the special charges maybe it would be as expected???
Not sure though - just a thought......
Not sure though - just a thought......
Mar 18, 2004, 8:01 pm
#3
Join Date: Jan 2004
Location: Chicagoland, UA 1k
Posts: 123
Until United actually finishes negotiations with aircraft lessors, etc, I am not really sure that United WANTS to tout how much it has reduced its CASM. I think in the end, its CASM will come down from the levels that it was, and while certainly won't be competitive with Southwest, will be closer than the NY Times shows...
Mar 18, 2004, 8:19 pm
#4
Join Date: Jan 2002
Location: Once Seattle...then DC....now CDG.
Posts: 4,059
Someone correct me if I'm wrong (such as B747), but I don't think United is releasing those numbers during Ch11, so I'm guessing it's comparing United's Pre-Ch11 numbers to AA's current numbers.
Either way, post-Ch11, I don't think you'll see United higher than AMR.
Either way, post-Ch11, I don't think you'll see United higher than AMR.
Mar 18, 2004, 11:58 pm
#5
Join Date: Aug 1999
Location: Fullerton, CA
Posts: 319
AA's costs (mainline alone) are currently the lowest of the Big 6.
As of last quarter,
AA CASM (mainline only) = 9.45 cents
United CASM (mainline only) = 9.85
Conitinental CASM (mainline only) = 9.53
According to United's 2003 annual report, ASM costs for the 4th Quarter 2003 reflect most if not all of the reduction in labor costs and some if not all of the reduction in aircraft rents. The annual report also indicates that UA's 4th Quarter results reflect the new capacity purchase agreements at United Express.
AMR recently reported that unit costs for the full year 2004 should turn out to be 9.34 cents.
While United can expect some more reductions in aircraft rents, those reductions could possibly be offset by the increased costs from capacity purchase agreements with Chautauqua. (The ACA replacement capacity could have come at quite a price.)
Moreover, United is still in jeopardy of being declared in default of its facility leases at ORD and LAX. Even if neither Airport authority succeeds in getting the right to evict United from its current facilities, United's failure so far to reach a settlement with either airport basically means that post-bankruptcy either airport entity could raise United's rent on gates and facilities to make up for any municipal bond liability United abandons. (Whichever way you cut it, this is bad news for United, particularly in Chicago, since with or without a settlement the city of Chicago has already signaled that it has no further intention of issuing municipal bonds to fund such things as new RJ terminals for tenant airlines.)
[This message has been edited by Scion (edited Mar 19, 2004).]
As of last quarter,
AA CASM (mainline only) = 9.45 cents
United CASM (mainline only) = 9.85
Conitinental CASM (mainline only) = 9.53
According to United's 2003 annual report, ASM costs for the 4th Quarter 2003 reflect most if not all of the reduction in labor costs and some if not all of the reduction in aircraft rents. The annual report also indicates that UA's 4th Quarter results reflect the new capacity purchase agreements at United Express.
AMR recently reported that unit costs for the full year 2004 should turn out to be 9.34 cents.
While United can expect some more reductions in aircraft rents, those reductions could possibly be offset by the increased costs from capacity purchase agreements with Chautauqua. (The ACA replacement capacity could have come at quite a price.)
Moreover, United is still in jeopardy of being declared in default of its facility leases at ORD and LAX. Even if neither Airport authority succeeds in getting the right to evict United from its current facilities, United's failure so far to reach a settlement with either airport basically means that post-bankruptcy either airport entity could raise United's rent on gates and facilities to make up for any municipal bond liability United abandons. (Whichever way you cut it, this is bad news for United, particularly in Chicago, since with or without a settlement the city of Chicago has already signaled that it has no further intention of issuing municipal bonds to fund such things as new RJ terminals for tenant airlines.)
[This message has been edited by Scion (edited Mar 19, 2004).]
Mar 19, 2004, 5:22 am
#6
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FWIW, United's pilot costs per available seat mile are now the lowest among the major airlines. In fact their pilot costs are now even lower than Southwest's.