Code Share Partners And Ua's Future...

[767jetz]

It seems to me that with all the codeshare agreements UA is involved in, this is a big part of UA's future plans. I for one think that these agreements are potentially a win-win situation for the parties involved if handled properly.

Take the recent agreement with China Air for example. Not only will it initially bring some new flying to UA and more revenue as a downturn in leisure travel approaches, but it will potentially open up even more flying and feed into our system in the future.

Of course the opposite could be true if a codshare is not handled properly. Take USAir for example. If USAir were to continue struggling as the rest of the industry recovers, how would this affect feed to United? Would we be better off doing the flying oursleves?

Any comments or opinions about codesharing and UA's future, from UA persons or others with constructive insight are welcome.

Jetz

 

[UnitedChicago]

I agree Jetz. The Air China deal is HUGE. United simply has the best alliances in the industry. There are so many business opportunities to pursue with United's partners - they've barely scratched the surface.

By the way - your PM on you-know-who was spot on. I appreciate your discretion in keeping conversations with United's senior management private. If you-know-who actually does have the extensive dialogues with his CEO - I feel it's a horrible breach of ethics to report his comments (proprietary information) on a pulic forum. Especially when they are about to offer stock for sale. It's not the same as the "quiet period" during a typical IPO, but it still could be grounds for manipulation.

Safe travels!

 

[767jetz]

Since we are talking about codesharing partners and UA's future, I had one more comment to make after reading an interesting article from the Pittsburgh Business Times.

I don't remember where I heard this, but someone recently suggested that UA might be selling assets to USAir. The assumption was that USAir's negotiation with Pittsburgh was being held up pending the outcome of UA's restructuring.

After reading this article, it sounds to me more like USAir simply cannot afford their leases and are trying to cut a better deal through 11th hour negotiations. They may infact end up paying a 20% premium due to this tactic. How might this affect the feed from our east coast regional partner to UA's worldwide route structure? Also notice the comments about USAir alienating it's employees. How would this affect a UA customers travel experience?



Here are some excerpts from the article:

Lack of lease could cost US Airways
County says 20 percent premium could be assessed after Jan. 4
Christopher Davis

FINDLAY TOWNSHIP -- If US Airways' last-minute decision to reject its leases at Pittsburgh International Airport is any indication, the airline could again wait until the 11th hour to make its next move in the ongoing negotiations regarding its future in Pittsburgh.

County Executive Jim Roddey has accused the Arlington, Va.-based airline of moving unnecessarily slow in responding to the $264 million financial incentive and improvement package offered in June by Gov. Ed Rendell and local officials.

Industry analysts said US Airways likely is simply taking its time to evaluate its post-Chapter 11 financial situation, as well as looking for ways to land a better deal at Pittsburgh International.

"There could be some gamesmanship," said Ray Neidl, a New York-based airline analyst with Blaylock & Partners LP. "These types of negotiations tend to go down to the wire. I think they're just trying to get a deal they can afford."

Mr. Roddey accused the airline of using delay tactics and questioned its commitment to Pennsylvania.

"I think David Siegel's perfecting his unique management style, which is we'll burn that bridge when we get to it," Mr. Roddey said. "He's alienated all of the unions and all of the employees, and, now he's trying to do that with everyone he's negotiating with."

In the meantime, he said the Airport Authority is actively recruiting new airlines, in the event that US Airways pulls out. He said he hopes to have news on that front within the next 60 days.

Mr. Neidl, the Blaylock analyst, said other airlines might be interested in adding flights at Pittsburgh International, but he said it's unlikely they would want to establish hub operations here.

He said MidAtlantic's future in Pittsburgh likely is "safe," but that it's also likely that US Airways would cut its mainline service in Pittsburgh by as much as two-thirds.

He said the state's current offer to US Airways is probably unacceptable to the airline (767jetz adds: this could be the real reason negotiations are at a standstill), and Mr. Rendell's calls for it to commit to continuing service across Pennsylvania at small airports in cities such as Latrobe and Williamsport as part of the agreement are unrealistic.

"The airline has to do what it has to do to say alive, and the hub in Pittsburgh is no longer a must have. It's a maybe have."

 

[767jetz]

By the way - your PM on -deleted was spot on. I appreciate your discretion in keeping conversations with United's senior management private.

As you know I would never disclose news like that in public.

Thanks for your continued support.

jetz

P.S. I agree with your comments about Regional Jets and the east coast.

 

[737nCH11]

From a United employee's point of view, code-sharing is a double edged sword. On the one hand, you are pulling in feed from cities that UAL would never consider serving, i.e. King-Dong province in China. On the other hand, you are probably missing out on some international service that will go to the code-share partner. An example of this is Chicago-Munich ala Lufthansa.

The USAirways code-share is a different story. The northeast is so saturated right now that it would be foolish for UAL to bulk up it's operation there. USAirways is cash-strapped also, so it will be nearly impossible for them to expand out of the northeast at this time. Taking these facts into consideration, the UAL/U codeshare is a match made in heaven.

The only better option would be an outright merger of the two companies. I realize what a powder keg that would be, but former CEO Jim Goodwin was correct when he said that the USAirways system was a perfect fit with UAL. Judging by recent comments made by UAL CEO Tilton, I don't think that the UAL/U merger is dead. It also keeps popping up in conversations with my friends at UAL ALPA.

This time around I think a merger would work. I think everybody has been scared enough at this point to find a seniority integration system that works. Talking with some USAirways pilots recently I learned that the average age of their pilot group was around 46. It would be a simple matter to fence the widebodies for 15 years, and shuffle people together on the narrowbodies. I'm speaking from a pilot's point of view, so I wouldn't even begin to know how the mechanics and flight attendants would work this.

UAL could take the USAirways fleet and incorporate it into it's low cost carrier plan. The northeast would be a perfect place for this potent weapon. UAL can expand without adding capacity to an overburdened system, and all employees could look forward to a more stable working environment created by the joining of these two companies.

 

[767jetz]

737nCH11,

I think I agree with most of your comments. No matter what it would be a powder keg though. I never really considered the fact that with the current average age at USAir of 46, fences could work. This is what TWA did when it aquired Ozark. It is a good example of a large airline with worldwide reach, absorbing a smaller carrier of regional size. By the time the fences came down, the most senior pilots had retired or were close to retiring, and they did so on the aircraft they would have retired off of anyway. I suppose that could work.

Of course another issue would be the furloughs. Their recall rights and the order that they come back would be a hot topic.

Regardless, this is all academic because no one is in a postion to purchase anyone else in this environment. I think for now the most you will see is a deepening of the codeshare agreements. I see it more like a NWA/CO arrangement. I believe that is the best of both worlds, without the pitfalls.

But back on topic... I'd rather not let this thread deviate into a discussion of integration.

By the way, I forwarded your private comments to others. I think they all agree.

jetz

 

[767jetz]

Bear96, Busdrvr, novaqt, ual06, ZMAN777, ukridge, gatemech, Fly, & Cosmo,

Please check your PM's. Thanks.

Jetz

 

[USA320Pilot]

The new United ALPA Contract now states that M&A pilot seniority integration will be done per ALPA Merger & Fragmentation policy for an ALPA carrier corporate transaction. In addition, in the Successorship clause, the United pilots agreed that if less than 50% of the company's assets are sold, then none of the United pilots would to transfer to the successor.

For more information on the United pilot contract and seniority integration rules, you can look at Attachment G, Section 1, (Recognition, Scope, and Career Security), on page 29.

Interestingly, the United and US Airways pilot contracts now have identical seniority integration language. I wonder why the United pilots elected to eliminate the previous "pre-nuptial" integration clause contained in the ERP I and ERP II TA's?

In regard to fragmentation protection between the two business partner pilot contracts, the United pilots have 50% protection, whereas the US Airways pilots have to transfer with any assets sold if more than 15% of the assets are transferred.

Best regards,

Chip

 

[737nCH11]

Here is a question.....After adding the China codeshare does UAL now have the world pretty much covered? I can't imagine there being enough traffic in Africa or the Middle East for a partner there. Maybe Lufthansa has those regions covered?

 

[767jetz]

The Air China deal is HUGE. United simply has the best alliances in the industry. There are so many business opportunities to pursue with United's partners - they've barely scratched the surface.

Yes. This is why I believe that United will prosper and continue to grow. Besides offering a superior product, our route structure and worldwide reach is second to none. Expect to see gradual growth as the BK process comes to a close. And when the economy recovers further... Look Out!

United is aggressively building on it's strengths. A further reduction in size or a transfer of assets is no longer even on the radar scope. Also expect to hear more information about exit financing by the end of this year, once the POR is fine tuned and acceptable to the ATSB.

I just hope that troubles at our codeshare partners are resolved in a way that will not negatively affect UA's feed or revenue.

 

[737nCH11]

UAL LCC chief Sean Donohue did say that UAL was poised for growth upon exiting CH11. Let's hope he's right!

 

[767jetz]

Here is a question.....After adding the China codeshare does UAL now have the world pretty much covered? I can't imagine there being enough traffic in Africa or the Middle East for a partner there. Maybe Lufthansa has those regions covered?

Interesting Question.

I know that TWA used to do much flying to the Middle East, but pulled back significantly before they were bought by AA. One of the good things about being a worldwide presence like United and having international name recognition is that we have options not available to smaller regional airlines.

I think we pretty much do cover the globe with this China deal. With the exception of the Middle East. However, flying to that region right now, may carry more risk than benefit. Perhaps this would be a perfect place to codeshare. Let someone else deal with those risks.

 

[ual06]

Interesting Question.

I know that TWA used to do much flying to the Middle East, but pulled back significantly before they were bought by AA. One of the good things about being a worldwide presence like United and having international name recognition is that we have options not available to smaller regional airlines.

I think we pretty much do cover the globe with this China deal. With the exception of the Middle East. However, flying to that region right now, may carry more risk than benefit. Perhaps this would be a perfect place to codeshare. Let someone else deal with those risks.

How about those vast regions that used to be known as the USSR?

 

[767jetz]

How about those vast regions that used to be known as the USSR?

Oh yeah! Almost forgot about them!

 

[ual06]

Just a week ago, who would have every expected a code share with an airline in China? Could it be that a code share with Aeroflot is next in line? Perhaps through the Star Alliance?