Continued Losses

[mrfish3726]

Interesting read from the RMN

said the plan was "feasible" but subject to "many assumptions and execution risks."

United hasn't released full details of its strategy, which is designed to lift it from bankruptcy next year.

Bridge said it was advised that no single document existed that constituted the entire business plan. Rather, the plan is an amalgamation of reports by managers and consultants.

"To the extent that in the aggregate the company does not achieve the revenue enhancement, contractual and other cost and cash savings projected, (the plan), while feasible, may not be achievable," it said. :blink:

United declined to release the full report. B)

http://www.rockymountainnews.com/drmn/busi...3413815,00.html

 

[ualdriver]

Let’s try another approach. I’ll use the same pretty pictures and words that UA used in its filing with the SEC and the bankruptcy court on 12/15. … you know the one in which they asked to terminate the employee defined benefit pension plans and the contracts if they don’t get what they want? Try pages 25-35 where UA talks about the revenue environment......
View attachment 2310

[post="230696"][/post]​

World, yield is one component of a product that MAKES REVENUE. No one is arguing that yields have come done from where they were. I'm looking at what UAL filed WITH THE SEC. DESPITE the decrease in yields your "pretty picture" shows, revenue for the nine months ending SEPT '04 which is the most current information I have for now until the full year's data has come out shows that REVENUE HAS GONE UP despite declining yields at UAL.

Now what you are arguing is that sometime, in the future, yields may decline to the point where it will have an impact on REVENUE to the point where REVENUE will no longer exceed COSTS. Maybe in the future you'll be right. It's certainly the case right now but I argue that at UAL cost problem is about to be fixed in the up and coming 6-12 months assuming no major setbacks that are impossible to predict. What I'm saying is that from what I have seen so far filed with the SEC, UAL's revenue is increasing year over year DESPITE industry sucking yields. Once UAL cuts its costs so much by cutting labor, renegotiating leases, cancelling pensions, etc., etc., our revenues for the forseeable future will be greater than what I anticipate what our costs will be (see my previous post for the actual numbers I used) and suddenly we're profitable despite crappy yields.

Your taking general, individual components that make up the problems the airline industry has and are applying them to UAL. I'm looking at the real, no-$hit numbers that UAL filed with the government, looking at our NET loss for the year, subtracting out what I think will be decreases in cost for '05 and beyond, assuming flat revenue when revenue has actually gone up, and seeing that we may have a profitable entity going forward assuming no catastrophes. If you want to believe that revenue at UAL is going to continue to decline faster than cuts can be made despite what the numbers for the last 9 months of '04 are stating, I guess you're entitled to your opinion.

 

[Fly]

But he still can't answer how it is ok for Delta to lose buckets of money and still be the example for us to follow.

 

[WorldTraveler]

You are taking 2004 data to date and saying that UAL has fixed its revenue problem because they were absolutely at the bottom of the industry in the year that began right before their bankruptcy and persisted for a year. Of course you begin to turn revenue around and year over year comparisons look good when you have fallen as far as United revenue fell in the 2001-2003 time period.

When United and USAirways are compared to the four solvent legacy airlines, the bankrupt duo currently has a lower percentage of revenues today (I have compiled the statistics through 3Q 2004) than they did in the two years before 9/11; the statistics also tell the same story if a snapshot date sometime in 2002 is also used. I have posted the statistics before and invite you to either review my statistics or pull them and compile them for yourself. UA would have to increase its revenues on a level of about 10% to be back in the same league (percent of retained revenue) as AA, CO, and DL; NW has done an even better job at retaining revenue through 9/11.

Trends are built over years – not just over the last 12 months. If you think UAL has fixed their revenue problem in the past year, I certainly can’t argue with you but I’m terribly afraid you will be sorely disappointed by the summer of 2005 when the revenue environment has sunk to even lower lows.

No solvent carrier has taken the tact that they will shrink their domestic system in order to return to profitability. In fact, UAL is actually shrinking the entire network by about 3% by hoping that international revenue will make up for domestic revenue. Like UA, AA and DL have been impacted by the changing industry dynamics more than NW and CO because the latter two did a better job of controlling costs in the 90s and also fly to markets which have been less impacted by low fares than have the big 3. Yet, AA and DL both have made increasing domestic capacity and efficiency as cornerstones of their turnaround plans. Seems to me that they fully expect that average fares/revenue/yields will continue to shrink and it will require more and more work to get the same amount of total revenue. By shrinking domestic capacity, United is leaving itself very vulnerable to further declines in yields which will drop directly to the bottom line. And the wise flight attendant realizes that once you give up market share, it’s near impossible to get it back.


Again, don't let me take away your hope. But if I were you, I would ask serious questions about UA's revenue instead of simply agreeing to cost cuts in the expectation that UA will then be able to make the checkbook balance.

 

[WorldTraveler]

Fly,
show me what's so tilted to DL about the commentary I just posted?

You also keep forgetting that DL's FIRST post 9/11 employee salary cuts just went into effect 3 weeks ago for pilots and go into effect for non-pilots on New Years Day.

UA is on round 2 and US is on round 3...

 

[uafa21]

Driver you can call me a dumbsh** if you want. The summer of 2000 did drive away many of our corporate customers. You can't treat customers as we did that summer.

The lcc's where present, this just hepled to insure they had more of a foothold. I don't care what excuse you make. Other circumstances happened as well like I said before. It was not all the summer of 2000. Now we depend on the asian markets for growth and revenue. When other carriers gear up and operate that market it will soon lower the ticket prices as well.

The Asian airlines ARE gearing up and they will be a force in those markets. Ua needs to get a business strategy that works.

 

[Cosmo]

Yet, AA and DL both have made increasing domestic capacity and efficiency as cornerstones of their turnaround plans. Seems to me that they fully expect that average fares/revenue/yields will continue to shrink and it will require more and more work to get the same amount of total revenue. By shrinking domestic capacity, United is leaving itself very vulnerable to further declines in yields which will drop directly to the bottom line.

IMHO, your logic is flawed. Why should any airline -- United, American, Delta or anyone else -- increase domestic capacity in the face of low and continually declining domestic yields, rather than increase international capacity at a time of rising international yields, especially with equipment that is optimized for long-haul international routes? And it's certainly more efficient for United to add, say, a daily IAD-MAD nonstop round trip (which incidentally would tie together two Star Alliance hubs with traffic feed at both ends) with over 16 hours of daily aircraft utilization, as opposed to operating several shorter, higher-CASM domestic sectors each day with a total daily aircraft utilization of probably no more than 12 hours.

If, as you say, falling yields go straight to the bottom line to reduce profits (or increase losses), it would seem that those carriers with larger domestic operations would be more vulnerable to this phenomenon. Thus, under the scenario you outlined, it appears to me that United's actions to shift some current domestic capacity to its international operations is the proper course of action to take to lessen its vulnerability. Let's remember that the object here is for the network majors to maximize network profitability, not to maximize domestic revenues (after all, there's a reason they're called network majors). And while these two goals are not necessarily mutually exclusive, if only one of the two can be attained, the maximization of network profitability is clearly the one to seek. And that's exactly what I believe United is doing.

 

[WorldTraveler]

I absolutely think UA should shift as many resources as possible to international flying as possible - and that is what AA and DL are doing. However, UA is actually shrinking system capacity. Further, UA still receives 65+% of its revenue from the domestic marketplace and must fight to stay in the markets it chooses to serve. US and DL's strategy of completing closing a failing hub and redeploying assets to the remaining hubs that can be supported makes more sense than shrinking every part of the system by a thousand cuts.

 

[mrfish3726]

Worldtraveler,

Problem with UniTED is that they think all their HUBS are money makers :blink:

If they closed any HUB it would be DEN, you could count on that. But UniTED management isn't as smart as AA or DL management. They don't know when to retrench!

 

[Fly]

If they closed a hub it wouldn't be Denver. There is NO competition in Denver.

 

[ual777fan]

If they were to close one it would probably be Dulles, or if they are really dumb LAX.

 

[mrfish3726]

Exactly FLY no cometition no worries, right???? To much competition at their other hubs and to important for connecting pacs to your overseas routes. UniTED's whole domestic market is in shambles from LCC competition. You got competition everywhere you look, that's why you can't make ANY MONEY PERIOD! Let me re-state that, "If they closed ANY hub operation it would be DENVER over LAX, CHI TOWN, DULLES, or SAN FRAN.

Remember Delta walked from DFW which was every bit as big a hub as UniTED is in DENVER. So FLY never say NEVER!!!

 

[Cosmo]

Further, UA still receives 65+% of its revenue from the domestic marketplace ...

C'mon, we're having a good debate, but I expect you to get your facts straight!

According to Exhibit 45 on page 108 of United's filing with the bankruptcy court last week, United currently gets 65% of its traffic from domestic markets but only 54% of its revenues from domestic markets. Moreover, United expects those percentages to drop to 59% and 45%, respectively, once its forecast domestic-to-international capacity shift occurs in 2005. As I've mentioned previously, this shift will lower United's exposure to the declining yields in the domestic marketplace, probably to a greater extent than the other network majors, and help to ameliorate any negative effects on its CASM from the small (roughly 3%) systemwide capacity reduction that the carrier will implement.

 

[casual rat]

Worldtraveler,

Problem with UniTED is that they think all their HUBS are money makers :blink:

If they closed any HUB it would be DEN, you could count on that. But UniTED management isn't as smart as AA or DL management. They don't know when to retrench!

[post="230832"][/post]​

Thank you for providing further evidence with respect to your stupidity. UA isn't going to leave Denver because you got fired Chum. Get over it. Go to a Bronco game....buy a pretzel. Why would they leave DEN? Give me a reason instead of farting your ignorance. Like hard numbers maybe, not just some peon's opinion.

 

[Cosmo]

Remember Delta walked from DFW which was every bit as big a hub as UniTED is in DENVER.

You're not even close with this analogy. United (mainline and Express) has about 100 more daily flights at DEN compared to Delta (mainline and Connection) at DFW, and United's percentage of mainline to total flights at DEN is much higher (60%-70%) than Delta's at DFW (20%-25%). Thus, United carries literally millions more passengers through DEN than Delta does at DFW. But most importantly, United is by far the largest carrier at DEN (by at least a 2-to-1 margin in passengers over #2 Frontier) while Delta is a distant #2 at DFW to American (by at least a 3-to-1 margin). That's why Delta is closing its DFW hub at the end of January and why United will continue to operate its DEN hub.