Fish,
DL is DFW is quite different than any other hub situation. DFW is the only other hub besides ORD that is shared by two legacy carriers. DL never has made DFW work in large part because AA has aggressively expanded DFW when doing so for DL would have made no sense for ATL or SLC. ORD will be the only 2 legacy airline hub left and it continues to exist because it is protected from additional service by any carrier because of air traffic constaints. DL was simply overhubbed, a condition that is unnecessary particularly in light of the increase in the number of regional jets with their longer ranges when compared with turboprops before them.
Cosmo,
You are right on the revenue and traffic percentages for domestic vs. international. I stand corrected. Although 55% of revenue is certainly an improvement compared with 65%, United is and will continue to derive the MAJORITY of its revenue from the domestic marketplace. My position is unchanged that UA will continue to be vulnerable to revenue shrinkage in the domestic marketplace. If United can increase international revenues faster than the losses grow on the domestic revenue and enough to cover the current system losses, then UA clearly wins. Although United has a substantial headstart on its way to becoming an even larger international carrier relative to its domestic operation, other carriers are pursuing a similar strategy but are not necessarily shrinking their domestic operations in order to become more international.
The arguments that you, driver, and others make are all factually accurate. It should be obvious that I am looking at the future in light of the past along with a look at the present. I believe I am justified in saying in light of the history of other airlines and even other businesses in other industries that once a company shrinks its presence in a particular geographic region, it most often leads to further losses rather than a financial improvement. Since I cannot predict what will happen with United any more than anyone else can, I can only make a prognostication and stand by it. We’ll have to compare notes a few years down the road and see what we both have learned.
Turning attention to another reorganization related issue, I am struck by how willingly folks like ualdriver are willing to accept termination of the defined pension plan. As has been posted before, I believe the PBGC will use every legal move not only to delay UAL’s ability to terminate its defined benefit pension plans but will also seek to recover the payments which have not been made but which are legally due until the plans are terminated. Either one of those two efforts by the PBGC could keep UAL in bankruptcy for months if not years longer than planned which provides the creditors with more time to shop for new homes for UAL’s assets.
Further, I don’t think it is any mistake that Grinstein at Delta has quickly turned his attention from securing DL’s in-house finances to petitioning for pension relief for the legacy airlines. The PBGC is likely to end up w/ some additional pension obligations simply by virtue of one or more legacy airlines being unable to survive. Everyone recognizes that it is very dangerous to allow airlines that are trying to reorganize but are still operating to terminate their pension plans if for no other reason than it provides a huge incentive for other airlines to “stumble†in their attempt to reorganize so they too can get rid of their pension obligations. DL, with the second largest pension obligations, and the other legacy carriers have a very keen interest in obtaining pension relief for themselves solely to ensure their survival. DL’s pleas for pension relief certainly have competitive implications as well. If DL and other carriers are able to convince the government to help them, UAL will find it harder for them to pawn off their obligations on the PBGC. It is probably more likely than not that the other legacies will receive some help from the government given the very real risk of them being unable to pay such huge pension obligations in light of their own turnarounds which are tenuous at best. Even if the solvent legacy carriers are successful in stretching out their pension obligations, UAL may still be forced to pay their current pension obligations and will have larger near-term pension payments due by virtue of UAL’s total pension obligations which are the largest in the industry. While the whole pension issue is far from stable, Congress could well act to change pension funding regulations. UAL and US are clearly trying to move as fast as possible before laws are changed; it is possible UAL and US could succeed at terminating their pension plans while the other legacies are left with either current or revised pension funding regulations or be forced to quickly move themselves toward bankruptcy (highly unlikely given the huge difficulties US airlines have in getting out of bankruptcy).
Regardless, it is not at all certain that UAL will succeed at terminating its pension plans and wipe out its now past due pension obligations. Even if they do succeed at both of those exercises, UAL (and US) may not end up with a competitive advantage if the other legacies are allowed to spread their obligations out over a much longer period of time. Again, there is a tremendous amount of uncertainty regarding UAL’s future. Actions by the government and by competitors will certainty have an impact on UA’s ability to succeed in the future.
Again, your position are based on interpretation of current facts while mine includes an element of how the world could look based on very possible scenarios. I think the approach I take reflects prudent business planning and part of what I incorporate in my business and personal planning.
Since family is now descending on the house and I may be preoccupied for the next several days, let me wish you all a most blessed Christmas and, soon thereafter, a joyous and hopeful New Year.
