Posted by Deltawatch on U's board today.
United Airlines wants to buy rivals
Once it's out of bankruptcy
Highlights from Dallas Morning News Story
Bankrupt for two years, United Airlines Inc. has a new role in mind if it can reorganize: industry consolidator.
Look for his carrier to act, he said. (Tilton)
"For the industry to get to a position where it can genuinely make some progress through the current level of disfunctionality, there need to be fewer network legacy carriers," he said at the J.P. Morgan Airline Conference.
United, based in Elk Grove Village, Ill., lost $1.6 billion in 2004. But it's primed to be an acquirer because it has the best assets and will have used its bankruptcy to strengthen its finances for mergers, Mr. Tilton said.
"The perception of what's possible in the industry from two years ago has changed," he said.
"Two years ago ... you would have not thought possible what we have already done."
Union concerns
The bigger problem has been blending labor unions together, which causes fierce seniority wars and savages morale.
With United poised to terminate all its pension plans, unions are becoming "more and more aware of the realities" of the industry's dire economics, Mr. Tilton said.
Analysts agree unions have lost their ability to dictate wages and working conditions.
"We think unions must acknowledge that there aren't any more golden eggs to squeeze out of the airlines," said Ray Neidl of Calyon Securities in a recent research report.
The last obstacle, integrating different computer systems, facilities and aircraft fleets, "is just work," said Mr. Tilton, whose background is in the oil industry.
"I think there are synergies to be had."
With six large hub carriers fighting fast-growing low-cost competitors, the industry will remain drenched in overcapacity for years to come with no clear way to get planes out of the sky.
The largest carriers are expected to lose more than $1 billion this year despite record demand for air travel.
Even top dog Southwest Airlines Co. has felt the pain of too many seats.
Its average fares fell 5 percent in January compared with last year, chief financial officer Laura Wright said at the conference.
Southwest's rivals will add an average of 10 percent more capacity on competitive routes this year, she said.
"There's just a tremendous amount of seats in the market," she said.
That's not stopping Southwest from increasing its schedule by 10 percent in 2005 compared with 2004. It's increasing its fleet by 29 new planes.
IT'S ALL UP IN THE AIR
Who might United Airlines might want to acquire?
US Airways: Got left at the altar with United in 2001; networks fit well together
Delta Air Lines: Probably too big to pass antitrust muster but would pose the fewest union hurdles.
Northwest Airlines: Stubbornly independent and has Asian routes that overlap a lot with United's. A bad match for airport hubs.
Continental Airlines: Great brand and strong hubs, but weakening balance sheet may force some tough decisions.
American Airlines: As unlikely as great airline coffee.
Southwest Airlines: In United's dreams. Southwest could buy several Uniteds with its current bankroll.
United Airlines wants to buy rivals
Once it's out of bankruptcy
Highlights from Dallas Morning News Story
Bankrupt for two years, United Airlines Inc. has a new role in mind if it can reorganize: industry consolidator.
Look for his carrier to act, he said. (Tilton)
"For the industry to get to a position where it can genuinely make some progress through the current level of disfunctionality, there need to be fewer network legacy carriers," he said at the J.P. Morgan Airline Conference.
United, based in Elk Grove Village, Ill., lost $1.6 billion in 2004. But it's primed to be an acquirer because it has the best assets and will have used its bankruptcy to strengthen its finances for mergers, Mr. Tilton said.
"The perception of what's possible in the industry from two years ago has changed," he said.
"Two years ago ... you would have not thought possible what we have already done."
Union concerns
The bigger problem has been blending labor unions together, which causes fierce seniority wars and savages morale.
With United poised to terminate all its pension plans, unions are becoming "more and more aware of the realities" of the industry's dire economics, Mr. Tilton said.
Analysts agree unions have lost their ability to dictate wages and working conditions.
"We think unions must acknowledge that there aren't any more golden eggs to squeeze out of the airlines," said Ray Neidl of Calyon Securities in a recent research report.
The last obstacle, integrating different computer systems, facilities and aircraft fleets, "is just work," said Mr. Tilton, whose background is in the oil industry.
"I think there are synergies to be had."
With six large hub carriers fighting fast-growing low-cost competitors, the industry will remain drenched in overcapacity for years to come with no clear way to get planes out of the sky.
The largest carriers are expected to lose more than $1 billion this year despite record demand for air travel.
Even top dog Southwest Airlines Co. has felt the pain of too many seats.
Its average fares fell 5 percent in January compared with last year, chief financial officer Laura Wright said at the conference.
Southwest's rivals will add an average of 10 percent more capacity on competitive routes this year, she said.
"There's just a tremendous amount of seats in the market," she said.
That's not stopping Southwest from increasing its schedule by 10 percent in 2005 compared with 2004. It's increasing its fleet by 29 new planes.
IT'S ALL UP IN THE AIR
Who might United Airlines might want to acquire?
US Airways: Got left at the altar with United in 2001; networks fit well together
Delta Air Lines: Probably too big to pass antitrust muster but would pose the fewest union hurdles.
Northwest Airlines: Stubbornly independent and has Asian routes that overlap a lot with United's. A bad match for airport hubs.
Continental Airlines: Great brand and strong hubs, but weakening balance sheet may force some tough decisions.
American Airlines: As unlikely as great airline coffee.
Southwest Airlines: In United's dreams. Southwest could buy several Uniteds with its current bankroll.
