The Big Picture

[Light Years]

Why on earth we would be interested in Washington Dulles is beyond me. Maybe we can also fire up a hub at Trenton, NJ, and Wilmington, DE while were at it. They have a plethora of hubs and focus cities on the East Coast- U is still the biggest airline east of the Mississippi.

United's East West hubs at SFO, DEN, and ORD combined with our North-South hubs at PHL and CLT, and focus cities in the high O&D cities of BOS, DCA, and LGA make for one killer route structure and I do think they will be incorporated together in some way in the future.

The last time, when the industry was doing great, they wanted to do it in the classic merger way, keep everything, no furloughs, no fare hikes etc etc and it still didnt go through. Now theyve had the chance to ride a national tradgedy in order to get everything they want- close this hub, furlough these folks, rape that contract, replace the mainline with contract RJs, outsource this and that, build the new domestic mainline (MDA- now that weve allowed this it will be industry standard) etc etc. Build the airline they want before combining it- how that goes remains to be seen... but something along the lines of AA-TWA or a full out liquidation and "asset re-purchase" of one of the airlines seems to be the way its heading.

Lufthansa is absolutely very well connected in this and will be very involved in the resulting USA Star Alliance carrier- be it an Airways or an Airlines.

 

[USA320Pilot]

Light Years:

I agree with your entire post and Siegel's interest in Dulles is surprising.

Your analysis is correct and is one of the most important reasons the parties have discussed the UCT.

The UCT would allow both companies to survive, increase US Airways' ASMs/stage length to drive down costs, combine facilities to drive down costs at both carrier's, and provide United with exit financing.

However, the key issue is the UCT would permit the companies to not integrate labor forces, which would eliminate a lot of problems.

Your route network analysis is valid and according to Stephen Wolf, pre-September 11 United's E&FA Department believed the US Airways merger fundamental’s would have generated a $1.6 to $1.9 billion increase in revenue annually.

Post September 11 and with the Delta, Northwest, & Continental tri-lateral alliance now in place, I suspect the UCT revenue increase would be lower, maybe by something like $600 million per year. Thus, the UCT could increase revenue for the two companies by maybe $1.0 to $1.3 billion per year.

I still believe United will survive, but if ALPA president Duane Woerth's comments are true and United cannot currently get exit financing to emerge from bankruptcy, how can they acquire another company?

Respectfully,

Chip

 

[RowUnderDCA]

As far as the big picture, I agree, IAD is problematic for U/UA. That is if U/UA agree as to the value of PHL.

I'd acknowledge a couple of things about IAD.

1. As mentioned its too close to PHL, DCA and PIT. Therefore creates too much capacity for mid-atlantic connectivity. I'm not in touch with the O&D out of IAD, but I don't think it makes such a great connecting point, considering the other assets.

2. IAD has major capital improvements coming down the line. Does ANY airline really want to sign up for those debt payments?

3. If PIT does go for U's proposed debt cost reduction, PIT will be much more attractive for midatlantic connectivity. It will be more attactive for both U and UAL.

4. I'd suspect that the regulatory posture of the DOT has changed since the growth of LCC's. Presuming debt cost reduction, I'd pursue a PIT RJ hub with increased transcon mainline providing most of the north/south connectivity; a PHL international hub and modest hub operation, focusing on O & D; an IAD international hub, supporting UA int operations AND star alliance operations AND service to destinations that cannot be served from DCA (kind of a duel hub operation, as is really required by the perimeter rule).

5. In response to DL/NW/CO, I still wouldn't merge U/UA, but I'd explore combining the FF programs. Star Miles, anyone. You know. like Green Stamps.