February 02, 2003
United could be first war casualty
By Paul Merrion
If war erupts in Iraq, one of the first casualties undoubtedly will be United Airlines.
The double-whammy of skittish passengers and soaring oil prices threatens to push an already-teetering United into liquidation, says Sanford “Sandy†Rederer, president of Virginia-based consultancy Aviation Planning & Finance. “It depends how bad the public reaction (to war) is in terms of travel demand.â€
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Short-term survival would become the order of the day, putting United’s long-term restructuring plans on hold.
In the event of war, all airlines would sharply reduce flight schedules immediately, as they did after the Sept. 11 terrorist attacks and during the Persian Gulf War in 1991. In addition, UAL Corp., United’s Elk Grove Township-based parent, could ask the Bankruptcy Court to impose emergency reductions in labor costs.
And there would probably be a call for federal relief to help the airline industry, perhaps by reopening the government-guaranteed loan program created after Sept. 11.
United’s failure to win such a loan deal pushed it into bank-ruptcy in December. That move gave the airline more breathing room with creditors and more leverage over unions to create real growth potential by slashing labor costs. Last week, UAL CEO Glenn F. Tilton unveiled the linchpin of his plan to dig out of bankruptcy: a controversial discount-airline subsidiary aimed at leisure travelers.
But an outbreak of hostilities overseas “will definitely make things more complicated†for United’s low-cost-carrier concept, says Ron Kuhlmann, vice-president of Unisys R2A Transportation Management Consultants, based in Hayward, Calif. “The leisure traveler won’t take vacations. All discretionary travel will be less. They may not have as many passengers as they thought they would.â€
United is already at war with its unions over the low-cost-carrier plan, which executives presented last week in substantial detail to the company’s board of directors and the bankruptcy proceeding’s committee of unsecured creditors.
Internally code-named “Star-fish,†according to several sources close to United, the low-cost-carrier plan is deemed essential if United is to compete against Dallas-based Southwest Airlines, New York-based JetBlue Airways and other growing carriers that now offer low-fare competition for 72% of the passengers flown by United.
Complete coverage of this story appears in the Feb. 3 issue of Crain’s.
United could be first war casualty
By Paul Merrion
If war erupts in Iraq, one of the first casualties undoubtedly will be United Airlines.
The double-whammy of skittish passengers and soaring oil prices threatens to push an already-teetering United into liquidation, says Sanford “Sandy†Rederer, president of Virginia-based consultancy Aviation Planning & Finance. “It depends how bad the public reaction (to war) is in terms of travel demand.â€
Advertisement
Short-term survival would become the order of the day, putting United’s long-term restructuring plans on hold.
In the event of war, all airlines would sharply reduce flight schedules immediately, as they did after the Sept. 11 terrorist attacks and during the Persian Gulf War in 1991. In addition, UAL Corp., United’s Elk Grove Township-based parent, could ask the Bankruptcy Court to impose emergency reductions in labor costs.
And there would probably be a call for federal relief to help the airline industry, perhaps by reopening the government-guaranteed loan program created after Sept. 11.
United’s failure to win such a loan deal pushed it into bank-ruptcy in December. That move gave the airline more breathing room with creditors and more leverage over unions to create real growth potential by slashing labor costs. Last week, UAL CEO Glenn F. Tilton unveiled the linchpin of his plan to dig out of bankruptcy: a controversial discount-airline subsidiary aimed at leisure travelers.
But an outbreak of hostilities overseas “will definitely make things more complicated†for United’s low-cost-carrier concept, says Ron Kuhlmann, vice-president of Unisys R2A Transportation Management Consultants, based in Hayward, Calif. “The leisure traveler won’t take vacations. All discretionary travel will be less. They may not have as many passengers as they thought they would.â€
United is already at war with its unions over the low-cost-carrier plan, which executives presented last week in substantial detail to the company’s board of directors and the bankruptcy proceeding’s committee of unsecured creditors.
Internally code-named “Star-fish,†according to several sources close to United, the low-cost-carrier plan is deemed essential if United is to compete against Dallas-based Southwest Airlines, New York-based JetBlue Airways and other growing carriers that now offer low-fare competition for 72% of the passengers flown by United.
Complete coverage of this story appears in the Feb. 3 issue of Crain’s.
32 AM skyflyr69 wrote: 
