Is United about to follow Aloha and ATA?

BoomerD

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Feb 26, 2006
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http://www.forbes.com/2008/04/...ml?feed=rss_popstories

Investors bailed out of UAL on Tuesday after concerns surfaced that the parent of United Airlines was not living up to conditions of its loans.

UAL lose 36.8% of its value on Tuesday, falling $7.88, to $13.55. The decline put pressure on the entire stock market. (See "UAL Tailspin Leads Wall Street Lower") (link below this story)

The company's first-quarter earnings report fueled speculation by analysts that the airline was not fulfilling loan covenants. Covenants are agreements with lenders that require the company to perform to certain standards or be forced to immediately redeem its bonds.

On a conference call with analysts, United management said it remains well above the requirements on its two bond covenants, but acknowledged that the company's trajectory is downward due to soaring fuel costs and revenue challenges, making it difficult to project compliance in coming quarters. The company added that publicly held data was not sufficient to determine its loan situation.

UAL reported a pretax loss of $537.0 million, or $4.45 per share, for the first quarter, far worse than its deficit of $152.0 million in the equivalent period the year prior.

It wasn't for lack of fliers. Sales were $4.7 billion, up 7.7%. The airline's available seat miles, or the amount of space for passengers to purchase, increased 15.9%, while its revenue passenger miles, or the amount of those seats actually sold, increased 8.6% in the quarter.

But the company reported a $618.0 million increase in fuel costs during the quarter. That's likely to get worse: light sweet crude rose to a record $119.37 per barrel on Tuesday.

"The path to sustainable profitability requires us to fundamentally overhaul every facet of our business," said Chairman Glenn Tilton of United.

That could include a loss of independence.

The planned merger between Delta Air Lines (nyse: DAL - news - people ) and Northwest Airlines (nyse: NWA - news - people ) has stirred up the aviation stew and caused many to speculate that United and Continental Airlines (nyse: CAL - news - people ) are the next to take the plunge. Both companies released statements saying they were looking into strategic alternatives but did not give any indication of plans to unite with each other.

Together, United and Continental would be the world's largest carrier, topping Delta-Northwest and American Airlines (nyse: AMR - news - people ), the current No. 1. The combined company would have $35.0 billion in annual revenues and nearly 100,000 employees.

That is if UAL doesn't continue to cut capacity before a deal can be made. The company said during its earnings report that it will ground 30 aircraft, 10 to 15 more than it initially announced last month. It said capacity will be reduced 9.0% by the fourth quarter of 2008 following a 5.0% reduction in the past fourth quarter.

The company said it will continue to pass costs onto the passenger in the form of surcharges and will cut 1,100 jobs to save money.

http://www.forbes.com/markets/..._ss_0422markets17.html


UAL has had its share of financial difficulties over the years, but the higher fuel prices may be enough to put them under. Sad, because I've always experienced great service when I flew United. At this rate, there won't be ANYONE left flying except the military jets.
 

AndrewR

Lifer
Oct 9, 1999
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Here's a thought for the airlines: How about trying to emphasize customer service with such things as free on-board snacks and drinks (American has eliminated that, at least one some flights), or perhaps not losing baggage at a prodigious rate, or not cramming people into seats spacious enough for toddlers, or enforcing the damn baggage rules so that selfish pricks aren't dragging huge bags onto full flights and taking up an entire overhead compartment for themselves, and the list goes on.

Perhaps if the current airline woes knock out some of the competitors or force consolidation among carriers, we can see a return to some customer service with a slight rise in prices. The only place you can get decent service these days is on an international flight.

Oh, and we need attractive female flight attendants like in Japan and Korea. :)
 

K1052

Elite Member
Aug 21, 2003
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There is going to be a lot more attrition/mergers in the airline sector rather soon if oil prices keep rising. Airfare is probably never going to be as cheap as it was again.

Hopefully this means it is finally attractive to exploit high speed rail for medium and short haul trips inside the US.
 

ElFenix

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Mar 20, 2000
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this'll just make it cheaper for continental to buy them.
 

Slick5150

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Nov 10, 2001
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The rest of the world doesn't care as much because they have fast, inexpensive rail service. If there's ever been a time for a company to invest a few billion dollars into rebuilding america's rail lines, it would be now.
 

ElFenix

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Originally posted by: Slick5150
The rest of the world doesn't care as much because they have fast, inexpensive rail service. If there's ever been a time for a company to invest a few billion dollars into rebuilding america's rail lines, it would be now.
i take it you haven't been on the rest of the world's trains.
 

K1052

Elite Member
Aug 21, 2003
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Originally posted by: ElFenix
Originally posted by: Slick5150
The rest of the world doesn't care as much because they have fast, inexpensive rail service. If there's ever been a time for a company to invest a few billion dollars into rebuilding america's rail lines, it would be now.
i take it you haven't been on the rest of the world's trains.

Guessing by "world" he means Western Europe and Japan....
 

Zorba

Lifer
Oct 22, 1999
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Originally posted by: dmcowen674
Originally posted by: BoomerD

At this rate, there won't be ANYONE left flying except the military jets.

Would that be so bad?

I never thought of you as being someone who supported Monopolies, Dave. I can't wait to see your next thread title of "OMG Airfare from Dallas to Chicago is $1000, Corporation hate people on vacations!"
 

Modelworks

Lifer
Feb 22, 2007
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Originally posted by: Slick5150
The rest of the world doesn't care as much because they have fast, inexpensive rail service. If there's ever been a time for a company to invest a few billion dollars into rebuilding america's rail lines, it would be now.

It would actually make sense to invest and bring back some of the rail lines.
Especially for cargo and shipping.
The tracks are there, and a train can carry much much more cargo and passengers cheaper than any other method available.