Bad news for UAL

[CaptainCrickettMan]

Just looked at UAL news with dear old dad today and it's not good. Take a peek.

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Fleet Reductions
We will remove a total of 100 aircraft from our fleet beginning in September and reduce our mainline domestic capacity in the fourth quarter 2008 by 14 percent year over year. The reduction eliminates our Boeing 737 fleet, including the 30 previously announced B737 aircraft, provided we can work out terms with our lessors. We also will retire six Boeing 747s. Over 2008-2009, we will reduce cumulative mainline domestic capacity between 17 and 18 percent and cumulative consolidated capacity between 9 and 10 percent.

"We are taking additional, aggressive steps that demonstrate our commitment to size our business appropriately to reflect the current market reality, leverage capacity discipline to pass commodity costs on to customers, develop new revenue streams and continue to reduce non-fuel costs and capital expenditures," said Glenn Tilton, chairman, president and CEO. "This environment demands that we and the industry act decisively and responsibly. We continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment."

When complete, our fleet reduction will retire our oldest and least fuel-efficient jets and will lower our average fleet age to 11.8 years. Schedule changes related to the elimination of 30 B737s previously announced are currently in our reservations system.
We will file further changes related to the retirement of an additional 50 aircraft by year end in our systems in the near future. Schedule reductions will be primarily reached through frequency reductions while retaining commitment to all five of our U.S. hubs. We expect to remove about 80 planes from the system by the end of 2008, with the remaining 20 being removed by the end of 2009.

As part of these changes, we will eliminate our Ted product and reconfigure that fleet’s 56 A320s to include United First class seats. The Ted aircraft reconfiguration will begin in spring 2009 and be completed by year-end 2009.
"The decision to dramatically reduce our capacity profile particularly in the domestic marketplace, while also eliminating a fleet type, is a significant step leading to a more effective and efficient operating fleet for us in the years ahead, while improving our customer experience and reliability," said John Tague, executive vice president and chief operating officer.



Staffing Changes
As we reduce the size of our operation, we also expect to reduce the number of salaried and management employees by 1,400-1,600, including the previously announced 500 employee reduction by year end. Work is currently under way in each division to determine critical priorities and necessary SAM reductions. As we finalize schedules, we will identify the reductions necessary on the front line and communicate those as they are available.


Future at UAL? May Tilton and his toy soldiers rot in hell.

[skydog]

So what are they supposed to do instead? Leave the airplanes in place and continue to lose even more money?

[CaptainCrickettMan]

Originally Posted by skydog

So what are they supposed to do instead? Leave the airplanes in place and continue to lose even more money?

Are you kidding me? Do you really think that there is no other alternative?!? If you think parking the planes is good for the company, you're highly mistaken my friend.


Surreal takes home a prize. He's getting the picture.
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[surreal1221]

Originally Posted by skydog

So what are they supposed to do instead? Leave the airplanes in place and continue to lose even more money?

Tilton's had a hard on for sinking the airline out from under his watchful (or not so watchful) eye for quite some time now.

Nevertheless, this is only the beginning of gaining some sort of pricing power for the industry.

[stuckingfk]

Originally Posted by CaptainCrickettMan

Are you kidding me? Do you really think that there is no other alternative?!? If you think parking the planes is good for the company, you're highly mistaken my friend.


Surreal takes home a prize. He's getting the picture.
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Doesn't Surreal's comment contradict your statement of "if you think parking the planes is good for the company, you're highly mistaken."

Wouldn't one have to park planes to reduce capacity? Given the current economy I'd say that's the only way to do it.

[surreal1221]

I've said it before. . .and I'll continue to say it, since finally these companies are beginning to take notice.

Charge the appropriate fare for the services rendered.

[stuckingfk]

Originally Posted by surreal1221

I've said it before. . .and I'll continue to say it, since finally these companies are beginning to take notice.

Charge the appropriate fare for the services rendered.

I'm not picking on you Surreal, but if it were that easy, don't you think the airlines would have done that already?

Example

120 seat airplane

Airline A finds out it can easily sell 100 seats at an average ticket price of $300. Airline A thinks, that was easy, lets try selling them at $305. General public says, wait a minute, that's too much, plus Airline B (Southwest, JetBlue, Airtran, etc) is still selling the same ticket for $300.

All it takes is 2 passengers to not book that ticket to at $305 to make less money on the flight.

100 x 300 = $30,000
98 x 305 = $29,890

Airlines are constantly changing ticket prices based on demand. Believe me, they want to keep those extra two people at their airline, even if it's only for $110.

Example 2

120 seat airplane

Airline A is consistently overbooking a route from MSP - LAS. Airline A will increase ticket prices to maximize profits till it sees a drop in sales.

115 x 410 = $47,150
118 x 405 = $47,790
119 x 404 = $48,076
120 x 400 = $48,000
125 x 390 = $48,750

How many passengers do you think the airline will want to book? Obviously this depends on many variables, but I'd choose 119 pax. Statistically, at least a few passengers will not show up for this 120 seat airplane. This increases revenue a couple ways; When pax rebook, they're charged an outrageous fee and now the airline is able to sell the more expensive walk-up fares.

Yes, this post is my opinion only, but the simple answer of "just raise the fares" is in fact not that simple.

[CaptainCrickettMan]

Originally Posted by stuckingfk

Doesn't Surreal's comment contradict your statement of "if you think parking the planes is good for the company, you're highly mistaken."

Wouldn't one have to park planes to reduce capacity? Given the current economy I'd say that's the only way to do it.

What contradiction? Surreal is merely stating a reason for parking the airplanes. All I said is it's not good for the company, specifically the employees, captain obvious. There is no contradiction, I just stated the obvious, surreal stated a reason. I don't know what post you've been reading.

Put the cost on the customer. The fuel companies are doing this to you everyday and you're still foolish enough to pay the $4.00+ a gallon. If the ticket prices went up, people would still pay it.

[surreal1221]

I know you're not picking on me. . .so I'll simply say this.

My statement is a macroeconomic statement that should and will be utilized as pricing power is regained.

If people can't afford to fly, too bad. . .sorry.

[stuckingfk]

Originally Posted by CaptainCrickettMan

I didn't say it was a good thing knuckle head.

Glad you can resort to name calling.

I don't think you understand. I AM saying it's a good thing. So is Surreal.

Your statement of "Surreal getting it", and you saying "it's a bad thing" are a contradiction.

[stuckingfk]

Originally Posted by surreal1221

I know you're not picking on me. . .so I'll simply say this.

My statement is a macroeconomic statement that should and will be utilized as pricing power is regained.

If people can't afford to fly, too bad. . .sorry.

I'm not picking on you at all. Just chose to quote you.

You're right when you say airlines need to regain pricing power. Reducing costs by parking airplanes and reducing available seats will hopefully drive prices to profitable levels.

Mr. Cricket doesn't seem to think so.

[CaptainCrickettMan]

Originally Posted by stuckingfk

I'm not picking on you at all. Just chose to quote you.

You're right when you say airlines need to regain pricing power. Reducing costs by parking airplanes and reducing available seats will hopefully drive prices to profitable levels.

Mr. Cricket doesn't seem to think so.

Yes, my name calling was out of line and I do apologize and yes, it was a contradiciton to his second statement. But, when I said that he gets it, I was referring to his comment about Tilton sinking the airline.

I should have been more specific that when I refered to the company, I meant specifically the employees. They have been through enough of this. Hope that eliminates the confusion I caused.

This entire ordeal hits very close to home so I hope you'll understand my frustration with the issue.

I see your points but why not just keep the damn fleet in order and raise the ticket prices anyway? Wouldn't that generate more revenue? I'm far from an economist so maybe you can put this into perspective for me.

[wheelsup]

Originally Posted by CaptainCrickettMan

All I said is it's not good for the company, specifically the employees, captain obvious.

What's good for the company, and the employees, are not always the same thing.

Put the cost on the customer. The fuel companies are doing this to you everyday and you're still foolish enough to pay the $4.00+ a gallon. If the ticket prices went up, people would still pay it.

Foolish enough to pay for gas? Are you kidding? For 98% of the population we really don't have a choice. If we all "smartened up" and stopped paying for gas, where would that leave our country?

Guess what? If airfare goes up by 30% to cover costs, a lot less people will fly. There are other options. People don't HAVE TO fly. They pretty much have to drive to get to work and back.

Horrible analogy.

[surreal1221]

Companies should not be comparing the costs of driving (Greyhound) from point a to point b and trying to compete with that cost. It appears that the industry has ignored the fact that they are providing a service at a significantly reduced time consumption than traveling by ground. So sure, people don't have to fly, but if they need to travel. . .and the traveling public has not reduced year over year ever - so there will be people to sit in the seats, are they really going to resort to sitting next to Mario from Mexico in row 6 on a Greyhound bus that takes 10 hours to get to their destination? I think not.

Unfortunately the companies have lacked the balls to put a price on this premium of traveling by air.

Blame the LCCs all you want, or don't blame anyone. But something will certainly change in the coming months / year.

(This post is not directed towards anyone who has replied to this thread)

[CaptainCrickettMan]

Originally Posted by wheelsup

What's good for the company, and the employees, are not always the same thing.



Foolish enough to pay for gas? Are you kidding? For 98% of the population we really don't have a choice. If we all "smartened up" and stopped paying for gas, where would that leave our country?

Guess what? If airfare goes up by 30% to cover costs, a lot less people will fly. There are other options. People don't HAVE TO fly. They pretty much have to drive to get to work and back.

Horrible analogy.

Fair enough.

[wheelsup]

Originally Posted by surreal1221

Companies should not be comparing the costs of driving (Greyhound) from point a to point b and trying to compete with that cost. It appears that the industry has ignored the fact that they are providing a service at a significantly reduced time consumption than traveling by ground.

ORF-LGA

Leaving June 6th, coming back the next day

Greyhound: $126

Airline: $941

That's a pretty big premium. Oh and it's on a Dash.

There are certainly markets where it's almost as cheap to fly as it is to take a Greyhound bus, I posted some examples not too long ago. But to say the airlines don't charge a premium over Greyhound is just plain wrong in most instances.

and the traveling public has not reduced year over year ever

Actually between 9/11 and July 2004, levels were at a lower level than pre-9/11. They've since recovered. So yes, travel has been reduced if you look at 9/11 and the following year. And that was with $70 tickets (I remember taking Airtran a few times between LGA and MCO and it was $78.50 including tax!).