some news on United, it’s debts are hug, and they are withdrawing and restructuring services.
October 25, 2002
Air & Land Transport News
Ailing United Airlines to stop flying to four overseas destinations
It also submits updated business plan for federal loan guarantee
(CHICAGO) United Airlines, battling to avoid bankruptcy, announced plans on Wednesday to stop flying to four cities in Europe and South America and strengthened its application to the US government for an urgently needed US$1.8 billion federal loan guarantee.
The latest steps in its financial recovery effort came as United continued negotiating with its unions on the most critical element of its emergency overhaul plan: US$5.8 billion in labour cost reductions.
In its second round of cost cuts this week, United said it would stop flying in January to Caracas, Venezuela; Santiago, Chile; Dusseldorf, Germany; and Milan, Italy, and switch to smaller aircraft on seven overseas routes.
The international cost-cutting will result in a combined 229 layoffs in those four cities and save an estimated US$120 million annually, on top of US$100 million in savings from US-based reductions announced on Monday, which included 1,250 job cuts.
United said the moves would affect 69 employees in Caracas, 110 in Santiago, 46 in Milan and four in Dusseldorf. Its last flights will depart Dusseldorf, Caracas and Santiago on Jan 6, 2003, and Milan on Jan 21.
‘Closing a station is always an extremely difficult decision to make, but given the unprecedented challenges the global airline industry faces, these closings are an essential and prudent course of action,’ United CEO Glenn Tilton said. ‘These measures are unfortunately necessary given the continued deterioration of profitability in these four international markets.’
The government filing drastically increases the cost-saving measures envisioned by the nation’s No 2 carrier beyond those outlined in its application in June, including an additional 12 per cent reduction in capacity for 2003.
United said it submitted the updated business plan on Tuesday night to the Air Transportation Stabilization Board, which had signalled the earlier proposal was insufficient to receive the asked-for loan guarantee. It comes with United desperately seeking financial help and looking to restructure after reporting a US$889 million quarterly loss last week. The airline faces US$875 million in debt payments by Dec 2.
Airline analyst Ray Neidl of Blaylock & Partners said the package of cost cuts should be sufficient to keep the carrier from filing for Chapter 11 bankruptcy, provided the labour concessions gain final approval by its unions. Whether the three-man federal panel overseeing the loan guarantee process will approve remains in doubt, he said.
As part of the latest reductions, the airline will now fly Boeing 767s instead of B777s in the Paris-Washington, Paris-San Francisco and Miami-Buenos Aires markets, and will replace B747s with B777s on the Osaka-San Francisco route, its second daily Seoul-Tokyo flight and its second Tokyo-Chicago flight.
The changes to United’s original application also include the targeted US$5.8 billion in labour cuts over 5 1/2 years, non-labour savings of US$1.4 billion annually plus a process for developing an additional US$400 million in savings, and further reduction in 2003-05 capital spending of US$1.2 billion. – AP
By: MapleLeaf_330 - 28th October 2002 at 18:21
RE: United Airlines In Trouble.
The sticking point for UA, as the article points out, is their labour costs. Even if the do create timmer airline in terms of equipment, destinations, etc., they still need to cut labour, as costly move, and not a very pretty situation to be in when people might lose their jobs. I fear that if the government doesn’t step in, and if UA can’t pay a massive labour force, then the future may not be so rosey. I don’t think the partner airlines will help. I recall the when AC was in serious trouble the partners did not bail them out.
Hand I will be in CDG on November 1, small world.
AC also uses their 767’s from YVR to LHR, and I believe (at least they used to) from YVR to CDG.
By: Hand87_5 - 28th October 2002 at 10:25
RE: United Airlines In Trouble.
Well , I’ll be flying cdg-sfo on Nov 1st Return Nov 10th.
My flight is still scheduled with a 777.
I have made a simulation for the same legs in Feb 2003 and the 767-300ER is already in their computer. It seems that the switch is schedules some time in Jannuary.
By: monster500 - 27th October 2002 at 09:53
RE: United Airlines In Trouble.
immediate i would think.
By: Hand87_5 - 27th October 2002 at 09:45
RE: United Airlines In Trouble.
Yep , I flew many times 767 on SFO CDG route before UA was operating 777’s.
Does somebody know when this will be effective?
By: greekdude1 - 27th October 2002 at 07:59
RE: United Airlines In Trouble.
The 767-300ER has more than adequate range to fly U.S.west coast to Europe routes. LHR is only 5,500 miles from LAX. A 763 has 6,000+ mi range. What do you think both UA and AA used on that route prior to the arrival of the 777? That’s right, the 763. Heck, Air Canada even uses it to fly the YVR-HNL-SYD run. HNL-SYD is not close, by any means.
GD1
By: Saab 2000 - 26th October 2002 at 16:42
RE: United Airlines In Trouble.
[updated:LAST EDITED ON 26-10-02 AT 04:43 PM (GMT)]I’m doubtful they will go bankrupt.They will just continue with their restructuring plan and will emerge with a smaller fleet, fewer routes and a better cost structure.
By: A330Crazy - 26th October 2002 at 16:23
RE: United Airlines In Trouble.
[updated:LAST EDITED ON 26-10-02 AT 04:24 PM (GMT)]NEW YORK (Reuters) – United Airlines, which is teetering near the edge of bankruptcy, has approached its air alliance partners, including Singapore Airlines Ltd., about strengthening ties between the carriers, Singapore Airlines’ chief executive said on Friday.
“United Airlines has been talking to us as well as to other Star Alliance partners about increased cooperation,” Dr. Cheong Choon Kong, Singapore Airlines’ SIAL chief executive, said in a telephone interview with reporters on Friday.
“We haven’t gone into specifics and, even if we had, I don’t think it would be very good manners of me to speak out of turn,” Cheong said.
United, the main operating unit of UAL Corp. UAL , has worked feverishly in recent months to avert bankruptcy by cutting billions of dollars in expenses through new contracts with its labour groups and lenders.
United, the second-largest U.S. airline, filed an updated application for $1.8 billion in federal backing for loans from the private sector Wednesday. The airline has still not agreed with its individual labour unions on how much each will give up, although it has set a lowered target of $5.8 billion over 5-1/2 years.
Talks between United and its Star Alliance partners, including Deutsche Lufthansa AG LHAG , All Nippon Airways 9202 and Air Canada AC , could include discussions over one or more of those carriers taking an equity stake in United to help prevent a bankruptcy, industry sources say.
A United spokeswoman would not comment on whether the airline has talked with its partners about any stake in the company.
“As always, we continue to keep all of our Star Alliance partners abreast of our financial situation,” she said.
ALLIES IN TALKS
A spokeswoman for Lufthansa said the airline was adhering to a strategy within the Star Alliance that cautions against the carriers holding each other’s equity.
“The strategy of the alliance is that the airlines don’t take stakes in each other — that’s why it has been so successful,” she said.
Air Canada President and Chief Executive Robert Milton told analysts in a conference call on Friday that he had talked about the issue with Glenn Tilton, United’s chief executive.
“We had a good chat and, you know, we’re going to look to be supportive to the extent that we can. They are a great partner and provide us tremendous benefit, as we do them,” Milton said.
Singapore Airlines has not taken a serious look at buying equity in airlines within the struggling U.S. commercial airline sector, Cheong said, although he did not comment on United in particular.
“Our focus is still near home,” he said. “And don’t forget that in the U.S. you still have your limitations on foreign ownership.”
U.S. regulations limit the voting stake any foreign entity can hold in a U.S. airline to 25 percent, although foreign companies have owned larger percentages of shares in U.S. air carriers and sacrificed the extra voting rights.
Some airline industry executives have urged legislators to ease the restriction, but Congress has shown little interest in rolling back the rules.
END——————————————————–
I think we may be saying farewell to United in the near future???
By: Selsport69 - 26th October 2002 at 15:51
RE: United Airlines In Trouble.
They had better not go out the box as I am flying on them in Feb LHR to NY.
By: Bhoy - 26th October 2002 at 15:29
RE: United Airlines In Trouble.
jeez… longest (actually only) flight I’ve been on a 767 was LGW – PIT, and that seemed a long enough flight… about 9 hours, if I remember correctly…
(BA 767-336ER)
By: monster500 - 26th October 2002 at 12:43
RE: United Airlines In Trouble.
Yes the 767-300ER has the range to cover this distance nonstop, would be about 11hours flying time.Alitalia uses the 763 from Narita to Malpensa which is a 12 hour 30 minute flight.
By: Bhoy - 26th October 2002 at 12:38
RE: United Airlines In Trouble.
has the 767 got the range to fly non stop from the West Coast to Europe?
I’m surprised at them using the 76 on the SFO-CDG flights… Surely there must be an enroute stop somewhere?
By: monster500 - 26th October 2002 at 12:18
RE: United Airlines In Trouble.
Dueselldorf and Santiago, as mentioned in the article posted.
By: KabirT - 26th October 2002 at 12:05
RE: United Airlines In Trouble.
they are cutting services too Carcus, Milan and 2 other cities.
By: Saab 2000 - 26th October 2002 at 10:34
RE: United Airlines In Trouble.
[updated:LAST EDITED ON 26-10-02 AT 10:35 AM (GMT)]I think they are cutting LHR-BOS.
Its bad news for these airports, but if bankruptcy looms then it needs to get rid of routes that are not generating enough passengers to sustain operations.
UA have looked at these routes and seen little prospect of them becoming profitable in the future, consequently it was best to just drop them.
For customers affected by these cuts, then obviously they will be served through UA’s Star Alliance partners.
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October 26, 2002 at 10:18 am