The Tactical Traveler
A SPECIAL BRIEFING ON UNITED
DECEMBER 6, 2002
BY JOE BRANCATELLI
When to book United--and when to book away; the government's stinging criticism of United management; Dow Jones pulls United from the Transportation Average; thoughts on the turmoil at the United-led Star Alliance; and the best places to keep up with breaking news.
COUNTER INTELLIGENCE: When to Book United--and When to Book Away
The media frenzy surrounding Wednesday's federal denial of United's loan-guarantee request and the resulting speculation on the timing of the carrier's inevitable Chapter 11 filing obscured more practical considerations. When should you book United? When should you book away? Surprisingly, the answers are fairly simple. For travel in the next 30 days or so, you can book virtually any United flight with confidence. The airline will strive to show it is "business as usual" in the immediate aftermath of any bankruptcy filing. More troublesome is booking United flights 60 days or more from now. The airline's daily cash burn is a startling $8 million a day and it will eventually begin slashing its weakest routes. You'd hate to be one of the passengers told a few days before departure that a flight you booked 60 days before has suddenly been eliminated. The next important period: the weekend of March 30-31, when airlines implement their spring schedules. Expect massive cutbacks in United's service at that time; many flights currently on United's schedule will disappear. If you're planning now for flights in April and beyond, I'd definitely book away from United whenever you have an alternative.
REQUIRED READING: United's Ongoing Management Failures
We can spend an infinite number of electrons rehashing the horrendous management decisions that led to United's current financial state. But why bother? What is more distressing than United's past transgressions is the ongoing nature of its corporate incompetence. When it dismissed United's loan-guarantee request, the Air Transportation Stabilization Board (ATSB) was brutally critical of the current regime at United. In a letter to United chief financial officer Frederick Brace, the ATSB said that "the business plan proposed by United is not financially sound. United's management presented a business plan that does not position the company to meet the challenges of the current airline industry." United's request for a loan guarantee had "fundamental deficiencies" and, even with the proceeds of a $1.8 billion loan, the airline faced "another liquidity crisis within the next few years." Finally, the board said, the proposed loan was assigned "an extremely low credit rating" and "United is more likely than not to default."
TRACKING THE NEWS: Keeping Up With Developments at United
Developments at United are likely to move with lightning speed in the days ahead and there are two good places to keep up. Yahoo! Finance's aggregation operation for airline news posts the latest breaking stories from the Associated Press, Reuters, CBSMarketWatch.com and TheStreet.com. It is the single best source for breaking news. If you're looking for perspective, however, surf to United Watch, a special Web page created by Kevin Mitchell of the Business Travel Coalition. Mitchell has been culling the best United stories from newspapers around the nation and posting links to them.
NOTED: Dow Jones Pulls United From the Transportation Average
Want the United situation in a nutshell? Fair enough. On Thursday (December 5), Dow Jones & Company yanked UAL Corporation, United's parent company, from the Dow Jones Transportation Average. What stock replaced UAL in the 20-company index? United Parcel Service Inc.
THE PARTING SHOT: Considering the Fate of the Star Alliance
For the past several years, the Star Alliance was the 800-pound gorilla of the skies. The 14-carrier consortia had continental Europe's best carrier (Lufthansa), good junior European partners (SAS and Austrian) and the strength of United Airlines and Air Canada in North America, Varig in South America, Air New Zealand and Singapore in the Pacific and All Nippon in Japan. It was flying proverbial rings around the Oneworld and SkyTeam alliances. But how quickly things change. United is headed for the bankruptcy courts, Varig is battling apparently never-ending financial and managerial crises, ANA and SAS are sputtering and Air New Zealand is now partially owned by Qantas, a founding member of Oneworld. "The other situations were manageable," one discouraged executive of a comparatively healthy Star Alliance carrier told me this week. "But United is deteriorating much faster than we expected and it seems rudderless. It's hard to maintain dominance when your U.S. partner is sinking."
This column originally appeared at JoeSentMe.com.
Copyright © 1993-2004 by Joe Brancatelli. All rights reserved.