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Wednesday 14 August 2002

United Airlines Warns of Potential Bankruptcy

Today, the parent corporation of United Airlines warned that it may have to declare bankruptcy in the fall, unless it pulls some other magic solution out of its ass.

“The world has changed,” [UAL CEO Jack] Creighton said. “Revenue isnít coming back the way the industry expected. Demand isnít returning, fares remain low and the industry is grappling with how to respond.”

Yep. That would explain why Southwest Airlines is continuing to pay steadily-rising dividends. In the first quarter of 2002 — in this “changed” world, in an industry “grappling” for a response, with lower fares than United — Southwest made $21.4 million on revenue of $121 million.

UAL, on the other hand, lost $487 million on revenues of $3.3 billion in the first quarter. At that time, Jack Creighton said that “We certainly are seeing signs that our industry’s situation is beginning to improve.” UAL did improve, in fact: in the second quarter, it only lost $392 million on $3.8 billion in revenue.

But, of course, it’s a changed world since September 11. UAL can’t be expected to make money in this kind of environment. I mean that — especially since they couldn’t make money before September 11. In the first and second quarters of 2001, they lost $305 and $365 million, respectively. And I’m even using UAL’s own figures, which exclude all kinds of garbage ‘one-time charges’ — meaning that the actual losses were even worse.

The last time UAL showed a profit was in the second quarter of 2000: $374 million. Or slightly less, once you include the $38 million in non-recurring charges they took. Still, it was a profit.

Southwest, on the other hand, has been profitable for 29 years; has never laid off any employees; and has increased rather tha reduced service since September 11.

Perhaps Mr. Creighton should consider the possibility that it’s not the airline industry that’s in trouble, but rather that United and other similar large carriers are just incredibly poorly-run companies.

Posted by tino at 23:02 14.08.02
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Comments

Oh, I SO hope these companies fall apart. Bunch of whiney bastards.

Why AREN’T there more airlines like Southwest? They’re allegedly a low-cost airline (what, because of the lack of first/business class and the shorts on the flight attendants?) but everybody I know prefers them, service-wise, to any of the bigger airlines. And like you said, they’re actually profitable.

Posted by: Evelynne at August 15, 2002 04:02 PM