Monday, March 02, 2009
Wednesday, August 13, 2008
Boy, I've Sure Wanted To...
It is hard to tell if Roben Farzad is speaking on behalf of investors, customers or employees when suggesting that the parent of United Airlines Inc. should be liquidated. It is harder still to say which of these groups, if any, would benefit from his plan to put the troubled carrier out of its misery.
Without doubt UAL Corp., United's parent, is in a tough situation. The company lost $2.7 billion in the second quarter (including $2.3 billion in charges) on high fuel costs and is engaged in an ugly public dispute with its powerful pilots union, the result of years of ill will between management and employee groups.
But is liquidation the answer? Tough to think that the company's shareholders would think so. Though United does hold coveted landing rights on the Pacific Rim and a powerful hub in Chicago, it is unclear that other airlines, themselves in cash-preservation mode as they deal with the same high fuel costs that plague United, are in a position to engage in a bidding war. It seems uncertain that United would do any better than recouping its $8 billion in long-term debt (minus cash) in a liquidation, leaving little for other parties.
Employees, obviously, would not benefit. But Farzad appears to be advocating for consumers with his plan. "Travelers and the beleaguered air-transport system," he writes, "would be better served by United's creative destruction: Liquidate it and let stronger hands manage the pieces." This too, is debatable. With United's planes flying full (83% of United's seats were filled in the second quarter) other airlines would undoubtably backfill most of United's most popular routes, resulting in little relief to the beleaguered air transport system and from the resulting delays. The liquidiation would likely hurt small communities currently served by United that might find it difficult to pick up new service if current fuel prices remain.
While Farzad is correct to note that Pan Am and Eastern were split up and liquidated, moves he says shows that "industry precedent and business logic almost demand" United take similar steps, he fails to recognize how much worse off those airlines were financially compared to United's current state. UAL, with nearly $3 billion in cash on hand, is in no position to be forced to sell assets.
To be sure, customer service in the U.S. airline industry right now is abysmal. And it is easy to understand why anyone forced to endure delays, cancellations and lost baggage might in their frustration wish an airline would simply go away. But United is not unfixable, and a solution other than liquidation -- though difficult -- is almost certainly a better option for all involved. Even the passengers. - Lou Whiteman
Might Cut Down on Foreign Wars
Troops pay baggage fees on way to war zones:CNN treats this as a slander on the airlines, but isn't there a bit of command responsibility here?(CNN) -- Some airlines are charging U.S. soldiers extra baggage fees to take their military kits with them as they set off for war.
Some U.S. airlines give military personnel a break on baggage fees, but others levy surcharges.
Military personnel carry large, heavy kit bags containing boots, clothing and gear. In the past few months, airlines have instituted fees for all travelers ranging from $15 for one bag to $250 for a third. ...
John mutters "only in America," but I don't know--I can easily imagine the Russians insisting that their soldiers pay their own freight to Georgia.
Sunday, August 10, 2008
Friday, July 18, 2008
I Cried Because I Had No Shoes ...
I'm betting those speculators at the Chicago Mercantile Exchange were behind the retention of that counter agent who recently placed me, my 3-year-old and my infant in completely different rows for a cross-country flight, instructing me to "sort it out at the gate." The CME undoubtedly also hired the gate agent who told me to "fix it on the plane." Ditto the stewardess who yelled at me for not dealing with this problem before I boarded and then ordered a dozen people to shift seats, delaying our departure. Not that it mattered, since we sat on the runway for two hours.
HT Carpe Diem.