A Do or Die Scenario for United Airlines

When it comes to troubled airlines, United is not completely out of the woods yet. They may have raked near the bottom of several airline consumer satisfaction surveys for years. And while their online reservation website is difficult to navigate, United Airlines has recently announced its order for Boeing 737-700 series aircraft to enter its fleet in the summer of 2017 will help it repair its image as an airline filled with corporate strife, the resignation last year of a CEO accused of breaking the law by allegedly currying favor with the New York and New Jersey Port Authority with unethical and unscrupulous deal making, and surly on board customer service.

ual1Photo: UAL

United’s current 737-700 aircraft seat accommodates 118 passengers, with 12 seats designated for First Class, and 40 Economy Plus seats. United said it plans to replace more than half of the 50-seat aircraft in its fleet by the year 2019. This move is an opportunity to keep up with competitors using 76-seat regional jet aircraft for the flying public..

Although United reported a record profit for the fourth quarter of 2015 with $934 million, earnings and revenues missed Wall Street’s projections.

Then in January 2017, United Airlines announced its fourth-quarter and full-year 2016 financial results as follows:

• Achieved best full-year on-time performance while reporting the lowest number of cancellations, delay minutes and mishandled bags in company history.

• UAL reported full-year net income of $2.3 billion, diluted earnings per share of $6.85, pre-tax earnings of $3.8 billion and pre-tax margin of 10.4 percent. Excluding special items, UAL reported full-year net income of $2.9 billion, diluted earnings per share of $8.65, pre-tax earnings of $4.5 billion and pre-tax margin of 12.2 percent.

• UAL reported fourth-quarter net income of $397 million, diluted earnings per share of $1.26, pretax earnings of $884 million and pre-tax margin of 9.8 percent. Excluding special items, UAL reported fourth-quarter net income of $562 million, diluted earnings per share of $1.78, pre-tax earnings of $857 million and pre-tax margin of 9.5 percent.

• Technicians and related employees ratified a joint contract in the fourth quarter. UAL has completed new agreements with every domestic unionized work group in 2016.

• Employees earned $628 million in profit sharing for 2016. “Our fourth quarter financial and operating performance capped an outstanding year for United Airlines,” said Oscar Munoz, chief executive officer of United Airlines. “In 2016, we put into action our plan to become the best airline in the world, and last year’s results demonstrate we are on our way to achieving that ambition. We will continue delivering on this commitment by investing in our employees, elevating our customer experience and driving strong and consistent returns for our shareholders.”

ual2_briyyz

Photo: BriYYZ

United, Delta and American Airlines are the three sole “legacy airlines” (started around 1930) who compete directly with low cost airlines such as Southwest, JetBlue and Virgin America (recently acquired by Alaska Airlines).

United’s unique challenge is the merger integration pains as a result of its purchase of Continental in 2010, strife that witnessed the resignation of Jeff Smisek as CEO who stepped down last September of the aforementioned alleged corruption investigation.

Following a heart attack and subsequent heart transplant, Smisek’s replacement, Oscar Munoz is back, with minority stakeholders Par and Altimeter having replaced several board members. United’s new chairman is Robert Milton, ex CEO of Air Canada. The didactic aspect of United’s service issues is that it has the best route system of any U.S airline. Whether the changes carried out by Mr. Munoz and the employees of the carrier is successful enough to turn the airline around remains to be seen.

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