One Year After Emerging From Bankruptcy, United Has Turned a Profit

For all its progress, though, United could be headed toward new storm clouds. Worker groups will be looking for wage and benefit increases in coming years after taking massive cuts, which could boost labor costs significantly.


On the one-year anniversary of United Airlines' emergence from bankruptcy, Glenn Tilton stood at a lectern in the nation's capital, championing industry consolidation to a group of aviation lawyers.

"We cannot prevent the acceleration of change in the world of international aviation," Tilton, United's chief executive officer, said Thursday. "It is up to us in the U.S. to acknowledge that fact and then decide if we wish to be participants or spectators."

Tilton's comments reflect the new United Airlines, a company looking to grow now that it has regained some of its status and swagger - not to mention its financial health - a year after emerging from the longest, most expensive Chapter 11 case in U.S. aviation history.

United has come a long way, although the fight is not over by any means.

The company posted a small profit during its first 11 months out of bankruptcy and has been adding service in key competitive markets such as Denver. It's expanding internationally and introducing new amenities and services for customers.

And it wants to become an even bigger force in the industry, having indicated it is on the hunt for potential mergers or acquisitions.

"I think United has been pretty shrewd," said Tom Parsons, who runs travel site Bestfares.com in Texas. "I think management has been aggressive where it needs to be. I'm surprised at how well United has done since they came out."

Its relative stability is good news for Denver, where United employs more than 5,000 workers and ranks as the city's largest carrier.

For all its progress, though, United could be headed toward new storm clouds.

Worker groups will be looking for wage and benefit increases in coming years after taking massive cuts, which could boost labor costs significantly. Two of United's large competitors expect to exit bankruptcy soon as stronger, leaner companies.

And, perhaps most worrisome, United only managed a small profit last year despite a strong economy, declining fuel prices and rising fares.

"This is a volatile industry, and you've got to make a lot of money in the good years to cover the bad years," said Roger King, a Connecticut-based airline analyst with research firm CreditSights Inc. "They haven't done that yet, and these are the good years."

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Coach to first class

United's post-bankruptcy focus is centered on providing different levels of service for different consumers.

The Chicago-based carrier, for instance, offers "economy plus" seating that allows customers to upgrade to seats with more leg room and overhead storage for a fee. It operates a Denver-based discount arm of its business called Ted, a no-frills carrier created to compete with low-cost rivals such as Frontier Airlines and Southwest Airlines.

It also contracts with regional carriers to provide United Express service, which uses smaller planes and typically flies less-popular routes.

On the higher end, United sells upscale coast-to-coast service with amenities such as power outlets, phone and e-mail access from every seat. It also is upgrading some of its first- and business-class cabins with lie-flat seats and new entertainment systems.

The goal is not only to boost revenues but also to offer consumers more choice.

"We are trying to provide premium services for customers that will pay for them yet provide a good experience at the same time," said Pete McDonald, United's executive vice president and chief operating officer.

It's a significant departure from the rest of the industry. Most other airlines are looking to standardize and simplify their services, not broaden them.

"United has added or expanded products on both sides of the price spectrum, which is a bit unusual," said Steve Stapleton, a Dallas-based lawyer who represents airline creditors for Cowles & Thompson. "Their thinking is you have to price things differently to attract different kinds of people."

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