More than three years ago, airline industry pundits predicted a tour through bankruptcy court would transform United Airlines into a lean, tough company and a formidable rival for American Airlines and other major carriers.
Now, as United emerges from its lengthy excursion through Chapter 11 proceedings, analysts agree that the streamlined airline is a far cry from its former, bloated self. But it remains to be seen whether United's restructuring has transformed it into a fearsome adversary for American and other major carriers.
"Clearly, United post-restructuring is a very different animal than what we saw in 2002," said William Warlick, an analyst with Fitch Ratings in Chicago. "They've lowered the cost bar tremendously."
But some argue that while it has slashed billions in costs, United, which is scheduled to leave bankruptcy court protection as early as today, hasn't gained much ground on American and Continental Airlines, both of which have restructured outside of bankruptcy. And although the new United may have an advantage over Delta Air Lines and Northwest Airlines, those carriers are both in the midst of their own bankruptcy cases and are making substantial cuts of their own.
US Airways, meanwhile, merged with America West Airlines and has vowed to reshape itself into a nationwide low-cost carrier that more resembles AirTran Airways or Southwest Airlines than United.
"Everyone has slimmed down," said Ron Kuhlmann, an analyst with Unisys R2A Transportation Management Consultants. "United certainly isn't unique in that respect."
What is clear is that when it officially ends its bankruptcy tour, United will be a leaner, more efficient airline that has gained significant relief of burdens like pension payments, debt and high labor costs.
And the airline, based in Elk Grove Village, Ill., near Chicago, has implemented a strategy that focuses on snaring premium business passengers with a high level of service, even while its competitors reduce perks and in-flight amenities.
The success or failure of United, the world's second-largest airline, is of particular interest to Fort Worth-based American, the world's largest carrier. The two airlines operate competing hubs at O'Hare Airport in Chicago, and they also compete on lucrative overseas routes.
"These two are always going to be competing fiercely," Warlick said.
But the airline's emergence from Chapter 11 also marks an end to some advantages over nonbankrupt rivals.
"United is re-entering the real world, where they have to pay all their bills and honor their contracts," Kuhlmann said. "They're back on a level playing field, and that will be beneficial to the carriers not in bankruptcy."
In bankruptcy, United slashed more than $7 billion in annual expenses through a series of concessions and contract renegotiations.
"We have made fundamental, sustainable changes to United's business and established a solid financial platform," United's chief executive, Glenn Tilton, said in a prepared statement.
But some analysts wonder whether the cuts have been deep enough.
"Whether the cost structure will be low enough for the company to be competitive remains a question," said analyst Ray Neidl of Calyon Securities in a recent report on United.
United executives have predicted that the company will earn a profit this year, but that's based on oil prices averaging $50 per barrel, and many analysts have questioned United's assumptions.
American, by contrast, is forecasting crude-oil prices at $65 per barrel. United executives counter that even if oil prices are higher than expected, they can offset the expense with greater revenue from higher fares and other sources.
United reported a small cost advantage over American during the fourth quarter of 2005. During that period, American paid 11.6 cents to fly one seat one mile on its network, a common industry benchmark. United's cost per seat-mile was 11.1 cents.
Meanwhile, discount carrier Southwest, based in Dallas, had an even bigger advantage, spending 8.4 cents.
Northwest Airlines under its reorganization plan has irked unions whose pay was cut.
Northwest Airlines' Chapter 11 bankruptcy case lowers operating costs, but chronically tense labor-management relations are worse than ever.
In a regulatory filing, Continental said labor costs made up 23.6 percent of its total operating expenses in 2005.