Air Travel

Question:

>"Mr. Goodwin’s letter undercut passenger confidence in air travel just >when it was beginning to return," Buffenbarger said.

Could it make things worse for UA, since people with lots of UA frequent flyer miles may decide to use them all up (instead of paying for UA or code-share flights) as quickly as possible in order to avoid losing them if UA fails? — Timothy J. Lee Unsolicited bulk or commercial email is not welcome. No warranty of any kind is provided with this message.

Response:

> >"Mr. Goodwin’s letter undercut passenger confidence in air travel just >when it was beginning to return," Buffenbarger said. > Could it make things worse for UA, since people with lots of > UA frequent flyer miles may decide to use them all up (instead > of paying for UA or code-share flights) as quickly as possible > in order to avoid losing them if UA fails?

Something similar to this helped sink PanAm.  They didn’t adequately limit the number of frequent flyer redemptions and ran short of seats for paying customers.  I’d consider United smarter than that.

Response:

> Something similar to this helped sink PanAm.  They didn’t adequately > limit the number of frequent flyer redemptions and ran short of seats > for paying customers.  I’d consider United smarter than that.

In Canada, at least in the past, the liability to the airline was only a certain percentage of seats on each flight instead of the total amount of points accumulated by passengers. This way, they limit the amount of potential redemptions per year, and remember that the FF programmes are renewed every year, so the airline would have at max the liabilityof one year’s worth of freebee capacity. And when load factors are low, they can add freebee seat capacity without impacting revenus. If the USA airlines also impose capacity restrictions on redeeming points, can’t they restructure their FF programmes to also limit liability to only one year’s worth of possible redemptions ?

Response:

> Could it make things worse for UA, since people with lots of > UA frequent flyer miles may decide to use them all up (instead > of paying for UA or code-share flights) as quickly as possible > in order to avoid losing them if UA fails?

Isn’t this prevented by capacity controls for FF awards?

Response:

[snip] >If the USA airlines also impose capacity restrictions on redeeming points, >can’t they restructure their FF programmes to also limit liability to only one >year’s worth of possible redemptions ?

They can probably do, or attempt to do, pretty much anything they like.  The downside, is that when they tell the customer who has 1/2 million FF miles built up that (1) he will be able to use 5% of them and (2) they will be no good after December, they have lost that frequently flying, highly desirable, customer for life.  …and then he and all of his compatriots will sue the bejeesus out of them.  May lose, but it will be a distraction and a liability.

Response:

- Hide quoted text — Show quoted text – > [snip] >If the USA airlines also impose capacity restrictions on redeeming points, >can’t they restructure their FF programmes to also limit liability to only one >year’s worth of possible redemptions ? > They can probably do, or attempt to do, pretty much anything they > like.  The downside, is that when they tell the customer who has 1/2 > million FF miles built up that (1) he will be able to use 5% of them > and (2) they will be no good after December, they have lost that > frequently flying, highly desirable, customer for life.  …and then > he and all of his compatriots will sue the bejeesus out of them.  May > lose, but it will be a distraction and a liability.

So, how is allowing all the seats for award travel going to save them?? If they are no longer in business, then it doesn’t matter what benefit this super FF gets.

Response:

He’s the mordern day Frank Lorenzo! BYE BYE GOODWIN! We’ll be glad to see you go!

Response:

I agree. Under Goodwin, UA has so totally wrecked service levels, I’m flying other airlines as much as possible.

– Hide quoted text — Show quoted text -> He’s the mordern day Frank Lorenzo! > BYE BYE GOODWIN! > We’ll be glad to see you go!

Response:

 United Chairman’s Alarm Is Assailed Employee Unions See a Ploy In Warning of Airline’s Demise By Frank Swoboda and Martha McNeil Hamilton Washington Post Staff Writers Thursday, October 18, 2001; Page E01 United Airlines Chairman James Goodwin’s warning that the nation’s second-largest carrier could "perish" next year was met with general skepticism yesterday by employees and industry analysts. In a letter sent to United’s 100,000 employees Tuesday, Goodwin warned that "in the wake of the horrific events of [Sept. 11] we are in nothing less than a fight for our life." He said that unless the airline could stop hemorrhaging money, "United will perish sometime next year." A source close to United said the letter was intended as a wake-up call to employees who have become complacent about the company’s future. "The message is that things are not okay," the source said, adding that United was seriously exploring the possibility of applying for a federal loan guarantee under a program approved by Congress last month. United says it is losing $20 million a day and may make further cuts in jobs and operations. The airline has already eliminated 23 percent of its flights and 20 percent of its workforce since the terrorist attacks. The reaction from the company’s unions was not what management had hoped to hear. Tom Buffenbarger, president of the International Association of Machinists — which represents 45,000 United employees involved in contract negotiations — described the letter as "the alarmist rant of a man who is clearly not up to the task of crisis management." "Mr. Goodwin’s letter undercut passenger confidence in air travel just when it was beginning to return," Buffenbarger said. Victoria Pierce, a spokeswoman for the Association of Flight Attendants at United, said, "We believe it’s nothing more than a ploy to cry poor for upcoming contract negotiations with the International Association of Machinists and an attempt to wring concessions from other union groups." Kevin Murphy, an analyst for Morgan Stanley, agreed that Goodwin might be preparing United’s largely union workforce for concessions. "You have to say what is his motivation and that maybe it’s for seeking concessions, restructuring or some extraordinary action." The machinists are scheduled to resume negotiations with United in Chicago Oct. 15. Negotiations with the IAM began two years ago, when the airline was enjoying one of the best years in its history. United’s pilots’ union last August won what was then the best contract in the industry after the pilots engaged in a series of work slowdowns that bedeviled the airline’s schedule. The union also threatened to oppose United’s proposed, and since abandoned, merger with US Airways. "The pilots rolled over management," said Ray Neidl, an analyst for ING Barings. Brian Harris, an analyst with Salomon Smith Barney, agreed with the assertion that United would perish if things don’t get better. But, Harris said, "that’s true of almost all of the airlines so we’ve got to assume that things will get better." Earlier this month Harris rated United "outperform," his second-highest rating, after "buy." United’s stock price fell as much 9.6 percent yesterday, closing at $16.85 on news of the Goodwin letter. Stocks of other airlines were also hard hit. United was in financial trouble before Sept. 11 because of a sharp drop in business travel and continuing labor and service problems. Business travelers make up 9 percent of United’s passengers but account for 45 percent of its revenue. After the Sept. 11 attacks, the airline has been forced to deeply discount tickets to get anyone to fly. Compounding the airline’s problems is the fact that it is entering what usually is a a slow time of the year for business travel. Earlier this month, American Chairman Donald Carty took a distinctly different tone than Goodwin did with his employees. In a letter to all American employees, Carty said: "We now must get to the business of saving our airline, and it is the mark of this company’s character that thousands of American, Eagle and TWA employees have already offered to do so by taking voluntary pay cuts or making a donation to the company." Eagle is American’s regional airline subsidiary; TWA is the former major carrier that American acquired earlier this year. Also yesterday, the European Union approved Belgium’s plan to give bankrupt Sabena airlines a short-term loan of about $113 million. But the EU refused aid to Ireland’s national airline, Aer Lingus, even though the Irish government said the airline could go bankrupt within weeks. Ireland’s minister for public enterprise, Mary O’Rourke, said the government intended to provide a loan guarantee to Aer Lingus next week, partly to cover severance payments to laid-off workers — with or without EU approval, according to the Associated Press.