United Airlines

United Airlines Gregory C. StampASCI 602-Air Transportation SystemEmbry-Riddle Aeronautical University(May 2010)

OverviewBackgroundCurrent OperationsCurrent Financial StatusAchievements BlundersUnited Airlines UniquenessFuture Challenges

BackgroundApril 1926:Birth of United AirlinesWalter T. Varney-airmail service contract established Commercial Aviation United Aircraft and Transport Corporation (UATC)Major conglomerate (included Boeing Airplane Company, Pratt & Whitney Aircraft)

During 1930s:Company was officially established (July 1933)Became independent of UATC (Airmail Act of 1934)Introduce the Boeing B247 (worlds first modern airliner)William Patterson-President of new United Air Lines, Inc.

During WWII (1940s): United along with other airlines served in the war effort by providing military airlift service

After WWII (1946): Introduce their post transcontinental services using old DC-4 aircraftCompany turned around with acquisition of Western AirlinesExpanded into new markets

BackgroundEarly 1960s: United purchased Capital Airlines Determined by industry experts as the biggest merger in the American domestic aviation industry

Late 1970s: Passage of the Airline Deregulation act of 1978Several eventful conditions had impacted the company foreverThe company cut back on operations that werent profitable Expanded into non-airline business ventures such as computerized reservation system, hotel chain, rental car etc...

Early 1990s: Bought Pan American Airlines (PanAm) coveted routes to Heathrow Airport HUB, London (UK).Allowed United to become one of the most important International airlines in North America Beginning of New Millennium (Early 2000s)September 11, 2001: Terrorist Attacks using United Airplanes (Flight 175 World Trade Center and Flight 93-Pennsylvania)Filed for Bankruptcy (Chapter 11) to reorganize the company

Current Operations: Schedule RoutesFounding Member of Star Alliance Network:Network serves as a link between hundreds of destinations Major US Hubs: (Chicago OHare, LAX, Denver, Wash/Dulles) Destinations: Over 230 US domestic and international

Daily Flights: 3,300 flights per day (Mainline and Regional United Express)

Regional Affiliates:Atlantic Southeast AirlinesColgan AirlinesExpressJetGoJet Airlines

Current Operations: Fleet InventoryMainline Operations: 360 AircraftMixture of Airbus (e.g. A319 and A30) and Boeing aircraft (e.g. B747s, B757s, B777s)Owned 171 aircraft, Leased 189 of total 360 aircraftAverage age of all Mainline aircraft- 13 yearsRegional Operations (United Express): 292 AircraftCapacity purchase lease agreement. Mixture of Bombardier (e.g. CRJ200 and CRJ700) and Embraer (e.g. EMB 120s, ERJ 145, and EMB170)

Current Operations: WorkforceTotal Number of Active Employees: Approximately 47,000 The total workforce mainly consists of approximately: 18,524 flight crew employees (e.g. pilots and flight attendants) 14,811 ground operations employees (e.g. food service, security officers, instructors, ramp, and stores). 4,678 employees (mechanics and related support)Executive Leadership:Glenn F. Tilton: Chairman, President and Chief Executive Officer of United Air Lines IncJohn P. Tague: President of United and Executive VPKathryn A. Mikells.: Chief Financial Officer and Executive VP Union Membership : Approximately 82% of the active employees

Financial Status

Operating Revenues: Stock Listing ( NASDAQ)- UAUADerives mainly from airline related activities Mainline Operations:$13.3 billionRegional Operations: $3.1 billion Additional Revenues:Mileage Plus ($774 million)United Cargo ($536 million)United Services ($134 million) Operating Expenses:Jet fuel (most significant operating expenses)Price of jet fuel (extremely volatile and little control by Company) Net Income Change: Gain of $360 million in 2007 Loss of approximately $5.4 billion (approx. 1400% drop net income) Revenue Passenger Miles (2009): approximately 100.5 billionAvailable Seat Miles(2009): approximately 122.7billionLoad Factor : Remained relatively high (81.9% in 2009 and 81.0% in 2008)

Achievements

Early 1930sIntroduce the Boeing B247Modern airliner for that era (twin-engine, ten passenger, all metal aircraft)Reduce coast to coast flying time(~19 hours)

June 1937:Offered SkyLounge and SkySleeper flight service (DC-3 aircraft)Flights from NY to Chicago with overnight sleeper seats During World War II:Trained more than 7,000 ground crew members (US Army and Navy Air Services)Modified 5,736 bombersFlew the equivalent of 7,000 flights (more than 50 million miles)

June 1, 1961:Successfully merged with Capital Airlines Absorbing approximately 7,000 new employees Become the worlds largest commercial airline

Early 2000sAwarded Best Monthly Travel Magazine (Society of American Travel Writers0Awarded Best Overall In-Flight Entertainment - AVION award (2000 & 2001) First place honors for on-time arrivals (US Dept of Transportation)-2002

Blunders

September 1952:Ended 10 year merger with Mexican Airlines (LAMSA)Significant recurring financial lossesAirline sold to Mexican InvestorDecember 2002:Filed for Chapter 11 (Bankruptcy) Significant financial losses and bad managementReorganize the Company to conduct better business practicesFebruary 2006: Department of Justice (DOJ) issued a grand jury subpoena Investigation of Uniteds Office in Frankfurt, Germany International investigation into possible price fixing conspiracyRelated to certain surcharges included in the tariffs air cargo service June 2006:Department of Justice (DOJ) issued a second subpoenaPassengers pricing practices and surcharges International passenger services pricing issues

United Airlines Uniqueness1930s:First to introduces concept of stewardessEllen Church: Worlds first flight attendant (Boeing Air Transport) United opens the industrys first flight kitchen (Oakland, CA)

1940s:United establishes the industrys first employee pension program United launches the Douglas DC-6 (featuring innovative full cabin pressurization) 1950sUnited introduces Executive Flights for men only.Services include serving of complimentary cocktails, steaks, business publications, and cigars on board.Popular program January 1970 1960sLaunched longest marketing brand (Fly the Friendly Skies)

1990sCreated the largest majority employee-owned corporation in the world.Included Union representatives on the Board (IAM and ALPA)First airline to offer seats that converted to beds in first class 2010Merger with Continental Airlines (largest airline in the World)

Future ChallengesMaintaining Adequate Liquidity

Dynamic and Unpredictable Economic Changes in the Industry

High Fuel Costs or Disruption of Aircraft Fuel Supply

Possible Terrorist Attacks

Price Competition

This is in contrast to TWA, which introduce the sleek and modern Lockheed constellation (Centennial, 2003).This is in contrast to TWA, which introduce the sleek and modern Lockheed constellation (Centennial, 2003).