UAL Biz Plan Due By Month-End
Bankrupt United Airlines on Jan. 30 will present a new and much-anticipated business plan to its board of directors after discussions between CEO Glenn Tilton and labor union leaders. The plan, which will map out both a path to emerge from bankruptcy and a long-term strategy, may include a low-cost operation possibly focused on the West Coast and an emphasis on regional jets. In a message to employees last week, Tilton said interim wage reductions, imposed this month by U.S. bankruptcy judge Eugene Wedoff, provide "a short window of time to address labor issues and finalize the business plan." Wedoff, in forcing the International Association of Machinists—the only UAL union to refuse proposed cuts—to accept wage reductions, said, "It further appears from the evidence submitted by the debtors that interim changes to United's collective bargaining agreements with IAM are essential, at the present time, to continue United's business and avoid irreparable damage to its estate."
CO, Delta, NWA Await DOT Decision
The U.S. Department of Transportation has until tomorrow to either approve a three-way alliance between Continental, Northwest and Delta airlines, formally object to it or extend the review by another 30 days for a fifth and final time. A decision, expected last week, had not been announced by press time. The three airlines' CEOs each in recent weeks expressed disappointment in the length of time DOT has taken to make its ruling. Nevertheless, Continental's Gordon Bethune last week said alliance implementation will begin in the third quarter.
Heavy Airline Losses Expected To Continue
The U.S. airline industry is expected to post a fourth-quarter loss in excess of $2 billion, versus $3 billion a year ago, bringing the full-year 2002 loss to around $7 billion, versus $6.2 billion in 2001. Continental Airlines last week said it lost $451 million on the year, despite a narrower fourth-quarter loss compared with 2001, and Delta Air Lines reported a full-year loss near $1.3 billion. Four more major carriers report this week. Anticipated results for the current year also are grim. "With a possible war on the horizon, elevated jet fuel prices and broad business discounting, we have raised our loss estimate for 2003 from $3.6 billion to $4.5 billion," said UBS Warburg Sam Buttrick in a recent research note to investors.
Car Rental Driving Toward Economic Recovery
Returning transaction volumes, strong local market rentals and corporations' perception that car rental is a good value are among the factors steering the car rental industry toward economic recovery in 2003, with rentals in airport markets up between 10 percent and 15 percent over January of last year, according to Abrams Travel Data Services' Car Rental Market Scan, released last week. In the third quarter of 2002, the last period for which all revenue is available, only ANC Rental Corp. reported a loss—and a sizeable one at 26.5 percent. Otherwise, Budget reported the smallest profit margin at 3.2 percent, and Hertz the largest, at 9.4 percent, citing a favorable impact from the local market. Though the report noted that a recent reduction in the time between booking and renting leaves the industry less able to predict travel patterns, car rental executives said the industry still has improved control over costs by tightly managing its fleet through its relationship with automobile manufacturers. "We can give the cars back, so we don't have the assets sitting there empty," said Samuel Katz, chief strategic officer of Cendant and chairman and CEO of Cendant's travel distribution division.
Lufthansa Cutting Some Transatlantic First Class
Lufthansa German Airlines is planning to eliminate first class on seven additional routes following removal this month of first class from flights between Frankfurt and both Boston and Philadelphia. A Lufthansa official, citing "an overall strategy to eliminate first class where there is little demand," said the seven other routes may include both U.S. and non-U.S. destinations. Flights from both Boston and Philadelphia to Frankfurt this fall will be served by new two-class Airbus 340-600 aircraft, featuring an expanded business class cabin.
Hoteliers Point To Negotiated Rate Highs and Lows
UBS Warburg last month polled sales managers at 370 U.S. hotels to ascertain the cities where negotiated transient rates for comparable hotels grew the most for 2003. Washington, D.C., Los Angeles, Anaheim and Minneapolis topped the list. Conversely, negotiated rates tended to be lowest in New Orleans, San Francisco and Tampa.