United Airlines' imminent bankruptcy reorganization is not likely to impact many corporate accounts in the immediate term, according to travel managers and other industry sources.
"Unless we hear otherwise from them, it is business as usual," said Harriet Washburn, vice president of corporate travel for Chicago-based Aon.
For now, and even in the earlier stages of a court-supervised restructuring, United's expansive network, schedule, frequent flyer programs, alliance ties and corporate programs are expected to remain largely intact.
Longer-term ramifications are far less certain. Bankruptcy protection, which at press time appeared a near certainty, likely would lead to significant cost reductions and service adjustments, impacting competitors, regional and international airline partners, aircraft manufacturers and certain corporate accounts.
Yet, an executive at a competing carrier conceded that any short-term impact on United's client base would be minimal. "My gut feeling is that they will make it work in Chapter 11," the executive said. "They will work diligently with corporate accounts to keep folks calm."
"The idea of Chapter 11 does not sway my support for United as a preferred carrier at this point," said Phil Dunphy, senior manager of global travel at New York-based Pfizer Inc., "unless there is a degradation of service."
Other travel managers voiced support for United, including National Business Travel Association president Kevin Iwamoto. "We at NBTA wish United well and success in reorganizing and staying afloat," he said. "Some corporate accounts will get nervous and bolt. Then there are those that will stick by them for various reasons."
Certain accounts may be inclined to leave United if the carrier tries to renegotiate corporate deals or cuts service on a client's top city pairs, travel managers said. That spells opportunity for competitors eyeing greater marketshare, including those that lobbied intensely against United's Air Transportation Stabilization Board application.
"I have seen hyenas in the wild," Dunphy quipped. "That is what capitalistic business is all about."
Still, many of those same airlines will experience similar pains as United including labor union challenges, capacity decisions and possibly even bankruptcy. US Airways, itself attempting to restructure under bankruptcy protection, is particularly vulnerable. The nation's number-six carrier had estimated $150 million to $200 million in incremental revenue stemming from a nascent marketing and codeshare pact with United.
"Competitors will be under significant pressure to match or get closer to United's new cost structure achieved in restructuring," Iwamoto said. "Otherwise they will be at a serious disadvantage."
A large-scale cost revamp among the Big Six U.S. carriers could hurt many parties in many ways, but ultimately may be unavoidable. "Make no mistake, a successful reorganization of UAL benefits the entire industry," said J.P. Morgan Securities analyst Jamie Baker.
United's predicament, though years in the making, became dramatically more precarious last week when ATSB rejected the carrier's application for a $1.8 billion federal loan guarantee. ATSB called United's proposed business plan financially unsound, unreasonably optimistic and too risky for U.S. taxpayers. The board concluded "that with a more reasonable revenue forecast, United's revenues and costs still would not be aligned, even with the benefit of all proposed cost reduction initiatives."
ATSB executive director Daniel Montgomery left the door open to future support, fashioned either as exit financing available as United emerges from bankruptcy protection or on the condition of an acceptable business plan developed within or without a court restructuring.
At press time, United—on the hook for about $1 billion in debt payments and still losing millions each day—was working to secure debtor-in-possession financing ahead of a bankruptcy filing. The carrier also is said to be working on relief packages with Star Alliance partners, notably Lufthansa German Airlines.