Just_Another_Pilot
September 30, 2000, 07:19 AM
Always when an airline has to publish a loss, the pilots are blamed for it. When they have fantastic figures however, I never hear that's because of the pilots.
United Airlines warned that costly new contracts with its pilots, coupled with severe disruptions to its service since July, would cause it to report a loss for the third quarter.
The news on Friday put increased the pressure on United's planned $4.3bn acquisition of US Airways. The proposed deal is coming under close scrutiny from US regulators and opposition from union leaders.
The warning was the third from UAL, the parent company of the world's largest carrier, since July. Analysts had already reduced their third-quarter earnings estimates from as much as $3.35 per share in August to an average of 97 cents.
UAL was forced to cancel thousands of flights during the summer, and many more suffered severe delays and disruptions, as disputes with United's pilots were exacerbated by poor weather and air traffic control gridlocks across the country.
Jim Goodwin, UAL's chairman and chief executive officer, said the disruptions had reduced revenues "significantly". Higher jet fuel prices and a new pay agreement with its pilots "will further impact our results." A loss was also likely in the fourth quarter, he said.
United said that it had a hedge programme in place against crude oil increases for the year, but that jet fuel has risen at a higher rate than the cost of crude oil.
The tentative pilots' contract, which was agreed earlier this month, has set a new "gold standard" within the airline industry, with the average top pay rates being 10-12 per cent above the current industry maximum.
UAL may face more such cost pressures, analysts said, as The Association of Flight Attendants is also pressing for a compensation settlement which would be above industry peak rates.
The pilots agreement has caused concern among analysts that pay pressures may rise across the industry. Samuel Buttrick of PaineWebber wrote in a recent report that UAL management had "capitulated to save the operation and salvage the US Airways deal."
Ray Neidl of ING Barings said it was unclear whether UAL's troubles could derail the merger plan, but said regulators may be concerned that a company with its own management problems could tackle the integration of US Airways.
Investors have been concerned that regulators may not allow UAL to take US Airways over without substantial further concessions. UAL has offered $60 per share in cash, but US Airways' stock dropped $1.07 to close at $30.07 in New York trading.
Most analysts said other US carriers would be less severely affected by weather disruptions and high fuel costs in the third quarter, as some have benefited from passengers defecting from UAL.
Michael Linenberg of Merrill Lynch said the industry's total net income was likely to decline this year, given an expected 48 per cent rise in fuel costs and a likely 14 per cent rise in salaries.
Merrill Lynch lowered its estimate for UAL's third quarter from earnings of 30 cents to a loss of 50 cents.
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I am not afraid of crashing, my secret is . . . just before we hit the ground, I jump as high as I can.
— Bill Cosby
United Airlines warned that costly new contracts with its pilots, coupled with severe disruptions to its service since July, would cause it to report a loss for the third quarter.
The news on Friday put increased the pressure on United's planned $4.3bn acquisition of US Airways. The proposed deal is coming under close scrutiny from US regulators and opposition from union leaders.
The warning was the third from UAL, the parent company of the world's largest carrier, since July. Analysts had already reduced their third-quarter earnings estimates from as much as $3.35 per share in August to an average of 97 cents.
UAL was forced to cancel thousands of flights during the summer, and many more suffered severe delays and disruptions, as disputes with United's pilots were exacerbated by poor weather and air traffic control gridlocks across the country.
Jim Goodwin, UAL's chairman and chief executive officer, said the disruptions had reduced revenues "significantly". Higher jet fuel prices and a new pay agreement with its pilots "will further impact our results." A loss was also likely in the fourth quarter, he said.
United said that it had a hedge programme in place against crude oil increases for the year, but that jet fuel has risen at a higher rate than the cost of crude oil.
The tentative pilots' contract, which was agreed earlier this month, has set a new "gold standard" within the airline industry, with the average top pay rates being 10-12 per cent above the current industry maximum.
UAL may face more such cost pressures, analysts said, as The Association of Flight Attendants is also pressing for a compensation settlement which would be above industry peak rates.
The pilots agreement has caused concern among analysts that pay pressures may rise across the industry. Samuel Buttrick of PaineWebber wrote in a recent report that UAL management had "capitulated to save the operation and salvage the US Airways deal."
Ray Neidl of ING Barings said it was unclear whether UAL's troubles could derail the merger plan, but said regulators may be concerned that a company with its own management problems could tackle the integration of US Airways.
Investors have been concerned that regulators may not allow UAL to take US Airways over without substantial further concessions. UAL has offered $60 per share in cash, but US Airways' stock dropped $1.07 to close at $30.07 in New York trading.
Most analysts said other US carriers would be less severely affected by weather disruptions and high fuel costs in the third quarter, as some have benefited from passengers defecting from UAL.
Michael Linenberg of Merrill Lynch said the industry's total net income was likely to decline this year, given an expected 48 per cent rise in fuel costs and a likely 14 per cent rise in salaries.
Merrill Lynch lowered its estimate for UAL's third quarter from earnings of 30 cents to a loss of 50 cents.
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I am not afraid of crashing, my secret is . . . just before we hit the ground, I jump as high as I can.
— Bill Cosby