In his blog post What a Difference a Decade Makes on the Wall Street Journal's website, Scott McCartney rounded up a few interesting statistics that looked at United and Southwest - both today, and ten years ago. United has dropped from the largest airline in the US to the third-largest; its North American passenger traffic for the first five months of 2009 is down 26% from the first five months of 1999. Between 2000 and 2008, the airline's fleet as been cut by a third; its passenger numbers have dropped 38% and its workforce has been cut in half. In the last ten years, the airline has also had to deal with one of the largest Chapter 11 bankruptcy filings in American corporate history.
So the news about United has been pretty bad for the last ten years, and there's no sign of that changing. Even though it tried to strike an upbeat tone with the recent news that it was shopping around for new planes, the recent financial numbers that it has posted are pretty ugly - if you've got shares in United Airlines, the numbers are likely to make your teeth start itching. Traffic fell a whopping 12.3% in May, and the airline expects the amount of money that it makes for every mile that a seat flies (also known as 'unit revenue') to drop 18 to 19 percent this quarter, compared to a year ago.
And Fitch downgraded United's debt ratings, saying that its "credit profile is likely to weaken further, as extreme pressure in the revenue environment continues to undermine the positive cash flow impact of lower jet fuel prices in 2009." United's "heavy exposure to premium business markets" means that it's been hit particularly hard by the cutback on corporate travel spending.
But perhaps the most visible sign of United's financial distress came when TV host Jim Cramer blasted CEO Glenn Tilton on his show, Mad Money, saying that Tilton belongs on the CEO 'Wall of Shame' because United's abysmal stock performance is awful, even for an airline. The airline's shares have lost 88% since it left bankruptcy back in 2006, and are down 63% just this year.
Nobody's really predicting the imminent death of United, nor are they saying that the airline is likely to file for Chapter 11 a second time. And when the entire industry is facing its worst crisis since, well, the last major crisis a few years ago, it's unfair to think that United is going to start posting a profit or something. But the results that UAL has been posting have been significantly worse than the industry averages. United's got some strong assets - a sturdy, if somewhat tarnished, brand name; membership in the Star Alliance; some good international routes. But there's always been gloom-and-doom talk about how a big US carrier needs to fold in order for the rest of the industry to return to profitability, and if United doesn't want to be 'that one,' it had better come up with a better plan for financial viability, and soon.
photo by superciliousness from Flickr, licensed under the Creative Commons