Air Transport World

A bankruptcy is a terrible thing to waste: United needs to move fast and achieve real cost reductions to retake its leadership position. (Analysis).

The good news is that in normal times, it's not easy for a legacy airline--even a chronically unprofitable one--to go our of business. After all, Pan Am took nearly 20 years and Eastern 10, including 22 months in Chapter 11 bankruptcy during which it burned through almost $2 billion.

The bad news is that the times are anything but normal. That's the reality facing United Airlines, which last Dec. 9 found itself in the extraordinary situation of having to declare bankruptcy less than 14 months after it sacked its former chairman and CEO, Jim Goodwin, for implying that such an event was a possibility. Certainly United is in far better shape than was either Pan Am or Eastern. Despite a series of missteps, it has the best hubs in the industry and a global network in a network business. Although it has received more than its fair share of customer complaints regarding its product, it has made great strides over the past year in terms of punctuality and reliability. Labor relations, though thorny, have not deteriorated to the level of the Frank Borman-Charles Bryan battles at Eastern.

None of the analysts with whom ATW spoke see a shutdown as the most likely scenario. Avitas Senior VP Adam Pilarski told ATW that "there is a reasonable chance that United will not survive Chapter 11" but that he is "cautiously optimistic" about the carrier's future. UBS Warburg's Samuel Buttrick has put the odds of a liquidation scenario at only around 20%.

Nevertheless, it is a measure of how far United has fallen that analysts now accept that the world's second-largest airline may indeed "perish," as Goodwin warned. Yet, like an action sequence in a Hollywood shoot-'em-up, United's leaders appear to be responding in slow motion to their life-and-death struggle, as they often have for much of the airline's recent past during which it has lurched through a series of mostly self-inflicted crises. …

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