It will be interesting to see what UAL does tomorrow. This WSJ article isn't awful, but may worry investors a little.
SEPTEMBER 27, 2011
United Feeling Merger Pains
By SUSAN CAREY And JACK NICAS
wsj.com
CHICAGO—In the year since United Airlines and Continental Airlines merged, the economy has weakened and the price of aviation fuel has soared. But business for United Continental Holdings Inc. has been surprisingly rosy.
The Chicago-based airline, now the world's largest by traffic, is on course to turn a $1.4 billion profit this year. It is sitting on an $8.4 billion cash pile, its unit revenue gains are leading the industry and it is moving briskly to repaint its fleet and rebrand its airport terminals. Earlier this month, Fitch Ratings raised United's credit rating by a notch, citing significant debt reduction and cash-flow generation.
But things may become difficult in the coming months as the new United tries to clear three tall hurdles: new labor contracts, a new reservations system and government approvals. Events this week suggest that may come to pass.
On Monday, the Air Line Pilots Association, which represents United pilots, sued the company in federal court, alleging that "revised operating procedures" in relation to the merger are "inadequate to maintain the levels of safety" United passengers expect. The union is asking to postpone the airline's implementation of its latest phase of postmerger training.
United said the suit is an attempt by the pilots union to tilt current negotiations for a new contract toward the aviators' interest, according to internal correspondence between the company and the union. It said the complaint "is entirely without merit."
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But in recent months he has conceded that he was overly ambitious and that the "cumbersome" process of employees selecting which unions will represent them in the combined company has slowed progress. He also has warned that United isn't going to agree to contracts it can't afford.
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The company must then integrate its complex and incongruent passenger-reservations systems, which are the digital heart of airlines' customer relations—storing, organizing and calculating flight schedules, fares and passenger transactions. The airline plans to transplant United's Apollopassenger-reservations system into Continental's Shares system. It plans to make the switch in the first quarter of 2012.
Merging two systems is an enormous technology undertaking. "No one's ever done one this big," said Scott Nason, an airline-technology consultant and former information-technology chief of AMR Corp.'s American Airlines. "And there have been others that didn't go so well." Problematic switchovers can lead to flight delays, lost bags, overwhelmed reservations centers and inoperable check-in kiosks—for days or even months. Marrying computer systems is a bloodless task. Merging cultures and unions can be hairier.
Finally, in what is likely to be the most arduous task, United must reach new labor contracts with its far-flung employees—and then hope that the various unionized groups can agree among themselves to joint seniority lists.
At stake is more than $1 billion of annual cost savings and revenue gains United hopes to lasso by 2013, when the company is fully operating as one.
Already, United is "connecting the dots" on its extensive route network, Mr. Smisek said, by leveraging the market clout of one subsidiary to add flights by the other. For instance, Continental has long been strong in Mexico, so the combined airline has added flights to that country from United's West Coast hubs. United is big in Hawaii, so the airline has added flights from the West Coast to the Aloha State with Continental aircraft.
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Full article: http://online.wsj.com/article/SB10001424052970204010604576594663820835694.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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