Friday, July 17, 2009

An Illinois Irony - From Emergence to Emergency

Who'd a thunk it? There is a way outside possibility that three of the largest airlines in the country and all of whom dominate the Chicago market could be based in Texas!

Continental?! How’s that, you say? Some huge “if/thens” need to happen first but consider:
American Airlines is the 2nd carrier at O’Hare and is based in Ft. Worth.
Southwest Airlines rules the south side at Midway and is based in Dallas.

That leaves United, the hometown carrier. The financial press has picked up the beginnings of yet another death watch, this time by mid-2010 for the erstwhile largest carrier in the free world. Naysayers spout off a laundry list of ills lining the proverbial coffin:
a) Premium cabin upgrades to the 777 fleet have been delayed.
b) A noticeable lack of orders for new aircraft.
c) The strategy of financing their exit from bankruptcy protection with debt.
d) Unencumbered assets down to $1.1 Billion, once a king’s ransom, today a church offering.
e) The $140/barrel spike in 2008 that caught United flat-footed.
f) The broken guitar hit on YouTube.

Yeesh! How to get out of this mess? The list is long of dead airlines who sold the family silver for just one more day in the air. Matter of fact, United bought the Pacific Division from one of them!

One of United’s plans was to set itself up for possible sale or merger. Delta kicked the tires but went for Northwest instead while USAirways was sent back to the desert to finish digesting America West. American or Southwest were never options given the overlap with one and the domestic-only business model of the other. Enter Continental:

1) Marketing: Already in Mileage Plus and a soon to be member of Star Alliance
2) Fleet Compatibility: Continental is all Boeing airline with newer models
3) Domestic Structure: Hubs at EWR, CLE (cut), ORD, IAH, DEN, SFO, NRT and Guam
4) International Balance: UA across the Pacific, CO to Europe and Latin America
5) Continental has a long history in Denver and Los Angeles (former HQ).
6) Continental is based in Houston, Texas, completing The Illinois Trinity!

Would they do it? A lot of people seem to be pointing to it as a logical/last gasp measure. A ton of virtually easy money would otherwise be left on the O’Hare table for American if United goes under. While I do not predict or hope for the demise of United Airlines the perception is that United has been simply unable to get out of its own way.

If Continental flies to the rescue it should not be a consideration to leave even one of United’s management in place given their collective history as far back as the Allegis experiment. The deeply ingrained cultural residue each would bring to the table should put anybody off of that idea. The only other question if such a deal were to go through would be whose name would survive.

Gotta Go!

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