Investor trade press isn't kind towards UA...

Discussion in 'United Airlines | MileagePlus' started by Weatherboy, May 11, 2014.  |  Print Topic

  1. Weatherboy

    Weatherboy Gold Member

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  2. Wandering Aramean
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    Wandering Aramean Gold Member

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    Calling Seeking Alpha "Investor trade press" or calling that an article is generous.

    The guy is short UAL and wrote a story on why it is a bad investment. Shocking.
     
  3. Weatherboy

    Weatherboy Gold Member

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    Which he disclosed, but still a solid article with many valid points.
     
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  4. traveltoomuch

    traveltoomuch Silver Member

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    Reading the whole of it appears to require registration. :(
     
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  5. Weatherboy

    Weatherboy Gold Member

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    Ugh. It should be free though. Does MilePoint allow me to cut/paste an article with credit?
     
  6. Wandering Aramean
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    Wandering Aramean Gold Member

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    Definitely not the whole thing. Copyright is an issue regardless of where you're pasting the lifted text.
     
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  7. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    I always enjoy reading Seeking Alpha "articles" about my industry. It is so amusing to think that people actually might base their investment decisions on stuff like this.
     
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  8. Seacarl
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    Seacarl Gold Member

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    Registration is free, however.

    I think the writer has made a couple of important points. One of them is that the investment professionals aren't believing the excuses for the disappointing financial performance any longer. The weather excuse is BS since UA wasn't affected disproportionately more than AA or DL or even WN. Management has had plenty of time to work on computer systems, network planning, pricing and revenue management, and fleet optimization.

    The other point he made is that UA has earned a reputation for poor service and crappy product. It's in the press. It's in the blogs. It's in Flyertalk and Milepoint. And they are losing high value customers over it. The union mess has a role. Cost savings has a role. Overreliance on 50-seat RJs has a role.

    A point he didn't make but I'll make is that I think they are also losing customers over bad schedules and revenue management shenanigans. In the past there were always flights scheduled to match connecting banks and popular flight times. For the past year or so, on multiple occasions and multiple routes I have found holes in the schedule the preclude logical connections - that are not necessarily available over other hubs. I'm not sure how (or whether) they are able to evaluate the effectiveness of their schedule, it may simply show up as lower revenue or lower demand. The second is how they've tried to use married segment logic to restrict fare classes. I think they're simply losing business as a result of not offering the lowest fare or not offering those connecting options. There are probably other aspects to the revenue management that are at fault, but something seems wrong.

    With the network UA has, if they focus a little more on product and service and run the computer systems right, they should be able to generate comparable PRASM as DL, maybe even a bit higher since generally UA's international service is from superior hubs to DL's.
     
  9. chitownflyer
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    chitownflyer Silver Member

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    This article sums up many of United's current shortcomings and challenges, but it should make it apparent that these items can be fixed by product and operational improvement, but it will cost money to do so.
     
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  10. 8MiHi

    8MiHi Silver Member

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    He also points out that he is not a professional investor, analyst or adviser. His whole article might have been better placed on a blog aimed at FFs as much of his argument is one with which we all have grumbled about such as upgrades withheld for TOD purchasers rather than made available for CPUs and flying the 'Dark Birds' (No IFE, power or WiFi that works).
     
  11. HeathrowGuy
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    HeathrowGuy Gold Member

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    The article is rather unsophisticated, and here's why:

    1. Multiple overly simplistic comparisons to other airlines were made.

    Viewing SQ as a major rival of UA? Pretty laughable. But let's run with it for a moment. Since the dawn of the 21st century, SQ has shuttered service from ORD, LAS, and EWR, cut its LAX services from 3 to 1, and downgauged SFO-HKG from an A380 to a 77W. And SQ is now rushing to install a Premium Economy cabin because Economy flyers who can spend a bit more want more legroom than SQ provides, no matter how nice the wines are...you know, like the legroom offered by United Economy Plus. In short, it's Singapore who should be (and is) worried about United, not the other way around.

    Lufthansa? LH and UA shares revenues on all their TATL flights anyways, but let's set that aside for a moment. Yes, Lufty has a very nice First Class product, one of the best in the world. But Lufthansa's prevailing Business Class product is subpar, and flat bed installation is not slated for completion until 2017, five years after United got the job done (while merging to boot). And HVFs on longhaul journeys are pretty adamant about flat bed seats these days.

    2. The section about "Alienating the HVF for a Few Bucks of Ancillary Revenue" can be completely disregarded.

    Delta and American are far more aggressive in monetizing their First Class cabins than United. American, in particular, is the most aggressive of all by limiting complimentary upgrades for all but their top-tier elites, such that the numerical majority of their HVFs are paying surcharges/premiums (call it what you like) through upgrade certificate purchases for the mere possibility of sitting in First Class.

    3. The article is inattentive to the real "Bane" of HVFs, and United's biggest revenue challenge: Maintaining Real (and perceived) Operational Reliability and Service Recovery.

    For price-insensitive HVFs, especially in the domestic market, the confidence that a conveniently-scheduled flight lands where it's supposed to at its scheduled arrival time is the most important consideration in ticket purchase decisions. Everything else is a sideshow. A genuine fault that can be attributed to UAL management is allowing operational performance to go into the tank after 3/3, as United's institutional history makes clear just how serious and long-lasting the damaging perception that United can't be trusted to get you places on-time can be.
     
  12. downhillcrasher

    downhillcrasher Gold Member

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    Incorrect. Your upgrade certificate is only taken if you sit in first class, otherwise you retain it for a future flight (also you get 4 free every 10,000 miles). You never pay for just the "possibility" of sitting in first on AA, unlike on United where people really do pay for the possibility of sitting in a premium cabin when they buy a W or higher fare with the hope of clearing a GPU.
     
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  13. meFIRST

    meFIRST Silver Member

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    I'm surprised heathrowguy is defending Jin Jong Untied. His days may be numbered : There's talk of revolution!
     
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  14. HeathrowGuy
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    HeathrowGuy Gold Member

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    I am still correct, as the upgrade certificates have to be purchased prior to knowing whether the upgrade will be confirmed. Great that purchased unused certs may be used in the future, but it's a roulette game with $$$ for domestic upgrades that United flyers don't have to play.
     
  15. HeathrowGuy
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    HeathrowGuy Gold Member

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    I'm not defending UA or Jeff Jong Un, just pointing out that the author almost completely botched the discussion of United's problems from a customer standpoint, much less from an investor perspective.
     
  16. downhillcrasher

    downhillcrasher Gold Member

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    I guess technically you are correct, assuming you purchase them (although you get many for free), don't clear (I clear ~90% as plat) and never fly AA again (not likely if you are elite in the first place). If and only if all those conditions are met you have paid for the possibility of an upgrade. But that is a really contrived scenario and is really really stretching things, whereas on UA if your GPU doesn't clear on a W fare the additional money you spent over the lowest fare bucket is gone for good. UA is much worse here.
     
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  17. HeathrowGuy
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    HeathrowGuy Gold Member

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    Comparing domestic and international upgrades is apples and oranges. CPUs on nearly all UA intra-North America flights are applicable from all fares. Even if an AA Platinum elite ends up in F more often than a UA Platinum, the AA elite will have paid more money for that ability through upgrade cert purchases. So the author's point about UA monetizing F is nonsensical, since AA is -- and has long been -- much more open and aggressive about doing so.
     
  18. downhillcrasher

    downhillcrasher Gold Member

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    Don't change the subject, I never said anything about monetization, only about paying for a chance to upgrade. Namely that it isn't much of a 'roulette game' on AA, if you are elite on AA and purchase upgrades, you are very very very likely to be able to use them to sit up front. This is in contrast to UA, who operate an actual 'roulette game' with their 'W or higher' GPUs.
     
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  19. chitownflyer
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    chitownflyer Silver Member

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    With utmost respect, the author of the article has a valid point about CPUs not being processed, rather UA's IT is programmed to try and sell upgrades to everyone with Ma and Pa Kettle receiving purchased upgrade offers for TOD's, but UA elites receiving them at double the price or even HODs. By attempting to generate additional transactional revenue, UA is actually driving away elites and HVFs en masse.

    I do not think he is defending anyone, but what is this talk of days numbered and revolution, I am curious?
     
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  20. Weatherboy

    Weatherboy Gold Member

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    Agree with point one; everyone domestic airline's F product isn't on the same level other carriers are, but with point 2, I agree with the authors assessment that perception is reality.

    While other carriers may be more aggressive, UA comes across especially so when it comes to grabbing up the ancillary revenue. Chatter among HVFs is that some infrequent traveler will scoop up their upgrade for TODs. Whether it's true or not, or whether it happens with other carriers or not, the point that HVFs think this is a problem exclusive to UA is a problem.
     
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  21. Captain Oveur
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    Captain Oveur Gold Member

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    "Jeff Jong Un?"

    C'mon folks, Milepoint is better than that.
     
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  22. HeathrowGuy
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    HeathrowGuy Gold Member

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    Jeff is no longer the dear respected Supreme Leader of the World's Leading Airline. The full name is Jeff Jong Un(ited).
     
    Last edited: May 12, 2014
  23. meFIRST

    meFIRST Silver Member

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    Next comes the revolution. Let them eat MileagePoo
     
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