AMR Corp dropped to its lowest closing stock since 28-Mar-2003, following attempts to end a five-year deadlock with a contract proposal that offers pilots smaller pay increases than they had requested (Bloomberg/Dallas Business Journal, 15-Nov-2011). The proposal was posted on American Airlines’ labour website after a day of negotiations following a weekend break. The carrier is reportedly trying to increase the pressure on pilots to approve a tentative agreement by the end of the week. Two contracts presented late on 14-Nov-2011 included pay raises and job protection for pilots in exchange for increased productivity and operational flexibility.
AMR Corp's share price drops to record low after pilots review labour contract offer
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United Airlines Part 1: New management declares ambitions to usher in a new competitive era
For years United Airlines has operated at a competitive disadvantage to its large US network peers. The challenges that United never seemed to overcome were largely self-inflicted, and ranged from widespread employee discontent to consistent revenue shortfalls.
Now United finally appears to be charting a course to level the competitive playing field with its large global US network competitors, to close the long-standing revenue gap it has held with its rivals. The elements of United’s plan to shore up revenues include bolstering connections at its hubs, improved revenue management, and product segmentation that entails a new basic economy fare structure whose restrictions are more stringent than those of its peers.
United’s revenue transformation will not occur overnight, but for the first time since its 2010 merger with Continental the company seems laser-focused on shrinking the competitive challenges that have hindered its performance. It projects billions in improvement – to pre-tax profits by 2020 – as a result of its doubling down on efforts to shore up revenue. Obviously the measure of United’s success lies in its execution and its ability to navigate competitive responses to its revenue-generating strategies.
This is part one of a two part series examining United’s strategies to compete more effectively with its peers on revenue and costs.
Delta-Korean Air joint venture creates trans-Pacific's second largest bloc. Cathay, EVA under threat
The unprecedented aviation market growth between Asia and North America is forcing airlines to re-evaluate their core strategy and reassess who is a competitor and who could be a partner. It seems probable that Delta Air Lines and Korean Air will form a joint venture, potentially making them the second largest trans-Pacific bloc.
The next two largest airlines without a deep partnership, EVA Air and Cathay Pacific, are having to confront significant change, without the support of partners. Delta-Korean Air brings United-ANA its closest rival yet, while the American-JAL JV – already smaller – needs bulking up.
Korean Air brings Delta a wider network in Asia than ANA or JAL offer to their respective JV partners, United and American. A Korean Air-Delta JV could result in more destinations and flights being added once they are able to sell jointly.