United Airlines finally flies out of bankruptcy

Bucking the cheaper-is-better trend, United also has added or expanded products targeting both ends of the price spectrum. Besides its two-year-old discount airline Ted for leisure travelers, it has an enlarged Economy Plus program with extra leg room for frequent or higher-paying travelers and a premium transcontinental service called “p.s.” offering more comfort for more money.

All told, United shed $7 billion in annual expenditures during the complex makeover.

Some industry experts say it could have done more. They also note that some of the competitive edge it gained in bankruptcy court already has been eroded by rivals following with their own cuts.

“United comes out of Chapter 11 with no significant advantages over its major competitors,” said consultant Michael Boyd of the Boyd Group in Evergreen, Colo.

Ray Neidl of Calyon Securities said that along with other carriers, United faces a tougher challenge on costs than it did when it entered bankruptcy.

“They’re on the right path but they’ve got a few more feet to walk,” he said. “I’d like to see the costs come down more in this very competitive environment in which other carriers are reducing their CASM (costs per available seat mile).”

Leading financial institutions have endorsed United’s prospects after bankruptcy, with JPMorgan Chase & Co. and Citigroup Inc. leading a $3 billion financing package. Standard & Poor’s upgraded UAL’s credit ratings as soon as it emerged Wednesday, citing its “extensive and well-positioned route system” and labor and other cost cuts.

Many investors also were bullish ahead of the trading debut Thursday of the company’s new stock on the Nasdaq Stock Market. United’s early estimates were that the stock, whose ticker will be UAUA, would trade for about $15 a share, but on Wednesday they closed at $40 in pre-trading on Nasdaq’s over-the-counter market.

While United has contracts with its employees in place through 2010, relations with its unions remain tense because of the cost cuts. Several unions issued statements crediting employees, not management, with saving the airline and reiterating their anger at the new stock plan which gives 8 percent of shares to top executives.

“The empty suits at UAL world headquarters are dropping their bags of money only long enough to pat themselves on the back for a job well done,” said Randy Canale, president of District 141 of the Machinists’ union and a UAL board member. “The fact is that United survived in spite of its current leadership, not because of it.”

A leader of the Aircraft Mechanics Fraternal Association was even more blunt in urging a new management team be appointed.

“We challenge UAL to take the same carnivorous attitude used to beat concessions from the union work groups, and apply it towards its management team,” said AMFA Local 9 president Joseph Prisco, whose unit represents more than half of United mechanics.

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