I’m Not Surprised United Airlines Is Broke And Here’s Why You Shouldn’t Either

By: Smart Profits Report Friday, April 17, 2009 2:47 PM

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If you frequent MSN, you’ve probably seen their attention-grabbing headline for 10 Companies That May Go Bankrupt This Year.

If you haven’t yet read it, that really doesn’t matter much since it doesn’t offer many surprises. GM (NYSE: GM) made the list - obviously, since the automaker’s potential bankruptcy has made news for months now - as did Blockbuster (NYSE: BBI), which really has little to do with the flagging economy and more to do with progress and a little company called Netflix Inc. (Nasdaq: NFLX).

Then there were the other obvious choices from homebuilders to amusement parks. Clearly, our housing market leaves something to be desired and when consumers are cutting back on clothing and eating out, why in the world would they be spending their money on Six Flags (NYSE: SIX)?

The answer is, they wouldn’t be, which is why they’re not.

And then there’s United Airlines, which also made the list. Now that shouldn’t surprise anybody for a few different reasons.

First off, if it does have to file for Chapter 11, it won’t be a first either for the company or the industry. Both Delta Air Lines Inc. (NYSE: DAL) and Northwest took that particular walk of shame back in 2005, Frontier, Aloha and Sun Country had to file as recently as 2008 due to the high cost of jet fuel, and United led the way well before in 2002.

Now, seven years later, it’s trying to stay airborne after the double whammy of skyrocketing oil and falling consumer demand. The Federal Aviation Administration sees that pattern continuing for at least the better part of the year, estimating that U.S. passenger traffic will drop 9% this year resulting in a 5.7% revenue drop for the industry.

If United fell that far, it would be a blessing though. Parent company UAL Corporation (Nasdaq: UAUA), said just last week that its traffic was down 13.6% last month as compared to March of last year. In addition, UAL attempted to start Ted, a low-cost airline. If you’ve never heard of it, that’s because it didn’t last very long. UAL discarded it altogether in January, 2009.

Before you know it, the corporation might just have to do that to United.

Friday, April 17, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research

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4/18/2009 8:57:34 PM Wow - Another Jim Cramer by Mitch People who take advice from these reports should be willing to throw money away. You, just like Jim Cramer, put a few statistics and never show the opposite side of things. While yes, United and majority of the major carriers in the US are hurting financially right now...they have a plan to live through this recession. While you say passenger traffic dropped, as reported by the FAA, did you also mention how much capacity United and other airlines cut? Those cuts are in line with passenger drops - revenue drops. Revenue is definitely below what airline's would like right now, due to the economy and pricing power (lack there of) of the airlines. If United or any major airline were even close to going broke or bankrupt, they have agreements in place to sell of assets to raise cash and continue to fly. You post 4 great stats and expect us to believe why you think they're broke. Great opinion, but if you're going to try and sound somewhat intelligent put more facts, dig into the statements and actually show some viable information. You should re-post this article next week after United and other airlines post massive losses - yes massive - that means they're broke, right? Reply Rating: (0) (0)

People who take advice from these reports should be willing to throw money away. You, just like Jim Cramer, put a few statistics and never show the opposite side of things. While yes, United and majority of the major carriers in the US are hurting financially right now...they have a plan to live through this recession. While you say passenger traffic dropped, as reported by the FAA, did you also mention how much capacity United and other airlines cut? Those cuts are in line with passenger drops - revenue drops. Revenue is definitely below what airline's would like right now, due to the economy and pricing power (lack there of) of the airlines. If United or any major airline were even close to going broke or bankrupt, they have agreements in place to sell of assets to raise cash and continue to fly. You post 4 great stats and expect us to believe why you think they're broke. Great opinion, but if you're going to try and sound somewhat intelligent put more facts, dig into the statements and actually show some viable information. You should re-post this article next week after United and other airlines post massive losses - yes massive - that means they're broke, right?

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The above story is the opinion of the author only and it does not reflect iStockAnalyst opinion. Further, the author is not personally advising you regarding the suitability of the story for your investment needs. In no event iStockAnalyst will be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from or arising out of, or in connection with the use of this information. Please consult your investment advisor before making any investment decision.

Friday, April 17, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research

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