10/06/2004

Emerging From Bankruptcy

United Airlines in an effort to emerge from bankruptcy has begun to reduce the number of flights it makes to the U.S. Glenn Tilton, United Airlines' chairman, president, and chief executive officer said, “fundamental changes in our industry, including ongoing high fuel costs, intense pricing pressure, and continuing overcapacity, demand that we take aggressive steps now in implementing this plan to ensure that United remains competitive.” The business world today is ever-changing and in order to stay in the game businesses will have to make some very important decisions. United Airlines found it necessary to begin downsizing, and some companies may find that they need to completely restructure.

I found this article pretty interesting because it relates to a blog that I did earlier in the semester. My blog was about Aron Ralston, the man that cut off his arm that was trapped by a rock to save his life. Aron found that it was more important to live without an arm than to die ensnared by a large boulder. United Airlines is much like Aron in the fact that they were going no where but down. So in an effort to save their life (business) they had to start cutting costs somewhere. United chose to cut the size of their fleet and to reduce their U.S. flights. Was this a good decision? Well, if the benefits outweigh the costs I believe that it was.

5 comments:

Bryce Larkin said...

Most of the airline companies have been struggling for years financially. One of the only reasons most of them are still in business is because they are government subsidized. The airlines need to do something drastic and downsizing is probably a good idea.

Bruce Banner said...

With any business, when a company is losing money, they do have to cut cost somewhere so they can survive. With the airline industry I think is a little different because they get financial support from the government.

My question is why do the airlines receive help from the government when they are in trouble but other business do not?

Bryce Larkin said...

Bruce, I could be wrong but I think they are getting the governments help because they are necessary. There are many companies getting help because society can’t be without. The airlines don’t just transport people. They transport packages, food, etc…. I do agree that they should up their prices or downsize because our tax dollars should not pay for their company.

Maudi said...

United is trying to emerge and I agree that they must cut back in order to make it. Companies such as Southwest and Jet Blue understand the importance of finding a niche in the market. According to this article United is trying to find theirs. United is a good company and this will be a test to see if they are a great company.

Dr. Tufte said...

The airlines do not get much direct financial support from the government. What they do get is airports built for them - which is an indirect subsidy.

Having said that, they probably should get quite a bit of support. The history of passenger transportation is that no one can make money at it in the long-run. This is a good sign that fixed costs are too high to be recouped.