Challenges Facing the Carrier

Length: 726 words

On the 9th of December 2002, United Airlines announced that the day will forever remain memorable in the history of the airline. That day has been bookmarked as the moment that the American Commercial Aviation underwent a complete turn. In spite of its favorable conditions in the Aviation Industry, United Airlines has faced a lot of huddles ranging from stiff competition from other potential players in the sector up to those related to their internal management. This has seen a big decline in their profits.

The have tried several actions to help them came out of the financial ditch by tempting numerous options; some that include merging with other smaller air cargo handlers to strengthen their network have seen them slightly make a come back, though it was only temporary. They bounced back to its previous number one position in airline services in the nation and reversed by an equal momentum (Flint 1994). The airline has all along enjoyed what can be regarded as “close monopoly”.

Under the Airline Deregulation Act, all airline companies were at liberty to make commitments and enter new markets without seeking the government’s approval. But this freedom was short lived since in

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1978 the Congress forced the United Airlines to cut some of their operations upon passing legislation against the free market policy. The Deregulation affected the company so much leading an economic crisis and labor turmoil (Petzinger, 1995). The United’s problems continued in 1985 when its pilots went on a 29-Day Strike with claims that the Company’s CEO Mr. Richard Ferris was trying to disband their union.

The strike cost the Airline a total loss of USD $1 billion and a great financial decline that 20 years later culminated into bankruptcy (ALPA-MEC, 1985) and (Airline Pilot Magazine”, (July 1985) UA has been reported to have been cut loose by the US government during the period of financial disaster when they were really in need of some financial boost … what happened to the Airline soon caused the passenger flow to dry up , it therefore called for bailouts to its carrier services if it wanted to survive.

The 1990s recession effects in the United States that weakened the country’s economy were felt gravely the UA by reducing their passenger base. Oil prices steadily rose from the late 1980s and into the 1990s aggravated the matter. The Gulf War in 1991 worsened the situation further. The combined factors really cut into the carriers earnings leading to the company making a net loss of over $331. 9 million in the financial year that ended in 1991(Harrar 1995). Another contract dispute between the United’s Management and the pilot’s union erupted in May 2000.

United had scheduled flights over the busy summer season such that pilots were to work overtime to meet the overstretched demands. However the pilots refused to work overtime [they could not be forced to fly extra hours]. The management was not willing to hire new pilots to make up for the shortage and was therefore forced to council most of the planned flights in its major hubs. As a final resort, the then CEO Mr. Jim Goodwin together with the other board members decided to recall the pilots and offer them a 48 percent increment over four years up to 28 percent upfront.

The woes were not just about to end then, in February 2006 emerged from the longest and arrest airline bankruptcy case in the industry (Chapter 11 Bankruptcy) (www. usatoday. com). The September 11th 2001 attack on the Twin Towers of the US dealt a major blow to the United Airlines. Two of their aircrafts were hijacked by the Al-Qaeda Terrorist Group. The first one (Boeing 767-222; Flight 175) was crushed on the Southern Tower of World Trade Center-New York City and the other one (Boeing 757-222; Flight 93) crushed in rural Pennsylvania.

The economic downfall by losing two airplanes as well as the need to compensate the victims was a major draw back to the company’s progress. With a heavy presence in the West Coast, the United Airlines greatly benefited from the dot. com boom which promoted its San Francisco hub through boosting of the premium traffic. Business was in good shape until finally when the “bubble” busted putting United in a pretty bad position because they had ignored price control measures. The buttered network after the bust, the September Eleventh attack and the rise in oil prices saw the company to lose $2. 14 billion I the year 2001 (www. usatoday. com ).

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