Economic Analysis of United Airlines

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This paper is an analysis of the economic impact of governmental subsidies and fiscal policies on United Airlines after -11. This is an industry that much of our local, national and global economic vitality depends. An instantaneous and apparent financial consequence of the attacks was the full grounding of the airlines for days, which was followed by an unparalleled decline in demand. The value of planes plunged, as did the airline’s ability to obtain credit. Immediate stabilization measures, as lawmakers authorized cash compensation and institution of a federal loan guarantee program, prevented almost certain bankruptcy for many airlines and a loss of the nation’s second largest airline. This analysis indicates a strong potential for economic growth following the airline’s recovery. While the projected economic growth is not expected to exceed the potential, United Airlines (UAL) is in a position to capitalize on this growth as the global economy strengthens. The economic indicators provide UAL a unique insight to navigate strategically into the future. The economic forecast of United Airlines is a positive one that will be clearly demonstrated with the detailed analysis within this paper.

Narrative Outline for United Airlines Economic Analysis

 Thesis Statement-This section will provide the team’s opinion on the economic future of United Airlines.

 Introduction-The introduction will provide a brief overview of what is contained within the body of the paper and condensed, general information about United Airlines.




 United Airlines overview-The overview is a description of United Airlines and the history of events. The overview also addresses basic financial information.

 Description of ten economic indicators-This section will review traditional economic indicators such as Gross Domestic Product, inflation, unemployment and stock market performances in addition to company specific indicators such as, fuel prices, gross revenues, capacity (seat miles), Trans Atlantic/International market, revenues/passenger miles and cargo ton miles. The indicators are analyzed to predict future business activity and cycles.

 Eighteen-month forecast for each of the ten economic indicators-This section will forecast the economic future of United Airlines by utilizing current and historical economic indicators listed in the previous section.

 In-depth analysis of how the forecast indicators could affect United Airlines-This section will indicate that with careful monitoring of economic conditions, coupled with timely intervention, will enable UAL to take full advantage of the information provided by continued analysis of the economic indicators and ensure profitable growth of the organization.

 Overall economic forecast and potential range of outcomes supporting United Airline’s strategic planning-This section will include a brief forecast of the national economy and predictions of the indicators that will support strategic planning.

 Recommended strategic initiatives for United Airlines-This section will include strategic initiative recommendations to improve the economic future of United Airlines.



Introduction

United Airlines (UAL) is one of the largest air carriers in the United States. The services provided by UAL range from providing domestic and intercontinental passenger air travel, to mail and cargo services. The history of UAL is interesting, as UAL has provided service to the nation throughout times of peace, as well as times of war. For this reason it is sometimes important for the government to sometimes provide monetary assistance and offer initiatives in order to prevent bankruptcy, as well as maintain uninterrupted service. This paper will discuss a brief history of United Airlines from its inception to present day. Government policies concerning monetary aid and initiatives will be presented as they relate to United Airlines. Additionally, economic indicators used to forecast policies and growth of United Airlines will also be outlined.

United Airlines Overview



Product/Service - Air travel

When started - 11

Industry and Company’s ranking within that industry - 1/1

Stock Symbol - UAL



UAL Corporation, commonly known as United Airlines, is in the trans-airline industry. UAL Corporation (UAL or the Company) was incorporated under the laws of the State of Delaware on December 0, 168. The world headquarters of the Company is located at 100 East Algonquin Road, Elk Grove Township, Illinois 60007. The Companys mailing address is P.O. Box 661, Chicago, Illinois 60666. The telephone number for the Company is (847) 700-4000.

The Company is a holding company and its principal subsidiary is United Air Lines, Inc., a Delaware corporation (United), which is wholly owned. United accounted for most of the Companys revenues and expenses in 001. United is a major commercial air transportation company, engaged in the transportation of passengers, property and mail throughout the U.S. and abroad.

March 8, 11 United Airline Inc. is established as a management corporation overseeing the United Aircraft Transportation Companies subsidiaries (UATC). UATC was comprised of National Air Transport, Boeing Air Transport, Varney Aircraft Transport and Pacific Air Transport. Initial formation of the subsidiaries were propagated by the US postal service and need to contract air transport for mail services, air mail. Due to charges of monopolies and collusion among air mail carriers, Congress passed the Airmail act of 14. The Air Mail Act forced airline companies to spin off airline and equipment manufacturing companies, hence Boeing and Stearman Aircraft were spun off to incorporate Boeing Aircraft company.

During World War II United assisted in the retrofitting of B-17 bombers at its Cheyenne, Wyoming facility. After the war, an economic peacetime boom that was not foreseen by many, put a very high demand on air travel by consumers. Airlines were able to reduce rates and compete with rail lines on fares. New aeronautic technology along with increased capacity allowed airlines like United to expand with great momentum. With a newly developed hub in Denver and a state of the art facility in San Francisco, United was now a truly transcontinental operation. During this time United introduced new flights to Hawaii.

The 50s and 60s saw changes in plane engines, and the ever increasing sizes of planes allowed United to enter the global market place. All the while United was considered the largest commercial carrier in the world. Several years following all-time high earnings, United fell on hard times and posted record losses. After the federal deregulation of airlines in 178, United made slow and steady gains throughout the 80s. The 0s brought increased growth as the airline opened many new international routes and the customer base grew at home as well as abroad.

Recent financial statements show Uniteds steady growth as they work to get back to the airline they once were. Statements submitted to the SEC, disclosing current business conditions, show United to currently employ over 00 pilots, 0,000 flight attendants, 1,000 mechanics and 4,000 passenger and ramp attendants. United owns over 40 planes while leasing in excess of 00 at an average age of 8 years old. UAL is a publicly traded entity on the New York Stock Exchange with a $45 dollar high in 001 and $ low. The Financial Statements released to the SEC were independently audited by Arthur Anderson LLC for the period ending December 1, 001 and the three years previous to that. Anderson was sure to note that changes in accounting practices, and origins of the changes, were identified.

Description of 10 Economic Indicators

- Gross Domestic Product-This is a traditional indicator of the national economy. This is a measure of the total market value of all the goods and services produced during a specific time period.

- Unemployment Rate-This is a traditional indicator of the national economy. This is a measure of the percentage of working age people in the nation that are not performing duties for pay or profit.

- Inflation Rate-This is a traditional indicator of the national economy. This is a measurement of the increase in the value of money in relation to the goods.

- Stock Prices-This can be both traditional and company specific indicator of the economy.

- Fuel Prices

- Revenue Trend

- Capacity (available seat miles)

- Transatlantic/International Market

- Revenue Passenger Miles

- Cargo Ton Miles



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