The World’s Largest Airline, UAL Faces Bankruptcy

▽ Reason for ‘Giant’ Crash; United Airline that has 1,800 planes in service a day and has 84,000 staff is top second World Airline field following American Airline. The crisis of this airline started due to neglected management like excessive rise in salaries and introduction of airplanes in U.S. prosperous era. It had deficit of 21 billion dollars last year and is expected to have a deficit of 25 billion dollars. Since the end of last year, the airline dismissed 26,000 staff and reduced 23% of flights a day, however, its competition is still getting lowered, evaluated ATSB. Minor airlines such as Southwest, Air Tran, Jet blue, Alaska, etc have 20% cheaper fare against big airlines.

Labor Union that possesses 55% shares of United Airline was not co-operative with the effort of the firm, fighting bankruptcy. Engineering Labor Union refused reduction of salary by the firm at the end of November. It exalted bad influence such as denial of loan security to ATSB, after all.

Especially, security fee increased highly after two flights of United Airlines were used as bomb in 9.11 attack, however, passengers rapidly decreased, causing a balance of payment deficit. AP communication delivered that U.S. 7th airline, Airways decided to reduce staff in a big scale protecting against bankrupt in August as the aftereffects of 9.11 attack, like United Airline.

▽ Possibility of competing cheap fare by airlines; Stock prices of UAL dropped highly on 5th, however, its competitive firm, American Airline has increased 7.67%, and Delta Airline( 3rd firm) 4.45% and Northwest Airline (4th ), 4.64%.

Experts of airline industry consider that bankruptcy of United Airline would help other competitors in U.S airline industry which has been suffering depression in short term. However, in long term, competition regarding fares is expected. In order for United Airline to revive, it should compete with minor airlines that have a strategy of cheap price.

Delta Airline announced to have a competition with airlines that provide cheap fare, founding sister firm.

Such competition is likely to cause ‘competition for killing each other ’ in U.S airline industry that has been suffering depression. U.S airline industry recorded 90 billion dollars deficit last year due to 9.11 attack and has same situation this year, too. Domain of U.S airlines in such depression and competition seems to be reformed.

Ki-Tae Kwon kkt@donga.com