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United Continental +3.7% after investor meeting, Wolfe keeps the faith

  • United Continental (UAL) hasn't enjoyed the stock gains of competitors such as American Airlines (AAL) and Delta (DAL), but the company's investor meeting convinces Wolfe Research analysts that UAL understands how to address its problems; shares rose 3.7% in toay's trade.
  • Management handled the generally negative tone, Wolfe says, responding with explanations that didn’t sound like excuses - "we left increasingly optimistic that the current management team can turn things around."
  • UAL's gap is "temporary or addressable without more drastic steps of hub closures, but it will take some time," the firm says; for example, UAL flies far more 50-seat regional jets than American and Delta, and putting those down can’t be done overnight.
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Comments (11)
  • Pony01
    , contributor
    Comments (292) | Send Message
     
    I would short UAL. They will considerably under-perform DAL and AAL in the second quarter.
    23 May 2014, 05:50 PM Reply Like
  • markcc
    , contributor
    Comments (1613) | Send Message
     
    Pony01: Agreed that UAL is in bad shape, but before you short you might want to check ticket prices and seat charts for the next couple of months. United is going to get a lift from pushing it fares higher, in fact above those of their competitors. Due to heavy loading throughout the airline industry, and capacity restrictions by the other airlines, United can push prices and still fly relatively full planes for a positive impact on revenue. For the long term, United will alienate many of their high value flyers and in the next recessionary event, the slope down will not look as good for them. Short then for sure.
    24 May 2014, 11:38 AM Reply Like
  • Pony01
    , contributor
    Comments (292) | Send Message
     
    Markcc, while in the aggregate I do agree with you on the long term, it seems to me that being 3 out of 3 can't be good for the stock price. Although, UAL's stock pricing has perplexed me over the last two years.
    27 May 2014, 11:04 AM Reply Like
  • markcc
    , contributor
    Comments (1613) | Send Message
     
    I think we generally agree. Shorting can work, I agree. In a short, you have to count on the stock moving down in the visible horizon. Over the horizon, eventually, someone will get United to get its act together. This might have to happen by bringing in new management or some other draconian change to the company. Meantime the pure capacity restrictions airlines have adopted are creating a temporary shortage of seats that is driving aggressive pricing activity that goes right to the bottom line. I am not shorting UAL right now.
    27 May 2014, 11:24 AM Reply Like
  • MLP Trader
    , contributor
    Comments (975) | Send Message
     
    If UAL "knows how to address its problems" why hasn't it been doing so? While numbers continue to improve for AAL and DAL, they continue to get worse for UAL.

     

    http://bit.ly/1gXNMDT

     

    At the end of the day, UAL has 3 really big long-term problems:

     

    1) Its customers hate it
    2) Its employees hate it
    3) Its competitors are getting much, much more competitive

     

    Don't take my word for it. Just look at the latest surveys from J.D. Power, from ACSI, from the DOT. UAL is dead last repeatedly.

     

    I haven't seen them address any of these issues.
    23 May 2014, 06:01 PM Reply Like
  • raider747
    , contributor
    Comment (1) | Send Message
     
    United is a chicks--t organization, pure and simple. No matter what metric you use, UAL management has proven time and again that they are short-sighted, non-competitive and arrogant. Instead of competing, they cut costs-to the point where the employees and customers suffer. Management's arrogance would never permit them to listen to the front-line employees--the pilots, flight attendants and customer service reps who deal with our customers every day in every way. This company is near and dear to me, but I'm short the stock. The only reason why the stock is as high as it is is because of sector momentum. I totally understand why the rank and file shareholder is not insisting on replacing this inept management team--the stock is inexplicably up, so the stockholders are happy. The board of directors won't fire Smisek because they were hand picked by him. What I can't understand is why the investment bankers--the bond holders and note holders-- aren't calling for his resignation. Able to drill deep into the finances, they should see that the company is a sick puppy with a management team that is incapable of reaching the company's full potential. It is time for a change; time for a management team that is forward-looking, competitive-minded and cognizant of the value of having all employee groups pulling or pushing at the same time in the same direction.
    23 May 2014, 07:37 PM Reply Like
  • bobolaclune
    , contributor
    Comments (46) | Send Message
     
    raider747, well said, but why don't you tell us how your really feel?!
    23 May 2014, 08:55 PM Reply Like
  • Paolag
    , contributor
    Comment (1) | Send Message
     
    Bobolaclune- Raider747 is correct on every account. United is failing because management is not listening to their employees or customers. Without listening to those two, a company cannot bounce back. Continental under the leadership of Mr. Bethune, proved that by doing so makes a company stronger. Mr. Smisek is only thinking about the merging part of this equation. When the two companies merged, it was not to turn around and downsize because of poor management. The investors should be paying attention to this. United should be as profitable as Delta. The fact that we are not, should be an indication that maybe, United needs a new CEO that is ready for the challenge.
    24 May 2014, 01:08 AM Reply Like
  • jimmccarthy
    , contributor
    Comments (6) | Send Message
     
    Despite a great franchise UAL is unable to execute mostly because of the all consuming bureaucracy that carries over from the pre merger United. This airline will take many more years to sort out the merger issues and will lag DAL and AAl for the foreseeable future.
    25 May 2014, 05:23 PM Reply Like
  • congeeking
    , contributor
    Comment (1) | Send Message
     
    There is a lack of clarity of message from the top to the front line employees. This lack of goal setting has left the company rudderless in the perception of the employees. The rank and file have lost confidence in this CEO and his dis functional team. With this loss, it is time for a change at the top. The IT tools available to all employees are just patched versions of outdated systems that came from both entities. They don't work! The switch from Apollo to SHARES was supposedly made to save $550M annually in distribution costs for the combined company. Reinvesting one or two years worth of that savings dividend could have delivered a true state of the art ticketing system and IT platform for all facets of the airline operation. This lack of foresight is no excuse for past and future IT failures. The BOD must take notice and act accordingly. A change at the top and through the ranks of Willis Tower needs to happen before the price of oil rises and demand for product declines. The current management cabal has allowed the perception of favoritism to permeate the newly merged company and this has resulted in deep seated tribalism. How many times do you have to hear....we did not do it that way? Why are you not hearing.....let me fix that for you? It has been five full years since the announcement of the merger, and the time to have it completed has been long past. It truly is time for a new management team to get 'er done!
    31 May 2014, 06:09 AM Reply Like
  • SharkDude
    , contributor
    Comments (735) | Send Message
     
    This airline blows. After last long haul flight to Asia I refuse to fly this airline ever again. I even wrote a complaint I was so angry. 3 weeks later I get a response that says due to high volume of correspondence (???????? Complaints ???????) that they will get to my comments soon. That was over a month ago. They are so broken I do not think they get fixed.
    31 May 2014, 10:40 AM Reply Like
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