United Airlines Case Analysis BSAD 449 – Professor Muss May 9, 2006 by Renee Graham, Tamar...
-
date post
22-Dec-2015 -
Category
Documents
-
view
218 -
download
0
Transcript of United Airlines Case Analysis BSAD 449 – Professor Muss May 9, 2006 by Renee Graham, Tamar...
United Airlines Case Analysis
BSAD 449 – Professor MussBSAD 449 – Professor Muss
May 9, 2006May 9, 2006
byby
Renee Graham, Tamar Ferguson, Hope Halberg Renee Graham, Tamar Ferguson, Hope Halberg Jessica Powers, and Laura RickardJessica Powers, and Laura Rickard
Home
Previous
Next
Help
Summary Overview
• Introduction
• Industry Analysis
• Company Analysis
• Competition
• Problems
• Recommendations
• Conclusion
Home
Previous
Next
Help
General Environment and Trends
• Demographic
• Economic
• Political/Legal
• Sociocultural
• Technological
• Global
Home
Previous
Next
Help
General Environment and Trends
• Industry– Low-Margin
– Capital-intensive
• Cost components– Labor
– Fuel Costs
• Unions
• Price Competition
Home
Previous
Next
Help
General Environment and Trends
• Techonology-
• Internet
• Decrease of customer loyalty
• Global Trends
• -1992 Strategic alliance with Air Canada
• -1997 Star Alliance
Home
Previous
Next
Help
General Environment and Trends
• Sociocultural Trends-
• -September 11, 2001
• - United Airlines Response
• Political/ Legal
• -1978 Deregulation
• -Air Transportation Safety and System Stabilization Act
• -Emergency Aid Loans
Home
Previous
Next
Help
• The deregulation act of 1978
• Market size
• The point-to-point system
• Hub-and-spoke system
• Alliances
• Rolling hub system
Home
Previous
Next
Help
PORTERS
JET BLUESOUTHWEST
ROADWAY TRAVELTRAINS
OIL COMPANIESUNIONS
TRAVELERSFREIGHT COMPANIES
POSTAL SERVICE
AMR UALDELTA LUFTHANSA
JAPAN
Porters Model
Threat of new entrants
Supplier relationships
Threat of substitute goods
Bargaining power of consumer
Home
Previous
Next
Help
SWOT
BREAKDOWN JET BLUE AMR UAL SWEST DELTA
PRICE 0.4 9 7 7 8 8
22.5 17.5 17.5 20 20
GATE PERFORMANCE 0.2 8 8 8 8 8
40 40 40 40 40
QUALITY 0.2 9 7 6 8 5
45 35 30 40 25
RELAIBILITY 0.1 9 5 6 8 4
90 50 60 80 40
MARKETING 0.1 6 4 4 6 4
60 40 40 60 40
TOTAL 1.00 298.5 213.5 218.5 278 194
Home
Previous
Next
Help
SWUAL
Cost to Consumers
High Medium Low
JetBlue
RyanairLufthansa
Japan
DAL
AMR
High
SECURITY
Low
CAL
Home
Previous
Next
Help
Tangible and Intangible Resources
• Value– Price
• Tangible
• Intangible
• Brand Loyalty
• Frequent Flyer
Home
Previous
Next
Help
Differentiation
• Market Share– Point-to-Point
• No Change
• Competition Strategy
• Delta
Home
Previous
Next
Help
UAL Financial RatiosUnited Airlines Financials
Ratio 1997 1998∆ '97 to
'98 1999∆ '98 to
'99 2000∆ '99 to
'00 2001∆ '00 to
'01
Gross profit margin 43.5% 43.9% 0.4% 47.3% 3.4% 42.4% -4.9% 28.5% -13.9%
Net profit margin 5.5% 4.7% -0.8% 15.6% 10.9% 0.3% -10.6% -13.3% -2.7%
Return on assets 6.0% 4.4% -1.6% 13.4% 9.0% 0.2% -13.2% -8.5% -8.7%
Return on equity 38.9% 20.5% -18.4% 46.5% 26.0% 0.9% -4.5% -69.0% -23.4%
Debt to assets 81.3% 77.9% -3.4% 70.7% -7.2% 76.3% 5.6% 87.7% 11.4%
Debt to equity 527.1% 361.0% -166.1% 245.2% -115.8% 322.8% 77.6% 710.2% 387.4%
LT debt to equity 9.6% 2.4% -7.2% 1.5% -0.9% 3.0% 1.5% 39.1% 36.1%
Cash ratio 0.06 0.07 0.01 0.06 -0.01 0.26 0.20 0.21 -0.05
Quick ratio 0.36 0.34 -0.02 0.36 0.02 0.55 0.19 0.46 -0.09
Inventory turnover 1.77 1.78 0.01 1.90 0.12 1.74 -0.16 1.40 -0.34
Fixed asset turnover 1.09 0.93 -0.16 0.87 -0.06 0.86 -0.01 0.73 -0.13
Total asset turnover 1.10 0.95 -0.15 0.86 -0.09 0.79 -0.07 0.64 -0.15
Receivables turnover 16.53 15.43 -1.10 14.04 -1.39 15.91 1.87 15.41 -0.50
Avg.collec.period 0.05 0.04 -0.01 0.04 0.00 0.04 0.00 0.04 0.00
Payables turnover 16.87 15.26 -1.61 18.64 3.38 16.29 -2.35 12.73 -3.56
Days of cash 6.20 8.11 1.91 6.28 -1.83 31.67 25.39 38.18 6.51
Home
Previous
Next
Help
UAL Expenses
Components of UAL Income Statement as a Percentage of Sales
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
1997 1998 1999 2000 2001
Year
Per
cen
tag
e o
f Sal
es
Cost of Goods
Sell gen&admin.exp.
Net Income
Home
Previous
Next
Help
Industry Ratios
Airline Industry Leverage Ratios
-400.0%
-200.0%
0.0%
200.0%
400.0%
600.0%
800.0%
Debt to equity LT debt to equity
CAL
AMR
DAL
USAir
UAL
Airline Industry Profitability Ratios
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Gross profit margin Net profit margin
CAL
AMR
DAL
USAir
UAL
Home
Previous
Next
Help
Industry Ratios
Airline Industry Liquidity Ratios
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Cash ratio Quick ratio
CAL
AMR
DAL
USAir
UAL
Airline Industry Activity Ratios
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Inventory turnover Payables turnover Days of cash
CAL
AMR
DAL
USAir
UAL
Home
Previous
Next
Help
Selected Company Figures
($ in millions) CAL AMR DAL USAir UAL
Net Income -$95 -$1,562 -$1,216 $1,989 -$2,145
Net Sales $8,969 $17,484 $13,879 $8,253 $16,138
A/R $404 $1,371 $368 $272 $1,047
Cash $1,132 $117 $2,210 $537 $1,688
Airline Industry Financial Figures, 2001
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
Net Income Net Sales A/R Cash
CAL
AMR
DAL
USAir
UAL
Home
Previous
Next
Help
Recommendations
• Liquidation– $72 Million Cut
– $500 Million in Future
– $572 Million in Cost Reduction
• Continue Strategies
• Changing System– American Airlines
– Long-term Contracts