Free Essay Sample «United Continental Holdings, Inc»

Introduction

United Continental Holdings, Inc. which was formally known as UAL Corporation is a holding company. The company operates through its several subsidiaries United Air Lines, Inc. (United), and Continental Airlines. The operation of both United’s and Airlines basically is comprised of transit of persons, property and mails through the United States and overseas. The United Continental holdings, inc. are international carriers that are located in the United States. United, with other regional flights operated on behalf of the United Continental Holdings under the capacity purchase agreement with other careers which operated on roughly 3,400 flights a day to more than 235 United States domestic and international destinations from its hubs located in Los Angeles, Denver, Chicago, Washington, D.C., San Francisco, Tokyo, and Denver. This corporation also has global air rights in the Latin America, Asia-Pacific region and Europe (Nelson, 2002).        

Corporate Strategy

The company’s corporate strategy is simple; it identifies and increases the loyalty of Continental’s most valuable customers while enticing new clients, more profitable customers and many clients who are within the United States – into the fold with top notch customer service. The company’s corporation strategy is also a straightforward one that and it the one that aims at eluding other legacy careers. In order to achieve their goals, the company has employed an electronic ticketing so as to avoid congestion of customers while cuing in order to get their Visas. This strategy is important since technology plays a significant role in the improving the productivity of a firm while also saving time and energy. The corporation also relies on a nimble IT department that is developing automated tools that boosts efficacy as well as sharpening the business intelligence. This in turn helps in returning the career to profitability and makes it also a famous and favorite among the flying public (Ray, 1994).       

Business strategy

The business merger is likely to keep the firm at pace since it is considered to be more secure, even though the local officials’ conclusion that the eventual departure of Continental’s Houston headquarters will likely make it difficult to function in areas such as those of accounting and human resource management. The general history of airline industry has been full of obstacle as a result of mergers which does not function well as planned. During the period of recession, various airline firms bought shares from other companies. Amongst the hubs that were purchased included the American TWA which later in few days had been dropped by the Continental company. It also has a clear business strategy that enabled it to compete effectively with its rivals in the airline industry (Gordon, & Scott 1998).

The 2005 deal was a lucrative one which employed another business strategy of combining US Airlines and American West is still plagued by animosity between the two labor groups. Continental and the United talked concerning the merger which was made in 2008, but Continental which is the smaller although more financially secure of the two – moved away from the table (Alice, 2000). Later in this year following the acquisition of Northwest which seemed to be moving smoothly, made the talks to resumed and therefore leading to a more competitive atmosphere. UAL and Continental stock will continue to trade until the deals came to a closure and at this time, through it strategies, it became obvious that its shareholders were likely to earn 1.05 shares in the new United for every continental’s shares (Gordon, & Scott 1998).

Generally United Continental Holdings, inc. (NYSE: UAL/ power rating) currently gave a report that since October 2010 and year to date, its operation results are likely to grow. The Continental Airlines, inc. after combining, United and Continental’s did what is referred to as a consolidation capacity increase of 5.5%. The careers combined a consolidated load factor that recorded a 0.7 points increase as compared to a similar period in the other previous years (O'Reilly, 1989).

According to Gordon, & Scott (1998), the passengers’ revenue per the available seat mile (RASM) estimates for both the United and Continental are presented based on the historical income statement revenue classification. Through an appropriate business strategy in the United’s consolidated RASM increased an estimated 13.0 to 14.0 % in October 2009 while the United’s increased from 14 to 15 percent as compared to last period the same year. Continental’s October consolidated RASM increased an estimated 15.5 to 16.5 percent and mainlines consolidated a total increase of 17 to 18 percent as compared to last year the same period (O'Reilly, 1989).

In December, the United Continental Holdings, Inc. is likely to report the Continental’s November 2010 RASM estimate on a combined basis applying the aligned presentation for passengers’ revenues based on the final statement classifications (Alice, 2000).  

United Continental Holdings, Inc. (NYSE: UAL) is usually viewed as the holding corporation for both United Airlines and Continental Airlines. Together with United Express, Continental Express, and Continental Connection, the airline functions a total of roughly 5,800 flights a day to a total of 370 airports on six continents from hubs in Chicago, Houston, Los Angeles, New York/Newark Liberty, San Francisco, Washington DC, Cleveland, and Denver, Guam and United/Continental are members of Star Alliance, which offers 21,000 everyday flights to 1,162 airports in a total of 181 countries (Hammonds, 2001).

Operational strategy recommendations Change

According to Hammonds, (2001), the company intends to integrate express Jets operation in Atlantic Southeast operations and move that aims at combining careers under one single FAA operating certificate within 12-18 months after closure. United Continental Holdings have also formed Post Merger Integration (PMI) Office and a single Operating Certificate in its operations that has in turn led to the identification of roughly 35 projects for integration. The express Jets contract that has been employed by the company a contract flying services are expected to continue with the current crew base. But as the PMI strategy, all other express jet service line and the operational centers are likely to be reviewed. The integration savings should therefore be measured by evaluating the total starting cost base of around $ 760 million per year for Express Jet against 1.3 billion for the integrated and combined USA Express Jets without including the ownership costs and aircraft lease.

United Continental Holdings, Inc. has formed a joint management team that has been formed from executives at Continental’s Houston base and the old UAL. The company intends to locate the airline in United’s downtown Chicago headquarter building. This is one of the biggest buildings that have been selected by the old boards’ representatives as stated by Mr. Glenn Tilton, the UAL’s former CEO, who will in future discharge his duties as non-chairman. The two careers are likely to work as separate entities for a period of 12 to 18 months as they wait for certificate of operation which is to be provided by the Federation of Aviation Administration. After this certificate has been issued to both the corporations, they will be able to mingle their aircrafts, crews and maintenance processes (Hammonds, 2001).

The main aim of the United Continental Holdings is to negotiate joint labor agreements with all the unionized employee groups by the moment that FAA approval has been granted. The worker are likely to form performance groups where they are required to sign performance contracts and all the groups must be presented by the Airline Pilots Association, which is currently bargaining for a single contract. Since the current Continental pilot contract only allows that airline using regional jets of 50 seats or less in traveler operations.

After a conference was held, it was found that Continental has been hampered and completely disadvantaged through the stipulation in its pilot’s contract. Mr. Smisek in the conference held to determine the best strategy for the operation of the company, he declined to say how matters can be solved but he insisted that the goal of the contracts to the pilots is fair to both the workers and the company as well. The executive stressed that the aim of the general staff was to focus in ensuring that the corporation promotes the culture of working together a reference to Continental’s vaunted teamwork. In order to ensure that this is working, it may be important to enhance communication between the two companies to more than 88,000 workers and develop a joint worker website named “Flying Together.” The company and its executives intend to roll out a new perfect attendance employee reward program at United Continental in order to mirror the one already in place (Hammonds, 2001).               

Potential strategic changes the firm might make in the future

Until the next spring, the merger is not likely to bring out several changes, when more clients-service and marketing activities will go through integration. At the moment both the airlines’ frequent filter program is likely to remain separate and Continental customers ought to check in kiosks that belong to the Continental in order to get in touch with the employees. The company is also likely to serve selected alcoholic beverages without any payment being made. This is an amenity that is already in place in some airline companies (Hammonds, 2001).

The communication contains forward looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act that was signed in 2005 that are not limited to the historical findings that reflect Continental and UAL’s current beliefs, expectations, or intentions in relation to future events. These forward looking statements are comprised of with no limitation, Continental’s and UAL’s expectation by putting into consideration the synergies, costs and other monetary impacts of the future transaction; the future monetary and operation results of the combined company; combined company strategies, expectations, and goals. Interaction are also to be implemented but by respect of the future operations and services (Gordon, & Scott 1998).

Even though the forward looking statement must aim at helping the company to gain its productivity level, it also has some risks and uncertainties that are likely to make the actual result to differ (Alice, 2000). Many of these risks are outside the general control of the continental and UAL and a really not easy to predict. Some of these risks include:

a)  the possibility that the prospected synergies may not meet the stated deadline and volatility in the cost of aircraft fuel, high leverage, capital commitments of Continental and UAL, capability of avoiding terrorist attacks, fluctuations, obtaining combined company debt, competitive actions, willingness of traveler to travel, and cost of insurance (Alice, 2000).

b)  If the proposed transactions are delayed, failure to close conditions and stockholders or regulatory approvals.

Conclusion

It is therefore clear that the airline company in the United States has undergone through various competitive disadvantages that has not allowed it to prosper and increase its productivity. The operational, business, and corporate strategies employed by the United Continental Holdings, Inc. has been instrumental in evaluating the performance of the company in the last two years. Even though it is not clear whether the results of the company may turn to be positive or negative since it has a number of obstacles and on the other side it also has some advantages. All in all, it must have very comprehensive strategies in order to ensure that its customers receive the best services that they deserve (Hammonds, 2001).