Market Overview

United Airlines Suffers Delays Caused by Technical Glitches


The United Continental Holdings (NYSE: UAL)-owned United Airlines was struggling with technical glitches including flight delays, faulty kiosks and jammed phonelines, as the company tried to combine the United Airlines and Continental Airlines reservation systems while operating them.

It must be one of the most predictable dirt-storm that any company has had to deal with. The combination of two reservation systems during busy working hours was never going to be seamless and trouble-free. There are many example down the years of companies who have tried to make big changes to the computer systems while operating the business as usual, and then fallen on their faces. UAL is just the latest.

According to Reuters, UAL spent months preparing for the shift, with 15,000 employees trained on the new software. Unfortunately, the preparation was largely in vain.

United Airlines spokeswoman Megan McCarthy said that issues with the automatic check-in kiosks meant that every customer had to stand in line to see service attendants instead. “We did have some issues with our kiosks and at times that slowed the check-in process,” she said. “Our IT department still continues to fine-tune our system.”

The pressure is apparently on. It has been a difficult couple of weeks for UAL too. On February 22, J.P. Morgan released a research report stating that United-Continental had raised the majority of its domestic fares by $2 to $5 one-way, excluding sales categories. Starting February 6th, United initiated a $5 one-way “sun market” increase affecting Florida, Arizona and Nevada. After initially stalling and briefly rescinding its effort, Southwest resurrected the increase on February 9th. “While admittedly stopping short of a full, across-the-board initiative, Southwest's effort nonetheless represented the carrier's first substantive increase in 2012, in our view, and as expected it was fully matched by competitors over the subsequent days.”

Back on January 27, Morgan Stanley said that continued PRASM strength bodes well for carriers given macro uncertainty and implies positive consensus EPS revisions even in the face of high fuel prices. “Moreover, current attractive multiples present a compelling valuation case and the potential for additional capacity cuts and consolidation in the wake of AMR's bankruptcy filing offer additional upside.”

Posted-In: News Analyst Ratings Best of Benzinga


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