Worst Airline Ever

Image: David McNew/Getty Images

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Pick through the slag heap of the nation's big network carriers and it's easy to find the worst of the worst: United Airlines.

Just 29 months removed from the longest, costliest, and least-effective bankruptcy in aviation history, the nation's second-largest airline is once again facing a financial abyss. United's first-quarter net loss of $537 million was more than its two main competitors combined. Last month it paid a huge premium to avoid a default on its loan covenants. Its 4 percent decline in passenger traffic in May was twice as steep as that of any of its competitors. Last week's announcement that it would ground 100 aircraft, reduce capacity by 10 percent, and shed thousands more workers was startling given the huge contraction it already experienced while in bankruptcy. A 19-month search for a merger partner resulted in rejections from Continental Airlines and US Airways, a carrier that was desperate to sell itself to United just eight years ago. The airline's shares slid into single digits last week from a 52-week high north of $50.

United's day-to-day operations have also deteriorated markedly. Its no-frills Ted sub-brand is being closed, the airline's second expensive failure in the low-cost arena this decade. Travelers are furious about service cuts—the airline has eliminated some meals and some luxurious perks—on United's high-priced P.S. (for premium service), which runs in the high-profile Transcon Triangle between New York, Los Angeles, and San Francisco. And in April, United's overall on-time performance slumped to 72.7 percent, five points below the industry average and 18th among the 19 carriers tracked by the U.S. Department of Transportation.

United's woes since the 1978 deregulation of the airlines are legendary. A mid-1980s pilots strike dragged on for almost a month. United failed as a travel conglomerate called Allegis in the late 1980s and ended up selling off all the hotel chains and car-rental interests it purchased. A flawed Employee Stock Ownership Plan in the 1990s tainted the entire concept of employee ownership of public companies. A merger attempt with US Airways in 2000 became a nationwide scandal after it was revealed that top managers at the carriers would have reaped hundreds of millions of dollars on the deal. A concurrent civil war with its own employees led to weeks when 75 percent of United flights ran late and passengers and baggage were stranded for days in distant locations. Then came 9/11, when two United jets were hijacked by terrorists.

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