Oil Prices, Economy Also To Blame... But Pilot Shortage A Growing Problem

There are unconfirmed reports Chicken Little has been sighted in the vicinity of United Airlines headquarters in Chicago. In the past two days, stock in parent company UAL Corp. has plummeted over 20 percent, due to growing concerns about the economy, and labor strife at the nation's #2 airline.

On Monday, shares in UAL Corp fell 5.9 percent, after one industry analyst downgraded his rating in the airline due to growing labor problems. The Chicago Tribune reports Soleil Securities Group analyst James Higgins cited "rising evidence" that organized 'sick-outs' by pilots contributed to the airline's abysmal performance in December, which saw United rack up twice the industry average number of delays.

United says the rash of delays and flight cancellations were due to poor weather; with hubs in Denver and Chicago, the airline is particularly susceptible to winter conditions. Higgins says pilot actions are to blame for a portion of those problems, as well.

"We believe UAL management's view that weather was a key factor behind the many December flight cancellations, but also think pilot behavior exacerbated the situation," Higgins said in a report to investors. "The pilots' anger is manifesting itself in several ways. Most notable is a perfectly legal refusal to accept flying beyond amounts specified in their contract. We also believe UAL is facing increasing pilot sick calls, among other actions that hurt operations and earnings."

Higgins notes the apparent "widescale 'work-to-book' operation" by pilots -- in which pilots refuse to volunteer to cover extra shifts -- might force United to cut back on flights... and that will hurt profits.

Continued fears about the state of United's labor affairs may have also played a role in another sharp drop Tuesday... in which UAL stock fell another 15 percent, closing at $24.67. That far surpasses the previous 15-month low of $27.85, according to Reuters.

United isn't alone in taking a financial hit of late. Stock prices throughout the airline industry have declined in the past several days, due to record oil prices and continued investor unease about the health of the US economy.

In United's case, however... it appears to have still another problem to contend with, as well.

FMI: www.united.com