Annexure-V- Cover Page for Academic Tasks

Course Code: MGN514 Course Title: International Environment and

Management
Course Instructor: Deepak Pandey

Academic Task No.: 3 Academic Task Title: CA3

Date of Allotment: 05/03/2019 Date of submission: 10/04/2019

Student’s Roll no: 30 Student’s Reg. no: 11813177

Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by
students as specified at the time of assigning the task by the instructor)

Learning Outcomes: (Student to write briefly about learnings obtained from the academic tasks)
Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other
student‟s work or from any other source except where due acknowledgement is made explicitly in
the text, nor has any part been written for me by any other person.

Student’s Signature:

Evaluator’scomments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of Assignment

Evaluator‟s Signature and Date:

Marks Obtained: Max. Marks: ………………

INTRODUCTION:

United Continental Holdings (formerly known as UAL Corp. ) is a publicly traded airline
holding company headquartered in the Willis Tower in Chicago, U.S. The company was
founded on December 30, 1968.,UCH owns and operates United Airlines, Inc. The company
is the successor of UAL Corporation, which agreed to change its name to United Continental
Holdings in May 2010, when a merger agreement was reached between United and
Continental Airlines. Its stock trades under the UAL symbol. To effect the merger,
Continental shareholders received 1.05 shares of UAL stock for each Continental share,
effectively meaning Continental was acquired by UAL Corporation, at the time of closing, it
was estimated that United shareholders owned 55% of the merged entity and Continental
shareholders owned 45%. The company or its subsidiary airlines also have several other
subsidiaries. Once completely combined, United became the world's largest airline, as
measured by revenue passenger miles. United is a founding member of the Star Alliance.
United Continental Holdings, Inc. engages in the operation of its wholly-owned subsidiary
United Airlines, Inc, which offers satellite based Wi-Fi, including on long-haul overseas
routes. It operates through the following geographical segments: Domestic (U.S. and
Canada); Pacific; Atlantic; and Latin America. It also transports people and cargo through its
mainline and regional operations.
UCH has major operations at Chicago – O'Hare, Denver, Guam , Houston – Intercontinental,
Los Angeles, Newark (New Jersey), San Francisco, and Washington – Dulles. Additionally,
UCH's United is the largest U.S. carrier to the People’s Republic of China and maintains a
large operation throughout Asia.

PRODUCTS AND SERVICES:

The following is the list of current subsidiaries of United Continental Holdings, Inc.

 United Airlines, Inc. (formerly Continental Airlines, Inc.)

 Air Micronesia, Inc.
 Continental Micronesia, Inc.
 CAL Cargo, S.A. de C.V.
 CALFINCO Inc.
 Century Casualty Company
 Continental Airlines de Mexico, S.A.
 Continental Airlines Domain Name Limited
 Continental Airlines Finance Trust II
 Continental Airlines, Inc. Supplemental Retirement Plan for Pilots Trust
Agreement
 Continental Airlines Purchasing Holdings LLC
 Continental Airlines Purchasing Services LLC
  Continental Express, Inc.
 Presidents Club of Guam, Inc.
 Four Star Insurance Company, Ltd.
 UAL Benefits Management, Inc.
 United Airlines, Inc. (the original United Airlines)
 Covia LLC
 Mileage Plus Holdings, LLC
 MPH I, Inc.
 Mileage Plus Marketing, Inc.
 Mileage Plus, Inc.
 United Aviation Fuels Corporation
 United Cogen, Inc.
 United Vacations, Inc.

SERVICES:
 United Club locations and other United lounges:United Club locations and lounges
offer the busy traveler personalized service and a relaxing oasis amid the bustle of the
airport.
 Travel insurance:Travel Insurance, offered through our travel insurance partner AIG
Travel, provides greater peace of mind when you travel.
 Other services like united Airlines Credit Cards, Subscriptions, Premier Access travel
services , Gift certificates for purchasing on united.com, etc.,

FINANCIAL STABILITY:

 Over the past year, UAL has ramped up its debt from US$11.71B to US$14.39B –
this includes both the current and long-term debt. With this increase in debt, UAL
currently has US $ 3.80 B remaining in cash and short-term investments for investing
into the business.
 Moreover, UAL has produced cash from operations of US$3.41B over the same time
period, leading to an operating cash to total debt ratio of 23.71%, signalling that
UAL’s operating cash is sufficient to cover its debt. This ratio can also be a sign of
operational efficiency as an alternative to return on assets. In UAL’s case, it is able to
generate 0.24x cash from its debt capital.
 With current liabilities at US$12.68B, the company has not maintained a sufficient
level of current assets to meet its obligations, with the current ratio last standing at
0.56x, which is below the prudent industry ratio of 3x.
 With a high level of debt on its balance sheet, UAL could still be in a financially
strong position if its cash flow also stacked up. However, this isn’t the case, and
there’s room for UAL to increase its operational efficiency. In addition to this, its low
liquidity raises concerns over whether current asset management practices are
properly implemented for the large-cap. Keep this in mind it hasn’t been considered
 the other factors such as how UAL has been performing in the past. The holistic view
of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for UAL’s
future growth? Take a look at our free research report of analyst consensus for UAL’s
outlook.
2. Valuation: What is UAL worth today? Is the stock undervalued, even when its
growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free
research report helps visualize whether UAL is currently mispriced by the market.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects
with proven track records? Ex

COMPETITORS:

1. Spirit Airlines Inc: Spirit Airlines, Inc. is an American ultra-low-cost

carrier headquartered in Miramar, Florida. It is the seventh largest commercial airline
in the United States. Spirit operates scheduled flights throughout the United States
and in the Caribbean, Mexico, Latin America, and South America. The airline
operates bases at Atlantic City, Chicago–O'Hare, Dallas/Fort Worth, Detroit, Fort
Lauderdale, Orlando, and Las Vegas.
Spirit currently flies to 75 destinations throughout Central America, the Caribbean,
South America, and the United States. As of April 2018, It maintains crew bases
at Atlantic City, Chicago –O' Hare, Dallas /Fort Worth, Detroit, Fort Lauderdale ,
and Las Vegas.

2. American Airlines Group Inc.- American Airlines Group Inc. is an American

publicly traded airline holding company headquartered in Fort Worth, Texas. It was
formed December 9, 2013, in the merger of AMR Corporation, the parent company
of American Airlines, and US Airways Group, the parent company of US Airways.
[6]
 The airline groups together form the largest airline in the world, with more than
6,700 daily flights to 350 locations in 56 countries worldwide, about $40 billion in
operating revenue, over 100,000 employees, and plans to take delivery of 607 new
aircraft, including 517 narrow body aircraft and 90 wide body international aircraft.
[7]
 The integration of American Airlines and US Airways was completed when
the Federal Aviation Administration granted a single operating certificate for both
carriers on April 8, 2015.[8] The company ranked No. 71 in the 2018 Fortune 500 list
of the largest United States corporations by total revenue.

3. Southwest Airlines Company:- Southwest Airlines Company comes in as the

largest domestic carrier by total passengers and carries over 100 million passengers in
an average year. Southwest Airlines has a business model that maintains
low operating expenses through a great strategy of fuel hedging and by not offering
many amenities. Additionally, the company has employees who are focused on a high
 level of customer service. Coupled with low flight costs, this service has brought
repeat customers. Southwest Airlines has been able to remain profitable for 37
consecutive years, something no other airline can boast.

4. Delta Air Lines, Inc.:- Delta Air Lines, Inc. is the second-largest passenger airline in
the world by available seat miles, second only to American Airlines. However, the
company has faced fierce competition, causing financial difficulties due to price
wars with discount airlines such as JetBlue and Southwest. While the company still
remains large and has scalability that can compete with American Airlines, its price
wars have caused an inability to raise prices to natural supply and demand levels. This
inability to raise prices resulted in Delta entering bankruptcy in 2005. Since then, it
has followed a revised operating strategy, shifting its focus toward the more profitable
international routings. This new business strategy has kept Delta Airlines competitive.

5. JetBlue Airways:- JetBlue Airways Corp. is the eighth-largest airline in the U.S.
by revenue passenger miles. While the company has low fares similar to Southwest
Airlines and Delta Airlines, it achieves those low fares in a unique way. JetBlue has
low distribution and operating costs because the company has the youngest fleet of all
domestic airlines. This allows for efficient flights that do not eat up fuel costs. It
specializes in point-to-point flights that are cheap to operate and offers cheap fares.
JetBlue services these flights to over 50 destinations in 20 states, Puerto Rico, Mexico
and the Caribbean, making it a viable option to American Airlines.

EXPANSION PLANS:

United Airlines is planning a big year for San Francisco International Airport with the hub’s
largest-ever international expansion due to roll out through 2019. New services will include
nonstop year-round services to Toronto, Canada, and Melbourne, Australia as well as a
seasonal service to India’s New Dehli. Services to Pape’ete, Tahiti, and Auckland, New
Zealand, will also be extended to year-round and the airline will begin a second daily service
between San Francisco (SFO) and Seoul, South Korea.
With 300 flights a day, United is the biggest airline at San Francisco and has added 12 new
international destinations to San Francisco since 2013.
The new services, which are subject to government approval, will mean it will serve 29
international destinations from the West Coast gateway. They will include eight cities in
Europe, India, and the Middle East, seven in North America, and 14 in Asia and Oceania.

PESTEL ANALYSIS:
PESTEL analysis provides great detail about operating challenges United Continental
Holdings, Inc. will face in prevalent macro environment other than competitive forces. For
example an Industry may be highly profitable with a strong growth trajectory but it won't be
any good for United Continental Holdings, Inc. if it is situated in unstable political
environment.

1. Political Factors that Impact United Continental Holdings, Inc. -

Political factors play a significant role in determining the factors that can impact United
Continental Holdings, Inc.'s long term profitability in a certain country or market. United
Continental Holdings, is operating in Major Airlines in more than dozen countries and expose
itself to different types of political environment and political system risks. United Continental
Holdings, can closely analyse the following factors before entering or investing in a certain
market-
 Political stability and importance of Major Airlines sector in the country's economy.
 Level of corruption - especially levels of regulation in Services sector.
 Bureaucracy and interference in Major Airlines industry by government.
 Legal framework for contract enforcement.
 Intellectual property protection.
 Trade regulations & tariffs related to Services.
 Favored trading partners.
 Anti-trust laws related to Major Airlines.
 Pricing regulations – Are there any pricing regulatory mechanism for Services.
 Taxation - tax rates and incentives.
 Wage legislation - minimum wage and overtime.
 Work week regulations in Major Airlines.
 Industrial safety regulations in the Services sector.

2. Economic Factors that Impact United Continental Holdings, Inc.-

The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign
exchange rate and economic cycle determine the aggregate demand and aggregate investment
in an economy. While micro environment factors such as competition norms impact the
competitive advantage of the firm. United Continental Holdings, can use country’s economic
factor such as growth rate, inflation & industry’s economic indicators such as Major Airlines
industry growth rate, consumer spending etc. to forecast the growth trajectory of not only –
sectory name -- sector but also that of the organization. Economic factors that United
Continental Holdings, Inc. should consider while conducting PESTEL analysis are -
 Type of economic system in countries of operation – what type of economic system
there is and how stable it is.
 Government intervention in the free market and related Services.
 Exchange rates & stability of host country currency.
 Efficiency of financial markets – Does United Continental Holdings, Inc. needs to
raise capital in local market?
 Infrastructure quality in Major Airlines industry.
 Comparative advantages of host country and Services sector in the particular country.
 Skill level of workforce in Major Airlines industry.
 Education level in the economy.
 Labor costs and productivity in the economy.
 Business cycle stage (e.g. prosperity, recession, recovery).
 Economic growth rate.
 Unemployment rate.
 Inflation rate.
 Interest rates.

3. Social Factors that Impact United Continental Holdings, Inc.-

Society’s culture and way of doing things impact the culture of an organization in an
environment. Shared beliefs and attitudes of the population play a great role in how marketers
at United Continental Holdings, will understand the customers of a given market and how
they design the marketing message for Major Airlines industry consumers. Social factors that
leadership of United Continental Holdings, should analyze for PESTEL analysis are -
 Demographics and skill level of the population.
 Class structure, hierarchy and power structure in the society.
 Entrepreneurial spirit and broader nature of the society. Some societies encourage
entrepreneurship while some don’t.
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests.

4. Technological Factors that Impact United Continental Holdings, Inc.-

Technology is fast disrupting various industries across the board. Transportation industry is a
good case to illustrate this point. Over the last 5 years the industry has been transforming
really fast, not even giving chance to the established players to cope with the changes. Taxi
industry is now dominated by players like Uber and Lyft.
A firm should not only do technological analysis of the industry but also the speed at which
technology disrupts that industry. Slow speed will give more time while fast speed of
technological disruption may give a firm little time to cope and be profitable. Technology
analysis involves understanding the following impacts -
Recent technological developments by United Continental Holdings, Inc. competitors
 Technology's impact on product offering.
 Impact on cost structure in Major Airlines industry.
 Impact on value chain structure in Services sector.
 Rate of technological diffusion.

5. Environmental Factors that Impact United Continental Holdings, Inc.-

Different markets have different norms or environmental standards which can impact the
profitability of an organization in those markets. Even within a country often states can have
different environmental laws and liability laws.

Before entering new markets or starting a new business in existing market the firm should
carefully evaluate the environmental standards that are required to operate in those markets.
Some of the environmental factors that a firm should consider beforehand are -
 Weather
 Climate change
 Laws regulating environment pollution.
 Air and water pollution regulations in Major Airlines industry.
 Recycling.
 Waste management in Services sector.
 Attitudes toward “green” or ecological products.
 Endangered species.
 Attitudes toward and support for renewable energy.

6. Legal Factors that Impact United Continental Holdings, Inc.-

In number of countries, the legal framework and institutions are not robust enough to protect
the intellectual property rights of an organization. A firm should carefully evaluate before
entering such markets as it can lead to theft of organization’s secret sauce thus the overall
competitive edge. Some of the legal factors that United Continental Holdings, Inc. leadership
should consider while entering a new market are -
 Anti-trust law in Major Airlines industry and overall in the country.
 Discrimination law.
 Copyright, patents / Intellectual property law.
 Consumer protection and e-commerce.
 Employment law.
  Health and safety law.
 Data Protection.

NEWS:-
United Airlines CEO Munoz talks 2019 goals in memo to employees:
United Airlines CEO Oscar Munoz had customer service very much on his mind as he sent
out his final memo of 2018 to the 90,000-plus employees who work for the Chicago-based
carrier.
https://www.bizjournals.com/chicago/news/2019/01/02/united-airlines-ceo-munoz-talks-
2019-goals-in-memo.html

United Continental (UAL) Earnings Expected to Grow:

United Continental (UAL) is expected to deliver a year-over-year increase in earnings on
higher revenues when it report s results for the quarter ended March 2019. This airline is
expected to post quarterly earnings of $0.95 per share in its upcoming report, which
represents a year-over-year change of +88%.
https://www.nasdaq.com/article/united-continental-ual-earnings-expected-to-grow-should-
you-buy-cm1126500

References:-
https://en.wikipedia.org/wiki/United_Continental_Holdings
https://www.airlineratings.com/news/united-plans-record-san-francisco-expansion-2019/
http://fernfortuniversity.com/term-papers/pestel/nyse4/3228-united-continental-holdings--
inc-.php
https://en.wikipedia.org/wiki/Era_Aviation
https://en.wikipedia.org/wiki/Spirit_Airlines
https://en.wikipedia.org/wiki/American_Airlines_Group