By James Pilcher
The Cincinnati Enquirer

With experts predicting bankruptcy at the once mighty United Airlines as a foregone conclusion, the next question becomes: Who benefits and who besides United, its 83,000 employees and countless investors will be hurt?

Make no mistake, the entire industry - including local stalwart Delta Air Lines - is watching and waiting for the answers.

The airline's problems should have little direct impact in Cincinnati, where it has a tiny market share. But United's woes seem likely to cut the number of airline seats available generally - a step that could eventually send fares higher overall.

"This is high stakes indeed, because there are some very hungry competitors out there ready to pounce,'' said Kevin Mitchell, president of the Business Travel Coalition, which represents corporate travel managers. "We're talking about 19 percent of the world's airline capacity here. There will be some fighting over that.''

While individual airlines could scratch each other while fighting over what United sheds through the Chapter 11 process, Mr. Mitchell and others say that a United bankruptcy could be a good thing for the airline industry.

A bankruptcy would bring supply (in this case, total airline seats) more in line with demand (way down since the Sept. 11 attacks, which precipitated United's situation).

That's likely bad for consumers but good for airline stockholders, because carriers could regain more pricing power. And that could mean higher airfares, specifically on depressed leisure fares, meaning better bottom lines for the airlines.

"When there is less competition and less supply, the industry can more price what it wants," Mr. Mitchell said. But a war with Iraq "changes everything."

In the short term, however, United has said it doesn't expect a Chapter 11 filing would affect customers. It is expected to maintain its flights while working out a restructuring plan.

United, the world's second-largest carrier behind American Airlines, was put in its situation when a federal board refused to grant the airline's request for $1.8 billion in loan guarantees late Wednesday.

The Chicago-based carrier operates five daily flights a day from the Cincinnati/Northern Kentucky International Airport to its Chicago-O'Hare hub, and company officials say no immediate changes to the schedule are anticipated.

Delta, which operates its second-largest hub locally, also has been hemorrhaging money ($326 million in the third quarter alone).

While some experts have warned that a United bankruptcy could pull other carries down the same hole, Delta is in a much stronger financial situation than United.

The Atlanta-based carrier, the nation's third-largest, broke even on cash flow in the third quarter, compared with the $8 million a day that United is losing, although Delta expects to be cash-flow negative in the current quarter.

In addition, Delta had $25.6 billion in cash and assets on hand at the end of the third quarter, and $10.1 billion in total debt. United has almost $1 billion in debt coming due next Thursday.

A United bankruptcy could have a direct impact on Delta in that United owns the largest market share in the Washington, D.C., area, and its Dulles hub could face closure. Delta could move in there, considering it already operates the Delta Shuttle among major East Coast cities.

Jamie Baker, airline analyst with JP Morgan Chase Securities, also said United could be forced to consolidate its West Coast hubs in Los Angeles and San Francisco, opening the door for Delta - which is weak out west but is building up its Salt Lake City hub.

In addition, a United bankruptcy would be a crippling blow to the Star alliance, a partnership of several U.S. and international airlines at the same time that Delta is trying to grow its SkyTeam alliance.

The bankruptcy wouldn't appear to affect another local presence on the aviation scene: General Electric Aircraft Engines. United has historically bought nearly all its engines from Pratt & Whitney, a unit of United Technologies and GEAE rival.

A spokesman for Evendale-based GEAE said it has no engine orders or service agreements with United.

The airline does own CFM International engines, acquired in the late 1980s, which power 150 Boeing 737 jets in its fleet. CFMI is a joint venture of GEAE and Snecma Moteurs of France.

The spokesman said GEAE hopes United remains viable because the airline is a customer for spare parts for the CFMI engines.

Another potential benefit to all carriers, including Delta: Airlines could use the situation at United as a cautionary tale to their own employees as they try to lower employee costs in a highly unionized industry. (Delta is the least unionized, with only its pilot group represented by a union.)

"American and Continental have pilot contracts currently open for renegotiation," said Mr. Baker. "And Northwest is coming up soon, followed by Delta."

Delta spokeswoman Kristi Tucker said the airline was not speculating on what might happen at United or elsewhere, or what Delta would do in response if United filed for bankruptcy.

For its Delta Connection network, Delta contracts with two regional carriers, SkyWest and Atlantic Coast Airlines (which operates 84 daily departures locally), which also contract with United to fly under the United Express flag. But Ms. Tucker would not comment on what, if any, impact the situation would have on those relationships.

Some experts have said that the situation is a sign that the hub-and-spoke model used by major carriers is broken.

But while any restructuring would probably mean United will close some of its smaller hubs, one expert says that is also a good thing for the overall health of the hub-and-spoke system, which the airlines defend as the best way to transfer people from so many departure points to so many destinations.

"We've already got too many hubs in this country, and it's not the model that's broken, it's just that we've got too much capacity," said Brian Harris, airline analyst with the Wall Street firm Salomon Smith Barney. "The more the airlines retrench into the bigger hubs, the better."

And then there's the question what would happen if United were not to survive the Chapter 11 process and began selling itself off. That could start a feeding frenzy, experts say, with no way possible to pick a clear winner.

United owns prized routes to London's Heathrow Airport and another key route to Tokyo. A Chapter 7 filing could also mean planes would be sold for pennies on the dollar.

"UAL could emerge from bankruptcy as a strong competitor ... but there are never any guarantees, especially with all the competitors waiting in the wings," said Ray Neidl, airline analyst for Blaylock & Partners, L.P.

Staff writer Mike Boyer contributed to this report.

E-mail jpilcher@enquirer.com