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UA To Exit Chp 11 In 1H04?  
User currently offlineBusinessflyer From Singapore, joined Aug 2001, 288 posts, RR: 0
Posted (11 years 2 weeks 2 days 23 hours ago) and read 4672 times:

Apologies if this news has already been posted, but there is an interesting article in today's FT on United. The key points of the article are:

UA now believes that it will exit from Chp 11 in 1H04 and not in 03 as previously thought.

Glen Tilton sees an agreement with the ATSB as critical to UA's exit from Chp 11. (although I don't necessarily see why - any thoughts?)

The biggest issue, however, is with respect to UA's US$6bn of unfunded pension liabilities, although the article did point out that this is not a problem unique to UA. However, it does make you wonder how they can reach an agreement with the employees to ensure that pension plans are secured.

Anyway, apparently its cash position increased to US$2.3bn at the end of July...

37 replies: All unread, showing first 25:
 
User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 1, posted (11 years 2 weeks 2 days 22 hours ago) and read 4641 times:

Businessflyer--The reason the ATSB money is so critical is that UA cannot borrow from outside sources while in bankruptcy(it may not be prohibited but that is the reality of the situation). Unless it has those loan guarantees, it may not have enough cash left in 4Q03 to emerge comfortably.

The pension problem is most certainly not unique to UA--most companies' pensions are underfunded(except for those of the senior management, of course). This is a huge liability for those corporations not in ch. 11. For UA, it becomes a huge hurdle to regaining financial stability.TC



FL450, M.85
User currently offlineArtsyman From United States of America, joined Feb 2001, 4745 posts, RR: 34
Reply 2, posted (11 years 2 weeks 2 days 21 hours ago) and read 4599 times:

If the $1.5 billion that UAL has borrowed to get through Chapter 11 is not enough to get them profitable by 2nd quarter 2004, UAL should not be allowed to borrow more money from the ATSB, especially at taxpayers expense.

There has to come a point when people say enough is enough. I am all for UAL surviving, god knows enough people on here love them and want to remain in employment, but these huge losses cannot continue indefinately with them borrowing more and more each time in order to stay around. If by the 2nd quarter, they are still burning through the cash, what assurances does any lender have to getting their money back, if UAL couldn't stop the losses while in Chapt 11


User currently offlineSTT757 From United States of America, joined Mar 2000, 16863 posts, RR: 51
Reply 3, posted (11 years 2 weeks 2 days 20 hours ago) and read 4578 times:

"Sizing up United a matter of debate
CEO Tilton rejects suggestions for hefty trimming of its routes

By Susan Chandler
Tribune staff reporter
Published August 31, 2003
http://www.chicagotribune.com/business/chi-0308300297aug31,1,2913181.story

More than 1,800 pilots and 5,465 flight attendants on layoff. Capacity down by 24 percent since 9/11.

No question, United Airlines has become a dramatically smaller carrier.

But it may not have shrunk enough, some experts argue.

United has discontinued only 15 routes since seeking bankruptcy protection in December and added 12, which computes to a decrease of three.

The consequence of hanging on to its empire: a $431 million second-quarter operating loss that would have been far worse if United's employees weren't taking home substantially reduced paychecks.

To restructuring expert Michael Kayman, it means one thing: United needs to decide what business it is in and get out of routes that don't fit that model.

"United has to choose its customers," said Kayman, who counsels troubled companies from the Chicago office of Conway MacKenzie & Dunleavy, a Detroit-based restructuring firm.

If United is losing money flying to South America, where economies are weak and American Airlines is the dominant player, it should pull out altogether, he said. If it can't make a profit flying budget-conscious leisure travelers to Florida, United should say so long to the Sunshine State.

Kayman isn't the only one that thinks that. Some of the company's creditors and several of its competitors say the same thing.

Other carriers are undergoing more radical surgery.

American Airlines, which isn't in Chapter 11, is downsizing its St. Louis hub, cutting its flight schedule there in half and dropping non-stop service to 27 cities.

US Airways, which emerged in March from seven months of bankruptcy, has discontinued six mainline routes, including Baltimore/Los Angeles and LaGuardia/Tampa; closed operations in 13 cities served by its express carriers; and turned 19 mainline routes over to its express partners.

United says that kind of shrinkage isn't the answer.

Speaking in Hong Kong last week, United Chief Executive Glenn Tilton explained his rationale.

"One of our greatest assets is our global route network--getting our customers to 771 destinations in 133 countries with ease, efficiency and comfort," Tilton told members of the American Chamber of Commerce. "To business travelers, this network is essential."

If United were a retailer, Tilton's job would be much simpler. He could rank his stores from the most profitable to the least profitable and lop off the bottom 20 percent.

If that didn't push the chain into the black, he could go back and lop off some more. The repercussions would be relatively few. Closing a store in Nashville, for instance, wouldn't affect one in Chicago.

Domino effect

Of course, restructuring isn't really that simple in the retail business--just look at struggling Kmart Corp.--but it is more complicated for a network carrier, said John Pincavage, a financial adviser to airlines.

"You may look at a specific route where you're not making money, but it turns out that it's integral to the entire network," said Pincavage, who is based in Westport, Conn.

"If you're a hub-and-spoke carrier, every flight you drop eliminates the possible combinations of markets you can serve. You basically diminish the power of the hub."

For instance, dropping service to Florida cities or other medium-size markets such as Louisville/Chicago could potentially hurt traffic on major routes such as Chicago/Tokyo, he said.

That makes identifying unprofitable routes extremely complicated from a system perspective. Maybe one leg of a traveler's itinerary doesn't make money, but the other two do. If you pull out of the unprofitable market, maybe your passenger starts flying somebody else.

Because the cost of owning or leasing jets is fixed, it often makes sense for airlines to keep flying marginally profitable or unprofitable routes to bring in a little extra revenue, some airline executives say.

That's the problem, chide others. If everyone continues to fly unprofitable routes, the airline industry's overcapacity won't go away, and pricing power will continue to be weak. Although that's a boon for consumers, it doesn't help an industry that lost almost $19 billion in the past two years.

At United, its extensive global network is considered one of the company's "crown jewels," an essential asset that must be preserved for the airline to attract business travelers and return to profitability.

"You can't really judge a network on historical profitability when you have wars and SARS and bankruptcy effects in the numbers," Doug Hacker, United's executive vice president for strategy, said in an interview last week.

"We've said, `Let's focus on a future period when costs are in a steady state, revenue performance is at steady state, and use that as a sizing exercise for our network.' We believe analytically that this network preserved will be quite profitable in some future time frame."

Trotting out small lineup

Rather than cutting off routes, United has several other tools at its disposal, Hacker said.

It can deploy smaller jets on unprofitable routes, "down-gauging" its network, in industry parlance. Or it can turn that flying over to its regional partners, which have much lower wage costs. United has done that in 20 markets, including Chicago/Cedar Rapids, Iowa; Los Angeles/Tucson and Denver/Eugene, Ore.

As part of the new contracts between United and its pilots, United Express carriers Mesa Airlines and SkyWest Airlines soon will be flying 70-seat jets, larger aircraft than they were allowed under the previous contract.

Those jets could be used on lightly traveled routes of 300 miles or more where one of United's 120-seat Boeing 737-300s isn't cost-effective, consultants say, or on routes where discount competition is keeping United's revenue below its operating costs.

United also is forging ahead with plans for its own discount carrier, another way to stay in the game without giving up geographic reach. United still has not announced a date for the debut of the low-cost carrier, code-named Starfish, but it has said it initially is devoting only 40 aircraft to Starfish, less than a third of what it envisioned earlier this year.

Some cuts restored

No question, United has tightened its belt.

Its overall capacity declined 14 percent in the second quarter. A good chunk of that was related to flight cutbacks related to the Iraq war and the Asian outbreak of severe acute respiratory syndrome. But much of that capacity was added back by early June, after the war wound down and the SARS outbreak abated.

A better measure of United's downsizing is the 7.5 percent decrease in available seat miles flown during the first six months of the year. Although that may sound substantial, it is less than US Airways' 11.9 percent decrease and Delta Air Lines' 9.2 percent decline.

United continues to fly more routes than any of its competitors, according to data from the Bureau of Transportation Statistics in Washington. During the first five months of the year, United was flying 2,061 routes, compared with 1,869 for American and 1,473 for Delta.

All this talk about shrinking is headed in the wrong direction, says one airline consultant.

United should be focused on winning market share from its major rival, American Airlines. If it can do that, it won't have to worry about ceding routes to regional jets or low-cost carriers.

"United's service is outstanding right now. It isn't good. It's outstanding," said Michael Boyd, president of the Boyd Group in Evergreen, Colo.

"Remember, they're in Chicago, and two concourses over, American is boarding millions of passengers. Why not go after them? They should tell their employees, `Feel sorry for American because we're going to put them out of business.'"



Eastern Air lines flt # 701, EWR-MCO Boeing 757
User currently offlineArtsyman From United States of America, joined Feb 2001, 4745 posts, RR: 34
Reply 4, posted (11 years 2 weeks 2 days 20 hours ago) and read 4550 times:

Remember, they're in Chicago, and two concourses over, American is boarding millions of passengers. Why not go after them? They should tell their employees, `Feel sorry for American because we're going to put them out of business.'"
*****************

But it's going to take UAL years to accomplish this, so the taxpayer should foot the bill for 5 years until it eventually happens ?. Then AA declare chapt 11 and the same thing happens in reverse ?


User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 5, posted (11 years 2 weeks 2 days 18 hours ago) and read 4504 times:

arty,
you say that there comes a time when people have to say enough is enough? Well where would you be if they said that about CO with their numerous bankruptcy's? Or TWA? Just because AA bought out the old timers doesn't mean they would have had the same problems UAL is facing now, yes they made have gone tits up a few months after.
You have always been one of the doomsdayers who chants for the demise of UAL, we wont go into the lame crap I always bring up, you aren't our CEO and I would be willing to bet he has a plan for the company, he has more insight as to what is REALLY going on. You have in fact had some okay responses to issues regarding UAL but you always seem to lose it when you voice your opinion.

STT757,
that was a good article but one point I would like to add on this topic is this, the article complains that UAL in all only gave up like 3 routes? And "If UNITED were a retailer, Tiltons job would be much simpler. He could rank his stores from most profitable to least profitable and lop off the bottom 20%"

UAL already has done this, that is why mainline service doesn't stretch to MSN,MRY, AND various east coast cites like they use to. In came the lawn darts and BAE 146'S and do away with the guppies and stretch 27's(they left after 9/11) I work in a line station and I can assure you UNITED ranks it's stores or stations if you will, we had our necks on the chopping block but survived the cuts. For months rumors spread like wild fire of who was going next and we were okay for awhile. I know you didn't write the column but I thought I would add to what some may not know, or to others who may not care.

ual 777 contrail


User currently offlineArtsyman From United States of America, joined Feb 2001, 4745 posts, RR: 34
Reply 6, posted (11 years 2 weeks 2 days 18 hours ago) and read 4468 times:

It's one thing to reorganize in chapt 11, it is another thing to burn through 3 billion in borrowed money along the way (assuming they get the ATSB loan), and all the while while still not paying your bills and hiding from the real world for years.

Continental didn't borrow all the cash that UAL are, Continental never burned through the absulutely ridiculous amounts of cash that UAL are, and Continental didn't stay in Chapt 11 for a ridiculous amount of time.

US Airways went into Chapt 11, fixed what they could and emerged leaner, healthier and a little closer to their goal. UAL after all this time, still do not have a viable plan for profitability.

As the article states, UAL really needs to make some decisions and live or die by them, but they seem to be avoiding making decisions and seem to be wasting borrowed money along the way

I know you always think it is personal, but it really isnt. If it makes you feel better to think so, then so be it

Jeremy

[Edited 2003-09-01 08:47:30]

User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 7, posted (11 years 2 weeks 2 days 5 hours ago) and read 4361 times:

Jeremy,
I don't take it personal when you slam My airline, I know this forum means nothing but idle chat about who should go under and who isn't going under no matter how fast one thinks the sky is falling. Funny the rules change when it isn't your airline. I know you want to see UAL pull through  Insane and it would help CO out tremendously to feed off the carcass of UAL. We aren't going anywhere and if we do? It's to new destinations and better times. I don't live in a fantasy land, I have other things going besides UAL, and real soon it will leave UAL in the dust finacially. I only give you a hard time because whenever you print or comment on an article or column for the rest of the forum to see, you ruin it by adding your comments on the topic. I know the company is dancing on glass, one terrorist act will level the industry again bye,bye to UAL and probably CO or HP or bring AA to it's knees, so don't comment on my responses as being brash, or ignorant, I am loyal to my carrier until they close their doors for good. So you know it's all well and good, this is a forum for debates, news breaks, and shocking news that WE otherwise wouldn't have received in our local papers due to importance on the matter. Lets just have fun with it. Those who are pushing for UAL arent wearing blinders, we arent all idiots, we are just pushing for the airline we like and serve.


User currently offlineUAL777 From United States of America, joined Aug 2003, 1556 posts, RR: 5
Reply 8, posted (11 years 2 weeks 2 days 1 hour ago) and read 4277 times:

Ual777contrail,

I believe I speak for all of the employees and families at UAL when I say thank-you. We appreciate your loyalty in a world that is dominated by saving 2 dollars.



It is always darkest before the sun comes up.
User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 9, posted (11 years 2 weeks 1 day 22 hours ago) and read 4222 times:

UAL777:

Add another person loyal to UAL! I grew up in a UAL family, and though I lost my "benefits" at 23, I only fly United, but now as a revenue passenger. I'm going to UK next July, and learned only just yesterday on this website that UA is upgrading virtually all flights in the coming months to 744's! I've never flown on one, so I can't wait! Once that tax refund rolls in next Feb., it's going right to UA in the form of my ticket!

Good luck! BTW, just had four great flights two weeks ago between SEA and BOS.



User currently offlineMilesrich From United States of America, joined Jul 2003, 1997 posts, RR: 6
Reply 10, posted (11 years 2 weeks 1 day 22 hours ago) and read 4201 times:

Sounds like they may be exiting Chapter 11 for Chapter 7!

User currently offlineUALPHLCS From , joined Dec 1969, posts, RR:
Reply 11, posted (11 years 2 weeks 1 day 3 hours ago) and read 4127 times:

It is no use disscussing this issue on Airliners.net After over a year of explaining the ATSB comments as uninformed as this:

"If the $1.5 billion that UAL has borrowed to get through Chapter 11 is not enough to get them profitable by 2nd quarter 2004, UAL should not be allowed to borrow more money from the ATSB, especially at taxpayers expense."

Still get posted as read as fact.

ATSB money is not at taxpayer expence. The taxpayer is only on the hook if UA where to liquidate. Not likely since this discussion is about the timing of UA's exit from Chapter 11.

I fervently hope that UA exits Chapter 11 sonner rather than later simply so these threads will stop. They are repeatative to the point of extreme boredom. EX.
"Good News from UA"
"What UA was bought by WN?"
"No."
So what could the good news be? Who cares UA sucks"

Yawn.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 12, posted (11 years 2 weeks 6 hours ago) and read 4039 times:

Tilton's comments that shrinking the network isn't an option touches on the real difficulty in downsizing a network business. But when all of the network doesn't contribute to the bottom line, it has to give. UA is still very much in love w/ the idea of being all things to all people and they will be saying it all the way to the grave. Using South America as an example, CO and DL both recognized that there isn't money to be made in Buenos Aires right now so pulled out - and both are in much better shape because they aren't holding on to money losing routes for the sake of the network. AA and UA will never fix their problems until they both get over the idea of trying to be at the top of the heap. Even BA w/ all it's int'l clout has recognized that you have to lop off parts of the network if they don't make money. That Michael Boyd advises UA to hold onto routes w/ threats of AA gaining share is reprehensible.

The federal gov't is UA's only hope to repay the huge loans they've got outstanding and have cash to start over. And the cash from the ATSB will not even begin to address the pension issue. Although every airline has underfunded pensions, only companies in bankruptcy have to address the underfunding in order to get out of bankruptcy; AA, DL, and the rest have to keep making their yearly payments but they don't have to correct the whole problem now. There is no way UA can emerge from bankruptcy w/o terminating all of its pension plans; the gov't is not going to allow UAL to walk away from those kind of obligations.


User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 13, posted (11 years 2 weeks 6 hours ago) and read 4001 times:

UAL has already taken the money from the pilot's retirement generated by the ESOP concessions. If they thought they could get away with terminating the rest of the pension plans without destroying the company, they would.

I think the PBGC is in a fighting mood right now and won't gleefully write off $6 Billion in pension liabilities.TC



FL450, M.85
User currently offlineBeltwaybandit From United States of America, joined Mar 2003, 495 posts, RR: 0
Reply 14, posted (11 years 2 weeks 5 hours ago) and read 3935 times:

If the ATSB (the US Government) gives UA a loan guaranty, I will renounce my US citizenship! The ATSB is charged with providing post-9/11 liquidity to airlines that cannot get liquidity elsewhere; but only if the airline has a viable business plan. The last thing the ATSB (or any US citizen) wants is for the US Government to have to bail out UA (or UA's banks) because it emerged from bankruptcy with a half-baked business plan. At this point, any liquidity problem has little, if anything, to do with 9/11.

The ATSB turned its nose up to at least one airline that is solvent, alive and well today.


User currently offlineLadevale From , joined Dec 1969, posts, RR:
Reply 15, posted (11 years 2 weeks 3 hours ago) and read 3869 times:

Looks like this article hints at some of things I've been saying for a long time. In short, United management wants to retain the myth of UA as a "worldwide airline" at all costs. The ultimate cost may be the airline itself.

I was, however, a bit surprised by what Michael Boyd had to say. It makes sense only if he is saying that United's IAD hub drains ORD of capacity, and that UA could be more competitive at ORD if it focused its European operations there.

It does not make sense if he is actually suggesting that UA pull down capacity elsewhere to strengthen Chicago. Boyd also fails to acknowledge that United needs more regional jets at Chicago to compete against American. The impasse between ACA and United, however, has put a hold on any such plans.

As for providing an outstanding product, Boyd has to be kidding. It's notable that United continues to lead the industry in on-time arrivals. But, there is more to providing an outstanding product than that. United's premium product on international and domestic routes is by no means outstanding. American bests United on premium transcon routes and in domestic first/business out of ORD. Cathay, Singapore, JAL, and even ANA best United in first/business on transpacific routes. British Airways, Lufthansa, et al. best United in first/business on transatlantic routes. United has lost significant numbers of premium business to those carriers. As long as the "premium traveler" remains the cornerstone of United's marketing plan, a market share grab for leisure passengers at ORD really isn't going to help it much. You'd think Boyd would know that better than most.


User currently offlineUAL777 From United States of America, joined Aug 2003, 1556 posts, RR: 5
Reply 16, posted (11 years 2 weeks 1 hour ago) and read 3822 times:

Ladevale,

I your real name Bob Crandall or Gordan Bethume? You don't know much about UAL it seems because I have been checking the loads out of NRT, ORD and IAD over the past 3 weeks and all 3 have very high load factors internationally. In addition, UALs First Suite is second to none. In fact, I don't know what business magazines you've been reading, but UAL has recently gained the business of a number of French businessmen and their companies. In the future, do us a favor, and think before you speak.



It is always darkest before the sun comes up.
User currently offlineTWFirst From Vatican City, joined Apr 2000, 6346 posts, RR: 51
Reply 17, posted (11 years 2 weeks 1 hour ago) and read 3811 times:

Dude, you just shot yourself in the foot. If United can only manage to attract 'French businessmen', then it IS in serious trouble  Big grin


Seriously though, your posts and associated thoughts come across as based purely on emotion. Step back for a sec... you surely must realize Ladevale is entitled to critique your favorite airline's product, as well as Boyd's dribble. If that hurts your feelings, who has the real issue??



An unexamined life isn't worth living.
User currently offlineUAL777 From United States of America, joined Aug 2003, 1556 posts, RR: 5
Reply 18, posted (11 years 2 weeks ago) and read 3791 times:

It is not based purely on emotion. I based it off what I have seen...it doesn't hurt my feelings....Its just that he is making baseless accusations that fail to give any reasonable statistics. It seems that while Unitd is in trouble, he is doing nothing but pulling numbers out of his ass. My sources come from within the company. I don't know where his come from.


It is always darkest before the sun comes up.
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 19, posted (11 years 2 weeks ago) and read 3764 times:

It's also worth noting that AA consistently gets better average fares in most markets where it competes w/ UA. (this is factual from DOT data). While I agree that pure product isn't the sole driver and UA is delivering the best product ever (amazing how the threat of extinction forces one to finally produce), AA does the best job in the industry of getting companies to pay the highest fares possible.

UA had best be attracting lots of new business but all of the indications are that it is coming by deeply discounting fares and offering quick promotions just as they are doing publicly. UA is regaining some of the corporate business which they lost but they are not addressing the cost problems or network deficiencies fast enough so the short term revenue improvements will soon be insufficient to keep the company viable. Unfortunately, there are plenty of examples of similar behavior in this industry - esp. from bankrupt carriers. There are very few examples of airlines that have turned things around; CO and HP are the best examples and that came after several trips through chapter 11 together and a rebuilding of the airline around little more than the old name.


User currently offlineLadevale From , joined Dec 1969, posts, RR:
Reply 20, posted (11 years 1 week 6 days 19 hours ago) and read 3717 times:

Thank you WorldTraveler for a terrific explanation of how United is filling its planes these days. It may be common knowledge for us that high load factors don't necessarily equal high profits. But, apparently, not everyone has learned that lesson.

For those who can follow along, please note how I came to the conclusion that UA's Tokyo hub is becoming a liability. UA was losing money at Narita even before 9/11. More US airlines now offer non-stop service to Narita than in the days when PanAm and Northwest had exclusive rights. Today, United faces more non-stop competition to Narita than ever before. Given that it had exclusive rights, PanAm never had to worry about competition from other domestic carriers even at the domestic carrier's own hubs. For instance, PanAm never had to worry about AA starting service from JFK to Tokyo. Today, AA operates that route in direct competition with United. Continental also serves the Japan market from Newark. Eventually, United will be the odd man out here, since AA and Continental are much stronger carriers in the New York market.

Moreover, United now faces intense competition from codeshare routings that bypass Narita to points in Asia. As the market recognition of these codeshare routings increases, particularly the AA/Cathay pairing, much of the economic rationale for connecting services (Tokyo/Asia) will diminish. So far, Northwest has done a better job of addressing this strategic shift by finding the right plane to base at Narita. JAL's strategy has always been to make Haneda the focus of all of its intra-Asia services, thus undermining the market appeal of Narita as an intra-Asia transfer point. For these reasons, JAL and Northwest will be long term players in the intra-Asia market out of Tokyo. United, however, never quite made up its mind, whether to offer non-stop service from the US to points in Asia or whether to offer connecting service through Narita. As a result, United's Tokyo hub is now a much weaker economic operation. It may, in fact, be in its death throes.

On a happier note, it's been a good week for Continental and American. Both stocks have been soaring as a result of some really positive comments from various Wall Street analysts about their cost-cutting efforts and yields. AA's stock in particular was boosted by news today that American Eagle's traffic increased 20% year over year. The new scope clause has really given AA the opportunity to maximize the revenue and traffic potential of Eagle, all to mainline's benefits. A consensus seems to be forming on Wall Street that AA's operational loss will be significantly lower than last quarter's. They might even end up profiting on operations. Things are starting to look good for AA.

Meanwhile, some signs that not everything is well with United. Still no word on whether UA has resolved its differences with ACA. Still no business plan. In fact, rumors are that United will ask for another extension on the date to file. Still, no announcement about equity partners. Instead, news that UA plans to revise its ATSB loan application. Wonder what they are going to tell the ATSB about their pension obligations. They won't get the loan guarantee without some relief on the $6 billion dollars in underfunding. Hence, it came as no surprise that last week UA announced that they probably wouldn't emerge until sometime late in the first half of next year.

For the moment, however, no one seems to be paying attention to UA. Of course, why should they? With Continental and AA beginning to show strong signs of life, United is no longer such an interesting story. For United, however, that's not really good. The better things get for the other airlines, the worse the business conditions actually are for United.

At this point, in fact, it seems clear that Continental and AA are no longer waiting around for United to fail. They could care less. Indeed, they are acting as if United has already failed.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 21, posted (11 years 1 week 6 days 5 hours ago) and read 3627 times:

I'd like to make two points first:

1.) When UA originally entered Ch. 11 on 12/9/2002, they initially stated it could take up to a year and a half before they emerged, making the latest date 6/30/2004. Then, with things improving for UA, there was some speculation (and I think UA discussed this openly after that) that emerging earlier was a possibility. However, given the current uncertainty at both United AND the industry as a whole, they stated that it would in fact be sometime in the first half of '04, which comes back to their original timeline, as announced in their original 12/2002 statement. Cause for alarm and panic? Hardly.

2.) The ATSB loan is a guarantee. It is NOT a bailout or a handout, or whatever you want to call it. No need to renounce US Citizenship, either. If an airline gets it, and then repays it over the agreed term with interest, then it's just that: a loan guarantee. There are MANY strings attached to this ATSB loan guarantee package, it's not a blank check by ANY means.

If the government were to simply write a check for $x billion, with NO requirements, THEN that would be a bailout. However, this is not the case, and thus a moot point.

Finally, Regardless of which party occupies the White House, the President-appointed board is going to be very tough regardless. Why? Due to the amount, the board doesn't want to take the chance of a default, and therefore ask really tough questions and look very closely at numbers. They were right to reject UA's application last year, given the shortcomings of the plan, and a board appointed by Al Gore probably would have rejected it as well, and rightfully so.
---
In general, each bankruptcy case is unique in its own right. UA's is the largest airline bankruptcy filing by far, and the two filings by CO, TW, and even the 1991 filing by Pan Am are pale in comparison. Based on that, UA will more than likely spend more time in Ch. 11 than it's predecessors. The UA case is very, very complicated, and it will take a lot of time to resolve issues. A number of them already have been sucessfully resolved. One final thought on this topic, and this relates to any company in any industry in Ch. 11: never stay too long under the court's protection, but don't leave a day too soon, either. Make sure ALL issues are resolved, and that there isn't a penny left on the table that can't be given back in concessions (labor/vendors)that will help the company once it emerges. Companies that go against this conventional wisdom either a.) emerge and then find themselves back again or b.) don't emerge at all.

UA is not asleep at the switch, in fact, if I read that press release correctly, they have a range of options open to them regarding equity financing, pension obligations, they haven't given up on ACA, Denver gates, etc. Just because it isn't front page news every day, doesn't mean that discussions/negotiations aren't taking place. I would reasonably expect that over the next few months, we'll see each of these issues resolved in some form.

There *IS* a new business plan for United. Folks in Elk Grove have not been playing solitaire or surfing the net for the last year. I don't know what it is, neither do any of you (unless you're user "Elkgrove"). Glenn Tilton and Doug Hacker (VP-strategy) know, as do other key people behind the scenes. The DIP lenders know, as does the court. Why publicly announce it now, with big issues still on the table, especially in a cutthroat industry? UA is exactly right by keeping this under raps. They won't release it until absolutely necessary. Let the competition keep guessing.



User currently offlineBeltwaybandit From United States of America, joined Mar 2003, 495 posts, RR: 0
Reply 22, posted (11 years 1 week 6 days 2 hours ago) and read 3592 times:

2.) The ATSB loan is a guarantee. It is NOT a bailout or a handout, or whatever you want to call it. No need to renounce US Citizenship, either. If an airline gets it, and then repays it over the agreed term with interest, then it's just that: a loan guarantee. There are MANY strings attached to this ATSB loan guarantee package, it's not a blank check by ANY means.

If the government were to simply write a check for $x billion, with NO requirements, THEN that would be a bailout. However, this is not the case, and thus a moot point.

================================

First, I didn't, and would never call the ATSB guarantee itself a bailout. It is, however, a subsidy in that it will vastly lower their cost of funds, thus making it the equivalent of a cash dividend. I did say that it would be a US Government bailout if the government had to pay up on that loan guaranty.

The ATSB was very stingy, and that shows fiscal prudence. However, they have shown signs of inconsistency (the America West guaranty was ram-rodded through by McCain). Let's stop having the US Government pick the winners and losers, and let the marketplace decide.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 23, posted (11 years 1 week 6 days 2 hours ago) and read 3566 times:

Beltwaybandit:

Good points. In general, I've read many people miistakenly think the ATSB loans were free cash and thus a "bailout" which is certainly not the case.

Bush hates to give away government money, and I'm glad to see that the government IS being fiscally sound. Of the total pool of ATSB cash granted after 9/11, VERY LITTLE of it has actually been doled out. Bush has instead favored alliances, thus giving way to the AA/BA tie-up, and will likely do the same in the future. Let companies earn extra revenue through relaxed regulations, as opposed to government-backed loans.

In the case of the ATSB, they should base their decision on a sound business plan that is presented before them, not political connections, as was the case in America West. If United can do that, great. If not, they can pursue equity financing, which I would much rather seem them do.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 24, posted (11 years 1 week 6 days ago) and read 3522 times:

Ladevale,
AA), Japan">NRT is still a very valuable hub - if the right a/c are used. The intraAsia traffic rights are very valuable; one could wish they were from a country that had a stronger, healthier economy than Japan but the rights are within Asia and those will always be valuable. I think that the US airlines will one day regret giving up their intra-Europe traffic to their European partners. However, one of the biggest reasons US airlines gave up intraEurope flying was because of the change of gauge issues; Asia is much more spread out and the frequency of flights should allow US airlines to fly intraAsia flights w/ the same a/c they use to fly over the Pacific - this strategy doesn't work in Europe.

All,
The ATSB only guarantees loans that commerical banks write but which have a higher level of risk than they would otherwise assume. Banks won't write loans, even w/ the gov't guarantee, if there isn't a strong likelihood that they will make money and recoup their investment. UA's business plan isn't substantially different than it was before bankruptcy and they are still not paying many of the bills which they will have to pay if they were not in bankruptcy; thus their current finances are not at all indicative of how they will perform outside of bankruptcy. Banks will consider that in making loans.

Finally, as Ladevale points out, every other airline is improving financial performance. UA's creditors will become increasingly restless if UA doesn't turn things around very soon. The differing qualities of management is apparent between AA and UA; AA came breathlessly close to falling off the cliff but is taking full advantage of the opportunities afforded it w/ its near-death experience and is positioned to regain its previous preeminence in the industry. While AA's investment in AA), Japan">NRT flying was costly initially (loads were very light for months around the war), AA will very likely steal many of the pax that have flown UA to AA), Japan">NRT. Also, AA has a much better track record in dealing w/ the encroachment of low cost carriers and they are moving into transcon markets in full force. Getting out of bankrupcty is a herculean job for any airline but it is even harder for UA when other network carriers are adapting their business models to the new environment much faster and more successfully than UA.


25 UA744Flagship : United's premium product on international and domestic routes is by no means outstanding. I won't argue with you. But American's is not a great leap f
26 UA744Flagship : WorldTraveler, I just wanted to say I enjoy your posts very much. They are particularly objective and not filled with loyalist defensive/offensive cla
27 Airzim : Ladevale, Not sure what you are referring to when you discuss JAL's Haneda intra-Asian strategy. The only services that are offered by JAL or anyone f
28 Ual777contrail : Ladevale, Your anti-united statements and ignorance stating facts is hilarious to say the least. You sound like a high schooler stating his bias point
29 WorldTraveler : Flagship, obviously if you have insider information you are at an advantage to all of us. John Tague certainly should come w/ some pretty good ideas a
30 StevenUhl777 : WorldTraveler: Re: pensions: I don't have inside info., so I don't know all the options being considered. My reference to the "options" is what was me
31 Artsyman : I just don't see how the pilots can be given a large stake in UAL. Other than the fact that it has been argued by most UAL employees I know, and many
32 StevenUhl777 : The pilots are too strong collectively and too smart to just let their pension benefit vanish like a fart in the wind with nothing to show for it. Whi
33 Artsyman : Steven, I agree, loads of progress has been made over the last 6 months, especially in PR and in Operational performance, but to date, very little in
34 WorldTraveler : in alot of respects, US restructured so quickly that the employee issues (pension dissolution for pilots) happened w/o a whole lot of opportunity to d
35 BoingGoingGone : Yet another set back in recovery. UAL was in trouble before 9/11, they lost nearly $2 Billion in the three quarters leading up to it. UAL should just
36 StevenUhl777 : The first set of debt covenants were "easy" to meet, by design. DIP lenders want the company to start off small and make the changes such as CBA's, le
37 WorldTraveler : StevenUhl, agree that all of the debts won't have to be paid on day 1, post Ch. 11. The problem is that UA has so much debt (secured and unsecured) an
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