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Bankruptcy A Matter Of When, Not If- JP Morgan  
User currently offlineCubastar From United States of America, joined Nov 2006, 407 posts, RR: 5
Posted (6 years 2 months 2 weeks 17 hours ago) and read 15619 times:

J.P. Morgan maintains bankruptcy just a matter of When, not If, in reference to major carriers. Rated from lowest probability (Southwest) to highest (U.S. Airways).

http://money.cnn.com/news/newsfeeds/...OWJONESDJONLINE000355_FORTUNE5.htm

64 replies: All unread, showing first 25:
 
User currently offlineLAxintl From United States of America, joined May 2000, 24888 posts, RR: 46
Reply 1, posted (6 years 2 months 2 weeks 17 hours ago) and read 15580 times:

Interesting to watch how things play out.

Pass the popcorn please.  spin 



From the desert to the sea, to all of Southern California
User currently offlineBrilondon From Canada, joined Aug 2005, 4138 posts, RR: 1
Reply 2, posted (6 years 2 months 2 weeks 17 hours ago) and read 15473 times:

This is interesting to read. I would like to know what the criteria is for their ranking of these airlines. It is also interesting to note NW and DL are left as separate entities. I would like to see how they view the combined carriers as one airline.

[Edited 2008-05-19 10:08:49]


Rush for ever; Yankees all the way!!
User currently offline727LOVER From United States of America, joined Oct 2001, 6422 posts, RR: 17
Reply 3, posted (6 years 2 months 2 weeks 17 hours ago) and read 15406 times:

Can these be trusted?

If you remember a few weeks ago, FL was near the top of the BK list.



Listen Betty, don't start up with your 'White Zone' s*** again.
User currently offlineUnited1 From United States of America, joined Oct 2003, 5930 posts, RR: 9
Reply 4, posted (6 years 2 months 2 weeks 16 hours ago) and read 15339 times:



Quoting 727LOVER (Reply 3):
Can these be trusted?

If you remember a few weeks ago, FL was near the top of the BK list.

Yes and no, that was a different analyst that ranked FL as one of the more likely to file, the best way to read all of this is to take the opinions of several analysts and find the average. Analysts get paid to make guesses, they are informed guesses but they are ultimately still just speculating what is going to happen.



Semper Fi - PowerPoint makes us stupid.
User currently offlineConcordeBoy From , joined Dec 1969, posts, RR:
Reply 5, posted (6 years 2 months 2 weeks 16 hours ago) and read 15292 times:

Be interesting to know the reasons for the difference in ranking between DL (lower) and NW (higher) in their own right, and then as a merged entity.

User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7832 posts, RR: 52
Reply 6, posted (6 years 2 months 2 weeks 16 hours ago) and read 15258 times:

Wonder where DL/NW will be (if it's approved). I'm surprised at some of the ranking placements. I'm leaving for Basic Training today and won't be back until September, it will be an interesting industry when I come out!


Ironically I have never flown a Delta MD-90 :)
User currently offlineMSYPI7185 From United States of America, joined Oct 2007, 710 posts, RR: 0
Reply 7, posted (6 years 2 months 2 weeks 15 hours ago) and read 14904 times:

I will agree that with several airlines it will be a matter of when, however I disagree that US in the most likely. There are several airlines in much worse financial shape than US. I do agree that WN is the least likely.  twocents 

MD


User currently offline777fan From United States of America, joined Jan 2006, 2492 posts, RR: 2
Reply 8, posted (6 years 2 months 2 weeks 13 hours ago) and read 14341 times:

Kind of weird to see NW on the list. Any holdup with the DL-NW merger could result in NW's "go-directly-to-BK-do-not-pass-go" trip to chapter 11 which, I would guess could really put the brakes on a potential marriage. That, in turn, would probably smack DL around...and so on.

I can't help but wonder if a "liquidation list" would look nearly identical to the "bankruptcy list". Perhaps we have some more insight into UA's "cold feet" in regard to a merger with US. If US were to liquidate, UA would almost certainly jump at the chance to pick over some of US leftovers.

Let the war of attrition commence and may only the strongest survive!


777fan



DC-8 61/63/71 DC-9-30/50 MD-80/82/83 DC-10-10/30 MD-11 717 721/2 732/3/4/5/G/8/9 741/2/4 752 762/3 777 A306/319/20/33 AT
User currently offlineUnited1 From United States of America, joined Oct 2003, 5930 posts, RR: 9
Reply 9, posted (6 years 2 months 2 weeks 12 hours ago) and read 14219 times:



Quoting 777fan (Reply 8):
Kind of weird to see NW on the list. Any holdup with the DL-NW merger could result in NW's "go-directly-to-BK-do-not-pass-go" trip to chapter 11 which, I would guess could really put the brakes on a potential marriage. That, in turn, would probably smack DL around...and so on.

It is weird to see NW ranked that low I always viewed them as a reasonably well positioned airline (ie hubs have little to no LCCs and a strong international network) I'm wondering if he's speculating that if the merger doesn't get approved that NW will file for a prearranged BK alla AA/TW. Either way NW and UA both got covenant waivers from there lenders so there is no issue with them running into a technical default anytime soon, even with he price of oil being what it is the majors should all generate cash this quarter and next even though they may (more like will...) show massive paper losses as long as they stay cash positive over the course of a year there should be no issue with them being able to survive a down turn.



Semper Fi - PowerPoint makes us stupid.
User currently offlineDelta763 From United States of America, joined May 2008, 287 posts, RR: 0
Reply 10, posted (6 years 2 months 2 weeks 12 hours ago) and read 14163 times:

Meh...

Notice in the article they downgraded CAL while upgrading JBLU even though they ranked CAL less likely to file.

I think they're just blowing smoke.


User currently offlineSingapore_Air From United Kingdom, joined Nov 2000, 13738 posts, RR: 19
Reply 11, posted (6 years 2 months 2 weeks 12 hours ago) and read 14156 times:

A six month chart of UAUA (UAL Corp / United Air Lines). Ouch. Being a Star Alliance member, I hope they restructure and survive.




Anyone can fly, only the best Soar.
User currently offlineSydscott From Australia, joined Oct 2003, 2927 posts, RR: 20
Reply 12, posted (6 years 2 months 2 weeks 12 hours ago) and read 14133 times:

I thought you were talking about J P Morgan itself. With their bad lending practices and poor judgement in their own loans book I'm surprised they feel the need to comment about others going under.

User currently offlineMAH4546 From Sweden, joined Jan 2001, 32622 posts, RR: 72
Reply 13, posted (6 years 2 months 2 weeks 12 hours ago) and read 14116 times:

It sounds very far-fetched, but it would not surprise me if either US or UA (maybe both) might be divied up to other carriers if things do not get better within 8-16 months. They have assets that some airlines would love, and some lame duck assets (US' PHX hub, for example), that would just dissappear. I could see AA, DL, and CO having a field day buying up UA and/or US assets. They would be like kids in a candy store.


a.
User currently offlineOsiris30 From Barbados, joined Sep 2006, 3192 posts, RR: 25
Reply 14, posted (6 years 2 months 2 weeks 12 hours ago) and read 14095 times:

Interesting list, but I generally agree with their ranking (with a few minor changes). I would swap DL and UA for example. And I think B6 and AA are about equivalently likely IMHO. Be nice if they had assigned numbers incase they see any as 'tied'.


I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineRFields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 32
Reply 15, posted (6 years 2 months 2 weeks 12 hours ago) and read 14097 times:



Quoting Sydscott (Reply 12):
I thought you were talking about J P Morgan itself. With their bad lending practices and poor judgement in their own loans book I'm surprised they feel the need to comment about others going under.

My thoughts exactly.

If I were to rank investment houses and people to take financial advice from - JPM would be very near the bottom of desirability.

But one thing about their rankings in the too short referenced article - they appear to be focusing on the credit card hold-back issue. As we know from Frontier, that can force an airline into BK very fast.

If the credit card companies decided the merger with NW was a risk for DL, they could increase the DL hold-back and cut their cash flow in half for a 60-90 day period.

That would be near fatal for any company.


User currently offlineApodino From United States of America, joined Apr 2005, 4234 posts, RR: 6
Reply 16, posted (6 years 2 months 2 weeks 12 hours ago) and read 14025 times:



Quoting MSYPI7185 (Reply 7):
I will agree that with several airlines it will be a matter of when, however I disagree that US in the most likely. There are several airlines in much worse financial shape than US. I do agree that WN is the least likely

 checkmark 

USAirways is in a better cash position than other airlines on this list. (Note, that doesn't mean they have more cash on hand, it just means that they won't burn through all their cash as fast as other carriers if things remain status quo), plus their on time record as of late means they aren't delayed as much, which is also helping them to save money. I don't see them as likely to file anytime soon. In my opinion, United remains the most likely candidate to file this year, as their position is real bad. Midwest is probably in trouble as well.

At the regional level, I don't think its a matter of if, but when Mesa will file, and I don't think ExpressJet will be far behind. As much as I would like to see them stay independent, accepting SkyWest's offer probably would have been the best scenario for all the stakeholders.


User currently offlineApodino From United States of America, joined Apr 2005, 4234 posts, RR: 6
Reply 17, posted (6 years 2 months 2 weeks 12 hours ago) and read 14019 times:



Quoting MSYPI7185 (Reply 7):
I will agree that with several airlines it will be a matter of when, however I disagree that US in the most likely. There are several airlines in much worse financial shape than US. I do agree that WN is the least likely

 checkmark 

USAirways is in a better cash position than other airlines on this list. (Note, that doesn't mean they have more cash on hand, it just means that they won't burn through all their cash as fast as other carriers if things remain status quo), plus their on time record as of late means they aren't delayed as much, which is also helping them to save money. I don't see them as likely to file anytime soon. In my opinion, United remains the most likely candidate to file this year, as their position is real bad. Midwest is probably in trouble as well.

At the regional level, I don't think its a matter of if, but when Mesa will file, and I don't think ExpressJet will be far behind. As much as I would like to see them stay independent, accepting SkyWest's offer probably would have been the best scenario for all the stakeholders.


User currently offlineUnited1 From United States of America, joined Oct 2003, 5930 posts, RR: 9
Reply 18, posted (6 years 2 months 2 weeks 12 hours ago) and read 14012 times:



Quoting Delta763 (Reply 10):
Meh...

Notice in the article they downgraded CAL while upgrading JBLU even though they ranked CAL less likely to file.

I think they're just blowing smoke.

I'm not sure what they would be trying to accomplish by blowing smoke though, I can see their rating of DL possibly being a bit biased as JP Morgan is DLs largest shareholder. That being said no self respecting annalist (who wants to keep there job and not be sued) is going to play lets fake the market out games. (Also just to prevent a UA vs DL war from starting I actually think DLs rating is reasonably accurate as they are not expected to do too badly this year all things considered, that being said they have less cash on hand on for an airline of their size then some of their competitors do.)

Quoting Singapore_Air (Reply 11):
A six month chart of UAUA (UAL Corp / United Air Lines). Ouch. Being a Star Alliance member, I hope they restructure and survive.

All of the Legacies have been doing that same downward plunge over the last 6 months or so, If you take a look at the price of oil you will see that almost all the carries stocks virtually jump up or down in unison depending on what direction the price of oil is going.

Quoting Apodino (Reply 16):
United remains the most likely candidate to file this year, as their position is real bad.

How so?



Semper Fi - PowerPoint makes us stupid.
User currently offlineUAL777UK From United Kingdom, joined Nov 2005, 3356 posts, RR: 1
Reply 19, posted (6 years 2 months 2 weeks 12 hours ago) and read 13790 times:



Quoting Apodino (Reply 17):
United remains the most likely candidate to file this year, as their position is real

Really...please back that up with some facts please!

Tilton apparently came out rallying the troups in his message to employees today, comparing UA's figures to other legacies.........anybody privy to what he said?


User currently offlineCrewchief From , joined Dec 1969, posts, RR:
Reply 20, posted (6 years 2 months 2 weeks 11 hours ago) and read 13592 times:



Quoting United1 (Reply 9):
Either way NW and UA both got covenant waivers from there lenders so there is no issue with them running into a technical default anytime soon



Quoting Apodino (Reply 16):

USAirways is in a better cash position than other airlines on this list.



Quoting RFields5421 (Reply 15):
But one thing about their rankings in the too short referenced article - they appear to be focusing on the credit card hold-back issue. As we know from Frontier, that can force an airline into BK very fast.

Bingo. Perhaps the ranking was based primarily on the risk from credit card processors....and that's why US, NW, and UA are 1, 2 and 3? Could we really see a credit card holdback-initated Chapter 11 filing of a major carrier?

Who is the processor for each of those three airlines? First Data?


User currently offlineLightsaber From United States of America, joined Jan 2005, 12905 posts, RR: 100
Reply 21, posted (6 years 2 months 2 weeks 11 hours ago) and read 13415 times:
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Quoting LAxintl (Reply 1):
Interesting to watch how things play out.

Unfortunately so. I look at that list and while I would shift an airline here or there... overall its a fair estimate of the financial strength of US based airlines.

Quoting ConcordeBoy (Reply 5):
Be interesting to know the reasons for the difference in ranking between DL (lower) and NW (higher) in their own right, and then as a merged entity.

That would be interesting. Quite bluntly, without DL's cash, NW is sunk in my opinion. The combined entity could shed jobs quickly.


Unless airfares quickly get up to 140% of last year's fares... we'll see a rapid domino effect. Now since air travel is an elastic market and we're in a recession... that would cut demand quickly. The question is how much. 20%? 30%? So capacity must be removed from the system (in general. International demand/profits show that is where the growth should be.) Those airlines with fuel efficient fleets (e.g., CO) will do better than those with less efficient fleets. Ghad... $127/bbl... I would have laughed at that price a year ago. Not now.  cry 

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineUnited1 From United States of America, joined Oct 2003, 5930 posts, RR: 9
Reply 22, posted (6 years 2 months 2 weeks 11 hours ago) and read 13219 times:

Quoting Crewchief (Reply 20):
Bingo. Perhaps the ranking was based primarily on the risk from credit card processors....and that's why US, NW, and UA are 1, 2 and 3? Could we really see a credit card holdback-initated Chapter 11 filing of a major carrier?

Who is the processor for each of those three airlines? First Data?

I am not sure who UA uses but UA just renegotiated its CC processing agreement, also First Data was a little shocked when F9 filed for BK protection citing them for the filing in the first place. If anything that will make the CC processors less likely to take any action against a company.

http://seattletimes.nwsource.com/htm...ology/2004424622_webairfuel19.html
(little blurb about 2/3rds of the way down)

So I just found this online assuming that the information is still correct UA uses a JP Morgan subsidiary as its clearing house.
http://www.chicagobusiness.com/cgi-bin/news.pl?id=18061

[Edited 2008-05-19 15:49:45]


Semper Fi - PowerPoint makes us stupid.
User currently offlineKELPkid From United States of America, joined Nov 2005, 6346 posts, RR: 3
Reply 23, posted (6 years 2 months 2 weeks 11 hours ago) and read 13137 times:



Quoting Singapore_Air (Reply 11):
A six month chart of UAUA (UAL Corp / United Air Lines). Ouch. Being a Star Alliance member, I hope they restructure and survive.

What is that chart, stock price?

If UA goes broke, SQ will no longer be able to ticket to/from US Cities not directly serviced by themselves...  headache 



Celebrating the birth of KELPkidJR on August 5, 2009 :-)
User currently offlineUltrapig From United States of America, joined Dec 2003, 581 posts, RR: 0
Reply 24, posted (6 years 2 months 2 weeks 10 hours ago) and read 12099 times:

I thought it might be helpful to give a perspective of Chapter 11 and bankruptcy in general. Remember your Corporate law class 101 in college. In a liquidation shareholders get paid last then unsecured creditors then secured creditors from their security then priority creditors-(taxing authorities- consumers-employees) This is a simplification of course.

A Chapter 11 for an airline is filed for a number of reason. One might be that the airline has too many airplanes. Another might be that it can't generate enough cash flow to service the bonds.

In essence a Chapter 11 proceeding is an exchange of Debt for Equity. The shareholders get wiped out because in a liquidation they would get nothing. The bonds are partially converted to bonds and equity in the "reorganized chapter 11 airline" goes generally to the bond holders. If the bondholder and secured creditors figure they would be better off with a liquidation they can push for one. The people on Wall street make plenty of mistakes but the generally do what they think is best. Thus the lead bank for a trustee of bonds voting for a plan generally has negotiated for an believes that United Airlines II or IV will give them a better value than a liquidation. They are always right.

Many people who complain about airline bankruptcy don't understand that corporations unlike government can't print money. Thus when they don't have the cash they are required to pay they can either liquidate or try to come to an agreement with their creditors to keep alive in another form.

Airlien bankrutpciesmight be better thought of in the context of the depression era railroad bankruptcies. Imagine a railroad with leased trains, fees due to terminals and stock and bonds. Obviously one is not going to liquidate the tracks? One is either goign to sell them in place or reorganize into a new entitty. I know its not quite the same for an airline-but to the extent airlines have brand name recognition and items which realize nothing on liquidation (the cost to train a new crew at a new airline, to make new manuals, to simply hire new people) its the same.

Obviously I am a bankruptcy lawyer.


25 777fan : I suppose the challenge is to find the proper balance of fare increases (particularly on leisure fares), capacity cuts, labor cuts (I wouldn't be sur
26 Mariner : I thought that shortly after the Frontier/First Data issue, the CCP for Expressjet demanded - and got - 100% holdback? mariner
27 NWAJettjockie : That article is nonsense. They ranked NWA at the bottom (????). What a joke. We have one of the best balance sheets out there. Wonder what Moron wrote
28 Post contains links United1 : That I don't know, I was basing my thought off an article that you posted in the original F9 BK thread. First Data took alot of flak in the press for
29 Post contains links Mariner : Well, you may be right. From what I can now discover, the Expressjet holdback increase - to 50% in December then to 100% in March - happened just bef
30 Sxf24 : Tell me how the Balance Sheet helps with revenue and cash flow deficiencies? Not to mention militant labor?
31 LAXintl : United has about a ~$320mil hold back reserve at the moment, or 25% of its advance bookings and are governed by a host of coverage ratios and unrestr
32 United1 : Reading through ExJets 10Q apparently they violated some financial covenants with their CC Processor and as such it was raised to 100%. On the Q1 con
33 NWAJettjockie : I can tell you that we have as good a cash flow as the other airlines. We have some of the lowest labor costs in the industry. Our Management team re
34 Post contains links 777fan : The Chicago Tribune posted a related article, citing S&P analysts and some eye-popping numbers. Fair use excerpt: "US Airways' market capitalization h
35 Post contains links Twixer85 : Note below that both of these airlines' unit costs went up and by more than industry average after emerging from BK 1. This can explain why they filed
36 CatIII : Until you remember that you're talking about someone's livelihood...
37 United1 : Thats about right... for example in the past 6 months... AA dropped 59% DL dropped 62% UA dropped 69% CO dropped 39% US dropped 65% NW dropped 55% As
38 JetJeanes : well im sure its going to be more than a 7 billion dollar loss, Hell dal lost a billion last quarter and if im not mistaken Nw was close to it with 3
39 CatIII : Huh? Delta’s pre-tax loss for the first quarter was $274 million, driven by a nearly $600 million increase in fuel prices.
40 EA CO AS : If Tilton spoke, ten bucks says the words "synergies" and "paradigm" were uttered at some point.
41 Seafleet : Sydscott I am with you all the way some of the so called financial giants that issue such statements overlook the history of their own lending polici
42 JetJeanes : Sorry I looked at the Dal incorrectly... Now wasnt it Jp morgan that snatched bear stearns up for something like 2 bucks a share.
43 United1 : Nope not a once....
44 CatIII : It was, but what does that have to do with airline bankruptcies?
45 Lp0815 : Whose bankruptcy is JP Morgan talking about? Any airline's bankruptcy or JP Morgan's?
46 Panamair : Before all of you start taking potshots at Jamie Baker and his team (and think that you know better than some airline analysts), you many want to actu
47 United1 : So upon reading the pdf (thank you for sending it out) alot of it actually makes since. I do question one of there assets for DL however, they value D
48 MMEPHX : who is top/middle/bottom of this list doesn't really matter, what it really shows is that the US airline industry is an overall bankrupt business mode
49 Panamair : The $1 bn dollar savings is on the list as a potential liquidity lever (like forward selling miles, selling of Comair, etc.) and is hence not factore
50 ATCtower : The title is filing for bankruptcy, not folding up shop... That said, I would bet the higher risk lies with the larger airlines. They have more to los
51 Crewchief : The logic leads to a conclusion that the industry will have to radically change in order to attract capital, and survive. What core problems need to
52 EXAAUADL : Hopefully this time there will be liquidations
53 United1 : While I'm appalled that you would simply hope that tens of thousands of people would be out of a job. Liquidations would only be effective if the cap
54 Incitatus : Of course it does. I made a similar analysis last week and the most likely to file in my view were Air Tran and United.
55 Crewchief : I fail to see how that will solve the structural problems that plague the industry, such as the difference between revenue and cost flexibility. Also
56 United1 : There really isn't an enforcement mechanism per say outside of making fundamental changes is necessary for survival at this point. I don't think any
57 HPAEAA : If anyone has access to Morgan Markets I suggest reading the research note as a whole... it was an interesting change from the normal view... depends
58 AirframeAS : I would like to explain that: Pilots strike of 1998. Mechanics walk-out of 2005.
59 NWAJettjockie : Once again, someone who doesn't have a clue about what they are talking about. The pilots DID NOT strike!!!! WE WERE LOCKED OUT BY MANAGEMENT!!!!! Yo
60 LMP737 : You fly aircraft maintained by sub standard mechanics?
61 DLPMMM : It can't happen individually. The over-capacity is primarily in the legacy sector of the market (which does then affect the LCC sector as well). The
62 Cloudy : If the government let US and America West liquidate soon after 911, the problems we face now would simply not be as bad. Part of the reason we have ov
63 Crjfixer : LOL I hate to break it to you but MOST NWA employees have no idea what militant labor is. I cant speak for the pilots but i know they were well paid
64 NWAJettjockie : I agree with you. The flight crews I fly with do a fantastic job, and I wouldn't classify us as militant. And again for the record, we didn't strike
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