This is very interesting reading and almost makes me wonder what Gordon has been doing with all the liquidity. My gut instinct at first when he warned of dire consequences was that he was over-dramatizing the whole situation to accelerate a Federal aid package, but this announcement, and its corresponding effect upon the debt ratings for CAL and the industry in general comes as a bit of a shocker.
Is Continental really this badly over-stretched? Their Debt to Equity ratio as of last week was in the range of 3.25, which is on the higher side for the industry, but still not in panic signals territory. If their financial condition is indeed the case, then Gordon should be chided for his retrospectively foolish equity buyback program in January which reduced their liquidity significantly.
Doug_or From United States of America, joined Mar 2000, 3479 posts, RR: 3
Reply 1, posted (13 years 8 months 1 week 2 days ago) and read 1474 times:
wow, i had no idea that were on such shaky ground. Does anyone more familiar with their relationship with NWA know how this will affect NWA, and if NWA may help out? or if they can? Any other airlines making similar announcements?
Longhaul747 From United States of America, joined Dec 2000, 173 posts, RR: 0
Reply 2, posted (13 years 8 months 1 week 1 day 23 hours ago) and read 1449 times:
Wow this is not good news. I wonder what happens when an airline defaults on a lease? Do they hand the plane back to the leasing company or does the leasing company come in the middle of the night to repo? Taking a wild guess I would say the airline continues to operate the plane and the leasing company takes the loss. When the airline can afford to pay the leasing company will make the airline make back payments. I know how it works in other businesses but the aviation business is a little different.
AWA22 From , joined Dec 1969, posts, RR:
Reply 3, posted (13 years 8 months 1 week 1 day 13 hours ago) and read 1391 times:
If an airline starts to default on loans for aircraft the leasing companies have the same rights as when you lease a car. Eventually the bank will take legal action to repo the aircraft with the help of law enforcement. The banks will go to the airport with the marshall service and seize the aircraft and fly it to where ever.