United Airlines , One More Thread .

Fri Dec 06, 2002 2:15 am

Hi Guys ,

Decided to jump into the bandwagon here . There are quite a few posts about United filing chapter 111. Just a couple of opinions here and absolutely no intentions of treading on anyone's foot or starting a war . United files chapter 11 , no big deal the definition of chapter 11 in the US code is reorganization and not liquidation which is chapter 7 . There are 4 sections which are of prime interest
Section 1101:Defines roles and responsibilities
Section 1102:Defines committees
Section 1103: Defines Powers and duties of committees
Section 1110: Aircraft Equipment and Vessels.

In a brief Committees are what the Bankruptcy court creates which consist of a group of the bigges creditors . The committees have full authority to conduct any internal investigations , and interfere in the day to day functioning and all company decisions.

Chapter 11 protects the debtors , UA in our case from all creditors , but as per section 1110 "Except as provided in paragraph (2) and subject to subsection (b), the right of a secured party with a security interest in equipment described in paragraph (3), or of a lessor or conditional vendor of such equipment, to take possession of such equipment in compliance with a security agreement, lease, or conditional sale contract, and to enforce any of its other rights or remedies, under such security agreement, lease, or conditional sale contract, to sell, lease, or otherwise retain or dispose of such equipment, is not limited or otherwise affected by any other provision of this title or by any power of the court. " . Paragraph 3 (A) (i) describes the type of aircraft whicgh is aircrafts capable of carrying 10 or more individuals or 6000 pounds or more of cargo .

How UA would probably proceed , all IMHO ,abnsolutely no intentions of treading on anyone's foot here.

1. Going by Section 1110 all the aircrafts which are leased or payments of which have not been completed definitely go back to the respective creditors . However UA will be safe from the any payments they have defaulted on these aircraft . How would this help ? UA saves costs on aircraft maintenance , airport charges , fuel etc . The downfalls would obviously include route cuts and maybe more layoffs . This is a grim scenario and I really do feel bad for employees here . As for some of the posts which stated that UA's downfall is because of employees , completely wrong . Any company which goes down under goes because of the management not because of the employees . An ordinary employee (read pilots , crew ,ground staff and who ever else I missed out) does not influence any decision which involve capital spending . It is the management which does that .

2. All the old aircraft in UA's fleet go . There is no question about that . whatever gets sold off will increase the cash reserves of UA , which would be terrific . The aircrafts I see going :
B762 : 18 a/c
B727 : 57 a/c
B732 : 20 a/c
B733 : 50 a/c ( UA has 101 of these ,probably not all of them would go out , the older ones and the ones which have not been completely paid for as yet will definitely go out)

3. Code Shares : Most of the UA international routes would probably go to increased schedules by the Star alliance members and on a code sharing basis . How this would affect the alliance is that UA will get paid for seats eventhough the flight is not necessarily operated by it . Lots of cost savings there . Star alliance , however close it maybe , none of the members are going to pay and bail out UA . Any amount spent by these companies will inadvertantly affect their stocks , which in this slump is extremely critical. It may also be restricted by the percentage of ownership allowed by international concerns in US based companies . Individual country rules will also affect these decisions . How they could help is by probably buying out United's aircrafts and increase their fleets . Air Canada and Lauda air , use 762's and are currently are in a condition to buy aircrafts , I am not too sure if they do need fleet upgrades , but with the alliance and picking up some of united's routes they would need aircrafts .

4. Funding from external sources : I did read in a couple of earlier posts that there are cities and communitoes willing to fund the airline , this will help tremendously . Selling of office spaces,airport parking spaces , routes all amount to cash influx .

Well won't bore you guys any more. I think if UA does this one right it has all probabilities of getting out the Chapter 11 probably by Q4 2005. I do feel terribly bad for all the employees . There probably would be more job cuts , but this time it will not be decided by the management and more by the committees setup . Heck I feel bad for them . UA people , grin and bear it guys , there is a silver lining to every clud however dark it may be .


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Joined: Tue Feb 12, 2002 8:27 am

RE: United Airlines , One More Thread .

Fri Dec 06, 2002 2:28 am

Kartik--Great post. Thanks for the information. I do not think it will be difficult to negotiate with the aircraft lessors, they would rather take less money for their leases than have their airplanes sitting in the desert. That seems to be the least of their worries, I think.

I said in another post that those who are owed money(the big bucks) will be troublesome. Much of the value of UAL's unencumbered assets is on paper and the real market value is much less. If the creditors "call", UAL might have to sell more assets than it wants just to pay them off.

We'll see. I still think the ticket discounting will drive some other companies into Ch.11. Take care.TC
FL450, M.85

RE: United Airlines , One More Thread .

Fri Dec 06, 2002 2:44 am

Thanks AA717Driver . The thing is the big creditors would probably end up in the committes defined by the courts and will also end up running UA . They will probably not allow UA to sell much of their assets to raise money but thing is that what ever UA does manage to sell will count towards capital building . In this grim market the creditors would probably have no choice but to try and raise all the capital they can , after all they do have a lot of cash invested in the airline. Hope the best for UA .



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