ouboy79
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UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 4:44 am

The story:

http://biz.yahoo.com/djus/030304/1430000989_1.html
 
Sinlock
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Joined: Fri Dec 22, 2000 12:55 am

RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 7:11 am

This makes me wonder how much of this is from UAL's bookings being down.
I know a lot of people who try to NOT fly UAL when they go somewere.
 
CactusA319
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 7:19 am

I know a lot of people who try to NOT fly UAL when they go somewere.

That's true. My company has avoided booking on United out of ORD lately, instead opting for AA or DL.

 
prebennorholm
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 7:34 am

It is beyond me how this can continue. Under chapter 11 protection fuel is paid before it hits the fuel tanks in the planes. Who pays the fuel? Who pays the wages? Who pays maintenance and spare parts, landing fees, insurance etc.?

And why do the plane lessors let them continue to fly "their" planes?

UAL must raise ticket prices by 28% without losing one single passenger just to make a break even, not any profit!!!

Who pays the bills? How can it happen? What kind of money tank makes this possible?
Always keep your number of landings equal to your number of take-offs
 
artsyman
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 7:46 am

What makes this slightly more interesting is that they lost all this money while not paying all their bills. From what I understand they have not made all lease payments etc during this time either.

Nonetheless, we can hope they survive
Jer
 
N79969
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 7:51 am

I don't see the light at the end of this tunnel either.
 
brett80211
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 8:36 am

Give it up!Know one really know's what's going to happed to United at this point.They could go under, or they will emerge as a new profitable airline.You have your opinions, but it's too soon to know whats going to happen to UAL. United forever....-Brett
 
donder10
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 8:39 am

Well with a cash burn rate at this level they won't be around much longer will they because it is not sustainable without a massive change in the structure of the airline and its methods of operation.
 
N777UA
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 8:42 am

As horrible a loss as this is, $12 mil a day is still far better than the $20 mil that was going out in December. Shows that they are making progress in the cash burn department.

Remember though, this isn't how United is performing now, it's how they were a month and a half ago. Revenue has been going up since then. Also, United reported just a week ago that they are using less of the DIP loan than they had planned to, and that recovery was ahead of schedule.

United has some big changes that need to be made in order to pull through, but if they can make these changes, things may turn out ok.
 
gigneil
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 8:46 am

United's load averages are UP, not down.

Many companies like HP have instructed their employees to fly UA whenever possible.

N
 
artsyman
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 8:57 am

As horrible a loss as this is, $12 mil a day is still far better than the $20 mil that was going out in December.

*********************************

Yes it, but people do not seem to be accepting the significance of how large of a loss this is. At Continental, the cash burn is about a tenth of this, and they are worried about it, for United to stop the burn and actually turn a profit in this environment is not far from impossible. I dont say this based on the employees, assets etc, just based on the fact that none of the carriers have found a way to stop the burn, and UAL is burning way more than the others. I know there were some pretty significant covenants in place for UAL, one of them to turn a profit by AUG 2003, and this just seems extremely unlikely for all the majors and especially UAL. There is a limit to what can be cut, wages and contracts etc have already been slashed, lots of layoffs, they are not paying all their debts even at this point, and the losses are still catastrophic.

[Edited 2003-03-05 00:59:29]
 
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coronado
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 9:28 am

Meanwhile their ''dumping'' of air fares is costing carriers such as NWA 10-20MM per month in revenue by being forced to match. It is one thing to compete with A Southwest who is making money. It is another thing to compete with a UAL who has the protection of the courts not to pay its bills and for the sake of cash coming in--positive margins be dammed--end up competing in a way which should be considered illegal.
The Original Coronado: First CV jet flights RG CV 990 July 1965; DL CV 880 July 1965; Spantax CV990 Feb 1973
 
artsyman
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 9:52 am

positive margins be dammed--end up competing in a way which should be considered illegal.
************

Some of the covenants are designed to stop this from happening. UAL has to be in profit by AUG 2003 and doing the loss leader mentality will not help them acheive this. If they could do it long enough to put everyone else out of business first, then this would be possible, but they are weaker than the other carriers, and will be outlasted.

I am curious to see what happens when the majors eventually start competing at the LCC prices, if the LCC will then lower even further and so on...

 
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STT757
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 9:59 am

What UAL needs is a reduction of 25-29% in costs across the board, not only from the Unions but every sector.

Good luck to them, Im pulling for UAL, Glen Tilton and most importantly the employees.
Eastern Air lines flt # 701, EWR-MCO Boeing 757
 
N839MH
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 10:04 am

One thing which could help UA would to be sell there Pacific routes for
$400-700 million. This could possibly keep the rest of the the airline afloat thru the summer months. Not sure how this would effect AA...assuming DL were to purchase these routes.

UA could then turn there attention to Europe, S.America and Starfish.

Cash is King and he who has cash is KING....and UA needs the cash!
Solodude!
 
bobcat
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 10:25 am

sell the Pacific routes? How much did UA pay Pan Am for
those routes originally?  Sad
 
clipper471
Crew
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 10:34 am

"sell the Pacific routes? How much did UA pay Pan Am for those routes originally?"

Bobcat, the cost of the Pan Am Pacific routes was $750 million, in 1985. United quickly recovered that amount as Pan Am let the routes go without any bidding (another blunder by Pan Am).
 
flashmeister
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 10:37 am

United is in a pickle here: according to the terms of their DIP financing, not only do they have to get cash-positive quickly, but they have to get cash-positive over the entire term of their bankruptcy before they can access more of their DIP money past a certain threshhold.

So, a cash-loss month isn't just a 'shucks, try again' moment, it's a mark against them for the next month.

The problem with United is that management still doesn't believe that they're in dire straits -- no one has led the charge for fundamental change at the carrier that's really needed. Until that happens, forward progress is unlikely.

And, as for my company, effective March 1, United is to be used only when there is not an alternate itinerary available on AA, AS, CO, DL, F9, HP or NW, and even then, we're supposed to 'strongly consider' WN before opting for UA. (We're based here in PDX.)
 
N777UA
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 12:21 pm

The DIP covenant states that United must be profitable by November, not August.
 
Guest

RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 3:57 pm

Flashmeister observes, "[t]he problem with United is that management still doesn't believe that they're in dire straits -- no one has led the charge for fundamental change at the carrier that's really needed. Until that happens, forward progress is unlikely."

Isn't it somewhat surreal that the unions and management at AA are negotiating with more urgency, according to public statements, than the unions or management at UA. Heck, to jumpstart negotiations the FA's union at UA had to present management last week with its own wage concession proposal. It seems management at UA had yet to make a specific proposal.

Meanwhile, management at AA has already presented the TWU, which represents mechanics and rampers, with three different proposals. Negotations with the pilots are well underway, building on discussions AA has been having with the union for well over a year on a new contract. And, AA has already held preliminary discussions with their FA union.

It is becoming more and more clear that UA is running out the clock on its unions. It is obviously hoping that the judge will do their job by abrogating the contracts and imposing UA's terms in their entirety. The judge, however, might take issue with the fact that UA management has shown no evidence of bargaining in good faith with any of its unions. But, what else is new. This is basically the same management team that tried to bs their way to an ATSB Loan. This judge has already expressed his amazement at UA management's inability to perform an adequate analysis of their financial condition. So, he may just be waiting to call UA management's bluff. If he does and UA management is sent back to the negotiating table, how long before the DIP creditors decide that this management team doesn't have the wherewithall to get the job done? Hence, how long before they force UA into Chapter 7? However unfortunate it may be for UA's employees, United's liquidation would be as exemplary as Enron's bankruptcy. A company cannot be this poorly managed and expect to survive, especially when its survival would make it more difficult for companies that have been better managed to thrive.


 
speedport
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RE: UAL Burns Through $12+ Mil/day In January

Wed Mar 05, 2003 6:32 pm

With so much news, it is easy to overlook some important stories.

1) ALPA filed their own proposal with the company last Tuesday, a day before AFA which did the same.

http://biz.yahoo.com/rb/030304/airlines_united_8.html

While no details about the ALPA proposal have been released, I can't believe it provides everything United has asked for. Just as the AFA's proposal was half of the company demand, I expect ALPA's proposal falls short as well. In my opinion, United has nothing to gain by negotiating in the middle. They can go for the whole enchilada by voiding the contracts. I see a showdown in court on the 17th. It is my understanding the judge cannot simply choose one proposal over the other. His power lies solely in his ability to void the current contract. I must admit I am perplexed by these union moves.

2) On Monday, United asked the judge to order the DOJ to allow the IRS to refund 388 million in overpayments and interest. The judge said no. The problem is United has already accounted for this money, as if it were already in hand, to meet its DIP financing goals. The DOJ has frozen the release of this money because of 50 million it says United owes the government, United disputes the 50 million. United may well have to give up the 50M just to get the 338M. Somehow they are going to have to make up this 50M. From the reuters story:

" In court testimony, UAL attorney Kieselstein said that without any recovery of the tax payments, the company's cash balances would become inadequate. UAL's utilities and credit-card partners may come back to court seeking special amendments and assurances, he said. "We're talking about a potential run on the bank," he said. "The company needs the money literally to operate."

http://biz.yahoo.com/djus/030303/1614001015_1.html