SHUPirate1
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United And Chapter 11

Sat Sep 20, 2003 3:18 pm

Let's just say for a second that United fails to emerge from Chapter 11 bancruptcy...obviously no airline is going to totally absorb United. So let's take each of the five other major domestic airlines (American, Delta, Continental, Northwest, US Airways) and arbitrarily assign them each one of United's current hubs (SFO, LAX, DEN, ORD, IAD) based on what would fit each system, and an explaination would be appreciated as well...for example (my suggestion):

IAD: DL, would give them a hub in the northeast, and compliment their southeast hub at ATL, and their midwest hub at CVG
ORD: US, would be the perfect east-west hub for their passengers in the northeast, and would allow them to safely downgrade PIT
DEN: AA, would compliment their hubs at ORD and DFW, giving them a further east-west presence
SFO: NW, would compliment perfectly their hub at AA), Japan">NRT, plus give them a west-coast presence
LAX: CO, compliments their hubs at both IAH and Guam (not sure of the code)

Comments are more than welcome...
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wgw2707
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RE: United And Chapter 11

Sat Sep 20, 2003 3:54 pm

If United does go into Chapter 7, it will be bad news for the Star Alliance. US Airways will be under pressure from the likes of Lufthansa and Singapore Airlines to agressively expand to fill the gap left by UA. Expect to see more comprehensive US Airways routes, but nothing half the size of what United currently is (and hopefully will continue to be). There is the possibility that should US expand agressively following a UA collapse, they will over-extend and experience a fatal case of the dreaded Braniff Fever.

-WGW
 
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RE: United And Chapter 11

Sat Sep 20, 2003 4:05 pm

What about One-World-Partner American Airlines.
They are still in trouble, too. So it seems as if the US-carriers are a danger for Stars and world.
 
SHUPirate1
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RE: United And Chapter 11

Sat Sep 20, 2003 4:31 pm

As a frequent US/UA traveler (US on my north-south routes through either CLT or PHL, UA on my east-west routes through ORD) who invariably flies out of LGA over JFK, which is significantly closer to my house, simply to fly US, I think it would be great for US Airways for them to either take a bite into the market-share at STL that AA is abandoning, or, if UA goes Chapter 7, pick up everything out of ORD, although I would bet that CO and DL will be after the marketshare at ORD in no time at all as well...
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StevenUhl777
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RE: United And Chapter 11

Sun Sep 21, 2003 2:33 am

SHUPirate1: I'll give you this...you sure are brave to post a topic like this (especially since you're suggesting a Ch. 7 scenario, which the chances are now at about 10% and dropping) on this website...there have been many threads along similar lines and there's a LOT of pro. vs. anti-United folks here. I wouldn't be surprised if your thread here generates 5o+ replies...

Have fun...enjoy the ride!
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SHUPirate1
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RE: United And Chapter 11

Sun Sep 21, 2003 3:02 am

10% and dropping? The last I heard was that UA was pushing back Chapter 11 emergence...while such an outcome is probably fairly unlikely (who would expect the US gov't allow the world's #2 airline to go belly-up like that) it would not be incredibly surprising to see UA extremely scaled-down by the time they emerge from bancruptcy protection, if they emerge at all...
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flyboyaz
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RE: United And Chapter 11

Sun Sep 21, 2003 3:05 am

That's right...the courts gave them just 5 more months I think to come up with a plan....if they can't.....liquidation. Then they'll go the road Eastern went.....breaking apart bit by bit....would be sad to see.  Sad

[Edited 2003-09-20 20:08:06]
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tommy767
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RE: United And Chapter 11

Sun Sep 21, 2003 3:15 am

That ORD hub is huge. It would be most likely absorbed by AA b/c they are the second biggest carrier at ORD.

IAD: Maybe USAIRWAYS. That would be pretty likely considering that USAIRWAYS is based in Virginia. DL is pretty likely too.

DEN: AA? Thats pretty accurate. They would dominate the ski destinations

LAX: Not to sure about CO. LAX is not really one hub for anyone. My best guess would that there would be a division of airlines that would get slots.

SFO: I would agree that NW would try to get that. They would do good. But also ATA might try to get that.

What about the smaller Airports with United gates?

JFK: I think that terminal would be overtaken by BA. I dont imagine another carrier trying to overtake that terminal

EWR: A-1 would be absorbed AA b/c they are trying to build up NY. I heard somewhere that when UA was going to absorb US they were going to ditch A-1 and give it to AA. That was, unfortunately not a reality.

MIA: I would guess AA or DL.

LHR: Good question. Maybe BMI?


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luv2fly
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RE: United And Chapter 11

Sun Sep 21, 2003 3:20 am

I think the government is not the saving grace for UA, after all PA is gone and everyone said that the Government would not have allowed that one to happen.
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worldtraveler
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RE: United And Chapter 11

Sun Sep 21, 2003 3:25 am

while alot has been said on the topic, a couple points bear repeating.

UA does have monumental hurdles to overcome in order to get out of bankruptcy. However, they are making progress and the biggest help will probably come from changes to pension funding requirements (which appears likely and will benefit all airlines plus many other industries).

The real barometer to determine UA's disposition is whether they keep up w/ other network carriers in the size of improvements. If UA doesn't show improvements on a scale similar to what other network carriers show, UA's future will be very insecure. I personally think UA will be able to keep up and avert a disaster.

To the original post, if UA were liquidated, history indicates that the financially strongest carriers will get first pick of UA's assets. As I've stated before, the general assessment of financial strength of the network carriers goes something like DL, NW, AA, CO, US, and UA in order of descending strength. Given that DL is in the best financial shape of the big six, has the least overlap w/ UA of any of the big six carriers, and has a history of growing through acquisition, I would expect DL would get the biggest share of UA. I would guess DL's priorities would be in descending order: the Pacific operation, SFO and/or LAX, ORD, LHR, DEN, and IAD. Contrary to Pirate, I don't think DL would be very interested in IAD given their east coast strength and dual int'l operation at JFK and ATL.
 
SHUPirate1
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RE: United And Chapter 11

Sun Sep 21, 2003 3:27 am

I wouldn't exactly count on that ORD hub going to AA...combined, AA and UA account for nearly 1,100 flights a day out of ORD (don't have the exact numbers on me), granted, some would be ditched (both have hourly ORD-LGA service, no need for two planes to have an identical route) but they would still have a fortress hub that would exceed DL's ATL operations...plus, giving AA both ORD and DEN (which account for about 70% of UA's mainline domestic flights) would probably raise a few eyebrows at the justice department...
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andersjt
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RE: United And Chapter 11

Sun Sep 21, 2003 3:30 am

Although I cannot state probabilities, I'll echo StevenUhl777 and others and say that it is highly unlikely UA will go Chapter 7 now.

Many people bring up the Eastern Airlines example. Texas Air made the decision to liquidate, not the courts. Why try to run both Continental and Eastern when you need narrow your focus?

My other objection on these threads is that while UA is under court protection, they are getting a free ride. Not true, the "protection" offered is against debts you have already incurred up to the time of filing. While under Chapter 11, and considered a Debtor-in-Possession, you have to stay current on your obligations. Albeit some of those contracts have been negotiated down, but UA still has to stay current. That would include aircraft and gate leases. If UA can't stay current then the court has no choice but to have them surrender those assets over to the debtor with a secured interest.

The extension granted by the courts is not unusual or shows any favortism. A lot of people have been effected by the filing, and if UA can successfully show that when they do emerge employee pensions and debtors will be better off than by liquidating the company, then the court has to allow it.

I feel bad that I cannot stay on topic of this thread, thinking about the possibility is too difficult.
Oh how I long for the day when the skies were truly Friendly!
 
flyboyaz
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RE: United And Chapter 11

Sun Sep 21, 2003 3:41 am

Some people may disagree with me but I think America West might be interested in the IAD hub. Probably not on a huge scale but since UA has the same Airbus planes (engines), HP could probably acquire some of their planes with minimal cost from the lessors. Serving larger cities such as ORD, LAX, SFO, DEN, ATL, DFW, IAH, cities in Florida, etc....and possibly use ACA as an express carrier to fly to smaller cities.

Our corporate team definetely wants to expand and this would be a great opportunity to establish a better than CMH east coast hub.

It is difficult for me to think about as well...but who ever thought Pan Am or Eastern would be gone too?
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SHUPirate1
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RE: United And Chapter 11

Sun Sep 21, 2003 3:47 am

Flyboyaz-I respectfully disagree with HP being smart to move into IAD. IAD (and for that matter CMH) are great north-south hubs with absolutely no business being part of HP's west-coast network. I believe that the Star Alliance should pick up both HP and AS in the event that UA goes Chapter 7, as both are to the west coast what US is to the east...that said, if HP went looking for an east-west hub, they might be much smarter looking someplace closer to home, such as MCI or STL...
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StevenUhl777
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RE: United And Chapter 11

Sun Sep 21, 2003 3:51 am

Yes...10%...stated by outside analysts....a few months ago, and it's probably even lower than that now. Granted, we're coming up on the winter travel season, and like other network carriers, UA will certainly be watched. By announcing the start of "starfish" (which I'm sure you already assume will fail on Day 1) and advanced ticket sales starting in Nov., that will help build cash balances during the winter season, to offset the decrease from summer. Also, UA is working to resolve the pension issue as well as we speak.

Andersjt: Thanks, again, for setting the record straight and clarifying the situation at hand.

SHUPirate1: You (and most likely others) are incorrectly interpreting the newest 5 month extension UA received as an automatic prelude to Ch. 7...it isn't. When UA filed Ch. 11 last Dec., the original comment made by management was that it could take up to 18 months to emerge, putting it at June 30, 2004. Is that the day they will emerge? I don't know. It's very likely they could emerge March 31, 2004, but at a quarter end most likely.

A few weeks ago, UA came out said that despite earlier speculation on their part, an early re-emergence would not take place after all, citing the uncertain continued industry outlook, and therefore delayed their scheduled re-emergence until 2004, which was the original target all along.

Here's a press release, issued 8/25, that is posted on the UAL website, under "press releases". It relates to July financial performance, and I would expect August's to be released before too long.
**********************************************************
For Immediate Release
CHICAGO, August 25, 2003 – UAL Corporation (OTCBB: UALAQ.OB), the holding company whose primary subsidiary is United Airlines, today filed its July Monthly Operating Report (MOR) with the United States Bankruptcy Court, and reported that the Company earned $35 million from operations in July, continued to generate positive cash flow during the month and met the requirements of its debtor-in-possession (DIP) financing for the sixth straight month.

United's executive vice president and chief financial officer, Jake Brace, said, “United is continuing to deliver major cost reductions and is now coupling that effort with significant unit revenue improvement. United’s system wide unit revenue improved 10% year-over-year, well ahead of the industry average for the month. All of us at United are very proud of the solid progress we are making. As we continue to successfully bring down cost and improve revenue, we are building the momentum to emerge from Chapter 11 as a much more focused, efficient and flexible business for the long term. We know there is still much work to be done, but United is moving steadily in the right direction.”

Brace added, “United’s cash balance increased by an average of about $4 million a day in July, excluding a quarterly retroactive wage payment to IAM members, allowing us to maintain our strong cash position. We met the requirements of our DIP agreements for the sixth time, and expect to meet our DIP covenant for August as well.”

The Company reported earnings from operations of $35 million in July, a significant turnaround from July 2002. The Company also reported non-operating expenses of $148 million, which included $105 million in reorganization expenses. The majority of reorganization expenses were non-cash items resulting from the rejection of aircraft. Excluding reorganization expenses, United recorded a net loss of $7 million for July.

UAL again improved its cash position for the month and reported an increase in cash of approximately $48 million for July, ending the month with a cash balance of approximately $2.3 billion, which included $714 million in restricted cash (filing entities only). UAL began July with a cash balance of approximately $2.3 billion, which included $674 million in restricted cash (filing entities only). Excluding a quarterly retroactive wage payment to IAM members of $63 million, the company's cash balance increased approximately $111 million for the month or approximately $4 million per day.

United met the requirements of its covenants for DIP financing in July. As part of its DIP financing agreements, United’s lenders required the Company to achieve a cumulative EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) loss of no more than $448 million between December 1, 2002 and July 31, 2003
**********************************************************
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flyboyaz
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RE: United And Chapter 11

Sun Sep 21, 2003 3:51 am

That's a good point. I think we did use MCI for alot of flights back in the good old days with Ed. They used it as a stopping point to the east coast as well, before we got 757s. I'm just glad that we didn't get bought by UA....I probably would have been out of a job a long time ago!
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jmc1975
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RE: United And Chapter 11

Sun Sep 21, 2003 4:12 am

I expect UAL to lose only about $500 million for Q3 2003. With those kind of numbers, they'll do just great.  Yeah sure
.......
 
StevenUhl777
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RE: United And Chapter 11

Sun Sep 21, 2003 4:14 am

Jmc1975: And this loss projection is based upon....??? Do you have August financials for UAL Corp. available to you? How about September?

And the winner for best actress is....REESE WITHERSPOON for 'Walk the Line'!!!!!!!!
 
SHUPirate1
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RE: United And Chapter 11

Sun Sep 21, 2003 4:15 am

It would be a major surprise to me to see Starfish succeed...first, passengers connecting through DEN will have to pay significantly more for their tickets, as they would pay for both the mainline fare from wherever they are coming from to DEN, and then the Starfish price from Denver to their destination...secondly, the Delta Express (and it's successor, SONG) worked because they flew, in Delta Express' case, within the DL fare structure, and in SONG's, non-stop routes between the busiest domestic routes, namely the northeast to Florida, where connections aren't a factor, except for passengers flying to JFK with European connections...Starfish, on the other hand, is not working in an incredibly popular O&D market, but rather a connection market, off two separate fare structures...as a result, people would be paying higher prices, and would be scared off and fly other carriers, and, as a result, I'm among the people that think that Starfish will be a massive failure...
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STT757
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RE: United And Chapter 11

Sun Sep 21, 2003 7:02 am

"Texas Air made the decision to liquidate, not the courts. Why try to run both Continental and Eastern when you need narrow your focus?"

: Andersjt that's not accurate, in the bankruptcy Texas Air was removed from the relationship with Eastern. Eastern's creditors and the bankruptcy court were in charge, they put Martin Shegrue in as CEO and he was in charge of their turn-around.

Little known fact is that once Texas Air was separated from Eastern the striking workers stopped their picketing and offered to return to work. However it was too late to do them any good, and besides they had already been replaced with employees at much lower pay rates.

The creditors shut down Eastern, not Texas Air. Texas Air was separated from Eastern for over a year before Eastern shut down, the court and creditors had Martin Shegrue in charge. Not Lorenzo.
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flyboyaz
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RE: United And Chapter 11

Sun Sep 21, 2003 7:13 am

See I knew I wasn't dreaming! I knew Lorenzo was gone for a bit when they shut down.  Smile
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ouboy79
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RE: United And Chapter 11

Sun Sep 21, 2003 9:29 am

It would be wise to keep in mind that the RSA, whom owns 40% of US Airways and led by Dave Bronner, has come out and said they would foot the bill to purchase any assets of UAL for US Airways if it would help their investment. They specifically stated the IAD and ORD hubs as targets. Of course, this would only be in the event of a chapter 7 filing or if UAL would have to start selling off assets to stay afloat. From the way I see it...UAL chances of survival are around 60% right now - I want to see how they do with the next two revenue targets. If they continue to meet or beat them - great, they will stick around. If they miss them...well, then Chapter 7 will be all the more likely since the DIPs will be allowed to pull all financing.

We'll see what happens. I would hope we can keep everyone afloat and they each get their house in order and work on their niches. America West has apparently done a good job at this. US Airways is almost there...we'll see how the gamble with the new Embraer 170 mainline jets pay off.
 
StevenUhl777
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RE: United And Chapter 11

Sun Sep 21, 2003 10:47 am

Ouboy79: Didn't know that about RSA...when was that statement made? It would make sense for US to get ORD and IAD, but they can keep on dreamin'....I'm particulary interested in the PIT issue, Gov. Rendell wants a guarantee to keep jobs in PIT and PA overall, USAir can't offer that not surprisingly because RSA wants to bring those jobs to Alabama, and on top of all that, the mechanics may strike over it. And that's not good for USAir long term...

Wondering how you came up with 60% chance for UAL's survival....I had read around May or June that several analysts agreed the chance of liquidiation was at 10%, having come down from previous months. Perhaps that's after the CBA's were signed. Since then, UA has increased their cash balance and according to their 8/25 press release I posted above, they posted an operating profit for July, and August's results should posted before too long. Just based on summer results, I would put the chance at liquidation at well below 10%, not the 40% you're suggesting.

At the risk of repeating myself, the fall/winter/early spring months will be turning points for several network carriers in terms of financial performance. In UAL's case, I would expect them to hit the DIP target for Aug., Sept. and probably Oct., beyond, that, not sure. Their profit deadline is Oct., but I think they'll hit that in either Aug. or Sept. AA is also not out of the woods, but don't think they're on "bankruptcy watch" though.

Should get interesting...UA is past the "easy" stuff in terms of restructuring, now comes the hard part....pensions, long term business plan, implementing the LCC, updating the ATSB application, and securing equity financing, just to name a few...This management team (following a lot of turnover recently) seems to be doing what most outsiders said couldn't be done, so I continue to remain very optimistic about UA's LT prospects.

Time will tell.
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worldtraveler
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RE: United And Chapter 11

Sun Sep 21, 2003 11:01 am

DEN is an expensive hub to operate from and that will affect UA's performance there, particularly for connecting pax, regardless of which UA entity operates there.

Keep in mind that any asset sales in of UA, or any other company, are dictated by who has the most money. While we all enjoy looking at how the industry made by reshaped based on our interest in creating strategically strong airlines, any acquisition will be driven by who brings the most money to the table. Given that UA still has a very valuable route system, there will be no shortage of investors willing to help them keep going. In addition, the Justice Dept. is likely to be very aggressive in ensuring that any consolidation in the US airline industry does not reduce competition in key markets. DEN and the Pacific operation is about the only parts of UA that AA could buy and pass DOJ muster; it is doubtful that US would succeed in buying IAD given that the DOJ had the most trouble w/ the previous UA-US merger attempt over their combined strength in Washington. DL has the least overlap w/ UA and thus the ability to take the greatest chunks of UA without getting objections from the DOJ; DL also has the most amount of money to spend if an asset acquisition came up - which I consider increasingly unlikely to happen.

I believe any consolidation in the industry in the next few years will be via mergers - and not asset sales from bankrupcty. I wouldn't rule out a UA-US merger down the road but it will require UA to emerge from bankruptcy and become stable first.
 
StevenUhl777
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RE: United And Chapter 11

Sun Sep 21, 2003 11:20 am

WorldTraveler: Couldn't have said that better myself...you're 100% correct. Assuming the airline industry continues to move in the same direction, I believe it will be at least until 2006 before we see merger proposals, at least amongst the majors. Plus, it will also depend on who's administration is running the DOJ at that time, Dubya or whoever else.

In the EXTREME unlikely event, just to play along with SHUPirate1 fantasy, DL would be the theoretical "big winner" in a UAL Ch. 7, because they've borrowed up on their lines of credit in order to have the most money on hand, so they could potentially buy LHR route authority and maybe even NRT & beyond in a court auction. But, that of course won't happen, and DL will have to keep paying those committment fees on those lines of credit in the meantime.

I do think we will see a UA-US merger at some point in some modified form...should be interesting to see who comes out on top....though I don't like what's happening in PIT with USAir right now, and the mech's. were/are talking strike.
And the winner for best actress is....REESE WITHERSPOON for 'Walk the Line'!!!!!!!!
 
ouboy79
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RE: United And Chapter 11

Sun Sep 21, 2003 1:14 pm

Don't think of my 60% equaling 40% chance of liquidation. I spent my years at OU in their meteorology school...and we all know how 60% turns into 100%.  Big grin Then again...it sometimes becomes 0...oh well. ::shrug::

As far as Bronner's comments...you will have to look 6-9 months back. He had mentioned that RSA would be willing to invest an additional $2-3 billion...yes billion...dollars into US Airways buy purchasing assets of UAL and then merging them into US. Not giving US a check and saying "go buy this stuff."

As far as antitrust issues with a US-UA combo. IAD isn't going to be an issue anymore since ACA is going to start up its own LCC there to 60 some cities. Essentially it is the DC Air arrangement...just at Dulles. ORD would likely cause the elimination of PIT...or at the very least the relocation of the mx facilities.

We'll see what happens. You never know...RSA may end up owning two airlines by the time this is all said an done - and just keep shifting assets between the two as it sees fit. When you have 25 billion dollars to play with, it is amazing what you can do...especially when the investment will make you money.
 
Fleet Service
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RE: United And Chapter 11

Sun Sep 21, 2003 7:54 pm

Shifting assets between two airlines? That sure did work well with Texas Air and Eastern didn't it?


I wonder how much money the pensioners of the state of Alabama will make on Bronner's investment if the IAM goes on strike over the heavy maintenance outsourcing issue?

I know a few US Airways guys and they say the mechanics will go out if they outsource the Airbus heavy checks.
Yes, I actually *do* work for an airline,how about you?
 
ouboy79
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RE: United And Chapter 11

Mon Sep 22, 2003 2:33 am

I think a better example would be the TWA & AA merger. AA bought the assets and then offered the TWA people jobs...at the bottom of the senority list. It will be messy, but hopefully they will learn from the past - should that be the path taken.

As far as the IAM issues...it'll be solved and there won't be a strike. This management team negotiates extremely tough and that is all this is. In the end, should the outsourcing of mx prevail, we may see a hybrid "Jet for Jobs" scheme where they will award it to an IAM shop and allow preferential hiring of ex-US mechanics.

Another way to do it may be for US Airways to setup another division, call it US Airways Aircraft Services. This new subsidiary would have a "contract" with US Airways to maintain all of their aircraft and be represented by the IAM or AMFA (whom ever it is then). Then utilize this new subsidiary to attract business from other operators...essentially becoming an outsourcer themselves. Then to help lower costs, move the operation to Alabama or another right to work state and look at the ability of spinning this operation off. The IAM keeps the jobs, US Airways gets what they want, and the costs get reduced across the board.

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