Airtran At It Again!

[C54Capt]

herkav8r,
Keep in mind an "operating profit" while losing hundreds of millions of dollars in real acounting, is not a good thing indefinately. TWA was able to do it for an extended period of time, but unless a company becomes profitable it is not going to be perpetual. I haven't read anything about United taking back marketshare from F-9, but I know that both United and Frontier are flying more passengers out of Denver. I believe DEN has now exceeded pre 9-11 passenger levels.
v1rotate,
Take it easy on busdrvr's blood pressure. As extreme and volatile as his posts often are, I recently read a few that were reasonable and he should be commended on his tone in those cases.

 

[JetClipper]

Anyone have an idea when the loan decision will be made?

 

[Bizman]

lower employee costs due to new pension assumptions

Those pension costs are only temporary. Pension funding was given a reprive for two years. You then have to start the funding again. Granted, there is a different interest rate used and you won't have to fund as much. But if you owe somewhere upwards of 4B now, even with the use of corporate bond rates (which we all know are going to change). You're going to have a hugh liability in 2007.

 

[WorldTraveler]

UAL's pension liabilities prior to the latest Congressional action required about $1 billion in pension funding per year for the next 5 years. The pension reform law allows airlines to defer about 80% of their pension funding for the next 2 years so UAL's pension funding requirements will be a couple hundred million for a couple years; since this is a deferral only, there will still be about $4.5 billion due in the next 3 years, still a daunting task. My guess is that if UAL gets the loan, they will have to repay the majority of the loan before the big pension funding requirements kick in or else UAL will have to amend or terminate the pension plans. Between pension funding and loan repayment, UAL still faces over $1 billion in payments per year for the next 5 years or more and that doesn't even include settlements on loans that are subject to UAL/creditor settlement in bankruptcy. Very daunting numbers no matter how you slice it.

 

[hskrUA]

I have been lurking on this board since the beginning and have never felt such a need to respond. In regard to the bashing of Busdrvr, give the guy a break. People outside of UA love to talk about our problems between employees. Busdrvr seems to be a great employee who is working his/her tail off to turn this big bag boy around. With Tilton at the helm, we have a better shot than any. We all know this is still an uphill battle. We are the ones fighting it. I love to see fellow employees defending UA and his brother TED.

 

[C54Capt]

hskrUA,
I agree, busdrvr should be given a break. He/she brings the criticism on herself by making some arrogant and extreme posts that alienate the other folks from these boards. I have read some interesting posts from her and at other times have been disgusted. Fact is: she is a relatively junior furloughed United employee that missed out on the glory days of the airline industry and is pixxesd off about it. Can't blame her for that. Good luck to all.

 

[novaqt]

WorldTraveler:

Please understand, along with everyone else on this board that seems to think we are applying to the government for money. United is seeking a LOAN GUARANTEE from the ATSB. The loans will come from JP Morgan, Citibank, etc. The promise to loan the funds has already been established. United had certain requirements to meet before it re-submitted its application to the ATSB. United was invited to resubmit its application for the loan GUARANTEE when it was denied the first time.
United has met the requirements to resubmit and will be granted the GUARANTEE this time. THE GOVERNMENT IS NOT IN THE BUSINESS OF PUTTING COMPANIES OUT OF BUSINESS even if other small airlines such as Air Tran lobby for the denial.

 

[Dizel8]

"THE GOVERNMENT IS NOT IN THE BUSINESS OF PUTTING COMPANIES OUT OF BUSINESS."

Not surprisingly, this is where Airtran and Frontier beg to differ. Their claim appears to be, that granting the loan guarantee gives UAL an unfair, goverment sponsored advantage. One which UAL might use to drive smaller airlines out of business, by lowering fares to below breakeven. With a goverment backed loan, at very low interest rate, UAL would be flush with cash and might consider such a tactic.

"The loans will come from JP Morgan, Citibank, etc"

Several creditors have large exposures vis a vis UAL and it would be in their best interest, to see UAL survive, but they appear leery of granting further loans to UAL without a GUARANTEE. Yes, they are willing to put up a token amount unsecured, but looking at the finacial fallout if UAL were allowed to fail, that is not surprising. On the other hand, they stand to gain handsomely once UAL emerges.

They do not appear to be willing, at a reasonably low interest rate, to go it alone.

I guess it depends on which side of the fence one is sitting!

 

[Fly]

A token amount?!? :blink: :down: Do you have any idea how much they are putting up? I do....and it isn't "token"

Again, that guarantee was established for ANY airline to apply for (although United and American were obviously most hurt by 9/11). When United didn't qualify last time, they were given a list of items that needed to be corrected before the loan guarantee could be granted. Well, they fixed those things, so the loan should be granted. I still find it absolutely amazing that some of the little guys are lobbying against us getting the loan when they, in fact, got the loan themselves. Unbelievable. Our crews died that day (who could have been hurt more than that?)........we should get the loan because we fit the criteria and adjusted the plan to fit the ATSB's requirements.

 

[Dizel8]

$400 mil IIRC.

 

[Fly]

Did you know that the ATSB's requirement was HALF that amount?

 

[Dizel8]

Are you aware of the potential gain they stand to make on this investment, they are not doing it out of charity you know. If this works out, the way they hope, you can rest assured, that the payout will be way more than what they put in.

Still, they appear unwilling to do it, without a GUARANTEE.

I am aware, that FRNT got a loan, I am not sure AAI applied, but I may be wrong. AA was equally hard hit, but has restructured outside of Ch.11 and has not applied for a loan.

 

[WorldTraveler]

The question is not whether the government is putting anyone out of business or not. The question is whether the airline industry really needs assistance from the government as a result of 9/11 or whether free enterprise should be allowed to work. You will recall that no major airline has failed since 9/11 even though the industry was in a slump before 9/11 and no major airline has had to sell off assets. UAL has many valuable assets that it could sell before it would have to pull the plug for good. Traditionally, that is how failing airlines have stayed alive.
Many people (esp. outside UAL) seem to think government help is no longer needed. However, the ATSB is acting on the law that was passed that provides assistance to airlines post 9-11 whether people believe it is needed any longer or not. All of the other airlines got their loans when the industry was in worse shape and in some cases have already repaid them.
We all need to carefully watch Air Canada and Alitalia oversees and what Independence Air and USAirways do here at home. No other government has been willing to continue to prop up their failing airlines as the US has and the European Union is aggressively going after airlines that receive government aid (and may well go after United should UAL receive government loan guarantees). In the US, the longer the government waits to make a decision gives Independence more time to at least talk about the damage it will do to UA while US will likely continue to deteriorate and be less valuable as a UAL "feeder" and potentially more as a competitor (although it is far from certain how US will reinvent itself). The debate is not whether UAL has done what the ATSB said to do when it rejected 1st UAL's loan application, although UAL has still not demonstrated it is viable given the huge cash outlays that will be required in the future and the lack of consistent profitability (although no one can debate that UAL's financial performance has vastly improved). We will all have to wait and see whether all of the talk will make a difference and whether UAL will get the loan guarantee or whether they will have to resort to plan B. UAL undoubtedly has other options that will keep at least portions of the company alive so UAL is not likely to cease to exist based solely on the loan guarantee.

 

[C54Capt]

Dizel8,

Good point on what airlines intend to do with the loan proceeds. AWA was on the verge of BK when they received the loan. They were able to use that money to drop their fares and simplify their fare structure, which really helped them to turn the corner. Unfortunately, that strategy ultimately hurt all other carriers in terms of yields.

Frontier did not need the loan but applied and received it as a defensive maneuver, anticipating that UA would get the loan and employ similar tactics. When UA was denied the loan guarantee, Frontier promptly repaid the loan in full. The gov't made out like bandits. Now UA is in position to receive the loan guarantee again, but all other airlines are not eligible now. It is scary for anyone who competes with UA to play this airline game of attrition, especially if they are playing with taxpayer backed funds.

Personally I would like to see UA get the guarantee and survive, but I am concerned about how they will use the money to further weaken the industry.

 

[Cosmo]

Their claim appears to be, that granting the loan guarantee gives UAL an unfair, goverment sponsored advantage.

But it was OK to give Frontier an ATSB loan guarantee, providing it with "an unfair, government sponsored advantage"?

Let's be clear about something -- this campaign is being driven by Frontier, with AirTran, Spirit and the other smaller carriers simply along for the ride. Having received (and to its credit, promptly paid off) its own guaranteed loan to enable it to be competitive at the DEN hub, Frontier now hopes to deny the exact same benefit to United. Talk about chutzpah and, more importantly, monopolistic behavior!

United has taken dramatic steps to adjust its business to the "new realities" facing all airlines these days. It has trimmed more than 40,000 employees (over 40 percent) compared to its pre-9/11 payroll, reduced its aircraft fleet by 5-10 percent, dropped a number of international destinations (AKL, CCS, DUS, MXP and SCL), shifted some previous mainline service to United Express carriers, improved its on-time performance (as tracked by DOT), cut annual expenses by $5 billion (about 25 percent), recorded a small ($3.4 million) operating profit in March 2004, and reduced its CASM to the extent that it was lower than those of three other legacy carriers (Northwest, Delta and US Airways) in the first quarter of 2004. Does more need to be done to ensure United's emergence from Chapter 11 and its long-term viability? Absolutely. But by the same token, United's progress to date simply cannot be ignored.

And one more thing -- United's guaranteed loan application was filed in accordance with a Federal law, as it had a right to do. If United's application meets all of the ATSB's criteria, it will eventually be approved; if it doesn't, it won't. Arguments that "United doesn't deserve this support" or "the government shouldn't pick winners and losers" don't (or at least certainly shouldn't) have a place in the ATSB's decision-making process. After all, the ATSB has already been picking "winners", such as arguably Frontier and America West, and "losers", such as National and Vanguard, as it has sorted through the loan applications that it has received.

If you want the law changed, contact your Congressional representatives and present your argument accordingly. But until such time, if ever, that this law is changed, stop whining about it.