Airtran At It Again!

[Dizel8]

Cosmo, it is not a question of "whinning" as you so eloquently put it.

As far as what is going on, UAL would have done the same thing as Airtran, if it helped them. Obviously, Frnt used to loan to defend againts an attack from UAL, certainly UAL might return the favour, so to speak.

You are absolutely correct, the ATSB applications is valid and was done under accordance of law. If UAL meets the requirement and the ATSB believe it is appropiate, they should be granted the guarantee. It would be unfair, to change the enacted law at this juncture, on the other hand, should UAL's loan guarantee be denied this time, should UAL be allowed to reapply indefinitely?

Having a discussion, pro and con, is interesting and might even be in the spirit of this board

 

[Cosmo]

Some interesting information from United's first quarter 2004 SEC Form 10-Q:

DIP Financing. In connection with the Chapter 11 filings, the Company arranged a debtor-in-possession secured financing ("DIP Financing"). The DIP Financing consists of two facilities, a $300 million facility provided by Bank One N.A. ("Bank One Facility") and a $1.2 billion facility provided by J.P. Morgan Chase Bank, Citicorp USA, Inc., Bank One, N.A., and The CIT Group/Business Credit, Inc. ("Club Facility"). As of March 31, 2004, we had $240 million in outstanding borrowings under the Bank One Facility and $362 million under the Club Facility. Repayment of the Bank One Facility began in March 2004 and will be completed by July 2004. While the Club Facility matures on July 1, 2004, we are currently in negotiations with the Club Facility lenders to extend and modify certain terms of the agreement to more favorable terms as a reflection of our improved financial condition.

Cosmo comment: United made another $60 million repayment in April to further pay down the "Bank One Facility", reducing the carrier's total outstanding DIP balance to $542 million. This means that less of the projected $2 billion exit financing will be needed to pay off the DIP loans and more will be available to support United's post-bankruptcy operations.

We are currently required to contribute approximately $725 million to our pension plans in 2004 after giving consideration to the estimated impact of the Pension Funding Equity Act enacted in April 2004. We made $17 million in contributions to our plans in the three months ended March 31, 2004 and $110 million in contributions to the plans on April 15, 2004.

Cosmo comment: This means that United has already contributed $127 million, or 17.5 percent, of its 2004 pension funding requirement. So if United can maintain its first quarter 2004 positive cash flow of more than $200 million for the rest of the year, the carrier should be able to meet its remaining pension contribution requirements without diminishing its current total cash balance of $2.6 billion.

 

[Cosmo]

Dizel8:

The "whining" comment was really directed at the carriers like Frontier and AirTran, although I admit that I didn't word it very well.

And I do understand why these carriers are lobbying against United's ATSB loan application. It's clearly in their fiduciary interest to do so. But that doesn't mean that their arguments have merit, legally or morally.

 

[Borescope]

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.

If we were really to be competitive with Frontier we would allow them to attain the same size and market share as us. Then go head to head, and may the best man (woman) win. Right now, we have the power to overrun them. I have to agree with some of the other posters, even though it goes against UA, that we could very well use the money to get an unfair advantage over some of our competetors in various markets.

 

[ohcaptainron]

United and the ATSB:

The main concern of the LCCs and Legacy carriers alike is the prospect of UAL's restructured balance sheet, which many are not talking about. Current debt to equity ratios in the industry run from 80 to 130 %. A post BK UAL will have a estimated debt to equity of 46%. Coupled with an estimated $4.5 billion in cash and seat mile costs in the Frontier range mainline and TED costs below. This WILL change the dynamics in the industry and the long awaited rationalization of assets and consolidation will begin in earnest. The point is, the legacy carrier component of this industry cannot continue to operate with the traditional level of debt irregardless of employee or other costs. Unfortunatly DAL and AMR will most likly feel the pain of the BK process to restructure their mountains of debt as well. If I were Frontier or any other lcc that competed directly with UAL I would be VERY worried.

 

[Bigsky]

Right now, we have the power to overrun them{Frontier}

I guess we would have to define "overrun". But if you are implying that UA could basically run F9 out of DEN or perhaps have the option to let them exist only as a small DEN based airline who steals a few customers away every once and a while, I think you could be mistaken. F9 has come in with a great business plan, a nice new fleet a jets, and motivated employees who are really pulling for a bright future for their now "not so small" airline. They have become Denver's airline. UA has to accept this and somehow find away to successfully compete but F9, at this point in time, is in DEN to stay.

 

[C54Capt]

Right now, we have the power to overrun them.

Borescope,

I hope you don't have a drug test today. Take a step out of the forrest to get a good look at the trees. UA has shown some encouraging trends over the last year and a half but is in no shape to launch an all-out money losing battle to put another airline out of business, especially when their target is an airline with virtually no debt. UA must keep their powder dry for the real battle which will occur when they come out from under the protection of BK.

In reality UA needs Frontier to be their primary competitor in DEN. F-9 is a very conservative airline and does not hurt UA the way a jetBlue or SWA would.

 

[Busdrvr]

"In reality UA needs Frontier to be their primary competitor in DEN. F-9 is a very conservative airline and does not hurt UA the way a jetBlue or SWA would."

UAL had FRNT within DAYS of running out of cash in 1998. they backed off under the threat of court action (no guts...). The rational that they "needed" FRNT was part of the reason they backed off. Dal has also been soft traditionally vs AT. I think things are changing however, FRNT is getting overly aggressive in it's expansion. I think the smartest thing FRNT could do is to open another hub (pit, Msp, ect)

"reducing the carrier's total outstanding DIP balance to $542 million."

Cos, this can't be correct. Soem USA320 guy has been saying UAL will have to pay back three times that amount. Surely you are mistaken....

 

[Cosmo]

Silly me -- I forgot that a certain US Airways pilot knows more about United's bankruptcy process than United's accountants and lawyers who prepared the SEC filing. I'll try not to let it happen again. My bad!

 

[Cosmo]

One more thing ...

Cos, this can't be correct. Soem USA320 guy has been saying UAL will have to pay back three times that amount. Surely you are mistaken....

No, I'm not mistaken, and don't call me Shirley!

 

[JetClipper]

UAL had FRNT within DAYS of running out of cash in 1998. they backed off under the threat of court action (no guts...). The rational that they "needed" FRNT was part of the reason they backed off. Dal has also been soft traditionally vs AT. I think things are changing however, FRNT is getting overly aggressive in it's expansion. I think the smartest thing FRNT could do is to open another hub (pit, Msp, ect)

God forbid if anyone posted their opinion on anything, particularly if it's anti-UA. Geez! I guess "freedom of speech" is only valid if we're all singing the "United Kumbayah."

 

[Busdrvr]

God forbid if anyone posted their opinion on anything, particularly if it's anti-UA. Geez! I guess "freedom of speech" is only valid if we're all singing the "United Kumbayah."

What?! Valium, it ain't just for breakfast.... If you would like to refute the post, PLEASE do so (although a little supporting documantation would be nice). That was MY opinion. Will I agressively refute something I disagree with? YES!! Am I biased, YESSSS!! But I'm not gonna come to your house and kick your dog. You wrestle with pigs, you gonna get a little muddy....

 

[Busdrvr]

Oh, and FWIW, I no longer work for UAL (and likely never will again), and Cosmo never did.

 

[JetClipper]

What?! Valium, it ain't just for breakfast.... If you would like to refute the post, PLEASE do so (although a little supporting documantation would be nice). That was MY opinion. Will I agressively refute something I disagree with? YES!! Am I biased, YESSSS!! But I'm not gonna come to your house and kick your dog. You wrestle with pigs, you gonna get a little muddy....

Why bother? You seem to already know everything about everything.

 

[Fly]

He does! That's why we love him so much!!!