Bk End Is Drawing Closer....financing Announced

[767jetz]

Problem is, nobody is stupid enough to trust UAL or any other bankrupt airline with $3 billion of equity right now. Given the options available to UAL, it chose a reasonable path.

[post="310808"][/post]​

UAL did choose a reasonable path.

But I disagree with the you on the point of not being able to find equity investors. There were many people eyeing UA and hoping the judge would not grant exclusivity extensions. This is because they were hoping to put up a competing POR that included a large injection of equity investment. TPG group comes to mind. So does a group with which former UA CEO Gerry Greenwald was involved. (Sorry, I forget the name.) And of course we all know that David Bronner of USAir fame would have loved to get his hands on UA for penneys on the dollar, as was touted over and over again by a certain USAir captain. All of these options were rejected by Tilton. (One might even say he "shunned" them! )

Just look at how US Air pieced together many sources of equity investment to come up with around $2 Billion or so. If they could have gotten a loan from a bank with their POR, they would have.

UA could have gone the route of equity investment. There was no shortage of money being offered. Tilton chose not to because it was a better path for UA's future. It took longer and was a harder path, but it was still better in the end.

 

[novaqt]

767jetz:

I believe Greenwald's group is Greenbriar Equity Group.

 

[FWAAA]

MHO, United will target Northwest, Independence, and Frontier in this order, with different levels of intensity depending on competitive advantage. If NWA gets its house in order in a timely manner, UAL will then back off the Pacific assault and keep their powder dry to finish off Indy Air. If NWA succumbs to labor turmoil and cannot get its costs in line, UAL will be prime to take over the Pacific. Once objective #2 is complete, they will be able to focus the same effort in Denver. The fight will be much longer and tougher but in the end they may be able to buy Frontier and park it or less likely integrate it, acheiving unchallenged dominance at both major hubs DEN and IAD. How bout them apples Bigsky?

[post="310724"][/post]​

This makes no sense at all. There's no way that the US antitrust enforcers would permit UAL to take over the Pacific Ops of NW. Not a chance. Same thing if AA went out of business - UA is the only airline that would not be permitted to bid on AA's LHR Ops.

 

[Bulscu]

Post (02-20-06), they'll be trimmed then merged.

 

[synchronicity]

The point is not that UA hasn't reduced its secured debt through BK - it has and I quote a figure of at least $750M. However, they turned around and took on $3B more in debt. I'm at a loss as to what is going to make the balance sheet so lean.

- One more point from some of the more ignorant talking heads with respect to finance. The issue of oil prices being a problem merely looks at a static DCF spreadsheet and changes the cost numbers. A more reasonable (as reasonable as a DCF spreadsheet can be given it's inherant limitations) approach would be analysing the future cash flows via a Monte Carlo simulation that recognizes the correlation between oil prices and ticket prices. The correlation may not be 1 but it ain't zero either. Additionally, higher oil prices will have the effect of "thinning the herd" at some point resulting in increased pricing power for the remaining airlines. With the new cost structure at UAL (and what will likely be the structures at DAL and NWA), it won't be the LCC's that take advantage of any market share opportunities.

[post="310240"][/post]​

Well, Monte Carlos generally tend to be "backward looking" in that one often uses historical data to determine the mean and the deviations, as well as historical correlation coefficients. If oil prices do not decline but rather stay at elevated levels and/or continue on heading skyward, that may cause problems with estimates. In addition, it means that oil prices may become a far larger factor than they have in the past.

GIGO. I love Monte Carlos myself (usually use them for financial/retirement calcs, personally), but am aware of their limitations. Simply put, the future may not be as similar to the past as you'd like, and certain factors may become far more important than they have ever been previously.

-synchronicity

 

[767jetz]

This makes no sense at all. There's no way that the US antitrust enforcers would permit UAL to take over the Pacific Ops of NW. Not a chance. Same thing if AA went out of business - UA is the only airline that would not be permitted to bid on AA's LHR Ops.

[post="310872"][/post]​

It's not a matter of "taking over" NW routes exactly. But where NW pulls out, UA could easily put more frequency since they already have the infrastructure.

Anti-trust only comes in to play when purchasing assets from another.

 

[FWAAA]

It's not a matter of "taking over" NW routes exactly. But where NW pulls out, UA could easily put more frequency since they already have the infrastructure.

Anti-trust only comes in to play when purchasing assets from another.

[post="310898"][/post]​

No, that's not correct. Section 2 of the Sherman Act prohibits monopolies. Even when nothing is "purchased."

Anyway, abandonment of China routes by NW would cause the DOT to solicit applications by all carriers interested in them. Same thing for NRT frequencies. And nobody believes that NW would abandon its NRT fifth freedom rights, do they?

UA can grow as a result of pulldowns by DL or LCC or CO or AA, but pulldowns by NW of Pacific Ops would not benefit UA - as those Pacific Ops are not Open Skies routes.

C54Capt said "take over the Pacific." And that ain't gonna happen. UAL is the only USA-based airline that would not be able to "take over the Pacific" no matter what happens to NW.

 

[Bear96]

... pulldowns by NW of Pacific Ops would not benefit UA - as those Pacific Ops are not Open Skies routes.

[post="310900"][/post]​

True, Pacific routes are not "open skies." However, UA has a lot of route authority right now that they are not using because it doesn't make economic sense due to NW's competition. For example, GUM and MNL come to mind, both places UA used to fly to as recently as the 1990s. With competition from NW gone, it might make sense for UA to start flying to some of these places, or using the full freqencies allotted.

 

[FWAAA]

True, Pacific routes are not "open skies." However, UA has a lot of route authority right now that they are not using because it doesn't make economic sense due to NW's competition. For example, GUM and MNL come to mind, both places UA used to fly to as recently as the 1990s. With competition from NW gone, it might make sense for UA to start flying to some of these places, or using the full freqencies allotted.

[post="310906"][/post]​

OK - that's a far cry from "take over the Pacific."

As everyone knows, the valuable parts of NW are the authorities and frequencies to China, NRT and the fifth freedom rights at NRT. Sure, UAL could knock itself out flying to the Open Skies parts of the Pacific.

 

[Deleted by Moderator]

I'm not sure if they need to "take over" the Pacific. Doesn't United have more flying there than NW?

 

[767jetz]

I'm not sure if they need to "take over" the Pacific. Doesn't United have more flying there than NW?

[post="310926"][/post]​

BINGO! That's the point. I'm not saying it would happen, but IF NWA reduced the Pacific UA would most cetainly benefit. Even if UA didn't add any frequency at all, demand would remain while suppy would decrease. This equals pricing power for UA and more revenue.

 

[Bear96]

OK - that's a far cry from "take over the Pacific."   

[post="310910"][/post]​

1. I never said anything about "taking over the Pacific." You must be confusing me with someone else.

2. You also must have missed the part of my post where I said "FOR EXAMPLE."

 

[FWAAA]

1. I never said anything about "taking over the Pacific." You must be confusing me with someone else.

2. You also must have missed the part of my post where I said "FOR EXAMPLE."

[post="310949"][/post]​

Nobody said you did say anything about "taking over the Pacific." Certainly not me. And I missed no part of your post, as my posts on this thread aren't in response to your assertions. I'm not confusing you with anyone.

If you read my posts on this thread, you would see that I am responding to C54Capt's assertion (in post #39) that UA would be primed to "take over the Pacific" in the event of a drawdown by NW. I refuted that post with which I strongly disagree in post #48.

The simple fact is that NW holds more China frequencies than does UAL, and they have plenty of value. NW holds lots of NRT frequencies, which are also very valuable. The fifth freedom NRT rights also have plenty of value.

Certainly, NW flies to non-controlled Pacific destinations as well. UA (and any other airline) is free to expand into those markets if NW retrenches.

But "take over the Pacific" (C54Capt's words, not yours, not mine)?? Hardly.

 

[Busdrvr]

No, that's not correct. Section 2 of the Sherman Act prohibits monopolies. Even when nothing is "purchased."

Anyway, abandonment of China routes by NW would cause the DOT to solicit applications by all carriers interested in them. Same thing for NRT frequencies. And nobody believes that NW would abandon its NRT fifth freedom rights, do they?

UA can grow as a result of pulldowns by DL or LCC or CO or AA, but pulldowns by NW of Pacific Ops would not benefit UA - as those Pacific Ops are not Open Skies routes.

C54Capt said "take over the Pacific." And that ain't gonna happen. UAL is the only USA-based airline that would not be able to "take over the Pacific" no matter what happens to NW.

[post="310900"][/post]​

Ya think? Gosh, somebody better tell all the airlines that they are in violation of the law when they are the only player in a market. Guess what, UAL at one time had a sizable L.A. route structure. But AMR "took over" the market. They dominated and essentially chased off the other airlines. Now all the other airlines have big trouble reaching critical mass south of the border. Likewise, the notion of UAL "taking over" the PAC would be UAL running NWA out of some markets, and if NWA markets were shared by a bunch of differant airlines (after the complete loss of the 5th freedom rights), then no single airline could compete effectively in the market.

 

[Busdrvr]

Well, Monte Carlos generally tend to be "backward looking" in that one often uses historical data to determine the mean and the deviations, as well as historical correlation coefficients. If oil prices do not decline but rather stay at elevated levels and/or continue on heading skyward, that may cause problems with estimates. In addition, it means that oil prices may become a far larger factor than they have in the past.

GIGO. I love Monte Carlos myself (usually use them for financial/retirement calcs, personally), but am aware of their limitations. Simply put, the future may not be as similar to the past as you'd like, and certain factors may become far more important than they have ever been previously.

-synchronicity

[post="310889"][/post]​

Hey, I already got called pedantic and pathetic for even mentioning Monte Carlo, so the last thing I'd want to do is risk further assaults on my character by mentioning it's limitations, or worse yet start getting into differential discounting, ect..... Any modeling technique is limited in it's relevence by the quality of it's inputs. All things being equal, the simple static DCF is just about useless. As far as oil is concerned, consider it's effect in the early 80's when oil was more expensive in todays dollars and we were running those wonderfully efficient 727's, DC-10's, and worse yet, the low/no bypass jetliners (707, 720, DC-8's).