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UAL Corp Seeks Court Approval Of Fuel Supply Agreement
By NICHOLAS P. BRAUDE
Of DOW JONES NEWSWIRES
WASHINGTON -- UAL Corp. (UALAQ), the parent of United
Airlines, is seeking bankruptcy court approval of a jet fuel supply agreement
with a unit of Morgan Stanley (MWD), according to court papers obtained by
Dow Jones Newswires.
In a motion filed in bankruptcy court late Monday, UAL said the
proposed fuel supply pact would call for Morgan Stanley Capital Group Inc. to
supply 100% of the airline's fuel requirements at 35 selected airports in the
U.S. At some airports, Morgan Stanley Capital Group would perform all
pipeline supply requirements at cost, take on the carrier's local supply
contracts and resell the fuel at cost.
Also, the motion said, the Morgan Stanley subsidiary would finance
all third-party fuel sales and handle all fuel trades.
UAL and Morgan Stanley Capital Group would share all the profits from
the sale of jet fuel to other carriers and from fuel trades with non-airline
third-parties, the filing said.
In exchange, UAL would buy fuel from Morgan Stanley Capital Group,
and would negotiate supply contracts and third-party sales contracts on
behalf of the Morgan Stanley unit. The airline would also prepay Morgan
Stanley Capital Group daily for its projected fuel purchases.
The U.S. Bankruptcy Court in Chicago will consider the proposed
agreement at a hearing Sept. 19.
The supply agreement, which would have a three-year term, "will
ensure a ready supply of jet fuel at a competitive cost," the motion said.
According to UAL, the fuel supply agreement would result in annual savings in
estimated savings of $5 million a year.
The airline began in May to solicit proposals from third parties for
a jet fuel supply pact.
UAL has a fuel supply strategy through which it attempts to minimize
its fuel costs, ensure the integrity of its fuel supply and leveraging its
fuel infrastructure by selling fuel to other airlines based on its own
inventory and pipeline space, the motion said.
In 2002, UAL had total fuel purchases of roughly $2.8 billion,
according to the filing Monday.
UAL said in the motion that the carrier's fuel supply strategy
requires $250 million in working capital at any given time to prepay for fuel
purchases and maintain inventory. Also, the filing said, UAL faces a credit
risk from third-party sales and the trading environment for fuel can be
volatile.
The motion said UAL determined Morgan Stanley Capital Group's
proposal was the most beneficial after inviting about 20 parties to submit
partnership offers.
UAL filed for bankruptcy protection Dec. 9, 2002, listing assets of
$84.3 million and debts of $126.6 million as of Sept. 30, 2002. Subsidiary
United Airlines listed assets of $22.73 billion and debts of $21.48 billion
as of the same date in another Chapter 11 filing Dec. 9.
-By Nicholas P. Braude; Dow Jones Newswires; 202-862-1355;
[email protected]
Updated September 9, 2003 3:20 p.m.
UAL Corp Seeks Court Approval Of Fuel Supply Agreement
By NICHOLAS P. BRAUDE
Of DOW JONES NEWSWIRES
WASHINGTON -- UAL Corp. (UALAQ), the parent of United
Airlines, is seeking bankruptcy court approval of a jet fuel supply agreement
with a unit of Morgan Stanley (MWD), according to court papers obtained by
Dow Jones Newswires.
In a motion filed in bankruptcy court late Monday, UAL said the
proposed fuel supply pact would call for Morgan Stanley Capital Group Inc. to
supply 100% of the airline's fuel requirements at 35 selected airports in the
U.S. At some airports, Morgan Stanley Capital Group would perform all
pipeline supply requirements at cost, take on the carrier's local supply
contracts and resell the fuel at cost.
Also, the motion said, the Morgan Stanley subsidiary would finance
all third-party fuel sales and handle all fuel trades.
UAL and Morgan Stanley Capital Group would share all the profits from
the sale of jet fuel to other carriers and from fuel trades with non-airline
third-parties, the filing said.
In exchange, UAL would buy fuel from Morgan Stanley Capital Group,
and would negotiate supply contracts and third-party sales contracts on
behalf of the Morgan Stanley unit. The airline would also prepay Morgan
Stanley Capital Group daily for its projected fuel purchases.
The U.S. Bankruptcy Court in Chicago will consider the proposed
agreement at a hearing Sept. 19.
The supply agreement, which would have a three-year term, "will
ensure a ready supply of jet fuel at a competitive cost," the motion said.
According to UAL, the fuel supply agreement would result in annual savings in
estimated savings of $5 million a year.
The airline began in May to solicit proposals from third parties for
a jet fuel supply pact.
UAL has a fuel supply strategy through which it attempts to minimize
its fuel costs, ensure the integrity of its fuel supply and leveraging its
fuel infrastructure by selling fuel to other airlines based on its own
inventory and pipeline space, the motion said.
In 2002, UAL had total fuel purchases of roughly $2.8 billion,
according to the filing Monday.
UAL said in the motion that the carrier's fuel supply strategy
requires $250 million in working capital at any given time to prepay for fuel
purchases and maintain inventory. Also, the filing said, UAL faces a credit
risk from third-party sales and the trading environment for fuel can be
volatile.
The motion said UAL determined Morgan Stanley Capital Group's
proposal was the most beneficial after inviting about 20 parties to submit
partnership offers.
UAL filed for bankruptcy protection Dec. 9, 2002, listing assets of
$84.3 million and debts of $126.6 million as of Sept. 30, 2002. Subsidiary
United Airlines listed assets of $22.73 billion and debts of $21.48 billion
as of the same date in another Chapter 11 filing Dec. 9.
-By Nicholas P. Braude; Dow Jones Newswires; 202-862-1355;
[email protected]
Updated September 9, 2003 3:20 p.m.