Will United Get The Loan

[767jetz]

Contrary to what you reported, labor contracts are not amendable until 2008. Neither are they front loaded. If you have evidence to the contrary, please publish it.


Public Debt Group. At the most recent bankruptcy court proceeding, UA's lawyers declared that UA was very close to reaching agreements with the "public debt group." I am assuming, and correct me if I am wrong, but that must mean that UA is close to coming to terms with some of the airport authorities over leases for airport facilities, outstanding lease payments, and any outstanding unsecured debt (e.g., municipal bonds) upon which UA, with the blessing of the court, had suspended payment.

I never said their contract was ammendable. I said it is front loaded. Sorry, I don't have the article to post. But being a former TWA pilot myself, I have many friends who fly for AA (both furloughed and not). They took a large cut for the first year, which brought them slightly behind UA's pay rates (but close), and are about to get back a good chunck of that as we speak. By the 3rd year they will be paid at a higher rate than UA. Plus, as anyone knows, work rules account for much of the cost. From shooting the $h1t with friends, I can say that their work rules are not as productive as UA's currently.

As for your assumption about the Public Debt Group, you are mistaken. UA has resolved it's municipal bond issues some time ago. Many of UA's aircraft are leased from large groups of investors who own small shares of aircraft. It is difficult to negotiate with such a large group of scattered investors to renegotiate rates. This is the final group that UA is/was negotiating with to finalize the A/C leases. (They are the reason UA's 1110 proceedings took so darn long.) There is a group of public debt holders that do not like the deal UA finally negotiated for those A/C, because they believe there will be less equityleft over for them when UA emerges, and they stand to lose out. (Being further down on the food chain.) That is the issue you refer to. And it is not going to increase UA's costs in any way.

 

[Cosmo]

Regional Affiliates. UA's CASM for the 1st quarter does not include fixed-fee for departure payments to ACA. So, UA's CASM of 10.18 will likely increase as ACA's operations are phased out throughout the United Express System. It is not possible to determine at this time whether UA realized any real cost benefits from replacing ACA with a host of other regional affiliates. But, here is a sobering fact. From the beginning of 4th QTR 2003 to the end of 1st Quarter 2004, costs to United of providing United Express service have risen $53 million ($321 to $374). While this may just be due to additional capacity purchases, it is still the case that United's overall losses from its United Express operation continue to rise, quarter over quarter, by $18 million dollars to $81 million for 1st QTR 2004. When UA begins accounting for the capacity that replaces ACA, therefore, look for UA's CASM to rise. This is just inevitable.

ladevale:

Your comment about the effect on United's CASM from ACA's departure from the United Express network is correct but it tells only part of the story. The revenues and expenses from ACA's United Express operations are fully reflected in United's financial reports at this time, just not in the same way as they are for the other United express carriers. The following quote from United's first quarter 2004 SEC Form 10-Q explains how the carrier handled its express carrier revenues and expenses:

United Express

United has marketing agreements under which independent regional carriers, flying under the United Express ("UAX") name, feed passengers to other United-branded flights. During the second half of 2003, we reached agreements with several UAX carriers, including Air Wisconsin Airlines Corporation, Mesa Air Group, SkyWest Airlines and Trans States Airlines to operate select portions of our United Express service.

Historically, we paid our UAX partner carriers on a fee-per-departure basis and included the revenues derived from them in passenger revenue, net of expenses. However, the long-term agreements with these UAX carriers change the previous fee-per-departure arrangement to a fixed rate and capital reimbursement arrangement. Thus, in accordance with Emerging Issues Task Force No. 01-08, "Determining Whether an Arrangement Contains a Lease" ("EITF 01-08"), we have concluded that the revised agreements are leases. Similarly, the UAX agreements we entered into during the quarter with Chautaugua Airlines, Republic Airlines and Shuttle America are also leases under EITF 01-08.

EITF 01-08 is effective for new arrangements or arrangements modified after the beginning of the third quarter of 2003. Accordingly, based on the terms in the new agreements, we have begun recording revenues and expenses related to these UAX carriers at gross, rather than net. As we were not able to negotiate a comparable, market-based arrangement with Atlantic Coast Airlines ("ACA"), revenues and expenses related to ACA will continue to be reflected net in [United's] passenger revenues for the duration of our relationship with ACA.

Thus, once this netting of expenses against revenues ends, United's CASM will indeed increase when ACA's United Express operations are replaced by other carriers. But United's yield and RASM will increase as well and offset most of the CASM increase. So not only is this situation not as dire for United as you made it seem to be, but replacing ACA will actually be a net financial benefit to United since its other United Express carrier agreements are less expensive than the expiring ACA agreement.

 

[WorldTraveler]

Looks like the pounding has continued while I spent the weekend at the beach. Thanks, Ladevale for stepping in. 767Jetz, you might be surprised to know that DL has the lowest labor costs in the industry in all categories except for the pilots. Those DL pilots will blink just like the AA pilots did and DL will be off and running again. And as Ladevale pointed out, the statistics are there to show that UA hasn't achieved the cost advantage that bankruptcy should have given them - exactly the problem US had. Absent a major correction to that "little" problem, UA will be in exactly the same place as US in a few short months.

"If our gov't would wrap things up in Iraq, do something about the fuel prices, cover the post 9/11 costs of our national security, mandate reasonable insurance, and use some of the Aviation Trust Fund for what it is intended for (to help fix the ATC structure and relieve overcrowding on the airways and at airports) instead of to fund pet projects, this industry would be in a far more sustainable condition."

Sorry, but that is the airline business and your post only reiterates my point that UAL needs to quit whining about what everyone else has done to United and what everyone else needs to do to make life comfy for United and instead get the job done. American doesn't talk about 9/11 anymore... and remember they lost another flight since 9/11 for yet a totally different reason.

 

[Fly]

767Jetz, you might be surprised to know that DL has the lowest labor costs in the industry in all categories except for the pilots.

No they don't. For one, the flight atttendants are one of the highest paid in the industry. LOL......go ahead, you're next (well Delta is anyway)!

 

[DLFlyer31]

No they don't. For one, the flight atttendants are one of the highest paid in the industry. LOL......go ahead, you're next (well Delta is anyway)!

Actually, yes they do. DL's unit costs (pilots excluded) are the lowest among the six network carriers (UA,NW,CO,AA,US,DL). Just because DL's FA's are paid more doesn't necessarily mean they cost more. You have to look at the total package including benefits and workrules.

This doesn't mean DL is safe or in good shape. DL is a sinking ship....just like UA, US, AA, NW and CO. Some ships are just sinking faster than others.

Don't believe me:

"Excluding pilots, analysts note Delta has the lowest costs of any of the legacy carriers, thanks in part to efficient use of planes and the fact none of its other work groups are unionized."

http://www.thestreet.com/_tscs/markets/eri...10154235_4.html

"Without pilot costs, Bastian said Delta is lower than any other big hub-and-spoke carrier on the same unit cost basis. It's in the middle of the pack when pilots are included, he said.

"It shows that we are absolutely quite productive," he said."

http://www.ajc.com/business/content/busine...04/06costs.html

 

[Fly]

From another message board, written by a Delta pilot.

From DL land
------------------
Folks,

You might have seen this too ...

Hey guys & gals,

It appears the previous Delta theory about a possible merger (with CAL) is
incorrect. Delta Senior Vice President of Flight Ops, Joe Kolshak showed up
to fly my leg from XXX to XXX on XXX XX, so I had a rare
opportunity to sit down in the cockpit with someone from senior management
for almost 4 hrs and have a 1 on 1 uninterrupted by cell phones, etc.
discussion.

We talked the entire time mostly about the state of Delta Airlines. I asked
tough questions and got candid answers. Here is what I came away with and
I'll warn you it's not pretty:

In all probability, Delta will file for bankruptcy in October or November
of this year. It seems that this course has been set and barring the slim
chance of a great miracle - it will happen. There are 3 main areas in
which the company needs to see significant improvements. Notice I said, we
need significant improvement. At this point, I got the impression from
Kolshak that at least 2 areas would have to improve drastically or all 3 a
good amount. to make a lasting difference. These main areas are FUEL,
YIELDS, PILOT PRODUCTIVITY/ COSTS. Fuel at over $40.00 a barrell is
killing us. We are paying a dollar or more per gallon spot pricing (can't
hedge - no credit). Obviously the market dictates this cost and it's out of
our control but not expected to improve any time soon. Yields are down 2%
system wide this year with no improvement expected. I saw many
charts and graphs related to this and the bottom line is that the yield
situation will not improve for a long while. For instance, when Air Tran
entered the LAX and SFO mkts. using Ryanair our yields fell by over 70% on
those routes in order to maintain our market share. The low cost carriers
are our worst competition. We are unable to get any fare increase to stick
in any market in which they exist and their mkt. presence is growing., etc.

Pilots - The company has managed to squeeze "productivity and cost"
enhancements from the majority of the Delta work force to the tune of 3
billion savings per year. The pilots are obviously the least productive
group especially after our new pay raises and furlough recall. The newly
recalled pilots are put in unassigned status and training is purposely being
delayed as long as possible so the company can pay them less. Kolshak said
we could run the airline right now with 6000 pilots (obviously with his
desired work rules). Apparently the average pilot (including sick leave and
vacation) only works an average of 8 - 9 days per month and the average
pilot on reserve only 4 days. I must be doing something wrong because I
know I'm personally well above those figures. Anyway, it basically comes
down to the need for more productivity per pilot dollar to compete. We will
not be a low cost carrier. Low cost carriers costs will increase as they
grow and quit flying strictly point to point. Delta's goal is to get our
costs within 10 - 15 % of the low cost guys and to get our CASM down to 8.5
from 10.
The most interesting chart I saw was a graph of projected money flows. We
currently have about 1.85 billion cash. To do it once and to do it right -
(learning from United, etc.) it will take 1.5 billion to go into bankruptcy.

We will be cash flow neutral or slightly positive from now thru the summer
months. If we wait till early next year to do anything, our cash position
will drop precipitously from 1.5 billion Nov 04 to 0 (zero) by the end of
Feb 05. We would not survive that situation. Therefore mgt. would rather
err on the sooner vs. later side.

The following blurb is just my own thoughts:
The union leaders have all of this info. It was given to them on 29 April
04. I am wondering (as they must be) if doing nothing at this point as far
as concessions is concerned is best? I never thought this way until now
but maybe it is. I came away with the distinct impression that we alone
cannot save the company at this point in time so why try and then start
from a lower point when we finally do go into bankruptcy? That might result
in a 40% imposed pay cut on top of a 33% previous paycut. I think I'd
rather take my chances with the 40% (estimated bankruptcy) cut once.

Kolshak told me that even American is going to have to ask for more $ from
employees and look how deep their cuts were! US AIr and United did not go
into bankruptcy with enough $ so their futures are very much in doubt. The
point is that we and other legacy carriers have crushing debt. Delta has
over 20 billion in debt right now - (12 .regular + 8 airplanes and
equipment.) Possibly the only way to get out from under all that debt is
to wash through bankruptcy. With over 20 billion in debt and 1.1 billion in
profit during our best year can we ever expect to get back to normal
otherwise?

It seems to me that they'll keep bleeding us for more an more $ until
eventually we all could hypothetically work for free and the problem still
would be there. I am no expert on bankruptcy - coming out of it and
succeeding long term is tough (not many airlines have) but having bad credit
and essentially no debt must be better than having almost bad credit and
crushing, unmanageable debt. I think Delta mgt. is resigned to the fact
that in all probability the only permanent cure for our problem is to wash
thru bankruptcy with enough money and preparation and the right people in
place to do it successfully on the first go. Kolshak mentioned the fact that
all the legacy carriers will eventually be forced through the same process
especially when we emerge leaner (yes, that does mean smaller than now) and
meaner. After this process or phase, mergers and acquisitions could happen.

Other facts in no particular order:

Don't buy DAL stock unless you know of a miracle about to happen. In that
case please let me know too.

Grinstein will be announcing new senior management replacements in the near
future. Grinstein doesn't like to fire people but basically lets them know
its time to leave and expects them to resign.

Senior mgt. has 3 committees with 8 members each. They are PRODUCT (who are
we? premium, low fare, song, mix, etc,). COST and HUB & FLEET. The new
Delta plan will be born in July and then fine tuned. Desired fleet will
consist of Boeing 4 aircraft types: 737 old, 737 new, 757-767, 777. (No
time frame on fleet)

Pilots will eventually see preferential bidding and many of the other
changes that the other employees have taken. (No doubt)

The upcoming company opener with pilots will be asking for more than on the
table now. A minimum of 1 billion in concessions. Does that equate to
around 50% of our current contract???

Lots of unknowns for the company and employees during bankruptcy. Many
procedures to follow. Eventually the process results in baseball style
arbitration. The arbitrator chooses one side or the other - no compromising
at that point. I hope our union is preparing like crazy for this process.

I will not write any more. I'm tired and busy and all this stuff takes up
too much time. Just wanted to let my friends know this important info.

Hey, were all tough and we'll survive!

Have a nice day!

 

[Borescope]

Joe Kolshak showed upto fly my leg from XXX to XXX on XXX XX, so I had a rare opportunity to sit down in the cockpit with someone from senior management for almost 4 hrs and have a 1 on 1 uninterrupted by cell phones, etc. discussion.

This goes to show you that the pilots are WAY over paid. They can fly a 4 hour leg and not do anything except carry on a conversation with some management flunky. Don't they have to make radio calls, program the FMC, change altitudes, level off, decend, etc. I guess not, because according to Fly's mystery man (woman) they were "uninterrupted" for the entire flight.

 

[Borescope]

I saw many charts and graphs related to this and the bottom line is that the yield situation will not improve for a long while.



The most interesting chart I saw was a graph of projected money flows.

Fly,

How long did it take you to conjure this up? Do you really think people are this gulible? What management person is going to bring charts and graph of the airlines costs on an airplane to try and convince the pilots that they need to take a pay / productivity cut??? I assume this management person also picked a long flight "almost 4 hrs" to have time to convince the pilots. Sure wouldn't want to try and explain all his charts and graphs on a flight from MSY to BHM. Maybe you are the gulible one.

 

[funguy2]

Just to clarify this issue for everyone ...

DCA was totally shut down for "only" about 4 weeks, and then service was phased back in over the next 6 months or so. That said, it is nonetheless clear that US Airways was indeed hurt the most by these flight restrictions at DCA.

Thanks Cosmo... I had trouble remembering/finding the details.

 

[RowUnderDCA]

It was only four or so weeks..... it just seemed longer. It was especially creepy for it being so quiet. And when they came back... also weird.

 

[WorldTraveler]

Fly,
B**S*** alert
Your quote of the posting is not accurate. I read the same posting and most of the facts you quote do not agree with the posting I read. Most notably, yields didn't drop 70% when AirTran entered LAX and SFO (most legacy airlines had average fares in the $300-400; a 70% reduction would put the average fares BELOW the LOWEST fare currently being offered). DL, AA, and CO have all put their yield reductions in their transcon markets in the 20-25% neighborhood. Furthermore, officers of companies don't tell reveal when the company is filing for bankruptcy even if he does know (an operations VP probably doesn't) and they don't tell employees not to buy stock since that kind of advice will land you in jail for providing privileged information on a publicly held company.

Nobody denies that airlines are struggling but most of us are smart enough to know the real difficulties from someone's fantasies. Try again....but be a bit smarter next time.

 

[Fly]

Are you insinuating that I made that up? Or that I, personally, changed the facts? Nope...sorry. Just a little cut n paste job. Now your getting a little bristled because it's against your airline I see.

 

[Borescope]

You obviously didn't make it up because of your link. But, are you gulible or what? It seems you're the only one who believes a story as far fetched as this. Worldtraveler had it right people go to jail for letting this info out.

 

[Fly]

Am I really? The only one? Why would that link have 3 pages of replies if I were the only one "gullible" enough to believe it? I think not. Maybe hitting a little too close to home for some folks over at Delta. Some say YES, some say NO....time will tell.

 

[whatkindoffreshhell]

Whatkindoffreshhell,

You have got to be kidding --- Tilton has been the best thing for UA. You obviously wouldn't be happy with anyone.

Nonsense! Tilton was the umpteenth choice for CEO, an industry outsider and a weak leader (he doesn't even have the brass ones to throw Jake Brace overboard).

UA needed a leader and all they got was a bureaucrat. The ultimate proof will be revealed when UA has to revert to Plan B after the ATSB rejection.