Airline Industry Focuses On Us Airways

[BoeingBoy]

I agree with Boeing Boy, however, too early to tell YV's involvement. Somebody should listen to their conference call.

[post="264814"][/post]​

Mesa has been reducing their exposure to US. A year ago we accounted for 45% of their passenger revenues, while only 34% today. HP has become increasingly important to Mesa, going from 37% to 41% of passenger revenues, while UA wasn't even in the picture a year ago and now accounts for 24% of passenger revenues. The importance of US to Mesa should continue shrinking as Mesa adds CRJ-700/900 flying for HP/UA.

Jim

 

[sfb]

Actually, I would say that Mesa repurchasing some portion of its common stock makes it LESS likely that they would participate in some "Strategic Corporate Transaction"; i.e. the SCT(tm). Cash is king these days in the airline biz, and it's pretty obvious that what Mesa could bring to the table would be cash.

I did get quite a chuckle out of US Airways "spurning" UAL's offer (well, the use of the word "spurn"); I would imagine that right now UAIRQ would be willing to take just about any offer they could get.

Honestly, if there is a an actual merger announcement between AWA and US Airways, you could make a bundle by shorting AWA. Their shareholders would have to be certifiably insane to approve a merger, in my opinion as well as most of the Street.

 

[dfw79]

Is there anyway the Mods can add any combination of letters with "CT" at the end to the filter? 😉 I'm still trying to figure out how there is another UCT/ICT/SCT/WCT/MCT when there hasn't even been one to begin with? I'm all for US, and all for discussing on how things may play out...but I think the continued presentation of ideas/desires as facts needs to stop. If you need to say something great...but don't shove it down other peoples throat as fact because we are forced to assume and believe it came from someone in management. Aren't there SEC laws in play here?

I just subscribe to the philosophy...go with the flow. Whatever happens...happens. Except for the few on this board that hold positions with in the unions, or the scattered management types lurking...its out of everyone’s hands.

 

[skyflyr69]

Hey Unitedchicago, kick any jetblue pilots off the jumpseat lately?

:down:

 

[funguy2]

Honestly, if there is a an actual merger announcement between AWA and US Airways, you could make a bundle by shorting AWA.  Their shareholders would have to be certifiably insane to approve a merger, in my opinion as well as most of the Street.

IIRC, HP is more than 50% controlled by TPG. I am not sure how the cash works out, but TPG holds 'Class A' Shares of AWA with a super-voting authority, and this is not traded on Wall Street. 'Class B' is publicly traded. Again, if I recall correctly, TPG holds at least more than 50% of the voting rights... Thus, they can out-vote any Class B shareholder. I guess that means the AWA end is up to TPG and Bonderman.

My recollection is that this was part of HP's early 90's BK exit financing provided by TPG, YV, and COs, I think.

 

[funguy2]

The "prudent man" rules governing their administration of the RSA pension fund would not allow this on penalty of a surcharge.

Can you expand on this?

While I have been convinced for a while that RSA would step aside, I am curious to these rules.

It would seem to me that a "prudent man" rule would have prevented a pension fund from investing in a BK airline the first time. So I am not sure how such rules would prevent a second investment.

As I said, I don't see RSA stepping up financing for US or a US-HP combination, but I'm not so sure a "prudent man rule" is what is preventing it. (Unless this rule is simply Bronner having learned a harsh lesson in airline investing...)

 

[BoeingBoy]

Prudent Man Rule

n. The requirement to only invest funds entrusted to him/her as a trustee, investment manager of pension funds, treasurer of a city or county, or any fiduciary (a trusted agent) as a person of prudence (I.e. discretion, care and intelligence) would. The following investments are classified as being within the prudent man rule: solid "blue chip securities, secured loans, federally guaranteed mortgages, treasury certificates and other conservative investments that provide a reasonable return. Some states list the types of investments that are allowed under the rule in statutes. However, the rule is subjective and some financial managers have placed funds into questionable investments to achieve higher rates of return, which have caused bankruptcy and disaster, such as in the case of Orange County, California (1994).

ALABAMA

What types of investments are considered appropriate under the "prudent man" rule?

The Alabama Code does not list any specific investments that may or may not be appropriate. All fiduciaries, including trustees, are given wide discretion in determining how to invest money, and courts will generally not interfere unless there is a clear abuse of discretion. The Alabama code states that a fiduciary's exercise of discretion is presumed to be "fair and reasonable." Ala. Code § 19-3A-104 (2001).

The courts have provided some clarification of the "prudent man" rule in Alabama. In First Alabama Bank of Huntsville, N.A. v. Spragins, 475 So.2d 512 (Ala. 1985), the Alabama Supreme Court held that "[t]he trustee is under a duty to the beneficiary in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property; and if the trustee has or procures his appointment as trustee by representing that he has greater skill than that of a man of ordinary prudence, he is under a duty to exercise such skill." Id., at 516. In Birmingham Trust National Bank v. Henley, 371 So.2d 883 (Ala. 1979), the Court stated that the determination of "prudence" is to be based upon the information available to the trustee at the time of the investment, rather than upon subsequently discovered information. Id., at 895-96.

Jim

 

[Bear96]

More specifically, I would guess (though with USA320pilot one can never be quite sure), since we are talking about a pension fund, that he may be referring to this provision of ERISA (hope you like legalese):

29 U.S.C. 1104 (ERISA S 404), Fiduciary duties.

(a) Prudent man standard of care

(1) Subject to sections 1103( c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and--

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administering the plan;

(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

( c) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter.

(2) In the case of an eligible individual account plan (as defined in section 1107(d)(3) of this title), the diversification requirement of paragraph (1)( c) and the prudence requirement (only to the extent that it requires diversification) of paragraph (1)(B) is not violated by acquisition or holding of qualifying employer real property or qualifying employer securities (as defined in section 1107(d)(4) and (5) of this title).

I'm not sure where he gets the bit about paying a fine, though. It's more like you can be sued by the pension plan's beneficiaries if you violate the fiduciary duty.

Oh, and ERISA would preempt any state statute or case law on the subject of pensions. (Just noting that because of the post about AL law above.)

 

[SpinDoc]

Aren't there SEC laws in play here?

SEC laws only apply to statements made by
Corporations or representatives of corporations
who have direct knowledge or acces to a
specific piece of information. Clearly, there is
not a single person on this forum who has
that kind of access to either US or HP corporate
information, so carry-on girls and boys. The
speculation has been interesting so far and
most of us await the final results to come from
official spokespersons of each organization.

When they are ready to release information
about the merger talks, they will and it will
be prefaced or disclaimed with the appropriate
SEC language.

Play on kids.

 

[SpinDoc]

Can you expand on this?

While I have been convinced for a while that RSA would step aside, I am curious to these rules.

It would seem to me that a "prudent man" rule would have prevented a pension fund from investing in a BK airline the first time. So I am not sure how such rules would prevent a second investment.

As I said, I don't see RSA stepping up financing for US or a US-HP combination, but I'm not so sure a "prudent man rule" is what is preventing it. (Unless this rule is simply Bronner having learned a harsh lesson in airline investing...)

[post="264868"][/post]​

FunGuy2:

We all know it was never about "prudent investing"
on old Doc Boners part. It was about the opportunity
to use other peoples money to expand the size of his
Johnson, and gamble on the future of US. Even the
mobsters in Las Vegas know enough to keep their
money out of the airline industry, with the exception
of extorting the unions like the IBT.

 

[FWAAA]

Oh, and ERISA would preempt any state statute or case law on the subject of pensions. (Just noting that because of the post about AL law above.)

[post="264878"][/post]​

You may be right, but I'm fairly certain that ERISA does not preempt state laws governing state-run public employee pension funds like RSA. For example, see:

http://www.nccusl.org/Update/DesktopModule...aspx?ItemID=135

 

[USA320Pilot]

USA320Pilot said: "Also noteworthy, today Mesa’s board authorized a stock repurchase, which could be used to fund a transaction with stock, such as an equity investment or purchase of a regional airline."

Mesa May Help Fund a US Airways-America West Merger (Update2)

ARLINGTON (Bloomberg News) April 26, 2005 17:09 EDT -- Mesa Air Group Inc., which gets about 75 percent of its revenue from America West Holdings Corp. and US Airways Group Inc., may help with financing if those two carriers complete merger plans, Mesa Chief Executive Jonathan Ornstein said.

See Story

Regards,

USA320Pilot

 

[JayBrian]

We think a combined US Airways/America West could cut the amount of regional flying done by Mesa


See Story

 

[Bear96]

You may be right, but I'm fairly certain that ERISA does not preempt state laws governing state-run public employee pension funds like RSA. For example, see:

[post="264895"][/post]​

Yup I think you're right ... so disregard that last part of my last post!

29 U.S.C. 1003 (ERISA Sect. 4), Coverage:
...
(b) The provisions of this subchapter shall not apply to any employee benefit plan if--
(1) such plan is a governmental plan (as defined in section 1002(32) of this title);
...

29 U.S.C. 1002(32) (ERISA Sect. 3(32)), Definitions:
The term "governmental plan" means a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. The term "governmental plan" also includes any plan to which the Railroad Retirement Act of 1935, or 1937 [45 U.S.C.A. § 231 et seq.] applies, and which is financed by contributions required under that Act and any plan of an international organization which is exempt from taxation under the provisions of the International Organizations Immunities Act [22 U.S.C.A. § 288 et seq.].

 

[funguy2]

OK... Two points.

1. From what I have read, using the "prudent man" rules, RSA should not have invested in US Airways in BK 1. Thus, I don't really see any legal precedent for RSA's non-involvement. It could be that a "prudent man" does not throw good money after bad, but of course that is exactly what RSA did in BK 1.

2. The quote regarding Mesa says that it MAY invest... Implying that it MAY NOT. I believe the stock repurchase program is also at the discretion of Mesa management. Thus, I think this is a situation where you follow the money. We will have to wait and see.

I have mixed feelings on this one... On one hand, Orenstein, as a former Wall Street guy, is a wheeler dealer. He has put Mesa together partially through acquisitions (Westair, Air Midwest, CC Air). He recently made an failed offer on FlyI. He seems the type to be involved.

On the other hand, we already have US, HP, GECAS, RSA, TPG, ATSB (and associated banks), AirWisc/Eastlake, Republic/Wexford involved. I suspect the goal of whomever is behind this is to remove parties from the above list, not add to it.