Anti-loan Guarantee Editorial

jimntx

Veteran
Jun 28, 2003
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Dallas, TX
www.usaviation.com
Editorial in this morning's NY Times on-line. No judgement on my part one way or the other. Just posting it in case others don't have access to the "newspaper of record."

No Airline Bailouts

Published: June 17, 2004

As part of its overall strategy to emerge from bankruptcy court and restructure the company, United Airlines is hoping to get $1.6 billion in federal loan guarantees. This plan should be thwarted. United is not entitled to a form of taxpayer support that was meant to stabilize the airline industry in the aftermath of the Sept. 11, 2001, attacks. United's woes nowadays have little to do with that tragedy.

As one of its final acts, the federal board established by Congress to manage $10 billion in potential guarantees is reviewing a revised application from United Airlines. It has turned United down once, in 2002, and the merits of that decision have only become more compelling since then. The board — composed of representatives from the Federal Reserve Board, the Treasury and the Transportation Department — should stand firm in the face of pressure. A decision is imminent.

United filed for bankruptcy shortly after failing to get the loan guarantee the first time around, and since then, it has worked hard to reduce its unsustainable costs and improve service. Whether it has gone far enough to emerge as a viable carrier remains to be seen.

But that needn't be the government's concern. Congress mandated that in addition to determining an airline's ability to pay its debts, the board must predicate any loan guarantees on a finding that an airline's hardship stems from the terror attacks and that federal intervention is necessary to maintain an efficient commercial aviation system.

That is where United's case falls short. Airlines have already been given grants to compensate them for their immediate 9/11 losses. The loan guarantee system was a further security net for the industry in the event of a protracted terrorism-related slump, and perhaps even more attacks.

The fact that all of the old major airlines have lost money since the attacks is due to the economic slowdown, their loss of pricing power because of the Internet and competition from new low-fare carriers. Soaring fuel prices are only the latest affliction, and are one of the reasons the major airlines are expected to lose billions more this year, even though they are flying full planes and have cut their costs significantly.

Some of United's major competitors have been more adept at reinventing themselves in this new environment, without seeking taxpayers' help. It would be unfair for them to have to compete now with a partly subsidized airline.

As for the viability of the overall aviation system, there is no need for the government to be worried. And United, the nation's second-largest airline, has 16 percent of the market and tremendous assets. If it cannot deploy those assets profitably, someone else will, just as United once took over some of Pan Am's old routes.
 
Not surprising. It's crunch time. Eveyone expects a final word this week. So there will be a flurry of negative opinion articles by those who have an interest in seeing United get rejected.

Also expect these articles to mis-represent the ATSB guarantee as a "bailout" (which it is not). They will also say that it's been too long since 9/11, which misrepresents of the fact that UA applied for the loan 2 years ago, and it's taken this long because of the ATSB's process, and them not having a specific time table.
 
jimntx said:
Not trying to start an argument, but why ever would the NY Times "have an interest in seeing United rejected?"
because they want to see Kerry elected.....
 
Busdrvr said:
because they want to see Kerry elected.....
:huh: :huh: I'ont get it? :blink:
So if United doesn't get the/a loan, Kerry will win the election?
:unsure: :blink: :huh:
 
latreal said:
:huh: :huh: I'ont get it? :blink:
So if United doesn't get the/a loan, Kerry will win the election?
:unsure: :blink: :huh:
you don't think over 100,000 folks losing a sizable part of their pensions, (not to mention additional paycuts), would have an effect on the general mood WRT the economy in general? Do you think distractions (like people who got their pensions slapped walking around the white house with signs) could skew attention away from the real economic data and influence consumer confidence? The ATSB may think they have this figured out and it's just a "united" thing, but IMHO, there ARE potentially serious negative political ramifications to the Bush administration for an outright stupid no verdict on UAL's app. The 1.6 Billion is CHUMP CHANGE in the big scheme of things. It would certainly not harm the economy in any way if the government didn't get a dime of it back.
 
Busdrvr:

With all due respect - I think you're harming your cause. Sure $1.6 billion is chump change to a global economy...but you're only arming UA's detractors by making these types of statements. I don't care how much money it is - it's tax payer's money.

IMO there will be further concessions necessary to successfully emerge. I hate to say it...but if the loan application isn't standing up to many of the measures they apply (common yard sticks in capital markets) then we all have to admit that not enough has been done yet.

Look at U. Do you want to be in their shoes this time next year?
 
Who's to say the a failing Ual would harm the Bush administration? I believe the majority of voters wouldn't support the loan. Just my.02
 
767jetz said:
Not surprising. It's crunch time. Eveyone expects a final word this week. So there will be a flurry of negative opinion articles by those who have an interest in seeing United get rejected.

Also expect these articles to mis-represent the ATSB guarantee as a "bailout" (which it is not). They will also say that it's been too long since 9/11, which misrepresents of the fact that UA applied for the loan 2 years ago, and it's taken this long because of the ATSB's process, and them not having a specific time table.
Its crunch time, yea baby, crunch time!!!

Crunch the numbers with a 401k only, after you take another w2 cut....

You'all still gonna need some money, Deltas almost bankrupt, same with American,.....who ya gonna call......"Sweet Home Alabama!!"

We got the money, keep the flyin in the alliance don'tcha know!!

Say adios to senoirity.....how does the saying go "He who laughs last, laughs loudest!"
 
bigbusdrvr said:
We got the money, keep the flyin in the alliance don'tcha know!!

Say adios to senoirity.....how does the saying go "He who laughs last, laughs loudest!"
bigbus,

Your true colors are shining through brighter than ever. It's amazing that you have time to try and bait UA employees. You have some very big problems to face at US. You'd be better served focusing on that.

Don't you lose any sleep over us at UA. We'll take care of things here.

In the mean time, I'll bet you you'll be on the street LONG before me and my colleagues.

Good luck to you. (you're gonna need it)