ATSB:Need More Info To Decide On United Loan Request

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ATSB:Need More Info To Decide On United Loan Request
DOW JONES NEWSWIRES
WASHINGTON -- UAL Corp.''s (UAL) United Airlines needs to provide more information before the Air Transportation Stabilization Board can decide if the carrier qualifies for a federal loan guarantee, the ATSB said Wednesday.
In a Wednesday letter to Frederick Brace, United Airlines'' executive vice president and chief financial officer, the ATSB said it received the additional information United presented at meetings with the ATSB Oct. 28 and Nov. 5, but said more information was necessary.
The materials are currently under review by the ATSB staff, the ATSB working group and the ATSB''s outside consultants, the ATSB said in the letter.
As a result of the discussions and our review of the materials you have submitted, we would like to alert you to some of the areas that will require additional information before the ATSB can determine whether UAL qualifies for a federal loan guarantee, the ATSB said.
 
DJN: DJ ATSB/United -3: To Discuss Issues In Coming Weeks >UAL
(Dow Jones 11/06 19:16:21)

In the ATSB's letter, which is the first correspondence with United that ATSB has made public, the board outlined the exact issues United needed to address.

United needs to provide further information on: the assumptions underlying the revenue forecasts in its business plan; the components, status and timing of United's proposed labor cost savings; the revenue enhancement elements of United's proposed non-labor profit improvements; United's pension and post-retirement obligations and alternatives for meeting funding requirements and United's current or future capital spending commitments related to airport infrastructure.

Further, the ATSB said it needs to follow up on the Nov. 5 meeting it had with United on the cost savings elements of United's proposed non-labor profit improvements. The ATSB staff is looking forward to meeting with you and your advisors to address these issues in the coming weeks. In the course of our ongoing analysis, we expect to develop specific questions based on the materials submitted and requested, the ATSB said.

United, the world's second largest air carrier, said in August that it may be forced to file for bankruptcy. In June it filed a request for federal loan guarantees of $1.8 billion, which it has said is crucial to avoid bankruptcy. Since then, it has announced a series of cost-savings measures intended to shore up its financial position and avert a potential bankruptcy filing.

The ATSB consists of Department of Transportation General Counsel Kirk K. Van Tine, Fed Gov. Edward Gramlich and Treasury Undersecretary for Domestic Finance Peter Fisher. David Walker, U.S. comptroller general, is a nonvoting member of the board.

Congress created the board after the Sept. 11 attacks and gave it the authority to make $10 billion in loan guarantees to airlines hit hard in the wake of the attacks.

-By Deborah Lagomarsino, Dow Jones Newswires; 202-862-9255;
[email protected]

(END) DOW JONES NEWS 11-06-02
07:16 PM
 
  • Thread Starter
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  • #4
It's not humiliating...just part of the process. This will be highly scrutinized either way. They're just doing the homework. I don't view this as bad either way.
 
If it is part of the process, then it's new. Of all the loans approved or rejected to date, this is the first time I've seen a letter like this released:

[blockquote]
FROM THE OFFICE OF PUBLIC AFFAIRS
November 6, 2002
PO-3604

Air Transportation Stabilization Board Letter

November 6, 2002
Mr. Frederick Brace
Executive Vice President
and Chief Financial Officer
United Air Lines, Inc.
P.O. Box 66100
Chicago, IL 60666

Dear Mr. Brace:

We have received your supplemental materials, as well as the additional information presented at our meetings on October 28 and November 5 with the ATSB staff and the ATSB working group. The materials are currently under review by the ATSB staff, the ATSB working group, and the ATSB’s outside consultants. As a result of the discussions and our review of the materials you have submitted, we would like to alert you to some of the areas that will require additional information before the ATSB can determine whether UAL qualifies for a federal loan guarantee:

1. The ATSB needs further explanation of the assumptions underlying the revenue forecasts in the company’s business plan.

2. The ATSB needs additional detail on the components, status, and timing of the proposed labor cost savings that the company has identified.

3. The ATSB needs additional detail on the revenue enhancement elements of the company’s proposed non-labor profit improvements.

4. The ATSB needs to follow up on the November 5 meeting on the cost savings elements of the company’s proposed non-labor profit improvements.

5. The ATSB needs additional detail on the company’s pension and post-retirement obligations, and alternatives for meeting funding requirements.

6. The ATSB needs additional detail on the company’s current or future capital spending commitments related to airport infrastructure.

The ATSB staff is looking forward to meeting with you and your advisors to address these issues in the coming weeks. In the course of our ongoing analysis, we expect to develop specific questions based on the materials submitted and requested.

Sincerely,

Daniel Montgomery
Executive Director
[/blockquote]
 
[blockquote]
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On 11/7/2002 2:38:55 AM UnitedChicago wrote:
But, this is an odd public tip-off. Would they really so bluntly help UAL management?
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[/blockquote]

Dude, there's a whole lot of pressure being put on the ATSB to approve UAL's loan guarantee request. So, yes, I think that the ATSB has considerable pressure to assist UAL in its efforts to be approved.
To be honest, I wouldn't be surprised to see a 'temporary' time extension occur for applications to allow AMR to get a loan guarantee.
 
  • Thread Starter
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  • #7
Yeah - Dude - there is a lot of pressure on the ATSB. But they demonstrated repeatedly that loan's are not easy to get. And it was the dems that kept the program alive. Now who controls both houses?

I think UAL can get this - but don't be fooled into thinking that this is a done deal.
 
  • Thread Starter
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  • #8
I think this paragraph is interesting:

The ATSB staff is looking forward to meeting with you and your advisors to address these issues in the coming weeks. In the course of our ongoing analysis, we expect to develop specific questions based on the materials submitted and requested.


So my impression is that ATSB will follow-up with UAL on specific questions to the 6 topic areas raised in this letter. I mean the letter is not detailed to highly specific request for information. Maybe this is obvious to all but i wanted to make the point.

If this is true, they ultimately gave UAL a public - they released the letter to the press - heads-up as to what they are scrutinizing.

Does this:

1. Simply increase pressure on key stakeholders to come to final terms - essentially helping UAL.

2. Setting up eventual rejection of the revised application

I hope it's note number 2. But, this is an odd public tip-off. Would they really so bluntly help UAL management?
 
[P][SPAN class=headline][A href=http://biz.yahoo.com/ap/021107/united_debt_1.html][FONT size=2]ATSB Delays Loan to United[/FONT][/A][/SPAN][/P]
[P][SPAN class=headline][SPAN class=headline][A href=http://biz.yahoo.com/ft/021107/1035873051446_4.html][FONT size=2]Lufthansa may offer aid to UAL[/FONT][/A][/SPAN][/SPAN][/P]
 
Undoubtedly, there is a lot of political pressure on the ATSB to approve both the loan for UAL as well as U (which is also still not approved).

My read on the letter is that it was a lobby us all you want to, but the numbers still don't add up statement from the ATSB.

But more importantly, why the ATSB didn't ask for more details on the impending corporate transaction with U???
 
[blockquote]
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On 11/7/2002 12:29:17 PM eolesen wrote:

But more importantly, why the ATSB didn't ask for more details on the impending corporate transaction with U???
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[/blockquote]

ROTFLMAO!

Shhh, the voices in my head ... err my informed sources, tell me that this is supposed to be kept out of the press until all clandestine organizations have approved it. Currently, everything is on track for UAL to turn all of their domestic flying over to U, it's just waiting approval by a couple more agencies. Wes Craven, head of Your Worst Nightmare office at the DOT just approved the deal. Right now, it is being scrutinized by the It's Worse Than You Thought office at the FAA. The last stop after that is Cut Employee Pay and Destroy Morale office at the ATA. But it should have no problem being approved by the last two offices; the skids have been greased to ensure smooth sailing.
 
It's all part of the process. Does anyone honestly believe UA is going to be turned down for the ATSB loan guarantee? In the end, we will get the loan. Until the, we'll have to continue to dot the I's and cross the T's. But this is a political process, despite what anyone thinks. There is LOTS of political muscle working in UA's favor behind the scenes that is not readily apparent to most. In the end, UA will be successful.
 
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On 11/7/2002 12:29:17 PM eolesen wrote:

But more importantly, why the ATSB didn't ask for more details on the impending corporate transaction with U???
--------------

I thought that it was a unique impending corporate transaction
 
>>>It's all part of the process. Does anyone honestly believe UA is going to be turned down for the ATSB loan guarantee? In the end, we will get the loan. Until the, we'll have to continue to dot the I's and cross the T's. But this is a political process, despite what anyone thinks. There is LOTS of political muscle working in UA's favor behind the scenes that is not readily apparent to most. In the end, UA will be successful.
 
[blockquote]
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On 11/7/2002 10:10:10 PM motnot wrote:

But if the numbers aren't there -- and given industry's current state they may not be -- the ATSB says no, IMO. The guys on the board seem to take seriously their role of guarding the taxpayers' interest. I don't think they want to be on the hook for $1.8 billion that they consider iffy.
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[/blockquote]

If they gave ATA, who lost BIG oney in the 3rd Quarter and is NOT getting union concessions, can make the numbers work, then the ATSB is on Crack to say they won't work at UAL. One of the things that the ATSB wanted more info on from UAL is the future pension obligation. I think it is possible that UAL is anti****ting a LOWER pension obligation. UAL's pilot pensions are based on the A/C that the pilot flew the last three years of his career. If you park nearly half of your 400 fleet, that 'obligation' goes down. the guideline are kind of Stupid IMHO. Would you rather cut back and make 7 percent on 10 billion in revenue, or add flights and have a 5% return on 20 billion?
 
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