[STRONG][EM]so what about that unique corporate transaction?[/EM][/STRONG][/P][/BLOCKQUOTE]
[/P]
[/P]
Dave's Gloomy Forecast
- Thread starter usresman
- Start date
[P]
[BLOCKQUOTE][STRONG][EM][/EM][/STRONG][BR]----------------[BR]On 10/9/2002 6:30:31 PM oldiebutgoody wrote:
[P] Also, isn't it the present condition of investments (stocks, bonds, etc.) which determines the level of the retirement funds[/P]
[P][STRONG][EM]they are under funded [/EM][/STRONG][/P]
[P] Does this mean that Dave isn't looking at emerging from Chapter 11 in the first quarter of 2003? [/P]
[P][STRONG][EM]ya think?[/EM][/STRONG][/P]
[P] [/P]
[P] I know that many of these items were things left open in the current TAs, but this statement does sort of seem to contradict Dave's latest statements which indicate that U's restructuring is on track.[/P]
[P][STRONG][EM]left open? nice, left big loop holes for the company to stick it in your back[/EM][/STRONG][/P]
[P] There are a lot of employees that believe in Dave and his team(me being one of them)[/P]
[P][STRONG][EM]you believed in santa and the easter bunny too huh?[/EM][/STRONG][/P]
[P]. I really hope that he doesn't spoil that trust by making another grab at employee compensation unless U really needs it. [/P]
[P][STRONG][EM]did you read the thing about 50-100% going to the pensions>,,theeres another grab coming alright,too bad it wont do one iota to help[/EM][/STRONG][/P]
[P] It would sure have the appearance of an opportunistic attack on the employees. [IMG src=http://www.usaviation.com/idealbb/images/smilies/14.gif] [/P]
[P][STRONG][EM]ya think?[/EM][/STRONG][/P]----------------[/BLOCKQUOTE]
[P][/P]
[BLOCKQUOTE][STRONG][EM][/EM][/STRONG][BR]----------------[BR]On 10/9/2002 6:30:31 PM oldiebutgoody wrote:
[P] Also, isn't it the present condition of investments (stocks, bonds, etc.) which determines the level of the retirement funds[/P]
[P][STRONG][EM]they are under funded [/EM][/STRONG][/P]
[P] Does this mean that Dave isn't looking at emerging from Chapter 11 in the first quarter of 2003? [/P]
[P][STRONG][EM]ya think?[/EM][/STRONG][/P]
[P] [/P]
[P] I know that many of these items were things left open in the current TAs, but this statement does sort of seem to contradict Dave's latest statements which indicate that U's restructuring is on track.[/P]
[P][STRONG][EM]left open? nice, left big loop holes for the company to stick it in your back[/EM][/STRONG][/P]
[P] There are a lot of employees that believe in Dave and his team(me being one of them)[/P]
[P][STRONG][EM]you believed in santa and the easter bunny too huh?[/EM][/STRONG][/P]
[P]. I really hope that he doesn't spoil that trust by making another grab at employee compensation unless U really needs it. [/P]
[P][STRONG][EM]did you read the thing about 50-100% going to the pensions>,,theeres another grab coming alright,too bad it wont do one iota to help[/EM][/STRONG][/P]
[P] It would sure have the appearance of an opportunistic attack on the employees. [IMG src=http://www.usaviation.com/idealbb/images/smilies/14.gif] [/P]
[P][STRONG][EM]ya think?[/EM][/STRONG][/P]----------------[/BLOCKQUOTE]
[P][/P]
So this means what? The unions and company took MONTHS of painful negotiations for......what again? All the messages from the company say we are on track and now we get this crap about liquidation?
So Dave is saying unless the pensions are slashed and productivity turned into robots then we might as well put up the yard sale sign?
For every one piece of good news there are 3 bad ones. I don't know how to interpret his comments except on face value and that says that we might as well hang it up.
So Dave is saying unless the pensions are slashed and productivity turned into robots then we might as well put up the yard sale sign?
For every one piece of good news there are 3 bad ones. I don't know how to interpret his comments except on face value and that says that we might as well hang it up.
Black Wind:
Black Wind asked: so what about that unique corporate transaction?
Chip comments: Mature airlines have the same basic problem. How can they compete against low cost carriers in the domestic marketplace. The intent of the unique corporate transaction was to download UA's high cost domestic operation onto US's new labor contracts to prevent a UA bankruptcy filing. In my opinion, this transaction will likely not proceed in its original form (but could easily occur in another form) for three reasons:
1. US took too long to obtain labor and other stakeholder concessions.
2. UA is likely headed into bankruptcy. In bankruptcy UA can accomplish required cost reductions. For example, the company can seek to cancel labor contracts, eliminate employee governance, and restructure debt, which would eliminate the need to fragment the domestic system.
3. RASM fell off of a cliff in September while costs continue to rise. In addition, the war with Iraq has added to the uncertainty.
Regardless, the parties continue to discuss options and if UA enters bankruptcy, do not be surprised if some sort of integration occurs between the parties. The government has been involved in discussions on how to fix the industry financial crisis and one alternative is to reduce capcity. Will a deal proceed? Nobody knows for sure, but the parties continue to talk.
Chip
Black Wind asked: so what about that unique corporate transaction?
Chip comments: Mature airlines have the same basic problem. How can they compete against low cost carriers in the domestic marketplace. The intent of the unique corporate transaction was to download UA's high cost domestic operation onto US's new labor contracts to prevent a UA bankruptcy filing. In my opinion, this transaction will likely not proceed in its original form (but could easily occur in another form) for three reasons:
1. US took too long to obtain labor and other stakeholder concessions.
2. UA is likely headed into bankruptcy. In bankruptcy UA can accomplish required cost reductions. For example, the company can seek to cancel labor contracts, eliminate employee governance, and restructure debt, which would eliminate the need to fragment the domestic system.
3. RASM fell off of a cliff in September while costs continue to rise. In addition, the war with Iraq has added to the uncertainty.
Regardless, the parties continue to discuss options and if UA enters bankruptcy, do not be surprised if some sort of integration occurs between the parties. The government has been involved in discussions on how to fix the industry financial crisis and one alternative is to reduce capcity. Will a deal proceed? Nobody knows for sure, but the parties continue to talk.
Chip
According to an person close to the U BK proceedings, he says the worst is yet to come. Fuel took a big jump when Bush started in on Iraq, and passengers began cancelling bookings by the thousands. There is a HUGE revenue shortfall.
That, however, is not the whole story. Politics, as usual, rears its ugly head.
A precondition of ATSB money is major labor cost reductions, to the tune of 20%. The White House staffer overseeing this made it perfectly clear the airlines were not getting a dime of 'his' money unless labor took a big hit.
The White House de-unionized Justice Department employees in the name of homeland security, and wants de-unionization as a precondition to form the Homeland Security Agency. I don't know how to reconcile this with the fact a bunch of union brothers ran to their deaths on 9/11 in aid of homeland security. Not to mention, a bunch of union guys and gals make the planes, tanks, ammo, etc. for our security, and often man those planes, tanks, ships, etc.
The White House signaled to the Pacific Maritime Association it would intervene in any West Coast dock strike, and would man the ports with National Guard if necessary. Thus the PMA hardline - the union is willing to give up obsolete jobs to technology, but want the jobs created by that technology to be union jobs - hardly radical.
So in this political climate, management is going to make hay.
I posted, just after 9/11/01, that management was presented with a once-in-a-lifetime shot to hammer labor. I said, regardless of anything, they would take that shot. They will, and we ain't seen nuthin' yet.
That, however, is not the whole story. Politics, as usual, rears its ugly head.
A precondition of ATSB money is major labor cost reductions, to the tune of 20%. The White House staffer overseeing this made it perfectly clear the airlines were not getting a dime of 'his' money unless labor took a big hit.
The White House de-unionized Justice Department employees in the name of homeland security, and wants de-unionization as a precondition to form the Homeland Security Agency. I don't know how to reconcile this with the fact a bunch of union brothers ran to their deaths on 9/11 in aid of homeland security. Not to mention, a bunch of union guys and gals make the planes, tanks, ammo, etc. for our security, and often man those planes, tanks, ships, etc.
The White House signaled to the Pacific Maritime Association it would intervene in any West Coast dock strike, and would man the ports with National Guard if necessary. Thus the PMA hardline - the union is willing to give up obsolete jobs to technology, but want the jobs created by that technology to be union jobs - hardly radical.
So in this political climate, management is going to make hay.
I posted, just after 9/11/01, that management was presented with a once-in-a-lifetime shot to hammer labor. I said, regardless of anything, they would take that shot. They will, and we ain't seen nuthin' yet.
Senate Eyes Quick Resolution On Aviation Security Legislation
WASHINGTON (Aviation Daily) - The Senate was expecting easy passage yesterday of an airline security bill extending war risk insurance, allowing commercial carriers to transport priority mail and pilots to carry guns.
The bill, S. 2949, sponsored by Commerce Committee Chair Sen. Ernest Hollings (D-S.C.), includes an amendment, offered by Hollings, Sen. Bob Smith (R-N.H.) and Sen. Barbara Boxer (D-Calif.), giving pilots the right to carry guns in the cockpit; it was scheduled to come to the Senate.
Discussions were underway yesterday with the staff of Sen. James Inhofe (R-Okla.), who objected to a provision in the Hollings bill barring small planes from stadium flyovers. An Inhofe spokesman said the provision would hurt more small businesses.
House Transportation Committee Chair Rep. Don Young (R-Alaska) and Transportation Aviation Subcommittee Chair Rep. John Mica (R-Fla.) have asked the Senate to approve their bill to arm pilots, and Mica has introduced an aviation financial relief bill that goes further than the Senate version by offering some reimbursement for security costs. A spokesman for Hollings said the two versions are not that far apart, and he predicted a fairly easy resolution in conference.
WASHINGTON (Aviation Daily) - The Senate was expecting easy passage yesterday of an airline security bill extending war risk insurance, allowing commercial carriers to transport priority mail and pilots to carry guns.
The bill, S. 2949, sponsored by Commerce Committee Chair Sen. Ernest Hollings (D-S.C.), includes an amendment, offered by Hollings, Sen. Bob Smith (R-N.H.) and Sen. Barbara Boxer (D-Calif.), giving pilots the right to carry guns in the cockpit; it was scheduled to come to the Senate.
Discussions were underway yesterday with the staff of Sen. James Inhofe (R-Okla.), who objected to a provision in the Hollings bill barring small planes from stadium flyovers. An Inhofe spokesman said the provision would hurt more small businesses.
House Transportation Committee Chair Rep. Don Young (R-Alaska) and Transportation Aviation Subcommittee Chair Rep. John Mica (R-Fla.) have asked the Senate to approve their bill to arm pilots, and Mica has introduced an aviation financial relief bill that goes further than the Senate version by offering some reimbursement for security costs. A spokesman for Hollings said the two versions are not that far apart, and he predicted a fairly easy resolution in conference.
OldieButGoody,
You're assuming the market recovers. When do you think that will be? I don't think anyone has a reasonable clue. War with Iraq would throw the economy into another downward hiccup and completely devastate what's left of this industry. I wholeheartedly agree that this industry hasn't seen the worst yet. It's going to get worse before it gets better folks. The only question is who the ultimate survivors will be.
You're assuming the market recovers. When do you think that will be? I don't think anyone has a reasonable clue. War with Iraq would throw the economy into another downward hiccup and completely devastate what's left of this industry. I wholeheartedly agree that this industry hasn't seen the worst yet. It's going to get worse before it gets better folks. The only question is who the ultimate survivors will be.
[blockquote]
----------------
On 10/10/2002 1:40:40 PM chipmunn wrote:
Black Wind:
Black Wind asked: so what about that unique corporate transaction?
Chip comments: Mature airlines have the same basic problem. How can they compete against low cost carriers in the domestic marketplace.
Captainron says: Chip while competing with low cost carriers is a long term problem the over whelming problem is revenue of any kind at this point in time. The economy is on its back, companies and individuls are concerened about financial security , and are not spending money on anything discrestionary. Especially travel personal or business. With a war likly expect it to get worse before it gets better. Ultimitly, the high cost carriers will have to restructure.
Chip says; The intent of the unique corporate transaction was to download UA's high cost domestic operation onto US's new labor contracts to prevent a UA bankruptcy filing. In my opinion, this transaction will likely not proceed in its original form (but could easily occur in another form) for three reasons:
Captainron says; This argument is numbing, it has NEVER been discussed in this context at UAL, the context has always been that UAL would aquire either thru aquisition or assets sales portions of US Airways to fill out the East coast UAL NETWORK.
I would argue that US Airways while having a relativly low cost structure compared with the major network carriers at least until they re
structure, US Airways bankrupt cost structure is NOT competative with the low cost producers, therefore in order to make the assets productive they will be fragmented to a larger network carrier. USAirways best option is to become a strong regional carrier, with UAL and the Star Alliance.
Here's an idea Chip,since AMRs and DALs costs are comparable to UALs why not download the entire domestic airline business to US Airways. If it makes sense for UAL it certianly should make sense for the others??? Not going to happen CHIP
CHIP says;
Regardless, the parties continue to discuss options and if UA enters bankruptcy, do not be surprised if some sort of integration occurs between the parties.
Captainron says;
Look for UAL to aquire all of those assets which do NOT fit the regional model initially, and addit
ional assets that become available
during the course of events.
Chip says:
The government has been involved in discussions on how to fix the industry financial crisis and one alternative is to reduce capcity. Will a deal proceed? Nobody knows for sure, but the parties continue to talk.
Captainron says:
the goverments involvement has only included discussions on the following;security, loan programs, war risk insurance, and airways and facility improvements. There has been some talk of reregulation, but there has been absoulutly NO discussions about the Goverment compelling the industry to reduce capacity, the industry seems to be doing a very good job of reducing capacity on there own.
Now that AMR and DAL shortly are being percieved by the market as being in the same dire straits as the rest of the industry look for expidited legislation before the election and a more comprehensive plan after the election to stabilize the industry.
----------------
[/blockquote]
----------------
On 10/10/2002 1:40:40 PM chipmunn wrote:
Black Wind:
Black Wind asked: so what about that unique corporate transaction?
Chip comments: Mature airlines have the same basic problem. How can they compete against low cost carriers in the domestic marketplace.
Captainron says: Chip while competing with low cost carriers is a long term problem the over whelming problem is revenue of any kind at this point in time. The economy is on its back, companies and individuls are concerened about financial security , and are not spending money on anything discrestionary. Especially travel personal or business. With a war likly expect it to get worse before it gets better. Ultimitly, the high cost carriers will have to restructure.
Chip says; The intent of the unique corporate transaction was to download UA's high cost domestic operation onto US's new labor contracts to prevent a UA bankruptcy filing. In my opinion, this transaction will likely not proceed in its original form (but could easily occur in another form) for three reasons:
Captainron says; This argument is numbing, it has NEVER been discussed in this context at UAL, the context has always been that UAL would aquire either thru aquisition or assets sales portions of US Airways to fill out the East coast UAL NETWORK.
I would argue that US Airways while having a relativly low cost structure compared with the major network carriers at least until they re
structure, US Airways bankrupt cost structure is NOT competative with the low cost producers, therefore in order to make the assets productive they will be fragmented to a larger network carrier. USAirways best option is to become a strong regional carrier, with UAL and the Star Alliance.
Here's an idea Chip,since AMRs and DALs costs are comparable to UALs why not download the entire domestic airline business to US Airways. If it makes sense for UAL it certianly should make sense for the others??? Not going to happen CHIP
CHIP says;
Regardless, the parties continue to discuss options and if UA enters bankruptcy, do not be surprised if some sort of integration occurs between the parties.
Captainron says;
Look for UAL to aquire all of those assets which do NOT fit the regional model initially, and addit
ional assets that become available
during the course of events.
Chip says:
The government has been involved in discussions on how to fix the industry financial crisis and one alternative is to reduce capcity. Will a deal proceed? Nobody knows for sure, but the parties continue to talk.
Captainron says:
the goverments involvement has only included discussions on the following;security, loan programs, war risk insurance, and airways and facility improvements. There has been some talk of reregulation, but there has been absoulutly NO discussions about the Goverment compelling the industry to reduce capacity, the industry seems to be doing a very good job of reducing capacity on there own.
Now that AMR and DAL shortly are being percieved by the market as being in the same dire straits as the rest of the industry look for expidited legislation before the election and a more comprehensive plan after the election to stabilize the industry.
----------------
[/blockquote]
OhCaptainRon,
I have a question. What makes you so sure US assets would be fragmented over to UA without it amounting to a bidding war with other carriers? Do you think AA, DL, CO and NW are going to sit back and allow US to parcel off key assets to UA, if that indeed is the thinking? I don't think it would be so easy for UA to obtain these assets even if US were interested in doing so.
I have a question. What makes you so sure US assets would be fragmented over to UA without it amounting to a bidding war with other carriers? Do you think AA, DL, CO and NW are going to sit back and allow US to parcel off key assets to UA, if that indeed is the thinking? I don't think it would be so easy for UA to obtain these assets even if US were interested in doing so.
several of our contributors seem to be talking all around the main thrust of
this thread which was......is u going to come back to the unions and seek
additional work rule changes and pension cuts.
my belief is that we may not survive if these requests / demands come so
soon after the last round of givebacks....any comments.
this thread which was......is u going to come back to the unions and seek
additional work rule changes and pension cuts.
my belief is that we may not survive if these requests / demands come so
soon after the last round of givebacks....any comments.
[blockquote]
----------------
On 10/10/2002 4
22 PM UAL777flyer wrote:
OhCaptainRon,
I have a question. What makes you so sure US assets would be fragmented over to UA without it amounting to a bidding war with other carriers? Do you think AA, DL, CO and NW are going to sit back and allow US to parcel off key assets to UA, if that indeed is the thinking? I don't think it would be so easy for UA to obtain these assets even if US were interested in doing so.
----------------
[/blockquote]
DL? Too big on the east coast. CAL? Too big in Newark. AA? Too Big (and too big in NYC, the carribean). NWA? Possible, but may have to decide between code share with CAL and U assets. I personally don't think we are to that stage yet. I think Ron's theory is that it would be a mutually benefitual transaction that kept U as a viable entity on the east coast with a profitable feed to UAL. Other bidders would likely take the assets and run. Again, not agreeing with the theory, just picking it apart.
----------------
On 10/10/2002 4
22 PM UAL777flyer wrote: OhCaptainRon,
I have a question. What makes you so sure US assets would be fragmented over to UA without it amounting to a bidding war with other carriers? Do you think AA, DL, CO and NW are going to sit back and allow US to parcel off key assets to UA, if that indeed is the thinking? I don't think it would be so easy for UA to obtain these assets even if US were interested in doing so.
----------------
[/blockquote]
DL? Too big on the east coast. CAL? Too big in Newark. AA? Too Big (and too big in NYC, the carribean). NWA? Possible, but may have to decide between code share with CAL and U assets. I personally don't think we are to that stage yet. I think Ron's theory is that it would be a mutually benefitual transaction that kept U as a viable entity on the east coast with a profitable feed to UAL. Other bidders would likely take the assets and run. Again, not agreeing with the theory, just picking it apart.
The fact that certain key assets of US might not perfectly mesh with carriers other than UA isn't really the point. The point is that those carriers know what those assets could do to them in the hands of UA with US feeding the operation. They're not about to make it easy for UA. Chances are they'd up the bidding to make UA pay a high premium. Remember, it isn't up to US management. The final decision would rest with the bankruptcy judge.
I have to agree completely with ohcaptainron here -- the biggest problem for the next twelve months or so is that revenue has dropped off the cliff. The winter months are always weak, but I suspect most of management's plans at every carrier anticipated a better revenue picture than last winter's. While a billion dollars plus in employee and vendor concessions is an enormous help to the company, the airline won't be out of the woods yet if revenues take a comparable dive due to war fears, a weak economy, etc.
Excluding asset impairments, U posted a loss of half a billion in the fourth quarter of last year. The fourth quarter of this year won't likely be as bad, but advance bookings are extremely weak. Two busy weeks (Thanksgiving and Christmas) won't be enough to balance out the other eleven.
Remember also that the loan guarantee is only a short-term fix. The company has to start making payments on the loan within a few years, and in order to do that, they actually have to have a comfortable working cash balance. Translation: they need to be making a good profit by 2004 and need to have not eaten through the entire billion dollars. If the economy is still weak 12 months from now, things will be very ugly for the entire industry.
Re-regulation won't work either, unless you think you can force passengers to pay the regulated fare to fly in the same numbers they do today. Remember that during regulation, the U.S. airline industry was a small fraction (roughly one-fourth) of its size in 2000. One of the biggest reasons for that was the sheer cost of air travel. You cannot force passengers to pay what they're unwilling or unable to pay; they will seek out other alternatives like driving, Amtrak, Greyhound, videoconferencing, not traveling, etc. If you're willing to see US Airways shrink even further (to, say, 150 mainline aircraft), then re-regulation is the way to go.
Besides, which set of costs should the government use to determine the appropriate fare on a route which has competition? Should the fare from ORF to LAX be based on US's costs or WN's? Should it be priced based on point-to-point costs? (Hint: US would always be stuck charging higher fares in this case, even if they got costs down to about 10 cents/mile, which is where the concessions seem to put them.)
Excluding asset impairments, U posted a loss of half a billion in the fourth quarter of last year. The fourth quarter of this year won't likely be as bad, but advance bookings are extremely weak. Two busy weeks (Thanksgiving and Christmas) won't be enough to balance out the other eleven.
Remember also that the loan guarantee is only a short-term fix. The company has to start making payments on the loan within a few years, and in order to do that, they actually have to have a comfortable working cash balance. Translation: they need to be making a good profit by 2004 and need to have not eaten through the entire billion dollars. If the economy is still weak 12 months from now, things will be very ugly for the entire industry.
Re-regulation won't work either, unless you think you can force passengers to pay the regulated fare to fly in the same numbers they do today. Remember that during regulation, the U.S. airline industry was a small fraction (roughly one-fourth) of its size in 2000. One of the biggest reasons for that was the sheer cost of air travel. You cannot force passengers to pay what they're unwilling or unable to pay; they will seek out other alternatives like driving, Amtrak, Greyhound, videoconferencing, not traveling, etc. If you're willing to see US Airways shrink even further (to, say, 150 mainline aircraft), then re-regulation is the way to go.
Besides, which set of costs should the government use to determine the appropriate fare on a route which has competition? Should the fare from ORF to LAX be based on US's costs or WN's? Should it be priced based on point-to-point costs? (Hint: US would always be stuck charging higher fares in this case, even if they got costs down to about 10 cents/mile, which is where the concessions seem to put them.)
[blockquote]
----------------
On 10/10/2002 5
36 PM UAL777flyer wrote:
The fact that certain key assets of US might not perfectly mesh with carriers other than UA isn't really the point. The point is that those carriers know what those assets could do to them in the hands of UA with US feeding the operation. They're not about to make it easy for UA. Chances are they'd up the bidding to make UA pay a high premium. Remember, it isn't up to US management. The final decision would rest with the bankruptcy judge.
----------------
[/blockquote]
UAL777flyer, I see a few holes in your logic. First, EVERY airline is cash strapped; playing a game where assets are bid up to 'stick it to UAL' could have the effect of sticking it to the airline that bid up the asset if they end up winning the bid for a particular asset.
It appears that the airline hemmoraghing the most cash is AMR, due to their acquisition of TWA. They would like to furlough more employees, but it gets very sticky from this point forward. I don't think that AMR has the time, cash, or desire to acquire additional assets.
Busdriver has already mentioned DAL's problem if they attempt to acquire much of U's assets ... too much overlap, and not likely to be approved if they go for more than a couple of smaller pieces.
Northwest and CAL are the most likely other suitors. CAL's cash position is not great, so NWAC is in the best shape to compete with UAL for U's assets.
UAL is not interested in U's most valuable assets, DCA gates and slots. If any other airline can scrape together additional cash to purchase any of U's assets, this will be the piece that they most desire. I would expect any competitor to go after those assets first.
You also assume that U's fragmentation would take place under the direction of a BK judge. However, U filed for Chap 11, not Chap 7. U could sell any assets after emerging from BK, which is probably a more desirable solution, since the proceeds from the sale of any assets wouldn't have to go to paying off debts that will be forgiven before emerging from BK.
UAL absolutely has to get the $1.8 Bil loan guarantee from the ATSB to make this work, and save UAL from having to file chap 11. If UAL files chap 11, every other major carrier will follow, because they won't be able to compete with a post-chap 11 UAL cost structure. If for no other reason than preventing the domino effect, I think that the ATSB will approve UAL's request.
In today's environment, aircraft and personnel are a liability. There is a lot of overcapacity in the airline industry. The assets of U that are currently valuable are gates and slots; other airlines aren't going to want anything else.
FWIW, I have no 'inside' contacts. However, in the past there's been a ton of inaccurate information attributed to insiders, so I discount certain individuals who lace their posts with references to those 'in the know.'
----------------
On 10/10/2002 5
36 PM UAL777flyer wrote: The fact that certain key assets of US might not perfectly mesh with carriers other than UA isn't really the point. The point is that those carriers know what those assets could do to them in the hands of UA with US feeding the operation. They're not about to make it easy for UA. Chances are they'd up the bidding to make UA pay a high premium. Remember, it isn't up to US management. The final decision would rest with the bankruptcy judge.
----------------
[/blockquote]
UAL777flyer, I see a few holes in your logic. First, EVERY airline is cash strapped; playing a game where assets are bid up to 'stick it to UAL' could have the effect of sticking it to the airline that bid up the asset if they end up winning the bid for a particular asset.
It appears that the airline hemmoraghing the most cash is AMR, due to their acquisition of TWA. They would like to furlough more employees, but it gets very sticky from this point forward. I don't think that AMR has the time, cash, or desire to acquire additional assets.
Busdriver has already mentioned DAL's problem if they attempt to acquire much of U's assets ... too much overlap, and not likely to be approved if they go for more than a couple of smaller pieces.
Northwest and CAL are the most likely other suitors. CAL's cash position is not great, so NWAC is in the best shape to compete with UAL for U's assets.
UAL is not interested in U's most valuable assets, DCA gates and slots. If any other airline can scrape together additional cash to purchase any of U's assets, this will be the piece that they most desire. I would expect any competitor to go after those assets first.
You also assume that U's fragmentation would take place under the direction of a BK judge. However, U filed for Chap 11, not Chap 7. U could sell any assets after emerging from BK, which is probably a more desirable solution, since the proceeds from the sale of any assets wouldn't have to go to paying off debts that will be forgiven before emerging from BK.
UAL absolutely has to get the $1.8 Bil loan guarantee from the ATSB to make this work, and save UAL from having to file chap 11. If UAL files chap 11, every other major carrier will follow, because they won't be able to compete with a post-chap 11 UAL cost structure. If for no other reason than preventing the domino effect, I think that the ATSB will approve UAL's request.
In today's environment, aircraft and personnel are a liability. There is a lot of overcapacity in the airline industry. The assets of U that are currently valuable are gates and slots; other airlines aren't going to want anything else.
FWIW, I have no 'inside' contacts. However, in the past there's been a ton of inaccurate information attributed to insiders, so I discount certain individuals who lace their posts with references to those 'in the know.'
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