Deadline for lease extensions

UnitedChicago

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Aug 27, 2002
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syncronicity:

while i agree that it's a cause for concern and i have read that the bankers have been turned off by united's approch - this is a monumental undertaking.

there are literally hundreds of parties that have an ownership stake in ua's fleet. it is no easy task to negotiate with each of these stakeholders.

while their approach may or may not be the correct one, i hardly think ua has wasted time. 60 days is just not sufficient to renegotiated with hundreds of stakeholders.

don't forget everything else they have to do as well...like figure out a restructing plan, negotiate with labor, etc.

bankruptcy is no easy task. we'll see what happens today. beginning at 1:30, the court has a full plate of issues.
 
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Agreed to most of what you posted.

I too read Crains so I already read the article.

There may well be some holders that can afford to lose money and want to make a point. But...like the article states...it is a big game of poker...so to a degree one could argue both sides are posturing in the name of negotiating.

Would love to be at the hearing today...the judge is to rule on Tilton's compensation and I think on State Street's request to sell the remaining stock.
 
Today is the last day for United to agree to new lease terms (or to get extensions) with their various aircraft creditors. After today, those creditors could take back the airplanes if they wanted to.
Apparently, in spite of being in bankruptcy, United still has an outsize amount of institutional arrogance. They are banking on the fact that the market for jets is so poor to force new agreements with their lessors. And as of today, it appears that they have worked out agreements with very few of those parties. And this IS the deadline, today.
Absolutely amazing. The stupidity in this is truly remarkable. United is in a situation where they HAVE to work with creditors in order to survive, and yet it sounds as if they are still trying to dictate terms. Well, if the proverbial ariplane repo men start coming around in the next few weeks and United is forced to drastically cut schedules, then what?
In other messages on this board I've criticized certain members of the mechanics union for essentially taking an aggressive position when they have little or no leverage. Well, now it's managements turn. You had 60 days to work out agreements for 300-400 airplanes, you should have been working on it from day one, and you're bankrupt! Stop acting like you're all that.
-synchronicity
 
In ANY negotiation, you always take into account what the other side's options are.

United is basically saying that since the market for aircraft is depressed, it would be better for the lessors to continue to defer the payments and keep the aircraft in service and out of the market. Depending on the lessors preference, some may choose to take the risk of getting cash in the future rather than parking the aircaft in the desert.

The deferred lease payments are a big reason why UA still has a bundle of cash right now and can continue operations.
 
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On 2/6/2003 12:56:36 PM UnitedChicago wrote:

syncronicity:

while i agree that it's a cause for concern and i have read that the bankers have been turned off by united's approch - this is a monumental undertaking.

there are literally hundreds of parties that have an ownership stake in ua's fleet. it is no easy task to negotiate with each of these stakeholders.

while their approach may or may not be the correct one, i hardly think ua has wasted time. 60 days is just not sufficient to renegotiated with hundreds of stakeholders.

don't forget everything else they have to do as well...like figure out a restructing plan, negotiate with labor, etc.

bankruptcy is no easy task. we'll see what happens today. beginning at 1:30, the court has a full plate of issues.
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I know exactly how monumental the undertaking is. However, taking an antagonistic stance is hardly the way to curry favor, especially when extensions will almost definitely be necessary (as you say, hundreds of parties are involved. I suspect it's more like thousands of parties).

Here's a link (hope it will continue to work) with more information on this issue: http://www.chicagobusiness.com/cgi-bin/news.pl?id=7857

Note the last sentence:

"It seems like there are a few bondholders that are big enough that they have significant control," said Persky. "They're of the mind that UAL is acting in a hostile and aggressive manner and they must respond in kind." (emphasis added)

Hey, I want United to survive, too, but for that to happen people have to start using their brains.

-synchronicity
 
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Uk:

Thanks - as always - for a respectful, non-melo dramatic post! I'm sure the employees would appreciate the respect you demonstrate. While people might not agree with you...at least you share your thoughts and observations in a professional and respectful manner.

I tend to agree with you that this may be the right approach.

Let's face it...United's survival is at risk. While I remain positive, there are huge barriers to overcome for them to make it.

It comes down to - in a sense - a last ditch, radical, bold approach to make it. It's a buyer's market in terms of airplane leases. Taking a tough stand is a bold move to draw a line and say we either get this type of relief or it's over. There's not time for coffee talk in terms of negotiations. Because there are hundreds of stakeholders, UA needs to set a precedent. If UA goes away, the airplane market would be flooded with parked airplanes.

Like anything in business - especially in the airline industry - both sides dig in to get the best possible deal. It's the art of negotiation.

Either way...I'm convinced that management will get a bad wrap with whatever they propose. UA has become the company that everyone loves to hate.

Take care!
 
I agree that UAL is the one to hate right now. Many people I know still hold grudges from the pilot slowdown and all the other idiotic things UAL pulled in the 1990's. I hope they can pull a rabbitt out of a hat and survive also, but the mountain is high. Good luck to all...
 
Sycronicity: The quote was one man's opinion. So are you saying now we start listening to the analysts?
 
UnitedChicago

Before the long knives come out and everyone starts to dance around the May Pole in a moment of Orwellian hate against United management, is it possible that this may very well be the best possible course against the creditors? By this I mean that United is using they leverage they have to negotiate better lease arrangements. In turn, the other parties scream and cry that they are not being treated fairly. Too bad. These are the very firms that would kill and maim to make a dollar. I would rather think that this pressure is exactly what is needed and it must be cutting close or the protests would not be so great. I have watched from the sidelines as other airlines, financial institutions, and analysts have tried to drive United out of business. When United fights back then this is then characterized as unfair. I must throw my support in behind United managment on this. I hope they end up having to pay a penny on every dollar!
Cheers
 
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mr. hell:

Yep...UA management have all taken an 8 week vacation. They've done absolutely no work. They've been all sunning themselves on the beach.

Please.
 
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On 2/6/2003 1:56:53 PM Ukridge wrote:

UnitedChicago

Before the long knives come out and everyone starts to dance around the May Pole in a moment of Orwellian hate against United management, is it possible that this may very well be the best possible course against the creditors? By this I mean that United is using they leverage they have to negotiate better lease arrangements. In turn, the other parties scream and cry that they are not being treated fairly. Too bad. These are the very firms that would kill and maim to make a dollar. I would rather think that this pressure is exactly what is needed and it must be cutting close or the protests would not be so great. I have watched from the sidelines as other airlines, financial institutions, and analysts have tried to drive United out of business. When United fights back then this is then characterized as unfair. I must throw my support in behind United managment on this. I hope they end up having to pay a penny on every dollar!
Cheers

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Actually, that would be me you appear to be responding to, not UnitedChicago, and the simple answer is: no, this is not in United’s best interests.

It’s not that United is being “unfairâ€. It is that the creditors can take back their airplanes if they want, at which point it’s game over for UAL.

Now, the market for airplanes stinks currently (although at different levels for different aircraft, the 737 market is just about non-existent, the 757 market is also poor, but is better for the newer planes with certain engines), but if United pushes it far enough, the creditors can choose to take their ball (or their 757) and go home. United won’t pay “a penny on the dollar†unless the market for the aircraft works out to less than that, both now and in the upcoming 12-36 months.

The other thing is that UAL is in no position to be “playing hardballâ€. There is a fine line between “being a strong negotiator†and “being a horse’s assâ€, and United is firmly on the “horse’s ass†side of the line. Which, coming from a company that is in in bankruptcy, is phenomenal.

I’m not saying United’s management should get down on the rug and beg forgiveness, but they should realize that they need to work with their creditors to survive, not actively piss them off. And so far they’ve been actively pissing them off, which is stupid.

As for Segue’s comments, you’re right, given the poor market, the lessors options are limited. However, this doesn’t mean United should act as though the lessors options are non-existent. Nor should they be coming down to the last minute (and beyond) without having worked out ANY agreements.

You might think this is a “bash UAL management†post. It’s not, it’s an observation that UAL management doesn’t seem to have learned anything, and institutional arrogance will only get in the way of any revival, and I’ve knocked some union personnel for that same attitude.

-synchronicity
 
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On 2/6/2003 12:56:36 PM UnitedChicago wrote:

while their approach may or may not be the correct one, i hardly think ua has wasted time.

don't forget everything else they have to do as well...like figure out a restructing plan, negotiate with labor, etc.

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"The Slows" again!! My god stop being an apologist for incompetency. In the past sixty days UA has neither figured out a restructuring plan nor negotiated with labor.

Now UA is flying naked, just daring the repo man. Just like the corner loan shark, if the lessors allow UA to get away with this stunt then those same lessors won't be in business much longer. Don't tell me about depressed aircraft markets --- a couple of months ago this same equipment was being touted as unencumbered assets!
 
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syncronicity:

Again...I agree with some of what you say.

But... ;)

First off, I would only imagine that faced with the reality of a plane being taken away, and if that plane is vital to ops - that UA would relent and cut a deal. I highly doubt they're going to sit back and hide behind a demand and watch their vital aircraft be taken away. If faced with this situation, they can get current in lease payments and continue to negotiate. I doubt UA would "go naked" on aircraft vital to ops.

Second off, I do think United is in the position to make certain demands. Look at the aircraft market and the alternatives. U did the exact same thing. Maybe their holders didn't rip them as much in the press and before the judge as UA's are but there's a good reason for UA holders to make a huge stink.

UA is far bigger than U - we're talking many more planes. All of this is setting precedent for the other airlines. Even without CH11 filings...all will seek to renegotiate with holders in order to compete with UA. Also, if AA goes CH11 - things get much worse for the holders.

I think much of this is a war of words, posturing, and trying to see who is truly in the position to make demands.

In the end, I'm willing to bet all parties will come to an agreement...and it will be in UA's favor. Bankruptcy is an ugly ugly process and you can't expect all parties to be nice. Rhetoric and threats are all part of the preocess.

I hope you don't take my comments the wrong way - I don't want to start a battle...just want to respectfully make some observations and rebut some of what you stated.

I think it's important to debate and disagree to the top of our intelligence so that we don't waste time and emotion being nasty.
 
mr. hell:

You have no idea the living hell the management folks are living right now, especially finance and treasury. Ever work a 24 hour day before?

Unecumbered assets? Yes, UA has them, as well as financed assets. The financed ones are the subject of the discussion.

Your ignorance of business is amazing.
 

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