Essential Reading

[SVQLBA]

Everyone with an interest in UA and the industry should pull down a copy of today's BK court brief, filed with the SEC as an 8K, in which UA presents its case for abrogating contracts. In particular, the discussion of industry trends and UA's performance is fascinating reading.

Go to
UA SEC Filings

click on "UAL Corp" filings, and then pull the 8K.

100 pages, but lots of interesting analysis ... the financial projections for UA for Q4 and 2005 make bleak reading.

 

[ualdriver]

Thanks for that post. Very interesting reading.

 

[tinpadro]

Thanks also for the post. I read the whole report and it has very interesting data. The two things I zeroed in on are the part on Glenn Tilton sharing the pension pain if the management pension were dropped. In fact the court has already provided income for Glenn should the empire drop the management pension as part of securing his captaining the empire through BK. Also I find it interesting in the graph of the minimum cash balance covenant clearance with proposed modifications, UA shows that without the savings UA risks dropping below the DIP requirements but at the same time even with the modifications UA still runs the same overall rate as the savings in Dec 04'.

In other words, One would have to assume that in all of 2005 the revenue environment would be positive for UA otherwise any drop or unforseen event would put UA back where it started. This is the same future forecasting that in early 2004 that screwed the retirees and had to incur modifications of medical. It would be safer to assume a negative flow in 2005 since UA hasnt a clear plan and one shold follow a conservative path rather than grasp at straws and come back once again to employees when that future forecast has to be modified. Plan for the worst and hope for the best would be a sensible path with the ever continuing losses the company incurs. Don't forget the 200 million USAir has part of our business pan. If they cease operations where is that money going to come from and does the revenue environment in 2005 assume they are there or not? Hard questions need to be asked here.



<_<

 

[WorldTraveler]

interesting indeed. Is it just a little bit curious that the size of the loss without relief is identical to the size of the relief UAL says it will get if the plans are terminated? The revenue numbers are significantly worse which does raise the same question as has been raised at US - will the business keep being revised every time the company needs more cash and there is a possibility the employees can provide it?

See also the discussion on Delta's transformation on the DL forum. It appears DL continues to say it will not terminate its pensions and dump them on the PBGC but it needs longer term pension relief from the government. There is no doubt that UA's difficulties are providing ammunition that Delta can use in attempting an out of court and less radical restructuring.

 

[Winglet]

I think all these managements are lying. They have every intention of foisting their pension obligations on the taxpayers . . . . . well all except their personal ones which will be paid, plus some.

 

[Walmartgreeter]

See also the discussion on Delta's transformation on the DL forum. It appears DL continues to say it will not terminate its pensions and dump them on the PBGC but it needs longer term pension relief from the government. There is no doubt that UA's difficulties are providing ammunition that Delta can use in attempting an out of court and less radical restructuring.

[post="229260"][/post]​

If Delta could transform itself, as apparently all the majors must, AND was able to preserve its pensions (in some form) it would have the most motivated work force of any airline in the country. Whatever management's intentions, they must be looking at this scenerio. Greeter.

 

[WorldTraveler]

I believe you are absolutely right, Greeter. There is no way AA, DL, CO, or NW wants to be in the position of having to walk away from its obligations to its employees. I have a hard time believing the government won't meet the solvent airlines at least in the middle.

As with many issues, there are real similarities between what is happening in the airline industry and what is happening in the larger American economy. Bush's advisors have got to be looking at what is happening in the airline industry and saying that what is happening here cannot be allowed to happen to Social Security or other pension funds. I don't know how the gov't will make it work, but allowing the rest of America go down the path the airlines are on right now is simply not an option if America is to fiscally survive.

 

[MCI transplant]

I believe you are absolutely right, Greeter. There is no way AA, DL, CO, or NW wants to be in the position of having to walk away from its obligations to its employees. I have a hard time believing the government won't meet the solvent airlines at least in the middle.

As with many issues, there are real similarities between what is happening in the airline industry and what is happening in the larger American economy. Bush's advisors have got to be looking at what is happening in the airline industry and saying that what is happening here cannot be allowed to happen to Social Security or other pension funds. I don't know how the gov't will make it work, but allowing the rest of America go down the path the airlines are on right now is simply not an option if America is to fiscally survive.

[post="229475"][/post]​

<_< World! If a presedant is set in the Airline Industry, what makes you think that other industries won't follow suit????

 

[FWAAA]

I believe you are absolutely right, Greeter. There is no way AA, DL, CO, or NW wants to be in the position of having to walk away from its obligations to its employees. I have a hard time believing the government won't meet the solvent airlines at least in the middle.

As with many issues, there are real similarities between what is happening in the airline industry and what is happening in the larger American economy. Bush's advisors have got to be looking at what is happening in the airline industry and saying that what is happening here cannot be allowed to happen to Social Security or other pension funds. I don't know how the gov't will make it work, but allowing the rest of America go down the path the airlines are on right now is simply not an option if America is to fiscally survive.

[post="229475"][/post]​

I agree with both you and Greeter.

Although everyone agrees that Defined Contribution pension arrangements (like at WN) are probably much cheaper for the company over the long term than old style Defined Benefit plans, what really matters these days is not so much the overall cost, but the immediate cash drain.

UA and US don't have enough cash to make their reduced 2004 minimum required contributions to their plans, and are seeking to cancel all of them.

AA, on the other hand, made its 2004 contributions early in 2004 and will have no problem making its 2005 contributions.

DL made VOLUNTARY contributions in early 2004 to all of its plans to help drain the large cash balance so as to speed up the inevitable pilot paycuts.

Sure, AA and DL might spend less over the next 10 or 20 years if they both terminated their pension plans and replaced them with DC plans, but both are concerned with how much cash they need to spend this year and next, and the DB plans might just require less cash.

Some evidence that the DC plans might take more cash right now? Southwest spends a much larger proportion of its revenues on its DC plan contributions than AA spends on its DB plans. WN's DC plans are a much larger percentage of total employee comp as well. By all measures, AA would spend nearly double this next year if its employees all had a WN-type plan and if AA contributed as much as WN does to its employees' plans.

That's right - for now, although in the long term, WN will probably spend less on its employees' retirement than will AA, WN's pension contributions are more expensive than AA's (when measured by percentage of employee comp, by percentage of total revenue and per employee).

On top of the fact that the DB plan is cheaper RIGHT NOW (when it matters the most), terminating the plan is a sure-fire way to piss off the few remaining employees who don't already despise their employer. AA and DL both know that.

Although the disgruntled employees are loathe to admit it, execs of both DL and AA don't sit around every day trying to dream up ways to screw their employees. Both companies demanded and enacted painful pay cuts, but for now, both still maintain their pension plans.

Lots of armchair pundits (usually the most disgruntled) predict that AA and DL will play "follow the leader" once UA and US cancel their remaining pension plans.

Don't be so sure. B)