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On 7/13/2003 10
02 AM Chip Munn wrote:
For example, your comment of "Does anyone else see the humor in a U pilot, whose company has 1,839 pilots on furlough, rag on UAL, where there’s 1,555 pilots on furlough. Clearly your post is to try and jab US Airways, but are you not trying to use this comment to self rationalize your situation and provide self therapy.
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Look pal, I''m already furloughed. I don''t expect to be back on property for several years, so there''s no therapy going on for me. I''m making almost double what I would as a A320/B737 FO, so if UAL doesn''t survive, I already have an alternate career. For that reason, I''ll take a bypass the first time that I''m recalled.
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On 7/13/2003 10
02 AM Chip Munn wrote:
This whole situation is bad for the entire industry, but let’s look at the facts if you want to do a comparison. What company has reduced capacity to match demand, has the highest industry yield RPM, is the only airline to receive unanimous approval for a federal loan guarantee, also had the highest load factor in the history of the company from 78.0% to 78.6% for the month of June, has an equity plan sponsor, and its liquidity equals that of the largest industry airlines whose revenue is three times the size? Moreover, what company has a strong business plan to compete with low cost operators, will add additional international code share revenue, worked out its RJ code share agreements, and continues to cut costs with other stakeholders?
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Chip, comparing a short haul carrier''s yield RPMs with a long haul carrier is like comparing a Hyundai with a BMW. Of COURSE the short haul carrier''s going to have a higher yield. What''s U''s average stage length? UAL''s? They are in completely different classes. It''s been pointed out to you multiple times that you have to subtract CASM from RASM in order to have a halfa$$ comparison between the two companies.
Here''s a refresher article for you: http://www.planebusiness.com/tscolumns/tsc....html
Notice how U has always had the highest yield in the industry? But it doesn''t mean crap if CASM is higher than RASM, which has always been U''s problem.
As for U''s business plan, yes it makes sense. Dump all of the large aircraft and replace them with RJs; turning U into a regional. It makes sense when you look at U''s route structure. U will be UAL''s replacement for ACA on the east coast.
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On 7/13/2003 10
02 AM Chip Munn wrote:
Which airline has none of these?
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Chip, stop pretending that you''re privy to UAL''s plans. You''re not. I''m not. UAL''s management is, IMO, a bunch of vicious ba$tard$. But they''re our ba$tard$. Just like you''d want to hire the biggest shark of a lawyer when you need one. I have a great deal of confidence in UAL''s management. Yes, they''ve made mistakes. Attempting to buy U at $60/sh. Starting Avolar. Both ideas made sense on paper, but the timing of the decision and UAL''s execution were poor.
I like UAL''s new plan; let U turn themselves into a regional and feed UAL mainline. Don''t be surprised when UAL takes over an increasing number of gates at PHL for our mainline.
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On 7/13/2003 10
02 AM Chip Munn wrote:
Furthermore, which airline recently briefed its board and unsecured creditors committee on the framework of its new business plan that some observers believe has more holes in it than a piece of Swiss cheese? This four-part plan includes: focusing on the premium customer, optimizing the route network, having a competitive cost structure, and providing industry leading operational performance. Where’s the beef?
That’s great, but shouldn’t that be the plan of a start up airline and not one of a company struggling to survive? Moreover, what’s different from United’s new business plan than that of any other company in any other industry?
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Has anyone who''s actually seen the plan publically stated that it''s swiss cheese? I''m very surprised; they''d be subject to a nondisclosure agreement.
And are you REALLY naive enough to believe that UAL''s management has fully disclosed its business plan?
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On 7/13/2003 10
02 AM Chip Munn wrote:
United has made progress in some areas that include reducing its labor expense, cutting maintenance costs by closing its Indianapolis and Oakland maintenance facilities and outsourcing this work, and reducing some Express expenses with new agreements. In addition, the airline will increase incremental revenue with its domestic code share alliance, however, it appears these cuts and revenue enhancements will not be enough to emerge from its formal reorganization.
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Won''t be enough to emerge? This is coming from the same person who called UAL''s takeover of U at $60/sh a good idea and slam dunk. Your history proves that you''re ill equipped to make such judgements.
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On 7/13/2003 10
02 AM Chip Munn wrote:
Moving forward the company continues to face significant hurdles and the airline must be cash flow positive in October or it will violate its DIP financing revenue and cash flow targets, which could occur as early as late summer. It’s unclear how the DIP lenders will act if the company violates the loan covenants, but it takes just one financier (J.P. Morgan, CIT Group, Citigroup, and Bank One) to not agree to waive the covenants or the airline could have some of its key assets repossessed, which undoubtedly would place the airline at further risk.
In addition, to emerge from bankruptcy the company must:
Repay up to $1.5 billion in DIP financing and find exit financing to cover this loan.
Obtain additional exit financing and an equity plan sponsor to provide liquidity to operate so the airline can emerge from its in-court restructuring.
Convince the ATSB to provide about $1.8 billion in federal loan guarantees, which the company is likely to pursue to become part of its plan of reorganization and to repay the DIP financing. However, it uncertain on whether or the company can convince the ATSB to provide the airline with guaranteed funds because the board’s previous position was the carrier''s revenue projections were too optimistic and that it failed to reckon with low-cost competition and future pension funding needs.
Solve the underfunded pension crisis. Due to further FOMC interest rate cuts and retirement fund market value declines, the airline will likely have to further address its year-end 2002 $6.3 billion Defined Benefit (DB) pension plan shortfall. As in US Airways’ restructuring, this could require further pension plan concessions, which could include DB plan terminations, if a legislative solution is not found.
Prevent a takeover specialist like Carl Icahn or somebody like him from coming in at the last minute with a couple of hundred million dollars and taking control of the airline.
Address the creditor’s committee previous desire to divest of the Dulles, Denver, and Los Angeles hubs, according to United senior vice president of planning Greg Taylor’s Omnibus Hearing testimony. In my opinion, the hubs will stay in some form, but I agree with the Chicago Tribune, in their four-part story titled, "United’s Undoing: A War Within", that the airline "may continue only as a shadow of its former self." Moreover, if parts of the hubs are sold, I believe the most likely suitor is US Airways because of the domestic alliance and the fact US Airways’ chairman of the board has publicly discussed his interest in acquiring United’s assets.
Answer the creditor’s committee motion to force the airline to release all of the McKinsey & Co. analysis, studies, and reports.
Satisfy the cities of San Francisco, Los Angeles, Denver, Chicago, and New York who have all filed a motion seeking back payments or to have the ability to evict the airline from its premises.
Improve upon its dead last mature carrier revenue performance, where according to a recent AVMARK report, United ranks last in Yield RPM for all hub and spoke carriers, before a plan of reorganization and disclosure statement can be approved. This is likely to be a very serious issue considering the Air Transport Association has said summer revenue is below target, there are weak September bookings associated with passenger fear surrounding the September 11 anniversary, and the traditional post Labor Day seasonal leisure traffic fall off will once again occur. Meanwhile, Pacific traffic is not returning to pre-SARS levels and United has the greatest U.S. carrier exposure to this economic downturn in Southeast Asia.
Reach sufficient agreements with Express partners to provide the traffic necessary to operate the hubs.
Figure out how to address the low cost carrier competitive threat, since the company has placed the Low Cost Operator (airline within an airline) plan on the back burner, especially since reports persist inside of WHQ that indicate there is zero movement towards implementing this strategy.
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Violation of DIP covenants: U violated its'' DIP covenants while in chap 11. Did your CEO pull DIP financing? UAL has financiers lined up TRYING to loan UAL money. This is NOT a problem.
The $1.5 Bil to emerge from BK and obtain additional exit financing ... see my above answer. There are plenty of financiers TRYING to loan UAL money. BTW, UAL had $2.2 bil in the bank at the end of May; since UAL''s been cashflow POSITIVE, that number should be higher now.
ATSB loan. It''d be nice to get it, but it''s not a showstopper. Just very cheap money.
Underfunded pension crisis. I like how you used the word crisis. UAL''s total pension shortfall (ALL pension plans) last Dec was only slightly more than U''s pilot pension shortfall. Considering that UAL is much larger than U, it is NOT a crisis. Problem yes, crisis no.
Takeover by someone like Icahn? Where do you dream this stuff up?
UAL''s hubs. You can continue to firmly believe that UAL''s going to sell pieces to U. I expect you to be flying an RJ before you retire; the A321 will have been the biggest piece of equipment that you will have captained. We''ll just have to wait and see who''s correct about each company''s future and career.
Release all of McKinsey''s analysis, studies, and reports. Wedoff''s already ruled in UAL''s favor on that one; they won''t be made public.
Satisfy cities of San Francisco, Los Angeles, Denver, Chicago, and New York who have all filed a motion seeking back payments or to have the ability to evict the airline from its premises. That''ll be settled in BK court. I expect Wedoff to continue to rule in UAL''s favor.
Fix UAL''s yield RPM. Chip, yields are only one measure. You''re using stats from the height of SARs. And you think that those numbers aren''t skewed?
Agreements with Express partners. Let''s see our east coast RJ partner will be U. For the rest of the country, UAL management will continue to play one company against the other to keep costs down.
The LCC threat. UAL''s successfully taken on SWA before and UAL controls FRNT''s DEN expansion. Most of the LCCs are concentrating on expanding on the east coast; U''s markets.
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On 7/13/2003 10
02 AM Chip Munn wrote:
Although United has made progress in implementing its restructuring, time is running very short and the airline has significant challenges ahead of it if the company is going to remain a viable on-going concern. I continue to believe United will survive, but in my opinion the structure of the airline could radically change. Regardless, the next few months will be interesting and we should know more about the company’s future prospects after the July 18 Omnibus hearing, the August 1 second quarter earnings/losses report (where CBS Market watch said on July 12 the company "appears to have lost the most with a $5.03 consensus estimate"), and during October when the company again addresses earnings/losses and discusses its DIP financing performance.
Iflyjetz, I find it hard to believe you believe United is in better shape than US Airways and can you tell me how your company, who is forecast by First Call consensus estimates, to have more than double the loss of every other major airline for the second quarter while it''s in bankruptcy and not paying all of its bills, is better off than US Airways?
Please spare me the emotion, but I’m just wondering how you can draw the conclusion United is in better shape than US Airways? Please just give me the facts like I presented above, since you believe I "rag on UAL" after the Chicago Tribune said today "United is on the verge of oblivion?"
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Chip, Tilton''s publicly said that UAL could come out of chap 11 this fall, but he doesn''t want to ''leave anything on the table'' before emerging. UAL isn''t the dire straits that U was; U HAD to come out of chap 11 quickly due to agreements with credit card companies. If U was unable to take payment for tickets with credit cards, they would have had to close the doors.
As for the consensus estimates for UAL''s quarterly losses, there are liars, damned liars, and then there are accountants. I don''t know if you''ve watched any financial programs over the last couple of years, but Enron, Tyco, etc were masters at manipulating quarterly results to show whatever they wanted. If I were CEO, I''d try to clear every drag on income off of the books while in chap 11 so that I could show huge profitibility upon emergence from chap 11.
UAL''s in better shape than U because U has multiple carriers encroaching on U''s routes and passengers. UAL doesn''t have the same problem. U continues to retreat from many markets, either downguaging or completely leaving those markets. UAL is ADDING flights because UAL''s maxed out capacity (82% load factor is unacceptably high IMO). U continues to reduce ASMs.
Let''s wait 12 months and see where we stand.
By the way Chip, have you EVER retracted your comments about UAL''s purchase of U being a slam dunk? You made yourself scarce around here after the deal collapsed; perhaps you posted a retraction that I missed?
