Execs get their take from UAL

[MiAAmi]

United execs' stock could zoom in value By Marilyn Adams, USA TODAY
Mon Jan 30, 7:28 AM ET



A court-approved plan to reward top United Airlines executives with $115 million in stock could be worth double or triple that sum, based on advance trading of new shares to be issued this week.


On Friday, creditors who will receive airline stock as part of the settlement of United's recently completed Chapter 11 bankruptcy were selling at $43 a share on a "when issued" basis. Analyst Helane Becker of Benchmark Co. says prices in last week's trading likely foreshadow share values in public trading of the stock, which is set to begin Thursday.


On Jan. 20, a Chicago bankruptcy judge approved a Chapter 11 exit plan for the No. 2 carrier that gives the top 400 executives an 8% stake in the reorganized company. In court, United consultants estimated stock in a reorganized United would fetch $15 a share. CEO Glenn Tilton's portion, the largest, was valued then at $15 million.


If United shares stay high, "the incentive plan could be worth three times as much" as the court estimate, said hedge fund manager Steve Gidumal of Virtus Capital.


Neither Tilton nor the other executives can profit immediately from this week's debut of the new stock under the ticker symbol UAUA. The compensation plan makes the stock and options eligible for sale over a four-year period. The first 20% is eligible for sale in six months.


United's executive incentive plan has been controversial from the start. The company had proposed executives get a 15% stake in the reorganized company, but the creditors' committee balked. The company later agreed to an 8% executive stake, which the judge approved over labor union objections.


Duane Woerth, national president of the Air Line Pilots Association, calls the plan "over-the-top" and "an insult to employees who gave up a lot" in pay and benefits during Chapter 11.


"Executive compensation in America has been crazy for a while," he said, "but I don't think anyone was expecting this from a company coming out of Chapter 11."


United spokeswoman Jean Medina said Friday the ultimate value of the stock plan is "theoretical" and will depend on share prices in the future, when executives can sell their stock.


United CFO Jake Brace declined Friday to comment on the share price, but said airlines generally are "on the upswing in the financial markets." He noted United's $3 billion exit financing drew $7 billion in bids from lenders wanting to take part.


Analyst Ray Neidl of Calyon Securities said last week's price shows market optimism about United's prospects. In bankruptcy, United shrank its fleet and workforce, slashed labor costs and debt, and kept its global route network.


The share price for US Airways, which merged with America West last fall, hit $40.60 earlier this month, nearly double the price when it was issued in September. It closed Friday at $28.89.

 

[mrfish3726]

They're laughing all the way to the bank to and when they get paid you can see a big management change at UniTED. Even with a management change though they'll still probably be in BK II just like USAIR. They talked the talk now lets see if they can walk the walk???? If they keep losing 100's of millions a quater it's just a matter of time really! Then they're only hope is to have a smaller competitior buy them up just like what AWA did for USAIR!

 

[Fly]

Now that would be interesting. And to think that LCC is now in an enviable position and last year they were all but toast. So tell me Mr Fish, what exactly is your cut down? Your sounding like you're on our side, that maybe we'll merge with a stronger carrier, retain our seniority and become one of the strongest legacies operating. Thanks! :wub:

 

[mrfish3726]

Fly,

It will have to be someone smarter than Tilton, McDonald, or Brace to keep UniTED out of BK II!

 

[Fly]

Where do you pull this stuff out of Fish? What gave you the impression that United was re-entering BK when they haven't even exited #1? Don't you think they would just push the exit back if there was any chance that they would be unable to make a go of it? I realize that you are a parrot and someone must have said that so now you can only babble the same thing over and over, but give it a rest. Some people are highly educated, unlike you, and those people have chosen to give United $3 BILLION. That isn't chump change, chump.

 

[synchronicity]

United execs' stock could zoom in value By Marilyn Adams, USA TODAY
Mon Jan 30, 7:28 AM ET

A court-approved plan to reward top United Airlines executives with $115 million in stock could be worth double or triple that sum, based on advance trading of new shares to be issued this week.


On Friday, creditors who will receive airline stock as part of the settlement of United's recently completed Chapter 11 bankruptcy were selling at $43 a share on a "when issued" basis. Analyst Helane Becker of Benchmark Co. says prices in last week's trading likely foreshadow share values in public trading of the stock, which is set to begin Thursday.
On Jan. 20, a Chicago bankruptcy judge approved a Chapter 11 exit plan for the No. 2 carrier that gives the top 400 executives an 8% stake in the reorganized company. In court, United consultants estimated stock in a reorganized United would fetch $15 a share. CEO Glenn Tilton's portion, the largest, was valued then at $15 million.
If United shares stay high, "the incentive plan could be worth three times as much" as the court estimate, said hedge fund manager Steve Gidumal of Virtus Capital.
Neither Tilton nor the other executives can profit immediately from this week's debut of the new stock under the ticker symbol UAUA. The compensation plan makes the stock and options eligible for sale over a four-year period. The first 20% is eligible for sale in six months.
United's executive incentive plan has been controversial from the start. The company had proposed executives get a 15% stake in the reorganized company, but the creditors' committee balked. The company later agreed to an 8% executive stake, which the judge approved over labor union objections.
Duane Woerth, national president of the Air Line Pilots Association, calls the plan "over-the-top" and "an insult to employees who gave up a lot" in pay and benefits during Chapter 11.
"Executive compensation in America has been crazy for a while," he said, "but I don't think anyone was expecting this from a company coming out of Chapter 11."
...

Well, remember that it's not like the top UAL execs get this as a big lump sum of cash, or as stock they can sell tomorrow. It's stock and/or options that can only be sold/exercised in various amounts over periods of time (as the article says, 20% six months from now)

Second, just because UAUA might trade at $40/share next week or month doesn't mean it will still do so in six months or two years, as well know.

Having said that, it's pretty obvious that executive compensation in this country is broken, as the differential between what top executives make and average workers make has exploded over the last 25 years. In 1980 CEO's made 42 times what an "average worker" made, by 1990 it was up to 85 times, and reached 531 times in 2000, thanks mainly to lavish option packages whose value was magnified by the booming stock market. Even on the heels of the market bust, CEO pay remained at 431 times that of the average worker in 2004.

CEO pay is normally determined by a compensation committee that is often little more than a rubber stamp, good 'ol boys network dealing with other people's money. Unless and until we see company shareholders take CEO compensation issues as seriously (if not more so) than they take overall coroporate cost issues, CEO pay will continue to grow at ludicrous rates (I'll also toss in that CEO compensation is at such levels that it seems to have little impact on actual CEO performance). I'm hardly a union apologist; I generally believe that free markets work quite well, but right now CEO compensation is largely insulated from market constraints.

I'll also add that the issue of the compensation going to United's top execs has certainly been a morale killer in my wife's department. Great leaders lead by example. UAL's (excuse me, UAUA's) don't.

-synchronicity

**Moderator Note: Please refrain from quoting a lengthy post. It just makes it easier for everyone to read follow-on posts. Thank you.**

 

[mrfish3726]

Fly,

Remember that UniTED lost 128M this last quarter and still has a debt to repay of 17B (Billion) after exit from BK. Good luck HUN, but I can see the same thing happening to UniTED that happened at USAIR. SAME/SAME BK II and then who will aquire UniTED????

 

[synchronicity]

**Moderator Note: Please refrain from quoting a lengthy post. It just makes it easier for everyone to read follow-on posts. Thank you.**

Moderator- then inform the powers that be to change their software so that "quoting an entire prior post" isn't the default function, and so it's easier to only quote parts of prior posts. It doesn't seem to be a problem in other message board forums I've participated in.

-synchronicity

 

[767jetz]

Fly,

Remember that UniTED lost 128M this last quarter and still has a debt to repay of 17B (Billion) after exit from BK.

Where do you come up with this stuff? Do you have any idea how foolish you sound?

Here's a little education for you, straight from UA's vice president and controller:

"We recorded reorganization expenses of $17 billion for the fourth quarter and $21 billion for the full year. These expenses reflect claims allowed against the company from our creditors as part of the restructuring process. In order to conform with the rules of GAAP, we have to record the full claim amounts as reorganization expenses now, even though these claims are expected to be settled to just a minor fraction of the claims recorded – and in most cases that will be for stock in the new company and not in cash.

So, based on this accounting, we expect to record a large reorganization gain in our earnings next quarter, the first quarter of 2006. We do that to reflect the fact that we actually will settle these claims for a minor fraction of the claim amounts recorded.

So, these very large reorganization items create quite a significant loss for this quarter and a large gain in the first quarter of 2006. But remember, in both cases, the actual impact on our cash position is minimal.

And that's why it’s important to look at our operating earnings, which are not affected by these restructuring charges, as a better measure of the company’s performance."

You really should learn a thing or two about finances before spouting off.

 

[767jetz]

Some people are highly educated, unlike you, and those people have chosen to give United $3 BILLION. That isn't chump change, chump.

Acutally it was more like $7 BILLION. UA only needed 3.

 

[WNjetdoc]

Its sick and it makes me want to hurl!!!