Exit Financing & The Future

USA320Pilot

Veteran
May 18, 2003
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www.usaviation.com
It is my understanding that US Airways has exit financing available.

It’s unclear where the financing will be obtained, but Bruce Lakefield has been telling employees throughout the system that he continues to work here to protect David Bronner’s investment. Moreover, US Airways does not have to cancel the common stock, although that normally occurs in a judicial reorganization, and Bronner has said the carrier still has investment value.

Before I discuss exit financing, I believe it is important to note there seems to be more to the story that runs deep into an industry-wide restructuring, which is probably why we are still operating. For example:

Why has the ATSB and their auditors, Moody’s and Lazard, approved 6 ATSB applications or amendments?

Why did the Bush Administration and the ATSB permit US Airways to have access to guaranteed loans until the target bankruptcy exit date, June 30, surprising many of the pundits?

Why did GE provide bridge that is effectively DIP financing?

Why did Govco & Citigroup replace BOA as the “at risk†financiers to lower US Airways’ interest expense?

Why has Bombardier, Embraer, and DVD Bank agreed to supply and finance more RJs during bankruptcy?

Why did Airbus agree to provide the company with $6 million and restructure delivery positions and cancel options?

In my opinion there are two reasons: US Airways’ route network has a very large footprint and the company is leading the legacy carrier transformation into LCC’s. Each of the financiers above, along with the Bush Administration (Andrew Card & Norm Mineta), recognize US Airways is the test case to fix an industry-wide problem and that is how can a critical industry finally become profitable for the long-term.

Interestingly, US Airways has some advantages to transform itself because it can provide point-to-point service in large population markets using EMB-170s, EMB-175s, and EMB-190s first, followed by Broup 2 aircraft, and is a smaller company that will be easier to “turn aroundâ€. US Airways is more like a Cruiser versus a Battleship, and the inertia to fix American, United, Delta, and others will be difficult because of their scope of operations.

US Airways' single most important point regarding its future? According to David Bronner in an interview last week the airline will have costs less than Sothwest when the Transformation Plan is fully implemented.

The next step is exit financing, the plan of reorganization, and bankruptcy exit, I believe David Bronner’s RSA or the Retirement Systems of New York will provide exit financing. If its RSA I believe Bronner will take the company private and have total control of a corporation that produces $5.5 billion in revenue for less than $500 million.

Following bankruptcy exit, I believe the company could be involved in a corporate transaction, which could occur before Labor Day. Do not be surprised if J. P. Morgan is the Investment Banker, because just like in the Steel and Railroad industries, the next step in the industry’s revolution could be consolidation to create further economies of scale.

Meanwhile, I believe US Airways could be the surviving business enterprise because as former US Airways ALPA Negotiator told me what drives airline industry chairman and CEO’s is one thing: ego’s. Bronner loves being the underdog as well as being interviewed by people like Maria Bartoromo, Susan Carey, and Michelline Maynard, thus in my opinion he will step up to the plate and not only invest more money in US Airways, but finance the next corporate transaction. For the industry to consolidate there must be venture capital because no U.S. airline has the resources for a financial transaction.

With that said, US Airways is not out of the woods and my concern is that the cost cuts will not come out of the company fast enough. For example, even though the IAM-Trainers approved their TA, and the IAM-FSA and IAM-M approved the company’s proposals, the IAM costs will increase in the short-term because the 21% pay cut will be eliminated and replaced by a lower number. Thus, the problem is three-fold: rapidly rising energy prices, no hedge positions, and Delta’s SimplFares implemented before US Airways has a competitive cost structure.

Therefore, the question could be what does US Airways have to do next to remain in business while the cost cuts takes place and revenue deteriorates until the company can fully obtain all of the negotiated cost savings?

Regards,

USA320Pilot
 
USA320Pilot said:
Therefore, the question could be what does US Airways have to do next to remain in business while the cost cuts takes place and revenue deteriorates until the company can fully obtain all of the negotiated cost savings?

Regards,

USA320Pilot
[post="241669"][/post]​
Change the employees psyche, possible mind control of some sort.
 
I won't even try to analyze all of your breathtaking assertions here, but I do have one question that requires an answer. Now that all the labor contracts are done, the PIT hub closed, a few more RJs leased, PHL rolled at some point, and FLL, DCA, BOS expanded as planned, how does US come up with "costs below Southwest?" Most of the labor cost reductions and many of the efficiency improvements are already in place, yet US is nowhere near WN in terms of costs (even when excluding fuel). Could you explain exactly how the costs are going to get to that level?

I just don't think that it is possible with an armada of high CASM RJs, a mixed fleet and hub operations. I do think that it is possible for a legacy airline to coexist with WN, but I'm having a hard time coming up costs lower then WN unless the employees work for free.
 
USA320,
You can talk about Southwest this and Southwest that, but until you have Southwest type MANAGEMENT it IS a moot point.
 
There is no equity in this company to give to anyone who would be stupid enough to provide exit financing.

All the stock is allocated to RSA, employees, some institutional investors and the rest is the general public.

US is in hock up to its eyeballs, so there is nothing to gaurantee a new loan for the $250 million.

Take of those rose colored glasses and let reality set in for a change.
 
I would certainly take Bronner's work as the Gospel :down: The paycut is just a little less than the 21% currently imposed for the majority of those affected. I would think also the costs should decrease when the workforce is cut almost in half and the company makes the agreed to severence payments.
 
700UW:

You're wrong, as usual, and obviously more than a little bitter. I told you over-and-over there would be a lot of IAM "pain" and you regularly disputed this point. The “pain: did not have to be this and much of it is unnecessary. The approach you and some of your colleagues took miserably failed, however, even you will be better of if US Airways succeeds. When would now be a good time for you to support the company and confront reality?

Regards,

USA320Pilot
 
USA320: what airline would usair try for in the transaction type of deal and will the Bush Admin. allow it to merge liek this come fall or labor day? also i do tend to agree with you on this but i not sure i understand how this could help other legacy carriers like delta? isnt delta close to ch11 especially given their 2.2 billion loss last qrter?
 
Robbedagain:

In regard to M&A activity, the Justice Department will not object to consolidation due to the "failing carrier" guidelines. In regard to Delta, their liquidity and cash drain is a concern, but they still have unencumbered assets, which will help prevent against a "judicial restructuring".

Regards,

USA320Pilot
 
Wrong?

Lets see, how many times did you spout the UCT/ICT with United?

WRONG IT NEVER HAPPENED.

Lets see you said the company would win the airbus arbitration.

THE IAM WON, you were WRONG AGAIN!

You said the company would envoke the "Painful" cause in the IAM M&R contract.

There is no such clause and nothing was envoked.

You said the company would move base mtc to an undesirable location where english was not the main langauge and that you could not commute to and from.

Gee,that never happened either.

And lets compare the 10/25/04 1113 c proposal from the company to the IAM.

It eliminated ALL heavy mtc, ALL utility, gave the company the right to outsource everything and everything.
It was a 9 year pay progression scale.
The pay rates for the and relateds were less.
Eliminated holiday pay
Eliminated 401K match
40 hour qualifier for OT
Mandatory OT
Bump the junior man
paid moves eliminated
Lead ratios unlimited
All grievances withdrawn
Agreement through 12/31/11

Gee None of those "painful" items were in the final offer.

Guess your WRONG again, and what did your post have to do with exit financing.

I could keep going but I don't want to embarrass you any further.

See you are not an IAM member, Represetantive nor a member of the M&R Negotiating Committee.

Maybe you should actually stick to something you might know, because you are proven to be wrong the majority of the time on this board.

And don't hate the Player, Hate the Game!
 
Boy, you armchair-CEO's are sure short sighted...

Let me describe the situation in a different manner.

Think as if this is a start up airline instead, but one now that has established market share, slots in DCA/LGA, a large presence in BOS, a international gateway (feeding the largest alliance) from the 3rd largest population center in the US, an efficent Hub in CLT ideal for North-South travel, and huge growth opportunities in FLL.

All of which you can own for the small cost of a few hundred million. Yet exit financing enough to weather the needed transition period.

Sure you "oh so smart" types are quick to naysay, but consider this...

Investors make money when they buy something that most everyone else thinks is worthless, and then turn a huge profit when that very same asset is later considered valuable.

A turnaround of US Airways will make those smart and brave enough to invest into this place a fortune.

But hey, what do professional investors know (that have made a career of this sort of stuff) compared to all of you so caled "experts"...?
 
Rico said:
But hey, what do professional investors know ...?
[post="241694"][/post]​
Obviously not a hell of a lot considering the fact many people are now working beyond their planned retirement years because they lost their complete retirement savings to the trust of the so-called experts. Rico try again, your batting average stinks.
 
USA320Pilot said:
Why blah, blah, blah.....
[post="241669"][/post]​

I believe I've gone over pretty much this entire list before, so let me just concentrate on one that you still have 100% (no, make that your favorite 1000%) wrong.

Govco and Citi did not take over the "at risk" portion of the loan. Govco assumed the role of primary Tranche A lender and Citi assumed the position of the alternate Tranche A lender. Let me make this perfectly clear - the "A" in Tranche A does not stand for "at risk". That is the portion of the loan that is guaranteed by the ATSB (taxpayers), so neither Govco, nor Citi (if it should become necessary for them to replace Govco) had any money "at risk". Zero, zip, nada.

USA320Pilot said:
With that said, US Airways is not out of the woods and my concern is that the cost cuts will not come out of the company fast enough. For example, even though the IAM-Trainers approved their TA, and the IAM-FSA and IAM-M approved the company’s proposals, the IAM costs will increase in the short-term because the 21% pay cut will be eliminated and replaced by a lower number.
[post="241669"][/post]​

Ah, at least one light has finally come on - the various agreements will provide less short-term cost savings than the judically mandated interim pay cuts.

USA320Pilot said:
Thus, the problem is three-fold: rapidly rising energy prices, no hedge positions, and Delta’s SimplFares implemented before US Airways has a competitive cost structure.
[post="241669"][/post]​

Yup, that's part of the problem with the "Transformation Plan" - higher fuel costs than envisioned ($10-$15 per barrel), no hedge positions - sold the ones we did have (did you notice what WN paid for fuel in the 4th quarter net hedges? Or that they have hedges through at least 2007?). and rationalized fares (that the company and you say are money losers).

USA320Pilot said:
Therefore, the question could be what does US Airways have to do next to remain in business while the cost cuts takes place and revenue deteriorates until the company can fully obtain all of the negotiated cost savings?
[post="241669"][/post]​

Somewhere there is a poll about whether there'll be more concession demands. The answer to your question may lie there.....

Jim