First Quarter Operating Loss Of $250 Million

I'd like to know how we can lose close to 300 million every month and then go to a 250 million loss for the quarter?
 
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spacewaitress said:
I'd like to know how we can lose close to 300 million every month and then go to a 250 million loss for the quarter?
[post="268514"][/post]​

The $250 million is an operating loss, before interest paid and special items. Total net loss before reorg items was $302 million; including the one-time reorg items, the total net loss was $1.07 billion. Ugly.
 
It is all accounting. Read everything. United was actually cash flow positive. "The fact that United is cash-flow positive in the face of record fuel costs demonstrates that restructuring is delivering results," Brace added.The company ended the quarter with an unrestricted cash balance of $1.4 billion, and a restricted cash balance of $885 million, for a total cash balance of $2.3 billion. The cash balance increased by $167 million during the quarter.


March Monthly Operating Report

UAL today also filed with the United States Bankruptcy Court its Monthly Operating Report for March. The company posted a $54 million operating profit for March. "Although we had a modest profit in the seasonally strong month of March, we need to complete our restructuring to be a viable company," said Brace. UAL met the requirements of its debtor-in-possession (DIP) financing.
 
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herkav8r said:
March Monthly Operating Report

UAL today also filed with the United States Bankruptcy Court its Monthly Operating Report for March. The company posted a $54 million operating profit for March. "Although we had a modest profit in the seasonally strong month of March, we need to complete our restructuring to be a viable company," said Brace. UAL met the requirements of its debtor-in-possession (DIP) financing.
[post="268537"][/post]​

That's an impressive turnaround. Operating loss of $304 million in January and February, then a $54 million operating profit in March. Not too shabby.

Then there's AMR, which posted an Operating profit for Q1 of $23 million, (compared to UAL's $250 million Operating loss) - and that's including pension fund contributions, which UAL couldn't be bothered to make.

Good times are just around the corner. :D

Been hearing that at UAL for nearly 3 years now.
 
Maybe now they can pick up the past payments on leased aircraft. In bk, lease payments continue or collateral has to be returned.

If Ua has an increase in cash flow then make the payments!
 
FWAAA, That's good for AA. Now don't come crying to us when they come after your pension. It is only a matter of time. Delta is next then you.
 
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herkav8r said:
FWAAA, That's good for AA. Now don't come crying to us when they come after your pension. It is only a matter of time. Delta is next then you.
[post="268559"][/post]​

Ain't my pension - I don't work for AMR nor any of its subs. :D
 
FWAAA said:
Then there's AMR, which posted an Operating profit for Q1 of $23 million, (compared to UAL's $250 million Operating loss) - and that's including pension fund contributions, which UAL couldn't be bothered to make.
FWAAA:

Your comment about pension fund contributions is misleading from an accounting standpoint. While it is true that AMR did contribute to its pension funds during the first quarter (although I've forgotten the exact amount) and UAL didn't, neither carrier's operating profit (AMR) or loss (UAL) was affected because such contributions are cash flow items, not income statement (P&L) items. Thus, if AMR had not contributed any money to its pension plans, its operating profit would still have been $23 million. Similarly, if UAL had contributed $1 billion to its pension plans, its operating loss would still have been $250 million. You need to distinguish cash flow impacts from income statement (P&L) impacts.

And while I'm in "rant mode" and wearing my accountant's green eyeshade, it's been claimed (though not in this thread) that the PBGC takeover of United's pension plans won't lower the carrier's operating costs because United hasn't added any funds to the pension plans in nearly a year. That claim is false because it is again mixing a cash flow item (adding corporate funds to the pension plans) with an income statement (P&L) item (the money United pays to its retirees every month, a direct expense). So now with the PBGC takeover, United won't be required to add any more money to its pension funds nor will it send out any more checks to its retirees, the former reducing United's cash flow requirements and the latter reducing its expense levels (CASM).

I hope this little accounting lesson helps.
 
Cosmo said:
with the PBGC takeover, United won't be required to add any more money to its pension funds nor will it send out any more checks to its retirees, the former reducing United's cash flow requirements and the latter reducing its expense levels (CASM).
[post="268572"][/post]​

You eliminate the pension related liability and expense, but isn't the replacement retirement plan a company match to the 401K? If so, you still wind up with either a cash flow line or an expense line.
 
You eliminate the pension related liability and expense,

And replace it with only an expense.....
 
Former ModerAAtor said:
You eliminate the pension related liability and expense, but isn't the replacement retirement plan a company match to the 401K? If so, you still wind up with either a cash flow line or an expense line.
You're right, the new 401(k) match will have both a cash flow impact and an income statement (P&L) impact on United -- just nowhere near as much as the amounts incurred due to United's former defined benefit plans. My comments above were focussed solely on the financial effects on United of the PBGC's takeover of the carrier's defined benefit pension plans, and they were not meant to imply that United would have no pension expense going forward.
 
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Cosmo said:
FWAAA:

Your comment about pension fund contributions is misleading from an accounting standpoint. While it is true that AMR did contribute to its pension funds during the first quarter (although I've forgotten the exact amount) and UAL didn't, neither carrier's operating profit (AMR) or loss (UAL) was affected because such contributions are cash flow items, not income statement (P&L) items. Thus, if AMR had not contributed any money to its pension plans, its operating profit would still have been $23 million. Similarly, if UAL had contributed $1 billion to its pension plans, its operating loss would still have been $250 million. You need to distinguish cash flow impacts from income statement (P&L) impacts.

And while I'm in "rant mode" and wearing my accountant's green eyeshade, it's been claimed (though not in this thread) that the PBGC takeover of United's pension plans won't lower the carrier's operating costs because United hasn't added any funds to the pension plans in nearly a year. That claim is false because it is again mixing a cash flow item (adding corporate funds to the pension plans) with an income statement (P&L) item (the money United pays to its retirees every month, a direct expense). So now with the PBGC takeover, United won't be required to add any more money to its pension funds nor will it send out any more checks to its retirees, the former reducing United's cash flow requirements and the latter reducing its expense levels (CASM).

I hope this little accounting lesson helps.
[post="268572"][/post]​


Thanks for the accounting "lesson."

But you are incorrect. The contributions to a qualified plan are deductible, both for GAAP purposes and for tax purposes, when the contributions are made. For the tax deduction, see section 404 of the IRC.

AMR's operating profit was most certainly affected by the contribution of $138 million to its defined benefit plans. And, as you point out, so was its cash.

The actual payment of retirement benefits each month to retirees has no affect whatsoever on the finances of the companies; the effect on the company's financial statements ends when the contributions are made. The monthly checks are paid by the tax-exempt qualified plan trusts, not by the employer.

Think about it for a minute: If you were correct, there would be affect on P&L for many years for a startup company that chose to offer DB plans. That is nonsensical. The company's expense occurs on plan funding, not on benefit payout.

So yes, AMR's results are all the more impressive given that it contributed $461 million to its pension plans last year. Those contributions are included in its labor expense line item.

UAL's results, on the other hand, are all the more disasterous, considering that it failed to contribute over $500 million of required contributions last year, and of course it has contributed nothing this year.
 

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