savyinvestor
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Lark nice comeback. Your PHD is showing! Savy
Forcasting Liquidation
- Thread starter CaptBud330
- Start date
With pricing power zilch and fuel at $50, ALL the legacy airlines are in deep deep trouble. The difference is that U and UAL are so close to the edge that they don't have enough blood left to last much longer, even with slashing employees and compensation. Sooner, rather than later, the parties going to come to a halt. When the GE loan-shark sees that no more is to be made by collecting the big interest on these huge loans, and they've got takers for the equipment, they're going to send Luigi to Mr. Lakefield's office with the financial baseball bat.
If oil comes down to $35, then things will ease up a bit for UAL and U . . . but I seriously doubt it will. Also, any catastrophic event such as terrorism directed against the industry would almost certainly drive several companies over the edge.
Non of the legacies have a clue about how to change their business model and as point of fact, there's no real alternative to the hub and spoke system . . . . unless of course you don't care about a coherent and air transportation system that services anything but the largest of cities.
It kind of makes you want to see the whole thing implode and watch the whinning and hand-wringing among the idiots in Washington.
If oil comes down to $35, then things will ease up a bit for UAL and U . . . but I seriously doubt it will. Also, any catastrophic event such as terrorism directed against the industry would almost certainly drive several companies over the edge.
Non of the legacies have a clue about how to change their business model and as point of fact, there's no real alternative to the hub and spoke system . . . . unless of course you don't care about a coherent and air transportation system that services anything but the largest of cities.
It kind of makes you want to see the whole thing implode and watch the whinning and hand-wringing among the idiots in Washington.
RowUnderDCA
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that's the scenario that i keep coming back to
Finish or Ignore
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USA320Pilot said:
I knew Roger King would not be on the "USA320 list of approved analysts".
hear you eighty nine...but don't forget these smacks change opinions like we change underwear......look back before IAM ratified and see what they were singing then....after we ratified...bingo....everythings smooth as silk.,......duh..... :down:insp89 said:
usairways_vote_NO
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USA320Pilot said:
And I am sure he has never heard of you but the big difference is you have nothing worthwhile to be known for despite anointing yourself to the status of guru of Usairways and the airline industry.
Lark: Good work on King's background. His analysis and advise seem reasonable.
USA320Pilot:
First, we need to be clear. US Airways CASM ex-fuel was 8.79cents. Southwest's CASM ex-fuel was 6.22 cents, not 6.7. That makes US Airways CASM ex-fuel over 40% more than Southwest's. US Airways full CASM was 10.96 vs Southwest at 7.59, or US Airways was more than 44% more than Southwest. And that's not stage adjusted to reflect that US Airways average stage length is almost 30% longer than Southwest. Thus, on a similar stage length, US Airways CASM is close to 50% more than Southwest's
Second, how does a mere line pilot know the publication schedule of major trade magazines... Hmmm...
Third, who predicted you would quote Mike Boyd when his opinion supported yours, after after you deemed him worse than "uninformed"?
USA320Pilot said:
USA320Pilot:
First, we need to be clear. US Airways CASM ex-fuel was 8.79cents. Southwest's CASM ex-fuel was 6.22 cents, not 6.7. That makes US Airways CASM ex-fuel over 40% more than Southwest's. US Airways full CASM was 10.96 vs Southwest at 7.59, or US Airways was more than 44% more than Southwest. And that's not stage adjusted to reflect that US Airways average stage length is almost 30% longer than Southwest. Thus, on a similar stage length, US Airways CASM is close to 50% more than Southwest's
Second, how does a mere line pilot know the publication schedule of major trade magazines... Hmmm...
Third, who predicted you would quote Mike Boyd when his opinion supported yours, after after you deemed him worse than "uninformed"?
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funguy2 said:
That one's easy, funguy. It was mentioned in the article from the 1/24 issue. As I recall it said something like "voting has not been concluded prior to this issue going to press". And of course, the issue hit the stands (or mailboxes) prior to the Dec results being posted to the BK filing website (it was dated and filed on 1/31)
The rest I'll leave alone, except to say that if anyone wants to read the entire AWST article I'll be glad to post it since it's a paid subscription (so far the moderators have let me get away with that).
Jim
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In all it's glory....
Air Transport
US Airways Demise May Not Be Imminent
Aviation Week & Space Technology
01/24/2005, page 39
Joseph C. Anselmo
Washington
US Airways in deep distress, but forecasts of imminent liquidation may be premature
Die Another Day
They may not be checking their luggage, but thousands of travelers still have faith in US Airways' near-term survival. On Jan. 17, the airline booked $4.7 million in sales on its web site, the second-highest daily total ever, thanks to a sale that offered fares as low as $49 each way. Reservations took in another $3 million that day, the highest single-day total in more than three months.
Indeed, there is finally some good news coming out of US Airways after a holiday season luggage handling fiasco that some industry observers predicted would be the knockout blow to the beleaguered carrier (AW&ST Jan. 3, p. 42).
On Jan. 13, the Air Transportation Stabilization Board extended $656 million in crucial government loan guarantees through June 30, when US Airways hopes to emerge from bankruptcy protection. The next day, the airline said it was meeting the terms of an agreement with its largest creditor, GE Capital Aviation Services (Gecas), which is providing $140 million in short-term liquidity. And most of the carrier's employees have accepted steep wage cuts, with a key vote by the mechanics union underway as Aviation Week & Space Technology went to press.
"THERE ARE SOME pretty disappointed airline executives at our competitors," says Chris Chiames, US Airways' senior vice president for corporate affairs, referring to widespread media reports predicting the airline's imminent shutdown.
Lehman Brothers analyst Gary Chase now gives US Airways a two-thirds chance of surviving the year, while UBS Investment Research analyst Robert N. Ashcroft puts the airline's odds of surviving 2005 at better than 50%. "Like W.C. Fields, who also preferred Philadelphia to being dead, reports of US Airways' imminent demise have been greatly exaggerated," writes Ashcroft. The airline has a major hub in Philadelphia.
To be sure, US Airways continues to face big hurdles in its bid to emerge from bankruptcy. High oil prices and bruising competition--exacerbated by Delta Air Lines' steep fare cuts and Southwest Airlines' expansion in the Eastern U.S.--make the path to profitability even more daunting. The airline has yet to attract new investors, employees are disgruntled about multiple wage cuts, and senior managers continue to exit, raising questions about the quality of the company's leadership team. Ben Baldanza, who was instrumental in developing US Airways' restructuring plan, recently announced he was leaving to become president and chief operating officer of Spirit Airlines.
A key force in keeping US Airways flying is Gecas, which leases 121 aircraft to US Airways and had $2.8 billion in exposure to the airline as of late October, the last figure released. "We're moving forward with them," says Gecas spokesman Eric Jones.
Industry analysts say it would make little sense for Gecas to pull the plug on US Airways because it would have to take possession of--and find new users for--all of those aircraft. Dumping so many jets on the market at once also would depress prices for Gecas, which leases 1,300 aircraft to more than 200 airlines around the globe.
Instead, Gecas is buying time by helping US Airways stay afloat while it reduces its exposure to the airline in an orderly fashion. The deal providing the carrier with $140 million in liquidity requires US Airways to return 25 high-value aircraft to Gecas that can be remarketed to other customers: 15 Boeing 737-300s and 10 Airbus A319s. In return, Gecas agreed to lease up to 31 less costly regional jets to US Airways. The airline also must raise $100 million from another investor as part of the deal.
Efforts by US Airways to cut costs have yielded significant savings, but analysts differ about whether it will be enough to save the airline. Steep wage cuts have also angered employees.
"Gecas is very well secured, as is usually the case," says Philip Baggaley, airline credit analyst for Standard & Poors. "The long and short of it is they can probably afford to have a fair amount of patience." S&P is a unit of The McGraw-Hill Companies, as is AW&ST.
Independent airline analyst Mike Lowry calculates US Airways has sufficient cash on hand to survive the traditionally slow winter months. He also believes the airline's aggressive cost-cutting plan will ultimately enable it to compete with low-cost competitors such as Southwest. Lowry says US Airways already has reduced annual costs by more than $1 billion through salary cuts, the court-approved termination of pension liabilities, renegotiated aircraft leases and efficiency gains. "I think Gecas will move forward and continue to provide the company with underlying financing to move out of bankruptcy," he says.
But other analysts believe the Gecas financing and extension of the government's loan guarantees are only prolonging the inevitable. "All of these things could very well keep them going for a significant period of time, but I don't think they change the basic equation," says analyst Ed Greenslet, who believes US Airways cannot drive its costs low enough to compete with low-cost carriers.
Airline analyst Mike Boyd also is skeptical of the carrier's long-term survival prospects. "Show us the exit financing, show us the increase in yields, show us the profitability," he says.
And analyst Julius Maldutis says US Airways made a huge strategic error last year by scaling back its hub in Pittsburgh, a move that opened the door to low-cost competitors. Southwest plans to begin service to Pittsburgh in May--a year after it began flying to Philadelphia--leaving Charlotte as the only remaining hub where US Airways can generate "decent yields," Maldutis says.
The airline also no longer has fuel hedges, making it vulnerable to swings in oil prices, which climbed back toward $50 a barrel last week, up from $27 a barrel at the start of 2004.
US AIRWAYS' CHIAMES maintains that Southwest's entry into Pittsburgh will have a "minimal" impact on his carrier. He says US Airways has led other legacy airlines in recognizing that it must offer lower, simpler fares to survive. "Nothing in our transformation plan assumes the old way of generating revenue," he says. "I think we're one step ahead of the others."
Jim
ps - remember those lists of estimated cost savings for the legacies to compete with WN and fiscal 2005 U cost savings identified our friend posted in the "Strategic Analysis:" thread? They're from a chart in this article....
Air Transport
US Airways Demise May Not Be Imminent
Aviation Week & Space Technology
01/24/2005, page 39
Joseph C. Anselmo
Washington
US Airways in deep distress, but forecasts of imminent liquidation may be premature
Die Another Day
They may not be checking their luggage, but thousands of travelers still have faith in US Airways' near-term survival. On Jan. 17, the airline booked $4.7 million in sales on its web site, the second-highest daily total ever, thanks to a sale that offered fares as low as $49 each way. Reservations took in another $3 million that day, the highest single-day total in more than three months.
Indeed, there is finally some good news coming out of US Airways after a holiday season luggage handling fiasco that some industry observers predicted would be the knockout blow to the beleaguered carrier (AW&ST Jan. 3, p. 42).
On Jan. 13, the Air Transportation Stabilization Board extended $656 million in crucial government loan guarantees through June 30, when US Airways hopes to emerge from bankruptcy protection. The next day, the airline said it was meeting the terms of an agreement with its largest creditor, GE Capital Aviation Services (Gecas), which is providing $140 million in short-term liquidity. And most of the carrier's employees have accepted steep wage cuts, with a key vote by the mechanics union underway as Aviation Week & Space Technology went to press.
"THERE ARE SOME pretty disappointed airline executives at our competitors," says Chris Chiames, US Airways' senior vice president for corporate affairs, referring to widespread media reports predicting the airline's imminent shutdown.
Lehman Brothers analyst Gary Chase now gives US Airways a two-thirds chance of surviving the year, while UBS Investment Research analyst Robert N. Ashcroft puts the airline's odds of surviving 2005 at better than 50%. "Like W.C. Fields, who also preferred Philadelphia to being dead, reports of US Airways' imminent demise have been greatly exaggerated," writes Ashcroft. The airline has a major hub in Philadelphia.
To be sure, US Airways continues to face big hurdles in its bid to emerge from bankruptcy. High oil prices and bruising competition--exacerbated by Delta Air Lines' steep fare cuts and Southwest Airlines' expansion in the Eastern U.S.--make the path to profitability even more daunting. The airline has yet to attract new investors, employees are disgruntled about multiple wage cuts, and senior managers continue to exit, raising questions about the quality of the company's leadership team. Ben Baldanza, who was instrumental in developing US Airways' restructuring plan, recently announced he was leaving to become president and chief operating officer of Spirit Airlines.
A key force in keeping US Airways flying is Gecas, which leases 121 aircraft to US Airways and had $2.8 billion in exposure to the airline as of late October, the last figure released. "We're moving forward with them," says Gecas spokesman Eric Jones.
Industry analysts say it would make little sense for Gecas to pull the plug on US Airways because it would have to take possession of--and find new users for--all of those aircraft. Dumping so many jets on the market at once also would depress prices for Gecas, which leases 1,300 aircraft to more than 200 airlines around the globe.
Instead, Gecas is buying time by helping US Airways stay afloat while it reduces its exposure to the airline in an orderly fashion. The deal providing the carrier with $140 million in liquidity requires US Airways to return 25 high-value aircraft to Gecas that can be remarketed to other customers: 15 Boeing 737-300s and 10 Airbus A319s. In return, Gecas agreed to lease up to 31 less costly regional jets to US Airways. The airline also must raise $100 million from another investor as part of the deal.
Efforts by US Airways to cut costs have yielded significant savings, but analysts differ about whether it will be enough to save the airline. Steep wage cuts have also angered employees.
"Gecas is very well secured, as is usually the case," says Philip Baggaley, airline credit analyst for Standard & Poors. "The long and short of it is they can probably afford to have a fair amount of patience." S&P is a unit of The McGraw-Hill Companies, as is AW&ST.
Independent airline analyst Mike Lowry calculates US Airways has sufficient cash on hand to survive the traditionally slow winter months. He also believes the airline's aggressive cost-cutting plan will ultimately enable it to compete with low-cost competitors such as Southwest. Lowry says US Airways already has reduced annual costs by more than $1 billion through salary cuts, the court-approved termination of pension liabilities, renegotiated aircraft leases and efficiency gains. "I think Gecas will move forward and continue to provide the company with underlying financing to move out of bankruptcy," he says.
But other analysts believe the Gecas financing and extension of the government's loan guarantees are only prolonging the inevitable. "All of these things could very well keep them going for a significant period of time, but I don't think they change the basic equation," says analyst Ed Greenslet, who believes US Airways cannot drive its costs low enough to compete with low-cost carriers.
Airline analyst Mike Boyd also is skeptical of the carrier's long-term survival prospects. "Show us the exit financing, show us the increase in yields, show us the profitability," he says.
And analyst Julius Maldutis says US Airways made a huge strategic error last year by scaling back its hub in Pittsburgh, a move that opened the door to low-cost competitors. Southwest plans to begin service to Pittsburgh in May--a year after it began flying to Philadelphia--leaving Charlotte as the only remaining hub where US Airways can generate "decent yields," Maldutis says.
The airline also no longer has fuel hedges, making it vulnerable to swings in oil prices, which climbed back toward $50 a barrel last week, up from $27 a barrel at the start of 2004.
US AIRWAYS' CHIAMES maintains that Southwest's entry into Pittsburgh will have a "minimal" impact on his carrier. He says US Airways has led other legacy airlines in recognizing that it must offer lower, simpler fares to survive. "Nothing in our transformation plan assumes the old way of generating revenue," he says. "I think we're one step ahead of the others."
Jim
ps - remember those lists of estimated cost savings for the legacies to compete with WN and fiscal 2005 U cost savings identified our friend posted in the "Strategic Analysis:" thread? They're from a chart in this article....
UseYourHead
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Not hearing much about the "L" word this week, except when talking about UAL...
CaptBud330 said:
usairways_vote_NO
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BoeingBoy said:
Was that a typo and should have been ... US AIRWAYS' CHIAMES maintains that Southwest's entry into Pittsburgh will have a "minimal" impact on his career?
