If one big domino falls :(

UnitedChicago

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Aug 27, 2002
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www.usaviation.com
This story was nothing but rehashed fluff.

I do appreciate American using the bankruptcy brush. Trust me...they DO NOT want United to file CH11. They would be screwed. They'd most certainly at least come extremely close themselves if UA files. If UA does, American will be talking CH11 or givebacks with their own coalition.

Notice Carty has been very silent on UA's prospects for CH11. I'm sure he's callin his good ole boy GW Bush every day pleading for them to approve the loan for UA. (For those who always jump to immediate conclusions...I'm being sarcastic). AA sponsored W's innagural bash after all.

I predict AA will pump out the PR crying financial dispair over the next two weeks to pressure the govt to approve UA's loan. Even though the $900 million was a write off and didn't involve cash flows...nice timing eh?? Will this govt allow the World's NBR 1 and NBR 2 carriers to simultaneously be in CH11. I highly doubt it.
 
[A href=http://www.thestreet.com/_yahoo/funds/ericgillin/10046730.html]http://www.thestreet.com/_yahoo/funds/ericgillin/10046730.html[/A][BR][BR]
 
UnitedChicago,

You're absolutely right. But it wouldn't be AA that got hurt by a UA banruptcy, it would be the industry. DL, NW, and CO would also be damaged. None of them want to see UA file for Ch.11 because there UA could obtain dramatically lower costs, shed debt and inefficiency and emerge a highly competitive carrier that puts considerable pressure on the other majors to do the same to remain competitive. That's also why I think that if UA files for Ch.11, there is going to be a lot of lobbying behind the scenes by the other majors to see UA fragmented and liquidated. If they were to be unsuccessful in that effort, I think that more carriers would follow into Ch.11, unless they could somehow dramatically lower their costs.
 
I think AA has the most to lose of the entire industry is UA files. They compete more head-to-head with us throughout our network. DA has a lower cost structure already with lots of non union employees (notice they are moving RES work to India - think UA or AA could ever do that?) and more regional jets. Sure DA would be under pressure from a UA filing, but not as much as AA.

In terms of UA's prospects in CH11...I don't think they would come close to being put on the block or liquidated. I would assume that someone like Texas Pacific would invest to be an equit holder after emergence. And after the BK judge promptly (and before a public audience I hope) voids the IAM contract and UA qualifies - they'll receive the 1.8 billion in loan gaurentees.

Nothing is certain obviously...but I would be shocked if UA didn't emerge from CH11 - albeit a bit smaller - largely intact.
 
Have to say I think UAL777Flyer is right on. The whole industry is turning into a big game of Russian Roulette. We're going to see one airline after another put the gun of Chapter 11 to its head. Pull the trigger, and hope that you come out of Chapter 11 alive. Unfortunately this game isn't going to end until at least one airline takes that bullet, dies, and gets chopped up into little pieces.

USAir has already pulled that trigger, and so far it looks like there was no round in the chamber.

UAL is next. Who then?

AA?

DL?

NW?

WN?

(Don't laugh... war with Iraq and oil at $100 a barrel will kill even the LUV)

Frankly, while I hate to see anybody suffer the horrors of a failure, I'm hoping somebody other than my old employer takes the bullet. Luck to all...

Peace!!!
 
On 10/10/2002 11:12:06 PM avek00 wrote:

Labor concessions, if necessary, won't prove as difficult as they are at United because AMR's workgroups don't have control of the company.

What?! Since when did United's workgroups have control of the company? When did AMR's pilots become less biligerant than UALs? When did the labor situation at AMR get so rosey (TWA LLC?)? Since UALs workgroups control the company, why were the pilot's and Mechs contracts sooooo late? Please, for once, research the limitations of the UAL ESOP. I don't think you have even a rudimentary understanding of it.

DAL - Delta has made great strides in reducing its costs post 9/11, and could easily turn a profit in the new year with some adjustments to its revenue models.

Like what? DALs CASM will likely go up as they cut capacity to the degree UAL had in the past.

Furthermore, DL can optimize the use of its nonunion workforce, reducing (or increasing) compensation and staffing as needed.

You'd like that, wouldn't ya? You think maybe as DAL starts yanking around the non-union workforce, they may decide to organize?

NWAC - Northwest made great strides in reducing its costs BEFORE 9/11, and took drastic steps immediately after 9/11 to conserve precious dollars. As a result, it has the largest cash cushion/war chest of any of the majors, and is likely to be the first to reach profitability.

But owe the most to the pension fund, when adjusted for revenue, of all the majors. Potential cash drain. Imagine the trouble going head to head with lower cost structured UAL in the PAC. Not good!

4. CAL - Simply put, CAL can't enter into a third reorganization. The BK Courts have what is known as a three-strikes rule; a company that files for BK a third time is presumed to have failed without possibility of further restructuring or rehabilitation.

Is that case law? Is there a time frame involved? Has that been tested in an industry where all the other players also declared BK? If it is case law, why did Bafoon threaten it in the days immediately following 9/11? Are the CAL lawyers and Bafoon unaware of the 3 strike law? Or is it more of a principle?

So can we PLEASE put the domino theory to rest?

If you put the crazy labor running the show theory about UAL to rest. the domino theory is likely MUCH more accurate.
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Where does the domino theory keep coming from?

A BK filing by UAL will NOT force the other majors to do the same. I'll run down the non-BK Big Six individually to explain why:

1. AMR - AA continues to hemorrage cash, but nonetheless has a cash cushion that gives the company 6-12 months to formulate and implement long-term solutions. The company is also equipped with arguably the best airline management team in the world. Labor concessions, if necessary, won't prove as difficult as they are at United because AMR's workgroups don't have control of the company.

2. DAL - Delta has made great strides in reducing its costs post 9/11, and could easily turn a profit in the new year with some adjustments to its revenue models. Furthermore, DL can optimize the use of its nonunion workforce, reducing (or increasing) compensation and staffing as needed.

3. NWAC - Northwest made great strides in reducing its costs BEFORE 9/11, and took drastic steps immediately after 9/11 to conserve precious dollars. As a result, it has the largest cash cushion/war chest of any of the majors, and is likely to be the first to reach profitability.

4. CAL - Simply put, CAL can't enter into a third reorganization. The BK Courts have what is known as a three-strikes rule; a company that files for BK a third time is presumed to have failed without possibility of further restructuring or rehabilitation.

So can we PLEASE put the domino theory to rest?
 
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On 10/10/2002 11:13:40 PM avek00 wrote:

Where does the "domino" theory keep coming from?

A BK filing by UAL will NOT force the other majors to do the same. I'll run down the non-BK Big Six individually to explain why:

Captainron says: I think your conclusion is premature, I will explain why.

1. AMR - AA continues to hemorrage cash, but nonetheless has a cash cushion that gives the company 6-12 months to formulate and implement long-term solutions. The company is also equipped with arguably the best airline management team in the world. Labor concessions, if necessary, won't prove as difficult as they are at United because AMR's workgroups don't have control of the company.

Captainron says; Don Carty does not share your conclusion, AMR is losing more cash than ANY airline currently. All airline analyist do not see a future for any of the major network carriers unless they restructure, AMR has lost 80% of its market cat in the last quarter alone. If UAL files all bets are off. When we declare war on IRAQ all bets are off. If you look at the current market capitalisations of all these companies I do not see how you can come to any other conclusion. By the way labor relations are not that great at AMR hopefully they will learn from UAL.

2. DAL - Delta has made great strides in reducing its costs post 9/11, and could easily turn a profit in the new year with some adjustments to its revenue models. Furthermore, DL can optimize the use of its nonunion workforce, reducing (or increasing) compensation and staffing as needed.

Captainron says: while DAL is loosing the least of the big three, they are still losing drastic amounts of cash. They will not be immune to the effects of a war, and as their market cap comes under increasing pressure their ability to avoid a BK becomes less and less likly. In fact they might be advised to file a prepackaged petition sooner rather than later.

3. NWAC - Northwest made great strides in reducing its costs BEFORE 9/11, and took drastic steps immediately after 9/11 to conserve precious dollars. As a result, it has the largest cash cushion/war chest of any of the majors, and is likely to be the first to reach profitability.

Captainron says; I agree N/W has made great strides, It will not be able to compete with a bankrupt UAL especially in there bread and butter far east franchise.

4. CAL - Simply put, CAL can't enter into a third reorganization. The BK Courts have what is known as a "three-strikes" rule; a company that files for BK a third time is presumed to have failed without possibility of further restructuring or rehabilitation.

Captainron says; CAL is a house of smoke and mirrors dispite what Gordon says. They will be in the headlines. N/W will try some kind of transaction to protect their investment.

Face it, if the goverment does not come up with substancial measures to safeguard this industry we are talking 70s-80s steel industry all over again.

So can we PLEASE put the "domino theory" to rest?

Captainron says ;No, not yet.
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[P][FONT face=Times New Roman size=3]I agree with Avek00.[/FONT][/P]
[P][FONT face=Times New Roman size=3]Chip[/FONT][/P]
 
Wait till all the stock market gurus start shorting these other airlines stock BIG TIME and you will see the dominos will fall if one big one goes aka UAL :(
 
Regardless of any great strides made by the other majors, they'd have to deal with a UA with a dramatically lower cost structure and a codeshare with US. AA and UA compete head to head in more markets than any other airlines. AA will feel significant pressure in not being cost competitive with UA, as will other airlines. I'm not saying that they'll all follow UA into Chapter 11. What I'm saying is that if we go to war with Iraq, fuel prices will skyrocket and what little demand is out there will fall through the floor. That good ole friend called Force Majeure will rear its ugly head again. That will cause airlines to go through cash like there's no tomorrow. Considering that, I dont' see how anyone can say that the other majors are impervious to a bankruptcy filing.
 
Why thank you UAL777Flyer for agreeing with my original post:

I think AA has the most to lose of the entire industry is UA files. They compete more head-to-head with us throughout our network. DA has a lower cost structure already with lots of non union employees (notice they are moving RES work to India - think UA or AA could ever do that?) and more regional jets. Sure DA would be under pressure from a UA filing, but not as much as AA.

In terms of UA's prospects in CH11...I don't think they would come close to being put on the block or liquidated. I would assume that someone like Texas Pacific would invest to be an equit holder after emergence. And after the BK judge promptly (and before a public audience I hope) voids the IAM contract and UA qualifies - they'll receive the 1.8 billion in loan gaurentees.

Nothing is certain obviously...but I would be shocked if UA didn't emerge from CH11 - albeit a bit smaller - largely intact.
 
Speaking of under funded pensions...UA does NOT top the list. From the WSJ:

Topping the list are American Airlines parent AMR Corp., Fort Worth, Texas, and Atlanta-based Delta Air Lines. CSFB estimates AMR will be underfunded by $3.37 billion at year end, a sum that is more than six times greater than the company's current market cap. Delta is estimated to be underfunded by $4.38 billion, or more than 3½ times its current market cap.

Also...please don't make wild assumptions that UA would sell the pacific routes in CH11. There are many other assets that they can unload...Pacific should be the absolute last resort. Also...UA purchased the pacific routes in 1985 or 1986 from Pan Am...and Pan Am was NOT in bankruptcy at the time.
 
Strangely, CNBC just reported on the rank of the most underfunded pensions of carriers. There is some kind of fluid formula that is based on Markt. Cap., Future earnings, debt and something else. The report will run again at 5:00pm EST. The present rank of the most underfunded as of today were : AMR, DAL, UAL, NWA.
 
Busdrv: But owe the most to the pension fund, when adjusted for revenue, of all the majors. Potential cash drain. Imagine the trouble going head to head with lower cost structured UAL in the PAC. Not good![BR][BR][SPAN class=BodyFont]Aviation Week: That has helped [STRONG]United Airlines[/STRONG], which [STRONG]TOPS[/STRONG] [STRONG]the list of underfunded [/STRONG]carriers with a projected $2.52-billion obligation. Pensions underfunded: UAL-2,520.Billion. NWA 2,275. Billion. If UAL enters bankruptcy, it may nolonger be flying accross the Pacific. The only carrier to exit Chapter 11 and survive and prosper was CAL. But remeber...CAL survived with the help of cash and assets of Eastern Airlines ( Frank Lorenzo).[/SPAN] BANKRUPTCY is NOT a healthy thing for a company. Contrary to what so many are pretending it is. There is no promise that UAL or U will come out of 11 half the company that it went in as. One must remember how UAL came to fly those Pacific routes (Pan Am, bankruptcy).