Is United Airlines making progress to emerge from bankruptcy or is there controversy in the Elk Grove Township headquarters?
This week there have been curious reports regarding United Airlines and its formal restructuring, which presents incongruent arguments on whether or not the Chicago-based airline is making progress in its efforts to emerge from bankruptcy.
On May 17 the New York Times published an article titled “United Insists It Is Acting on Financingâ€, which said executives involved in United's efforts said, that the search for financing was in only the most preliminary stages and that it could take months. They said the airline had not settled on its revamped structure nor provided much information about the low-fare operation that is the centerpiece of its plan.
Interestingly, the Times reported Texas Pacific Group is not talking with United about bankruptcy exit financing.
Then on May 20 Dow Jones reported the unsecured creditors committee in UAL Corp.'s bankruptcy case here filed an objection to the company's request to change the terms of a retention agreement with consulting firm McKinsey & Co.
McKinsey was hired by the carrier to provide a number of services including the development of a turnaround plan. Reports indicate this plan includes the pre-bankruptcy reduction of 30 to 35 percent of its ASM’s and the implementation of the Low Cost Operator.
According to court documents made available on May 20, the committee said it so far hasn't been able to talk to McKinsey's professionals or been given any information about the nature of work the firm is currently doing for UAL, parent of United Airlines.
In addition, the bankruptcy filing said, “The committee requires access to McKinsey directly without (UAL) acting as a filter to review the reports and analysis which McKinsey has generated. Without such information, the committee is not only unable to fulfill its own obligations to (UAL's) creditors but also cannot determine if the proposed services are duplicative of (UAL's) numerous other retained professionals.
Seprately, on May 22 Crain’s Business News reported United is seeking an emergency court order to prevent Atlantic Coast Airlines Inc. from bailing out of its contract as a United Express carrier on Saturday. On an emergency motion filed Wednesday, United went to Bankruptcy Court Thursday morning seeking a temporary restraining order to prevent Atlantic Coast from unilaterally terminating its contract as of May 24, according to a spokesman for UAL Corp., United's Elk Grove Township-based parent.
Curiously, the Wall Street Journal reported on May 21 UAL Corp. is considering emerging from bankruptcy-court protection as early as this fall.
Reports indicate chief financial officer Jake Brace held a conference call and said United would meet its April and May debtor-in-possession financing revenue and cash flow targets, likely due to receiving $300 million in federal aid last Friday. Brace told reporters “we see no impediments to an early exit†and the airline is making more progress than expected in lowering its costs.
However, if UAL truly had no impediments to an early bankruptcy exit than why would its unsecured creditors committee have filed a motion with the bankruptcy court to access to McKinsey directly without UAL acting as a filter to review the reports and analysis which McKinsey has generated?
Does it seem a little suspect the unsecured creditors committee, who hold significant power over UAL’s formal reorganization, feel compelled to ask the court to force the airline to provide this information? If UAL had nothing to hide, why would its creditors, who will vote on the Plan of Reorganization (POR) and Disclosure Statement, be at odds with the airline and its consultants?
Moreover, why did the New York Times say the carrier has not decided on its revamped structure nor provided much information about the low-fare operation? Could this be why the creditors committee is concerned and why airline turnaround specialist Texas Pacific Group is not interested in being UAL’s equity plan sponsor?
Does it seem odd that Brace would contact the press to tell the news media the airline may emerge from bankruptcy early, suggesting the reorganization is proceeding ahead of schedule, one day after the creditors committee filed a motion to force the airline to provide the creditors with the reports and analysis generated by McKinsey?
Also noteworthy, if UAL truly had a dramatic turnaround why is Atlantic Coast Airlines (ACAI) defecting from United Express if UAL’s reorganization was proceeding ahead of schedule? Furthermore, UAL and ACAI have a mutually dependent business relationship and why does ACAI believe it would be better of without the Chicago-based airline?
In my opinion, Brace’s conference call is suspect and there are a number of conflicting reports that indicate there is disagreement between key bankruptcy parties, UAL is far from exiting bankruptcy, and the airline's future is far from certain.
Best regards,
Chip
This week there have been curious reports regarding United Airlines and its formal restructuring, which presents incongruent arguments on whether or not the Chicago-based airline is making progress in its efforts to emerge from bankruptcy.
On May 17 the New York Times published an article titled “United Insists It Is Acting on Financingâ€, which said executives involved in United's efforts said, that the search for financing was in only the most preliminary stages and that it could take months. They said the airline had not settled on its revamped structure nor provided much information about the low-fare operation that is the centerpiece of its plan.
Interestingly, the Times reported Texas Pacific Group is not talking with United about bankruptcy exit financing.
Then on May 20 Dow Jones reported the unsecured creditors committee in UAL Corp.'s bankruptcy case here filed an objection to the company's request to change the terms of a retention agreement with consulting firm McKinsey & Co.
McKinsey was hired by the carrier to provide a number of services including the development of a turnaround plan. Reports indicate this plan includes the pre-bankruptcy reduction of 30 to 35 percent of its ASM’s and the implementation of the Low Cost Operator.
According to court documents made available on May 20, the committee said it so far hasn't been able to talk to McKinsey's professionals or been given any information about the nature of work the firm is currently doing for UAL, parent of United Airlines.
In addition, the bankruptcy filing said, “The committee requires access to McKinsey directly without (UAL) acting as a filter to review the reports and analysis which McKinsey has generated. Without such information, the committee is not only unable to fulfill its own obligations to (UAL's) creditors but also cannot determine if the proposed services are duplicative of (UAL's) numerous other retained professionals.
Seprately, on May 22 Crain’s Business News reported United is seeking an emergency court order to prevent Atlantic Coast Airlines Inc. from bailing out of its contract as a United Express carrier on Saturday. On an emergency motion filed Wednesday, United went to Bankruptcy Court Thursday morning seeking a temporary restraining order to prevent Atlantic Coast from unilaterally terminating its contract as of May 24, according to a spokesman for UAL Corp., United's Elk Grove Township-based parent.
Curiously, the Wall Street Journal reported on May 21 UAL Corp. is considering emerging from bankruptcy-court protection as early as this fall.
Reports indicate chief financial officer Jake Brace held a conference call and said United would meet its April and May debtor-in-possession financing revenue and cash flow targets, likely due to receiving $300 million in federal aid last Friday. Brace told reporters “we see no impediments to an early exit†and the airline is making more progress than expected in lowering its costs.
However, if UAL truly had no impediments to an early bankruptcy exit than why would its unsecured creditors committee have filed a motion with the bankruptcy court to access to McKinsey directly without UAL acting as a filter to review the reports and analysis which McKinsey has generated?
Does it seem a little suspect the unsecured creditors committee, who hold significant power over UAL’s formal reorganization, feel compelled to ask the court to force the airline to provide this information? If UAL had nothing to hide, why would its creditors, who will vote on the Plan of Reorganization (POR) and Disclosure Statement, be at odds with the airline and its consultants?
Moreover, why did the New York Times say the carrier has not decided on its revamped structure nor provided much information about the low-fare operation? Could this be why the creditors committee is concerned and why airline turnaround specialist Texas Pacific Group is not interested in being UAL’s equity plan sponsor?
Does it seem odd that Brace would contact the press to tell the news media the airline may emerge from bankruptcy early, suggesting the reorganization is proceeding ahead of schedule, one day after the creditors committee filed a motion to force the airline to provide the creditors with the reports and analysis generated by McKinsey?
Also noteworthy, if UAL truly had a dramatic turnaround why is Atlantic Coast Airlines (ACAI) defecting from United Express if UAL’s reorganization was proceeding ahead of schedule? Furthermore, UAL and ACAI have a mutually dependent business relationship and why does ACAI believe it would be better of without the Chicago-based airline?
In my opinion, Brace’s conference call is suspect and there are a number of conflicting reports that indicate there is disagreement between key bankruptcy parties, UAL is far from exiting bankruptcy, and the airline's future is far from certain.
Best regards,
Chip
