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UBS still sees UAL bankruptcy likely
NEW YORK, Nov 8 (Reuters) - UBS Warburg airline analyst Sam Buttrick said on Friday he still believes a bankruptcy filing this winter is most likely for United Airlines parent UAL Corp. [UAL.N], despite a recent cost cutting agreement with pilots and a debt restructuring.
Buttrick wrote that he believes the government board overseeing UAL''s request for 90 percent backing of a $2 billion loan will find United''s cost cutting plans fall short given the chronic weak yield environment. UAL cannot get access to sufficient capital without that loan guarantee, he wrote.
Neither of these views is swayed by events of the past week -- which we believe have bolstered the market more than close scrutiny merits, Buttrick wrote in a research note.
Shares of UAL, the No. 2 U.S. air carrier behind American Airlines parent AMR Corp., fell 32 cents, or 8.2 percent, to $3.59 Friday on the New York Stock Exchange. The shares have lost more than 70 percent of their value this year.
A letter from the government board to United on Nov. 6, which was also sent to the press, confirms that UAL has some heavy lifting to do with the federal panel, Buttrick wrote.
The Air Transportation Stabilization Board asked United to explain further assumptions underlying revenue forecasts and proposed labor concessions. It also sought more information on pension obligations and capital costs.
The stabilization board oversees the loan guarantee program established to help struggling airlines following the Sept. 11, 2001, attacks. It has demanded significant cuts from United before considering the airline''s loan guarantees request.
United and pilots struck a tentative agreement last weekend for cuts totaling $2.2 billion over 5-1/2 years and United said this week that it has reached an agreement in principle with German development bank KfW agreed to restructure about $500 million of debt payments due in November and December.
Notwithstanding the positive headlines of the past week ... our view distinctly remains that a bankruptcy filing at UAL Corp this winter remains the most likely outcome, Buttrick wrote.
Buttrick also widened his forecasts for U.S. air industry losses in the fourth quarter to $2.4 billion from $1.8 billion and for all of 2002 to $7.3 billion from $6.2 billion.
The fourth quarter outlook is poor, at least from a profit perspective, Buttrick wrote.
Despite the forecasts, and volatile swings in U.S. airline stocks, Buttrick recommends buying shares of carriers he sees as likely to avoid bankruptcy and holding for two years to await an industry recovery.
His buy recommendations, in order, are Northwest Airlines [NWAC.O], Continental Airlines [CAL.N], American Airlines'' parent AMR Corp. [AMR.N] and Delta Air Lines [DAL.N].
11/08/02 11:34 ET
Copyright 2002 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.
NEW YORK, Nov 8 (Reuters) - UBS Warburg airline analyst Sam Buttrick said on Friday he still believes a bankruptcy filing this winter is most likely for United Airlines parent UAL Corp. [UAL.N], despite a recent cost cutting agreement with pilots and a debt restructuring.
Buttrick wrote that he believes the government board overseeing UAL''s request for 90 percent backing of a $2 billion loan will find United''s cost cutting plans fall short given the chronic weak yield environment. UAL cannot get access to sufficient capital without that loan guarantee, he wrote.
Neither of these views is swayed by events of the past week -- which we believe have bolstered the market more than close scrutiny merits, Buttrick wrote in a research note.
Shares of UAL, the No. 2 U.S. air carrier behind American Airlines parent AMR Corp., fell 32 cents, or 8.2 percent, to $3.59 Friday on the New York Stock Exchange. The shares have lost more than 70 percent of their value this year.
A letter from the government board to United on Nov. 6, which was also sent to the press, confirms that UAL has some heavy lifting to do with the federal panel, Buttrick wrote.
The Air Transportation Stabilization Board asked United to explain further assumptions underlying revenue forecasts and proposed labor concessions. It also sought more information on pension obligations and capital costs.
The stabilization board oversees the loan guarantee program established to help struggling airlines following the Sept. 11, 2001, attacks. It has demanded significant cuts from United before considering the airline''s loan guarantees request.
United and pilots struck a tentative agreement last weekend for cuts totaling $2.2 billion over 5-1/2 years and United said this week that it has reached an agreement in principle with German development bank KfW agreed to restructure about $500 million of debt payments due in November and December.
Notwithstanding the positive headlines of the past week ... our view distinctly remains that a bankruptcy filing at UAL Corp this winter remains the most likely outcome, Buttrick wrote.
Buttrick also widened his forecasts for U.S. air industry losses in the fourth quarter to $2.4 billion from $1.8 billion and for all of 2002 to $7.3 billion from $6.2 billion.
The fourth quarter outlook is poor, at least from a profit perspective, Buttrick wrote.
Despite the forecasts, and volatile swings in U.S. airline stocks, Buttrick recommends buying shares of carriers he sees as likely to avoid bankruptcy and holding for two years to await an industry recovery.
His buy recommendations, in order, are Northwest Airlines [NWAC.O], Continental Airlines [CAL.N], American Airlines'' parent AMR Corp. [AMR.N] and Delta Air Lines [DAL.N].
11/08/02 11:34 ET
Copyright 2002 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.
