Falco said:
The problem is that the DIP covenants are becoming more restrictive, and require UAL to make a profit, which they obviously will not. Notice that all the other majors are saying flying will be increasing by 10% next year. This almost insures that no one will make a profit.
The DIP covenants require UAL to EBITDAR positive, NOT profitable. EBITDAR stands for Earnings BEFORE Interest, Taxes, Depreciation, Amortization and Rent.
I don't know what UAL's Dec 02-Sep 03 EBITDAR position is (I have yet to see anywhere in the press UAL's exact EBITDAR position), but UAL has been EBITDAR positive for the last several months.
Just for "contribute," (if you don't know who this is, read some other threads on this board) this is from UAL's quarterly statement: "The Company said it also expects to meet the EBITDAR requirements for its DIP agreements in October."
To find this quote, go to this press release:
http://biz.yahoo.com/prnews/031030/cgth046_1.html
Find the paragraph with the header: September Monthly Operating Report
DIP covenants started in Dec 2002 and DIP targets are based on Dec 2002- current month. However, once we hit Dec, they are based on a 12 rolling target, which means that the Dec 2003 covenants cover the Jan-Dec 2003 timeframe. The Dec 2003-Feb 2004