Republic To Hold Conference Call Today

[funguy2]

Funguy2:

There is a place for people to analyze public information, but I believe "inside" information is more telling.

I agree. However, if one of my employees consistently leaked proprietary information... That is a leak I would plug. In my opinion, a "loyal" employee, perhaps even an "ethical" employee would not give away proprietary information to the competition.

Funguy2, I get the impression from your posts about "adding costs" that you believe the US Airways-Republic deal will not improve US Airways' finances. Can you explain to me how US Airways' CEO does, who previously was the president of Lehman Bros-Europe, and you apparently do not?

I see this as a survival move. US Airways probably doesn't have a lot of options right now... At no fault of the current CEO, but definitely at the fault of company CEO's, BOD's, and management past.

Is this move required to live to fight another day? Probably. Will US Airways be stronger overall because of it? Probably not.

Sometimes, you have to cut off your leg to save your life. Problem is, you might bleed to death.

Now, I'm not necessarily a big fan of UAL's bankruptcy, but why is it that US Airways is going to rush through BK twice when UAL has yet to complete it once? Seems to me that there is opportunity here to say, "Listen, we are a decent sized company. We have some complex problems and issues. It might take a while to find the best possible exit financing deal. While we understand the importance of exiting BK, let's not rush through it and get it wrong or otherwise hurt the company long term."

This is a strategy that seems to be working for UAL. Despite being in a long BK, they have not had to shed valuable assets at all. All of their hubs are basically intact. Valuable trans-Pacific and LHR landing rights are in tact. These are probably important points for them, and will eventually help them get exit financing.

US Airways, however, has slashed employees pay (a mixed move - needed to be done, but executed poorly), reduced a hub (a good move in my opinion, however the company has yet to go far enough), acquired a bunch of higher cost smaller jets (a bad move, IMO), opened FLL (a mediocre move... seems to take advantage of local FLL subsidies and tries to move airplanes to non-LCC competitive routes... that is run from the problem), and is now selling assets (a bad move, in my opinion). I think US Airways would be better to keep extending BK at least through the end of 2005 until a better exit financing strategy can be found.

Of course, all of that does nothing for my theory that industry capacity must be reduced, and US Airways is the most likely candidate. Unfortunately, US Airways is doing little to set themselves up for long-term success post-BK. Part of why US Airways is rushing through BK, IMO, is to avoid Chapter 7. However, it seems to me that not getting it right in BK #1 caused BK #2. And if BK #2 doesn't end right, BK #3 is right around the corner. I believe the approach is all wrong.

That is my opinion.

 

[usairways_vote_NO]

I agree.  However, if one of my employees consistently leaked proprietary information...  That is a leak I would plug.  In my opinion, a "loyal" employee, perhaps even an "ethical" employee would not give away proprietary information to the competition.

[post="256122"][/post]​

Funguy you do understand it is all in his head right? He has nothing he is a wannabe.

 

[funguy2]

Funguy you do understand it is all in his head right? He has nothing he is a wannabe.

[post="256125"][/post]​

I don't know. It could all be in his head, or he could be leaking what proprietary information he has. I have to assume the second.

 

[700UW]

No executive at US would risk being charged by the SEC to let the blabbermouth know secrets.

 

[funguy2]

700UW: My logic agrees with you. However his statements and the "evidence" that seems to have occured suggest otherwise. Therefore, I assume that somebody intelligent enough to operate a complicated jet aircraft, and manage to find this website, doesn't have little people in his head giving him information to post.

 

[BoeingBoy]

Back to the topic, FUNGUY2, why do you think U is adding cost. I thought the fee for service was reduced from cost + 8% to cost + 5%, that sounds like a savings to me?

[post="256059"][/post]​

funguy touched on this, but let me take a stab also....

The reduction from cost + 8% to cost + 5% is specifically on CHQ's Emb-145 affiliate operation - that can drop to as few as 20 airplanes under the agreement.

The profit margin on the envisioned Emb-170 affiliate operation is not known at this time (it's redacted), except that it is to be comparable to that given to AWAC. And this part of the operation can be for at least 28 airplanes - airplanes which cost more to operate than the 145's (cost, not CASM). Thus, even if the 170's operate under cost + 5%, the 5% could represent more $$ on more airplanes than the 3% reduction on fewer, smaller airplanes. If the profit margin on the 170 affiliate operation is more than 5%, that's even more $$.

For example (and just pulling numbers out of the air), say each Emb-145 costs $1500 per hour to operate. We save 3% of the cost (going from 8% to 5% margin), or $45 per hour per aircraft less paid to Republic. Now suppose each Emb-170 costs $2000 per hour to operate. Even at 5% profit margin, that's $100 per hour per aircraft we pay Republic to operate them.

Save $45 per hour on the 145's, pay $100 per hour on the 170's. More 170's than 145's. Higher cost to U.

Jim

 

[sfb]

In a statement US Airways said, "This transaction provides us with new equity, reduced debt, enhanced liquidity, and a strengthened relationship with a key regional airline partner, as well as efficiencies in running the business that will allow us to focus more of our resources on the mainline operations," said Lakefield. "Overall, we will have both flexibility and a stronger regional jet network that will improve both our bottom line and service to our customers."

I'll take a stab at explaining the apparent contradictions here. Notice that Lakefield makes no claim that this agreement will "lower costs." I suspect that's because it really won't. The "focus...on the mainline operations" happens because the company will no longer run an "Embraer Division" as part of US Airways.

The reduced debt comes in two forms. First, if Republic does buy the Midatlantic assets and DCA/LGA commuter slots, the purchase price of $110 million will likely go in large part towards paying down a portion of the ATSB-guaranteed loan. What's not used for that can be retained by US Airways as part of the cash collateral. Though it's possible, I would be extremely surprised to see the ATSB agree to allow US Airways to keep the entire $110 million given that this asset sale significantly reduces the remaining non-cash collateral. Second, Republic will assume the leases on the leased EMB-170's, which removes lease-related debt from the balance sheet.

Funguy2, I get the impression from your posts about "adding costs" that you believe the US Airways-Republic deal will not improve US Airways' finances. Can you explain to me how US Airways' CEO does, who previously was the president of Lehman Bros-Europe, and you apparently do not?

The point most of us are trying to make is that deals like this are sacrificing long-term profitability for short-term cash infusions. Paying Republic cost plus 5% to operate EMB-170's isn't going to be cheaper than operating them as part of US Airways, Inc. at cost. Paying rent to Republic on DCA & LGA commuter slots adds to the company's costs. What we all recognize, though, is that US Airways is in a very severe crisis right now. Cash is extremely short, conventional financing is essentially unavailable, and high fuel prices mean the airline (like most of its peers) is burning through cash at an alarming rate. With the company already in bankruptcy and little left to mortgage, there's little choice but to sell assets and mortgage the future -- if the company makes it out of Chapter 11. Lakefield's job right now is to scrounge up enough liquidity to tide US Airways over until the current cash crisis ends.

I think it is quite telling that neither RSA nor Texas Pacific Group -- nor any other unaffiliated investor -- has stepped up at this point to provide the remainder of the emergence financing which Airways requires. If Bronner supports the new business plan so strongly, why hasn't he yet stepped up with some of RSA's money?

 

[usairways_vote_NO]

700UW:  My logic agrees with you.  However his statements and the "evidence" that seems to have occured suggest otherwise.  Therefore, I assume that somebody intelligent enough to operate a complicated jet aircraft, and manage to find this website, doesn't have little people in his head giving him information to post.

[post="256145"][/post]​

Can you please in chronological order exactly what was said for and against by 320 starting from beginning including the news and tell us what led you to your conclusion? With links please.

 

[Rico]

I think it is quite telling that neither RSA nor Texas Pacific Group -- nor any other unaffiliated investor -- has stepped up at this point to provide the remainder of the emergence financing which Airways requires. If Bronner supports the new business plan so strongly, why hasn't he yet stepped up with some of RSA's money?

Because the liquidation sales have not occured yet, in which valuable assets can be had at even cheaper prices, and without any of the labor/debt/contractual baggage that come with the purchase of such things today (read- the entire airline).

In the world of finance, airlines can be bought for practically nothing right now. But no one wants to deal with what comes along. So...

it becomes a game of "Survivor" now, in which the various players are just trying to last into the next round.

 

[funguy2]

UVN: I get your point. Based on items, such as the "waffling" on the Republic deal, and his being wrong on the UCT (because any deal has a 50/50 chance) indicates to me that USA320Pilot probably actually hears the stuff he reports on.

Whether or not he should be reporting it is another question.

 

[usairways_vote_NO]

UVN:  I get your point. 

[post="256235"][/post]​

I guess you mean you won't answer question.

Hey I have a bridge for sell!!!

How long you been reading his messages anyway? <_<