MarkMyWords:
MarkMyWords asked: "Let's say, for arguements sake, that UAL does end up liquidating. Since our business plan calls for substantial benefits from the code share agreement, if they liquidate would this then trigger a default in our ATSB loan because we would no longer realize the benefits of the code share? Could the ATSB come back and take their money?"
Chip answers: Your question is valid and warrants discussion. US’ final loan guarantee approval was based on a business plan that required a seven percent profit margin in seven years and the funds must paid back to the lending institutions. Moreover, the plan required Fitch Rating, the ATSB outside auditor, to provide the Board with and opinion of the business plan.
These requirements are the same for all loan guarantee applicants and is the reason the ATSB rejected UA’s first loan guarantee request.
The UA plan projected a $200 million per revenue increase due to the alliance, however, if UA fails, the money does not have to be returned to the lenders for this industry event.
US would be required to pay the loan back regardless of the UA situation, but a failure of UA would not be reason for US to lose the $1 billion.
Meanwhile, US has contingency plans in place should UA fail and as I have said before, maybe the only way UA can get its POR approved by the court is for a UCT or ICT to occur.
I had no intention to disucss the UA pension problems that are effecting all legacy airlines, however, in regard to the naysayers and those who like to shoot the messenger, the UA pension problems are real and could cause the liquidation of the airline, unless there is some form of resolution. This could include plan terminations, a legislative solution, or by other means, to permit the business plan, POR, and disclosure statement to be approved.
As with the US ALPA pension issue, the Rocky Mountain News reported "It's very much a possibility" that United will follow in US Airways' path, said Ray Neidl, an analyst at Blaylock & Partners in New York. The pension deficit "could be one of the obstacles to getting out of bankruptcy."
The Rocky Mountain News also said as part of its effort to obtain exit financing, the Chicago-based carrier plans to seek a $1.8 billion loan guarantee from the federal Air Transportation Stabilization Board. The panel rejected a previous request Dec. 4, prompting UAL's bankruptcy filing. It cited United's pension problem as a "substantial" concern.
Obviously, this is a huge issue and the financial markets have not recovered enough to meet all of its obligations. For those naysayers who are pilots, maybe you should check with ALPA R&I.
Finally, In my opinion I believe it’s significant the newspaper reported the company has not come to us (to try to terminate) our pensions, and we've made it very clear that it would be unacceptable for them to terminate any portion," said Capt. Scottie Clark, a spokeswoman for United's pilots union, the Air Line Pilots Association.
Such a move, she warned, "would cause a meltdown on this property."
Best regards,
Chip