Airline industry revenue models predicted a decline in September revenue due to the September 11 anniversary. However, across-the-board ATA member airlines, did not expect the September decline would not fully recover, especially with the business traveler, thus creating a double dip airline revenue recession.
While it has been difficult for industry observers to identify a specific cause, where for example UA's cash burn rate has grown from $7 million per day in Q2 to approximately $8.5 million per day in Q4, some causes are continued Middle East violence, the potential war with Iraq, the sluggish economy, domestic and international terrorist threats, short-haul alternatives, and the airport security “hassleâ€.
Virtually every airline and industry observer is predicting these lower traffic levels will continue throughout 2003 and maybe into 2004, creating unprecedented revenue pressure.
Meanwhile, the US AFA told its members on Nov. 5, 2002, the members of the AFA US Airways Master Executive Council met with representatives of management to get an update on the bankruptcy process and our airline's current financial condition. Management's basic message was that the airline is not meeting revenue projections that were in its application to the Air Transportation Stabilization Board for a $1 billion loan guarantee. Management said that revenue shortfall could be problematic if the trend continues.
To make up the difference between its revenue projections and the shortfall, management suggested that it may come to the unions and ask for productivity improvements in labor contracts, but reiterated that it will not ask the bankruptcy court to make more cuts.
US is required to file its final plan of reorganization by December 9, so it can have all motions in front of the court at the December 12 Omnibus Hearing. Therefore, all stakeholder agreements must be in place by December 9 if US is going to meet its fast track emergence schedule, which is considered essential if war breaks out in Iraq.
In addition, all union members have signed confidentiality agreements and cannot comment to the rank-and-file, therefore, there may be union leadership ratified concessionaire agreements that may be required to obtain further DIP financing, the loan guarantee, and Chapter 11 emergence.
Chip