UA Board will not approve a split up of the Airline.

767jetz

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Since rumors started to fly on the US message board about UA ALPA confirming a corporate transaction, UAL fragmentation, and spinning off a Low Cost Carrier, possibly transfering assets from UA to US, etc., I thought this quote from an MEC update may clarify things. There have also been some conflicting stories in various news articles.
{MEC Weekend Update Friday, January 31, 2003
By MEC Communications Committee Chairman Captain Scottie Clark

Perhaps heeding the message sent by ALPA and other labor groups regarding the Company’s plans to develop a Low Cost Carrier, the UAL board of directors on Thursday, according to various press reports, rejected a plan that would have basically caused a breakup of the carrier.
Although the Company has not released its full business plan, it did issue a statement late Thursday evening expressing its intent to “pursue further detail and analysis of the plan’s strategic initiatives.â€
The board, in the same statement, voiced its intent to
be “fully engaged in the development of the plan … as the Company continues its dialogue with its unions, the creditors committee and other constituent groups.â€
Before Thursday’s board meeting, it was anticipated that United would propose a Low Cost Carrier that would be operated by a separate corporation, utilizing new-hire employees on separate seniority lists and covered by separate labor agreements. This would be tantamount, according to ALPA, as the breakup of United Airlines.
MEC Chairman Captain Paul Whiteford strongly opposed the plan. “We will not let management break up the strongest asset base and route network in the airline industry,†he said in a press statement. “And we will not help management destroy the careers of the dedicated working men and women who built this Company. We will oppose management’s breakup plan by every lawful means available to us.â€
ALPA is not opposed to United creating an internal product to compete against Low Cost Carriers. We stand ready to discuss an agreement that makes rational economic sense.
Please go to the MEC website at www.alpa.org for updates on the Company’s business plan. We don’t know when details will be made available, but we will provide information when we can.
* In a related story, Reuters on Thursday night stated that the UAL board of directors “unanimously supported a restructuring plan to pull the airline out of bankruptcy.†There has been some confusion over this report. According to the Company, the board “was unanimous in its support for the need for fundamental transformation of the airline.†The board approved the framework for reorganization. It DID NOT unanimously approve the Company’s overall plan for reorganization, nor did it endorse the Company’s original outline for a Low Cost Carrier. Captain Whiteford and other labor leaders made their opposition to the LCC plan clear. The Company said late Thursday it would continue analyzing and pursuing union input for such a plan.}
So as it stands now, any LCC will remain an INTERNAL affair.
 

Bear96

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Denver Post

Saturday, February 01, 2003

"...While United discussed its cost- cutting initiatives in its financial report, the company has not publicly released details about its new business plan. Spokesman Chris Brathwaite said employees will learn details this week.

"The plan includes creation of a low-cost subsidiary with reduced wages and more stringent work rules, potential closure of maintenance facilities, handing of more mainline flying to regional United Express affiliates and further reductions in United's workforce and fleet of aircraft, sources have said.

*****"Unions succeeded Thursday in defeating the company's effort to establish the low-cost airline as a separate company. At a meeting of the board of directors, United backed off the proposal, union representatives said.*****

""The board approved the framework for reorganization," said Dave Kelly, spokesman for the Air Line Pilots' Association, which has a representative on the board of the employee-owned company. "It did not unanimously approve the company's overall plan for reorganization nor did it endorse the company's original outline for a low- cost carrier."..."

Sorry, Chip. Another brilliant theory of yours bites the dust.

Back to the ol' drawing board, huh?

Don't worry. I'm sure your overactive imagination will come up with something pretty quickly.
 

oldiebutgoody

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It would appear to me to be another step toward total liquidation of UAL. How long can a company bleed over $20 million a day? A plan had better be forthcoming really soon...
 

PITbull

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[blockquote]
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On 2/1/2003 7:34:32 PM oldiebutgoody wrote:

It would appear to me to be another step toward total liquidation of UAL. How long can a company bleed over $20 million a day? A plan had better be forthcoming really soon...
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[/blockquote]

Yea, yea, Everyone is LIQUIDATING. Here we go again.

Let's see, where's AA, oh yea, they have to file bankruptcy FIRST and THEN go after the liquidation "trump card", then, oh yea, NW, then CO, DL, and so on and so on and so on, until all the concessions are had by all of LABOR. Oh, and yea, they all need to get themselves one of of them there, airlines within an airline deal, you know, SING, SONG, SUNG, MAtlantic...ETC.. And you have to do it in that order and remeber to leave the PENSION issue LAST, cause if you use that first, then labor won't give anything else. You have to let them think that they are saving their pensions in the beginning.

Here's a plan:
United first has to let the airline go down more a little so they can make sure they don't have to pay any of their debts to the creditors,see bankruptcy is about hitting a few birds with one stone. Don't pay your debts, threaten all your labor groups, and the hell with the stock holders. Then, by announcing a bankruptcy will help them burn cash FAST as passengers run from airline bankruptcies. What they need to do to get rid of their cash is just get one of their DIP financers to threaten pulling the DIP financing and use the big L word, and that should ensure passenger count down to the basement. That should get their Labor to their knees.and scare the day and night out of them.And since United labor groups don't have a 1113 letter, they will be under threat of abrogation for oh, let's see 18 months while United enjoys the bankruptcy ride. Hey, I should go in the Labor Relations Consulting business...I got this down to a science.

We've all been there, done that..... will someone pass the popcorn???
9.gif']
 

wings396

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I agree that Tinton has not got much of a game plan, if any. Siegel knew how and what he was going to do, and in what order. He made most of it public about the lease negotiations and threw some target nubers out there. We have seen nothing of the sort from Tinton and UA mamagement. Tinton has ZERO airline experience and that is no secret. His only solution to date has been the proposed LCC that has already been shot down. UA is bleeding far more than US ever was, and has not done much of anything to date to stop it. If he has any plans, he better get moving or it will be too late. Also can the BOD override the BK Judge on any issues?
 

PITbull

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Piney,

There is no well thought out plan for UA, because they waited to see if U would be successful. When they saw U prance right into bankruptcy and U got rid of alot of unsecured debt. Plus, unheard of concessions in anyones history, along with renegotiating lease agreements inside BK that they could not do outside BK. U was a "shoe in" for emerging out of bankruptcy in a few months. U told ALL their labor groups to buy into these deep concessions JUST TO AVOID BANKRUPTCY, and after pilots and F/A ratified, they went into bankruptcy. They couldn't wait to do it. Next thing you know Siegel is doing road shows and telling Labor how GREAT is is to be in bankruptcy and getting OUR "fresh start" . Jerry's is probably writing a manuel on how to "stop the heart beat of Labor" as we speak!

Hell, UA didn't even try sencerely to get that ATSB approval. They did even better. They went right into bankruptcy and now they have over their labor's heads the contant threat of abrogation. Ingenious! There is no way the Big 6 can do it any other way to compete; even if the econmy turned tomorrow on the upswing, these companies would still have to implement the "plan". One by one, and who knows what other industry will follow suit just because they can.

It's all extortion, plain and simple Corporate legal extortion and they have a Republican congress who has never been a fan of labor to help them out, as well. If these airlines were really in as much trouble as their "so called books" reveal, every exec. would be trying to SAVE their own jobs by taking concessions that run deep and long term. NONE OF THEM HAVE DONE THAT TO DATE! It's all about getting the little guy to beg for mercy and operate corporations from the sacrifices made by the "rank and filers" of America.

WE now got Sec/Tres. Snow going after conversion ideas for"Defined Pensions" in America that will ultimately have a negative effect on the low-average salary earner retiree who invested 30 years + in a company. MOST WORKING AMERICANS DON'T MAKE ENOUGH MONEY TO INVEST IN A 401K to actually retire on. Unless you have been Lucky for 30 years of investing, and hell the 401K concept just came out in the late 80s. If we get rid of Defined pensions in America, older folks won't be able to retire, which will make it much more difficult for the educated youth to fine employement when they graduate from universities.

NO, I am not buying this "end of UA" crap. If that was the case, all AA and CO, DL, NW, have to do is wait, and they'll get all of UA passengers. As you notice, they are not waiting. They know the "plan" and they know its working. We'll see them all in bankruptcy for their "free ride" to profitability.The only thing going "down" for UA is the wages and benefits of all their employees.

Again, "just living out loud".

 
C

chipmunn

Guest
Our industry is in chaos and what's happening at US, UA, and apparently AA is sickening for employees. Nobody likes the painful restructuring process, but Piney Bob may indeed be right in that UA could be headed for a liquidation, if all of the parties concerned with the reorganization do not quickly get on the "same page".

The biggest challenge I believe UA has is that the Board, Management, and Labor seem to not be able to agree on a plan of reorganization. In fact, ALPA and Company code-a-phones provide a different perspective on the January 30 Board of Directors meeting. To listen to these calls dial 800-393-6682 and 800-843-2572. How can it be good if all of the players are not on the same page and are beginning to fight?

To compound its problems UA's financial position is getting worse instead of better, even after labor provided $70 million per month in W-2 concessions and the company is defaulting on its financial commitments.

- UA reported it has $1.4 billion in unrestricted and $500 million in restricted cash.

- The company said it's burning through $20 million per day. This enormous cash burn rate should moderate, but how long can the airline go on losing this kind of money before it runs out of cash or is forced to sell assets to fund on-going operations?

- The industry is now entering the slowest quarter of the year with international carriers likely having the greatest exposure to a Middle East war.

- The airlines financial position precludes it from hedging fuel with NYMEX prices skyrocketing.

- Today the Sydney Morning Herald reported aircraft lessors are considering calling in United Airlines' fleet of Boeing 747-400s.

I believe if a fight breaks out between the Board, Management, and/or Labor, Piney Bob may be right and a Chapter 7 liquidation may become "very real".

Chip
 

PITbull

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Chip,

It's not going to happen. No way the board will approve a liquidation. UA has $2 Billion in DIP financing. What investor would do this if they thought UA was on the "brink" of extinction. The Big 6 have to go through the same process in order to compete with one another. They will lose major money at first in order to go into bankruptcy to get rid of lease agreements they contracted in the 90s when times were booming. They have to burn cash now, otherwise, they can not go into bankruptcy.

UA management will be screaming to rid themselves of the ALPA pension too. They don't want those pension liabilities anymore. In order to get rid of those for life, they have to lose money; big money.They have to show that they can not make the pension contribution liability. ALPA United will suffer the same fate.

But there will be no liquidation of UA.
 

Bear96

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[blockquote]
----------------
On 2/2/2003 8:32:11 PM chipmunn wrote:

Our industry is in chaos and what's happening at US, UA, and apparently AA is sickening for employees. Nobody likes the painful restructuring process, but Piney Bob may indeed be right in that UA could be headed for a liquidation, if all of the parties concerned with the reorganization do not quickly get on the "same page".

The biggest challenge I believe UA has is that the Board, Management, and Labor seem to not be able to agree on a plan of reorganization. In fact, ALPA and Company code-a-phones provide a different perspective on the January 30 Board of Directors meeting. To listen to these calls dial 800-393-6682 and 800-843-2572. How can it be good if all of the players are not on the same page and are beginning to fight?

To compound its problems UA's financial position is getting worse instead of better, even after labor provided $70 million per month in W-2 concessions and the company is defaulting on its financial commitments.

- UA reported it has $1.4 billion in unrestricted and $500 million in restricted cash.

- The company said it's burning through $20 million per day. This enormous cash burn rate should moderate, but how long can the airline go on losing this kind of money before it runs out of cash or is forced to sell assets to fund on-going operations?

- The industry is now entering the slowest quarter of the year with international carriers likely having the greatest exposure to a Middle East war.

- The airlines financial position precludes it from hedging fuel with NYMEX prices skyrocketing.

- Today the Sydney Morning Herald reported aircraft lessors are considering calling in United Airlines' fleet of Boeing 747-400s.

I believe if a fight breaks out between the Board, Management, and/or Labor, Piney Bob may be right and a Chapter 7 liquidation may become "very real".

Chip

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[/blockquote]

Chip,

THIS time... I actually agree with what you say. UAL is certainly in deep doo-doo.

PITbull,

I think you are overestimating how much power the UAL BOD has in the current situation:

How does a board "approve" a liquidation or not? Once you are out of cash and checks start bouncing, and the creditors go to court to get their money, you are liquidating-- or liquidatED by the court, willingly or not.

And about the $2B in DIP financing. I think it is more like $1.5B. And of that, only half has already been paid out to UAL ($700 or $800 million). The other half is contingent upon UAL basically becoming technically cash-flow positive in a matter of several weeks. Ain't gonna happen, unfortunately, IMO.

As to what investor would "do" this (I take that to mean, Why would anyone loan UAL the DIP financing) if they thought UAL was on the brink of extinction? Well in actuality there is very little risk to DIP financers, if they have structured the deal properly. They go ahead of all other secured creditors to get repaid. So if UAL misses one covenant or other target, the DIP-ers will be there forcing UA to cough up the cash (through selling of assets or other forms of liquidation) so they can get their money and get out.

Maybe if everything goes exactly right over the next few months UA can somehow pull it off. But I know that I for one am planning to not be receiving paychecks from UAL beyond this year.
 

PITbull

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I probably did overstate the authority of the BOD while in bankruptcy. They pretty much lay dormant while in BK. But, that is why Bankruptcy is called "bankruptcy protection". For the mere fact that creditors cannot force a liquidation of the Co. while in the hospice of the courts. Better for the vendors and creditors to get some money on the dollar, than none. We were told in the summer by the AFA bankruptcy specialists that a Judge tries to assist the DIP in any way possible to help the co. emerge from brankruptcy much more healthy and solvant.The co. has 120 days to present a plan before creditors can force asset liquidation. (that's a gross synopsis)I am sure someone on this board can explain better than I. Oh, you'll hear the L word thrown around a whole hell of alot, and the passenger load will tank, but don't feed into it and let "fear" rule. It's all part of labor control and management strategy. And as far as trying to show cash positive for the rest of the DIP financing, U is emerging in a couple of months and hasn't shown any cash positve..o, ziltch, notta. We got all of ours.

So, don't start with the "doom and gloom" and the "I agree with chip stuff"; Liquidation ain't happenin.
 

tug_slug

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[blockquote]
----------------
On 2/1/2003 3:49:07 PM 767jetz wrote:

{MEC Weekend Update Friday, January 31, 2003

By MEC Communications Committee Chairman Captain Scottie Clark


Perhaps heeding the message sent by ALPA and other labor groups regarding the Company’s plans to develop a Low Cost Carrier, the UAL board of directors on Thursday, according to various press reports, rejected a plan that would have basically caused a breakup of the carrier.

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[/blockquote]

767,

I recieved this in my email today.

United management presented their "plan for transformation" to the Board of Directors this past week. The transformation plan is different than a fully developed business plan designed to get the Company out of bankruptcy. This plan appears to be an outline of what kind of airline United will be in the future, but without the details of exactly how it will get there. The more detailed business plan will eventually be presented to the creditors and the court for approval before United can come out of bankruptcy.

Depending on which newspaper article you read you were told that the Board either unanimously approved the plan or didn't.

United believes the Board completely agreed with the plan as it was described to them but statements from ALPA do not say the same thing.

The Pilots and the Flight Attendants have said the Board is split over the issue of the creation of a separate low-cost carrier and both unions are now very publicly opposing that portion of the plan. The reaction of the 2 unions almost seems that they just heard about this idea this past week. United included the concept of the separate airline in their business plan presented to the unions in early December. The IAM immediately posted the information on their web site and has made continuous references to it in bulletins related to the ongoing talks with United. ALPA and the AFA must have been aware of the plan during the discussions they held with United prior to ratifying their temporary pay cuts in early January.

ALPA and the AFA are opposed to the start up of a separate airline and claim it is really the liquidation of company assets. That is an interesting position for ALPA to take. They did not see the continual shifting of operations to United Express carriers and the closing of 17 IAM stations as a liquidation of assets. They agreed to increased use of RJ's in their last negotiations that allowed United to turn complete stations over to Express carriers.
 

PITbull

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[blockquote]
----------------
On 2/2/2003 8:43:16 AM wings396 wrote:

I agree that Tinton has not got much of a game plan, if any. Siegel knew how and what he was going to do, and in what order. He made most of it public about the lease negotiations and threw some target nubers out there. We have seen nothing of the sort from Tinton and UA mamagement. Tinton has ZERO airline experience and that is no secret. His only solution to date has been the proposed LCC that has already been shot down. UA is bleeding far more than US ever was, and has not done much of anything to date to stop it. If he has any plans, he better get moving or it will be too late. Also can the BOD override the BK Judge on any issues?
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[/blockquote]

I know it seems I am all over this post, but it just irks me to no end that folks can't see this in plain view. How many carriers does this have to happen to before folks get the idea that this is a "once in a life time" opportunity for these carriers to get the contracts of their dreams and to get them down there for many many years. It's worth billions to these airlines.

Do folks see any similarities here? New CEO for U (Siegel) new CEO for United (Tilton). Both have an alliance together, both in bankruptcy, both threatening labor with same retorhic, both want a LCC within the airline, both use the L word.

Point to ponder...Siegel had a plan because he brought in the best "union busters" in the business. UAL will succeed in their endeavor. Labor will regress for years, and it is the saddest thing for me to witness; and we are living it.
 

Bear96

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[blockquote]
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On 2/2/2003 11:04:00 PM PITbull wrote:

...The co. has 120 days to present a plan before creditors can force asset liquidation...
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[/blockquote]

That's what has me most worried. We will be halfway through that 120-day period by next week and there is STILL no real plan or vision from senior management or the BOD as to what UAL will look like on the other side of BK. Any plan that is proposed seems to get shot down. Meanwhile, the clock continues ticking.

About cash flow, U and UA have different DIP agreements. I am not familiar with U's. But at UAL, there are cumulative loss targets that must be met, retroactive to the filing of BK on 12/11/02. The target for 2/28/03 is $964M. The target for 3/31/03 is $881M. That means that between 2/28 and 3/31, assuming UA has lost the full $964M between 12/09/02 and 2/28/03, we must show a net operating PROFIT of $83M to bring us up to the $881M level, or UA is in technical violation of the DIP covenants. Every month going forward, the cumulative loss covenants get stricter and stricter, until by 10/31/03, UA must show a net PROFIT retroactive to 12/11/02 of $46M-- meaning, by then we must have made up all of the losses incurred since BK was filed, PLUS an additional $46M. And that is not going to happen. I think we all saw the $1.5B loss in 4Q02, and UA is predicting no profit for 2003 now.

Does that mean an immediate liquidation on 4/1? Probably not. But it could, and at the very least it will mean even more control goes to the DIP financers (and more leveraging of assets (i.e., some sort of fragmentation) and higher interest payments going forward, hobbling UA for a good long time) or whoever else pops up at the last minute with a "plan" for UA once the 120-day period is over.

This spring and summer will be truly, horribly ugly at UA.
 

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