UAL and U Loan Feedback: WSJ Article

[AirplaneFan]

[P]
[BLOCKQUOTE][BR]----------------[BR]On 11/18/2002 12:01:44 PM 767jetz wrote:
[P]
[BLOCKQUOTE][BR]Well, UAL says they expect to be profitable in 2004 and pay off the loan by 2007. Again, comparing UA to US is simply not comparing apples to apples. [BR][BR]That's just the facts of the matter.[/BLOCKQUOTE]
[P][/P]----------------[/BLOCKQUOTE]
[P]6 months ago, posters were telling us UAL would be profitable in 2003 and would be cash flow positive in late, 2002. The above is just a guess, based upon unknown assumptions. If it were obvious to investors that it actuallywas the case their stock price would be significantly higher.[BR][BR]I believe that UAL can never be profitable without significant concessions, since their costs are based upon generating revenues above 1999. In my estimate we won't be at that point again in the country for a LONG, LONG time.[/P]

 

[UAL777flyer]

United Chicago,

AA will lose either way. No matter what road is taken, UA is going to shed cost and become a leaner, more competitive carrier in the markets we serve. That doesn't bode well for AA. But with an out of court restructuring, it won't get nearly as ugly as Ch.11. That means the cuts won't be as deep, hence we won't be throwing more marketshare their way. The chaos created with a bankruptcy filing is such that AA can take advantage of it, as well as the fact that the level of cuts we'd have to undertake would be much steeper. But I think they realize that the pressure on them is going to increase shortly, no matter what road UA takes to restructure.

 

[UnitedChicago]

Rhino:

Name one analyst that actually understands the complex airline industry. Oh and whom isn't an alarmist (Boyd).

I can provide you with numerous examples of leading analysts that have contradicted themselves multiple times over the past 6 months in covering UA.

 

[Rhino]

Bus, no one can guarantee anything. OTH, clearly some bizplans are more likely to achieve that 7% than others.

Aside from your mischaracterization of the qualifications of those on the ATSB, the ROE are actually pretty cut and dried.

Look at it this way. The ATSB are 'bankers,' who have taxpayer dollars to invest. These bankers will review the various bizplans IAW some fairly concrete guidelines (OMB growth projections, debt/equity ratios, cost containment, etc.) Depending on how solid they view the plan to be, they will either 1) turn it down, 2) send it back for more work, 3) approve it with no equity requirement, or 4) approve it, but demand some level of equity in return.

You're savvy enough to know that this is what happens when you submit a bizplan to any bank or VC. The ATSB is not a freebie.

Hence the constant comparisons with US. US has set a benchmark for cost reductions. That's just the way it is.

Name one analyst who thinks UAL's cost-cutting proposals are adequate. Best way to tell? UAL's share price.

 

[Busdrvr]

[blockquote]
----------------
On 11/18/2002 9:08:06 PM Rhino wrote:

Jetz/Bus,

You missed the point. The bizplan presented the ATSB must demonstrate a 7% profit margin.

If the assumptions, either in cost or revenue, used to derive this are questionable or incomplete, the ATSB will require more detail, as they did with UAL.

BTW, FRNT and ATA did just fine during the last few years.
----------------
[/blockquote]

FRNT nearly went BK in 1998. Please tell me what airline will guarentee a 7% profit in 2005. Just one will do. The ATSB, a group of individual analyst (ie, can't get a job actually running something) is making policy based on what THEY think works best. that is NOT the charter of the ATSB.

 

[767jetz]

Rhino,

US has set a benchmark for cost reductions. That's just the way it is.

-Yes, but US doesn't have the same ability to generate revenue either. UA has far better route structure, alliances, etc. Cost is only one side of the equation in regard to a business plan. So comparing the cost alone is irrelevant.

-Now if you're talking about the politics involved in forcing huge concessions on organized labor, or financing the war on terrorism on the backs of labor, that's a different story. Then of course you would want to use the lowest example (US) as a benchmark whenever possible.

Make no mistake. Politics are heavily involved here. For example, instead of lowering the ticket taxes (expense that the airlines do not pass along to consumers, and can amount to up to 40% of a ticket) and allowing the airlines to keep that money so they can ask for less cost savings from employees, the gov't would rather keep their tax dollar and have the employees tighten their belts. Also, lower pay means less union dues. So does fewer employees. Those union dues go to supporting political candidates, the ones who are not currently in office. Now it's payback time. Get it?

My point is that comparing US's cost structure to UA's serves no useful purpose in determining UA's ability to pay back a loan.



Name one analyst who thinks UAL's cost-cutting proposals are adequate.

-Name one analyst who knows what's going on in the board room.
-Name one analyst who hasn't been wrong about UA in the past.
-Name one analyst who has seen UA's entire business plan.
-Name one analyst who actually has inside information. (No, not Chip Munn!)
-I can name 2 people off the top of my head who DO have all the facts and who HAVE said that UA's cost cutting proposals are adequate, and who have said that UA will be able to be profitable in 2004 and pay back the loans by 2007... Paul Whitford and Glen Tilton.

 

[wts54]

Yes thats right we will strike so
you wont get your presidential size paychecks.

 

[UAL24]

I am not a doom and gloomer BUT if UAL goes into BK we will not emerge. Our company will cease to exist for a couple of reasons. 1. AA needs us to fail and Bush will do as they ask because of past contributions and future promises. The industry has current overcapacity of 18% and that is the market share that UAL has so it solves the industries problems. 2nd, outside investors are lining up to control UAL when we go BK and they will breakup and sell the pieces. That is a simple fact of airline history. 3rd, the mechanics will go on strike when any judge tries to force a contract on them and we will cease to exist. So any of you who think BK will be wonderfull and helpfull to UAL need to seriously re-evaluate your position.

 

[767jetz]

[blockquote]
----------------
On 11/19/2002 5:39:02 AM AirplaneFan wrote:



[BLOCKQUOTE]
----------------
On 11/18/2002 12:01:44 PM 767jetz wrote:



[BLOCKQUOTE]
Well, UAL says they expect to be profitable in 2004 and pay off the loan by 2007. Again, comparing UA to US is simply not comparing apples to apples.

That's just the facts of the matter.[/BLOCKQUOTE]


[/P]----------------[/BLOCKQUOTE]


The above is just a guess, based upon unknown assumptions.----------------
[/blockquote]

No, actually this was not a guess, but a statement by our CEO and based on facts, research, actual numbers, and a solid business plan. NOT assumptions.

 

[Rhino]

UAL 24, and Busch will do as they ask because of past contributions and future promises.

I don't see what Budweiser has to do with this.

Jetz, agreed. My only point was that cost comparisons are inevitable. I'm sure the ATSB is aware of UAL's strengths vis a vis US. I didn't mean to imply that UAL concessions need to be as deep as US's. I do suspect they will have to modified from what's proposed.

Few lenders would agree to snapbacks/future raises that aren't profitability-based, given the uncertainties of the immediate future.

 

[UAL777flyer]

wts54,

Strike? Oh please don't make me laugh. Save the chest-beating rhetoric for the union hall, please. You guys won't strike and you know it. Oh sure, the militant minority are screaming about it. But in the end, the majority will do what's necessary like the rest of us. Because the alternatives are a lot uglier. Unless your sole purpose is to kill off United Airlines, that is. That could very well be your sole purpose. If that's the case, good luck in your new career as you join the already long unemployment lines.

As for the wisdom of airline analysts, those people swing whichever direction the wind is blowing. Talk about fence-sitters. And if you're basing UA's adequacy of cost cuts on their share price, you're crazy. The overwhelming majority of airline industry investors don't properly understand the way airlines work. They don't put things in their proper context, hence the continued volatility of airline stocks, especially UA. But to compare UA's cost reductions against US and then assume UA therefore shouldn't get ATSB approval is completely ignorant of the fact that UA's ability to repay such a loan is much greater than US simply because they have more assets with which to leverage in their favor. Judge each on its' own merits. If the ATSB is making the same blanket comparisons, than it only serves to highlight how little they understand the way airlines operate as a business.

 

[wts54]

If UAL goes chapter7 you wont be laughing either
will you.

 

[BillLumbergh]

Be nice, guys.

 

[UAL777flyer]

No I won't be laughing. But at least I'll know that I didn't have a hand in doing it. My pride and self-respect will be intact. Will yours? If you're willing to beat your chest proudly at being able to have a hand in pushing UA to a potential Ch.7, than that speaks volumes about the kind of person you are. You see, it's that kind of ignorant, selfish mentality that needs to be eliminated from this company. So keep up that tough-talking strike rhetoric. You're only kidding yourselves. Do you honestly think there are other jobs out there for you in this economic environment with the pay and benefits you currently enjoy?

 

[wts54]

No I'm not one of those people who says
they will walk out of here and find an equal
paying job thats horsec**p.If the company
gives a fair deal then I think we will
accept it.By the way that comment was
directed to that other person who
thinks mechanics are grease monkeys just
to make him stew a little.