UAL Faces Delay in Chapter 11 Exit

[USA320Pilot]

For all those naysayers who disputed my previous comments on this message board that there were Wall Street and other reports that US Airways' business partner United Airlines may not qualify for the loan guarantee and may not be able to come out of bankruptcy, what's your opinion of today's New York Times column?

See Story:

Moreover, today's Omnibus hearing could be very interesting with the docket having a number of key open issues.

Respectfully,

USA320Pilot

 

[USA320Pilot]

When would now be a good time for US Airways to terminate its alliance with United and seek an agreement with another carrier?

Respectfully,

USA320Pilot

 

[USFlyer]

Oh lord, here we go again. 🙄

 

[767jetz]

what's your opinion of today's New York Times column?

Well, here is the interesting meat of the article:

"United has already found lenders to provide a total of $2 billion in exit financing, the bulk of that contingent on the loan guarantee package.

Now, the loan board is considering asking United to seek about $100 million less, or around $1.5 billion, and turn to private lenders for $500 million, people close to the discussions said. The board has not yet made such a request formally, they said.

Representatives of J. P. Morgan Chase and Citigroup met yesterday with the board's staff to review the application - the first time United's bankers and the government had met to discuss United's second attempt to get federal loans. Previous meetings had been between United officials and the board's staff.

The loan board, which was constituted after the September 2001 attacks to oversee $10 billion in assistance to the airline industry, requires airlines to exhaust every avenue of financing before seeking federal loans. By suggesting that United reduce its request, the board would be signaling that it believed United had elsewhere to turn, industry experts said."



767jetz responds:
My opinion of this article is that after talking with the banks, the ATSB is confident that based on UA's business plan they have more access to capital markets than originally expected. This is a good sign. Expect to see a revision to the agreements with JP Morgan and CitiGroup that will have each lending UA $250Million each in unsecured money. (instead of the original $200M)

Who has been saying all along that UA could get the required exit financing without the ATSB, and that UA's access to the capital market is improving?

Looks like your PIT issues will have to be "held hostage" a bit longer. So Sorry!

 

[USA320Pilot]

767jetz:

The reason the ATSB will not agree with the company's loan guarantee request is the airline is too much of a risk. Furthermore, with deteriorating fundamentals the airline must prove it can make a 7% profit margin in 7 years, which is uncertain.

Furthermore, there are the other major obstacles such as the pension, UCT airport municipal bond problem that is being litigated, the Dulles fiasco and ACA asking for a release from its agreement, the NPC credit card processing problem, and the unresolved global EETC issue.

The question is how long will the bankruptcy court permit United to repeatedly miss POR deadlines, since the company cannot articulate a business plan?

From my perspective, it would be in US Airways' best interests to divest itself of any relationship with United and find another partner. In fact, I have mentioned this point to US Airways management.

Maybe this news will move US Airways and Northwest closer together.

Separately, I do not want a corporate combination with United and I believe it would be in US Airways' best interest to find a more stable partner. US Airways has been given more time by the ATSB and will have new labor deals in place within the next 90 days, except for the IAM whose position of not negotiating "Going Forward Plan" participation may lead to the incremental removal of all Boeing aircraft and outsourcing of virtually all heavy maintenance.

There is a reason the company can unilaterally exit the Pittsburgh Maintenance facility.

Regards,

USA320Pilot

 

[ua767fo]

For all those naysayers who disputed my previous comments on this message board that there were Wall Street and other reports that US Airways' business partner United Airlines may not qualify for the loan guarantee and may not be able to come out of bankruptcy,

what's your opinion of today's New York Times column?

-----------------

When would now be a good time for US Airways to terminate its alliance with United and seek an agreement with another carrier?

Does the poster of the above quoted feel slighted by having to continuosly remind us of his previous cmments? He could have easily have broken up the statement as shown, deleting the first 90%. The tone of the diatribe is very demeaning, causing a tremendous loss of credibility.

In direct comment to the question, I think UAL coming out of BK IS a forgone conclusion. The only question are will the pension plans be ravaged like USAirways plans were, and will there be another round of paycuts. What will be the final IAD solution, and what will the final widebody count be. I think there will be an ATSB loan as I can't imagine JPMorgan and Citigroup letting a $1.5B loan slip through their fingers. Bush knows that it is an election year. Most aviation business reporters (Susan Carry excepted) are clueless and dont understand the issues they write about.

On the last issue, USAirways can hardly afford to go out partner shopping right now. DAL,CAL, and NWA are tied up. AMR pilots would never give the scope relief necessary, the LCCs want to finish eating AAA for lunch, and AKA has no structure for and east coast feed.

So I ask the poster, WHO?......and could they afford to walk away from their dance partner right now, and afford the loss of revenue. I say no, and dont envision it happening. But then, just like the poster, I've been wrong before, but I'll admit it.

DENVER,CO


PS.....in response to the posters previous questions about what UAL employees are doing on an AAA board. I used to work there, still have lots of friends there, care about their future, still own property near the airport which I hope will retain its value.

 

[ClueByFour]

Nobody else is going to align with US--there is little point in spending the money in implementing the systems/processes to align oneself with a sinking ship.

OTOH, commercial banks (as opposed to pump and dump micromanagers like Bronner) are lining up to loan UA money.

History is going to show that having a true turnaround guy from outside the industry (Tilton) at the helm is a much better idea than a little man with a little man's ego (Little Dave).

 

[USA320Pilot]

Clue:

With all due respect, you're wrong.

Regards,

USA320Pilot

 

[USA320Pilot]

767jetz:

It is my understanding the Pittsburgh hub is most likely dead and the assets will be moved elsewhere, where other opportunities may soon appear.

Regards,

USA320Pilot

 

[USA320Pilot]

Ua767fo:

I do not want to see United Airlines die and I empathise with your situation, but there is mounting evidence the company is in deep, deep trouble.

For example, the recent Aviation Week & Space Technology Editorial titled" Let Failing Airlines Fail" said, "United Airlines is back on a glidepath to oblivion (see p. 35). To emerge from Chapter 11 bankruptcy protection, it must secure approval of federal guarantees for $1.6 billion of the $2 billion in borrowing that the carrier has lined up. There are no assurances such approval will be forthcoming, of course, so the next few months will tell the tale. It all depends on how the Air Transportation Stabilization Board assesses the airline's reorganization plan; the board rejected the first one."

Regards,

USA320Pilot

 

[BoeingBoy]

Since I posted that AWST editorial, I must add to your quote.

"The reality is that the future of all six major U.S. network carriers is questionable, and there's at least a 50-50 chance US Airways or United--or both-- won't survive to see the next cyclical downturn."

Jim

 

[Fly]

They'll get the loan (ATSB or just the regular old bank loan) regardless of a certain posters desire otherwise. It's what they do with the money that is the real question. Will they use it wisely? Or will they squander it like another recent BK participant?

I've just requested a 5 year leave of absence but they told me outright, NO! They said that ALL the voluntary leaves are going to be pulled back in too. Bad for me, good for UAL.

IMHO, the reason that the ATSB is so jittery is that they are watching the DeathWatch of USAir. I think!


(this poster likes to admit that these are my opinions, not those of my imaginary friends)

 

[Flying Titan]

In direct comment to the question, I think UAL coming out of BK IS a forgone conclusion. The only question are will the pension plans be ravaged like USAirways plans were, and will there be another round of paycuts. What will be the final IAD solution, and what will the final widebody count be. I think there will be an ATSB loan as I can't imagine JPMorgan and Citigroup letting a $1.5B loan slip through their fingers. Bush knows that it is an election year. Most aviation business reporters (Susan Carry excepted) are clueless and dont understand the issues they write about.

Perhaps you should pick up today's WSJ and see what Ms. Carey had to write. Her article certainly doesn't seem to indicate that it's a "foregone conclusion" that UAL will emerge from bankruptcy.

I understand that many of you are bothered by a certain captain's posts here, but it's interesting that none of you have stepped forward to say that - on this point at least - he was right. He's been saying for quite a while that UAL's trip through BK has not been smooth sailing and today's articles certainly back that up. UAL has some major hurdles to clear and they are spelled out pretty well in the articles - pension relief, the ATSB, sniping between creditors about who gets what stake in the new post-BK airline.

A certain captain posted a pretty straight-forward article to start this thread. What's followed has been a lot of spinning by people who seem to want to believe that these challenges aren't a real threat to the survivability of UAL - and quite a few attacks on anyone who would dare say otherwise.

 

[ITRADE]

Have to agree with Flying Titan. There is a lot of blind faith going on this board and a lot of antagonism against somebody who is occasionally correct.

I found the following sentence interesting of note that nobody has picked up on: "People familiar with the company's finances said United is concerned that it might not meet its May hurdle, which will require positive earnings, as measured before interest, taxes, depreciation, amortization and aircraft rents, for the past 12 months."

If that happens, it will, IIRC, be a first, but will certainly be of concern to the creditor groups to see a missed hurdle so far down the restructuring road.

 

[iflyjetz]

Have to agree with Flying Titan. There is a lot of blind faith going on this board and a lot of antagonism against somebody who is occasionally correct.

Yes, he is occasionally correct. But he's incorrect more often than correct. I could review his history (UAL/U merge a 'slam dunk,' UCT, ICT, etc), but let's just say that even a blind squirrel finds a nut on occasion. Heck, even I have been correct once or twice.

No doubt, UAL's current situation is not optimum. But many posters fail to understand that UAL is going to bankers for exit financing, not unconventional financing sources. At the start of UAL's chap 11, there was a line down the block of shady characters (Marvin Davis, Carl Icahn, TPG, etc) wanting to provide financing to UAL. We don't hear about those characters anymore because UAL appears to have secured financing from legitimate sources. JPM and C are NOT in the same league with RSA.