UAL Supposedly Makes $$, Why not US?

dfw79

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Aug 20, 2002
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Chip or someone, perhaps you can explain this situation - which is bound to bring up questions from others sooner or later...so why wait. How is it that UAL was able to make money in January...yet US was unable to?
 

Cosmo

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Aug 20, 2002
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dfw79:

You're confusing cash flow and income statement results. United said today that the carrier was cash-positive in January by about $1 million per day. On the other hand, last week United announced that it had a net loss of $382 million in January (or about $12.3 million daily). I'm no accountant but I'll try to offer some insight as to why these numbers are different.

Without seeing the detailed numbers, it's hard to explain the entire $13.3 million difference. But part of it (maybe $3-$4 million or so per day) was the fact that United withheld payment on some of its aircraft leases -- a cash savings -- while it probably accrued the expense in its income statement results. United also had a some amount (I have no idea how much) of normal depreciation and amortization expenses -- non-cash expenses -- for owned aircraft and other owned equipment. And United probably accrued some amount of bankruptcy-related expenses for lawyers, accountants and consultants that have not yet been paid, once again saving cash (at least temporarily). Whether these items total the $13.3 million daily difference in cash flow vs. income statement data that I noted above, I couldn't say.

This compares with US Airways' reported net loss of $98 million in January (I don't recall what the carrier's daily cash burn rate was for that month), which amounts to about one-fourth of United's monthly loss. Since US Airways is currently about one-third the size of United in terms of monthly ASMs, US Airways seems to be doing better on a pro-rata basis. But US Airways is also much farther along in the bankruptcy process, so the results (adjusted for the two carrier's relative sizes) may not really be that much better than United's.

In short, it appears that both carriers still have some work to do, with United having a bigger hurdle to overcome since it is larger and just in the early stages of the bankruptcy process.

I hope that helps.
 

insp89

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Aug 20, 2002
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Cosmo, Thanks for the explanation. What is going on here is the same old song and dance these companies do all the time. They throw out these numbers without giving people all the info as to how they arrived at these numbers. While I have no doubt that UAL is in trouble,, I believe it is nearly impossible to get a hold of the REAL numbers from the news media. Over at U,,on more than one occasion,, The company put out a HUGE quartery loss number in bold , large type, but at the end of the article they stated something like -includes one time charges- Which leaves the reader that bothers to read the whole article wondering what those charges are. These companies can SPIN these numbers whichever way suits them on a particular day.
 

FWAAA

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Jan 5, 2003
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It's easy to be "cash flow positive" when your measure of cash flow is really "Earnings before Interest, Taxes, Depreciation/Amortization and Rent.

UA only paid about half of its bills in January - and paid nothing toward aircraft. If you paint the target large enough, anyone can hit it.[img src='http://www.usaviation.com/idealbb/images/smilies/9.gif']

Summary of UA Jan Results:

Total operating revenues
1,179,899
Total operating expenses
1,511,366

Receipts from operations (net of Intercompany receipts)
$ 1,278,809,257
Operating Disbursements (net of Intercompany disbursements)
$ 790,861,821

.... which makes for $700m in operating expenses not actually paid in cash [including those airplane rents].

Cash should take a big hit in Feb due to resumption of many lease payments, including arrears.