United And The Atsb

[WorldTraveler]

"But then again, most of NWA's debt is unsecured."

not true. nearly all of NWA's debt except for the big payments due in 2005 is secured. UAL had a very hefty amount of unsecured debt prior to BK and much of it is likely to be wiped out, although the unsecured creditors are likely to demand equity from the restructured UAL in order to forgive UAL's unsecured debt. And that is precisely part of UAL's problem - you only have so much equity you can give in the company.

Pension payments have to be factored in and that is still a huge issue for UAL. While they have gained breathing room in 2005 and 2006, that only increases the obligations they will have in 2007 and beyond. Given that the ATSB loan is for 7 years, the ATSB still has every reason to be very concerned about pension obligations. UAL is still in the worst shape in this regard among the network carriers.

Incidentally, Delta also has a large amount of unsecured debt that is due in the next couple years and it is precisely those creditors that are very nervous about the prospect of Delta bankruptcy. Delta has indicated they want to stay out of bankruptcy but they would probably be able to dump an aweful lot of unsecured debt. In contrast to UAL, Delta and NWA do not have many leveraged leases or expensive leases which could be cut in bankruptcy. Nearly all of Delta's recent airplanes (737NGs, 777s, 764s) are owned. The point of all of this is to show that each company has different benefits they could expect from bankruptcy. Delta and NWA would probably not gain near as much as UAL will - with or without an ATSB loan.

 

[JetClipper]

"But then again, most of NWA's debt is unsecured."

not true. nearly all of NWA's debt except for the big payments due in 2005 is secured. UAL had a very hefty amount of unsecured debt prior to BK and much of it is likely to be wiped out, although the unsecured creditors are likely to demand equity from the restructured UAL in order to forgive UAL's unsecured debt. And that is precisely part of UAL's problem - you only have so much equity you can give in the company.

Pension payments have to be factored in and that is still a huge issue for UAL. While they have gained breathing room in 2005 and 2006, that only increases the obligations they will have in 2007 and beyond. Given that the ATSB loan is for 7 years, the ATSB still has every reason to be very concerned about pension obligations. UAL is still in the worst shape in this regard among the network carriers.

Incidentally, Delta also has a large amount of unsecured debt that is due in the next couple years and it is precisely those creditors that are very nervous about the prospect of Delta bankruptcy. Delta has indicated they want to stay out of bankruptcy but they would probably be able to dump an aweful lot of unsecured debt. In contrast to UAL, Delta and NWA do not have many leveraged leases or expensive leases which could be cut in bankruptcy. Nearly all of Delta's recent airplanes (737NGs, 777s, 764s) are owned. The point of all of this is to show that each company has different benefits they could expect from bankruptcy. Delta and NWA would probably not gain near as much as UAL will - with or without an ATSB loan.

WorldTraveler:

You make some great points. Unfortunately, you seem to believe that our pal Busdrvr will actually take the time to not only read but actually think about what you said before blasting out a response. Whatever happened to frank, civil discussions on these boards?

 

[Busdrvr]

Actually, I was reading the annual reports for both airlines. Sorry for the delay. Correct, different benefits for diff companies. Couple points, on a revenue-adjusted basis, NWA's pension situation is as bad or worse than anyone else. Keep in mind, NWA uses more, ahem, "aggressive" assumptions in calculating it's future obligations than UAL does. Additionally, the fund is loaded with stock from one of NWA subsidiaries. Not comforting. You are correct; NWA does have a higher "secured" debt than unsecured debt. Sorry for the false statement. Incidentally, the pacific route authorities back a LARGE portion of the secured debt due in 2005 as part of the 1.5 BILLION that matures. That's one thing you'll do anything to protect, and would never be allowed to be "repossessed".

 

[C54Capt]

Hey bigsky,
Do you buy that, or are the UA armchair accountants all wet?

 

[North by Northwest]

"NWA's pension situation is as bad or worse than anyone else. " Of course it is...and we are hoping to emerge from BANKRUPTCY soon. We really should have hocked our World Headquarters along with the route authorities. Well, there's always the quasi new fleet we used to own. If only we hadn't been so worried about someone else's house while ours burned. So much for the U/Ual alliance AKA "Welfare Wings". Strato......brilliant ode.

 

[North by Northwest]

Main Entry: [2]bankrupt
Function: adjective
Date: 1570
1 a : reduced to a state of financial ruin : IMPOVERISHED; specifically : legally declared a bankrupt <the company went bankrupt> b : of or relating to bankrupts or bankruptcy <bankrupt laws>
2 a : BROKEN, RUINED <a bankrupt professional career> b : exhausted of valuable qualities :

 

[Bigsky]

Do you buy that, or are the UA armchair accountants all wet?

C54Capt

Busdriver is correct on the fact that NW did make contributions to the NW pension fund in the form of Pinnacle stocks. It was, I believe, 190 million. I don't know if I 'd call that "loaded." As far as NW pension being secure? Well, I am not betting the farm since my retirement is over twenty years away and there are many more things that could happen that would be far worse than a bankrupt pension fund. But as of now, NW has met all their funding requirements with a little gov't legislation help and the fund seems to be secure as all funding requirements have been met through 2006.
What thread is this again?

cheers

bigsky