United Reports Feb. Net Loss Of $367 Million


Aug 20, 2002
United reported its financial results for February earlier this morning. The carrier said it had an operating loss of $307 million, a net loss of $367 million, and cash totalling $1.5 billion as of February 28 (a decrease of about $300 million from the end of January). United also said it beat the DIP financing EBITDAR requirement by a large margin. But March will likely be a much tougher month due to the war in Iraq.

Here''s the press release.


Aug 19, 2002
It''s hard to believe that March won''t be substantially worse and UAL still fiddles while Rome burns.

There have been comments that no route makes money at the moment. I guess that does make it hard to decide what to cut, but it''s time to wake up and DO SOMETHING.


Aug 20, 2002
Here is few tidbits from WSJ:


UAL Uses Bankruptcy Protection
As Leverage in Fight for Survival


CHICAGO -- UAL Corp., which reported further losses for February, is taking advantage of its bankruptcy-court proceedings to squeeze deeper savings from its workers and equipment lessors. As a result, some analysts believe recent concerns that the United Airlines parent could be forced to liquidate have been overblown.

Some industry analysts recently raised the probability that UAL would be unable to restructure in Chapter 11 and be forced to liquidate. Employees are fretting and customers who hold United frequent-flier miles worry, too, that the world''s second-largest airline is on the brink of failing. But for now, despite the war, a decline in bookings industrywide and higher fuel prices, UAL''s place in bankruptcy-court protection is giving the troubled company some flexibility that its competitors lack (see related story). "Bankruptcy is leverage," said Sam Buttrick, an analyst with UBS Warburg. "The case for an imminent liquidation of United has been vastly overstated."

Indeed, the company said Wednesday that it met its lenders'' first financial targets for its $1.5 billion debtor-in-possession financing by a wide margin. Helping to meet the cash-flow target, United said, were a couple of factors directly attributable to being in court protection: The company didn''t have to make some aircraft payments for the first 60 days after its filing, and the judge ordered one of its unions to go along with voluntary interim wage cuts agreed by the other groups. The wage reductions, $70 million a month, were one reason the carrier ended February with more cash than expected, $1.5 billion.

"These are extremely difficult times," Glenn Tilton, UAL''s chief executive, told employees last week. "It''s not news that Chapter 11 sometimes leads to liquidation. But we have absolutely no intention whatsoever of failing, and intend to do more than just survive."

United is making use of the bankruptcy proceedings to help ensure its survival. The company has asked the bankruptcy judge to allow it to void current labor contracts with its unions and impose new terms on the employees. United also sought court approval to impose additional wage reductions of 9% to 18% for three months in case UAL can''t win relief from its lenders on the loan covenants it expects to breach.

Other financially troubled airlines, operating outside of bankruptcy proceedings, don''t have the option of quick wage cuts via a court order. And United''s request to void contracts has given it leverage in negotiations to reach concessions with its workers. People familiar with the negotiations with the Air Line Pilots Association and one branch of the International Association of Machinists union suggest the talks are proceeding more productively and quickly in recent weeks than they were earlier.

Being in bankruptcy "is more helpful to United in a war scenario," said one person close to the company. Added another: "The war has further strengthened their negotiating leverage" with the aircraft lessors and lenders, helping the carrier win better terms on its planes. United is hoping to shave $500 million a year from its fleet expenses.

Still, UAL isn''t out of the woods, despite its war-contingency steps of cutting its capacity by 8% and putting thousands of workers on unpaid leave. A prolonged war or another terrorism attack could cause the airline to simply run out of money. Labor could react unhappily to court-ordered concessions.

United will need to win forgiveness from its lenders if it misses its cash-flow targets. Otherwise they could seize the collateral backing the loan and effectively shut down the airline. The banks would vastly prefer United to remain solvent than to take control of the collateral, said one person familiar with the situation. The collateral "has inherent value, but there aren''t too many buyers right now."