United's Future

[funguy2]

Liquidity issues aside, my concern about United getting the loan is twofold. First, they will be obtaining access to capital at a rate other network carriers can only dream of which, like bankruptcy, will give them an advantage (whether or not they “earnedâ€￾ it is debatable). Second, as with before the December 2002 Chapter 11 filing, United’s entire business plan seems to be built around getting the loan. If they get it and simply use the proceeds to fund continued losses while searching for a viable, long-term strategy, they won’t have helped anyone, least of all themselves.

JetClipper:

I believe the Banks do give the ATSB loan to the airline at the Fed Rate, because their risk is minimized (the whole point of the guarantee). However, in the AWA and US Airways cases, I believe that those companies also pay a "fee" to the ATSB. The "fee" is designed to make the cost of the loan to the company comparable to the market rate loan which is "unavailable" due to dried up capital markets for airlines (and some revenue for the fed govt). I would suspect if UAL is approved for the ATSB loan, they would have a similar fee built into their repayment schedule.

Also, AWA had to give warrants for 33% of equity, and US Airways 10% of (post-BK) equity. That hardly makes the loan "cheap" to the company that takes it.

 

[Just Plane Crazy]

The trouble for the government is that if UA will be liquidated, how many people will be unemployed and what will it cost the government to have all these unemployed people and the people that will be unemployed through the ripple effect. The cost of this will be calculated against what it will cost the government to keep UA alive and the lower #’s will determine which way UA will go. But in my humble opinion it will be less expensive for the government to keep UA alive and they will find a way to make it happen. It might not be as every one anticipates but it will happen.

GO UA!!!!!

 

[Segue]

The trouble for the government is that if UA will be liquidated, how many people will be unemployed and what will it cost the government to have all these unemployed people and the people that will be unemployed through the ripple effect. The cost of this will be calculated against what it will cost the government to keep UA alive and the lower #’s will determine which way UA will go. But in my humble opinion it will be less expensive for the government to keep UA alive and they will find a way to make it happen. It might not be as every one anticipates but it will happen.

GO UA!!!!!

If any carrier liquidates, its not a zero sum game. Simply, the aviaton system will not contract at that the size of United. Others will pick up the assets, but true there will be some losses due to the efficiencies of consolidation.

To the extent that some markets are picked up by LCCs, the total market could grow as LCCs have a history of stimulating travel with lower price points as they enter markets. More travel, more jobs.

No, I don't think UA will liquidate. It has made far too much progress in restructuring. Other legacy carriers will have to follow UA's lead - DL, U.