Us Airways defaults on $44.5 mln Airbus payment

Lou

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Aug 20, 2002
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Reuters
Us Airways defaults on $44.5 mln Airbus payment
Monday March 3, 8:59 pm ET
ARLINGTON, Va., March 3 (Reuters) - Bankrupt US Airways Inc. (OTC BB:UAWGQ.OB - News) said on Monday it did not make certain payments due on trust certificates related to 23 Airbus aircraft totaling about $44.5 million.
The company, based in Arlington, Virginia, said it is in discussions with interested parties regarding the payments and it expects to reach an agreement during the five-business-day cure period allowed under the certificates.
As of Feb. 28, the No. 7 airline said its unrestricted cash position was about $480 million.
On Jan. 17, the bankruptcy court approved the company''s disclosure statement with respect to its amended reorganization plan and authorized a balloting and solicitation process that began on Jan. 31, and will end on March 10.
A hearing on confirmation of the amended plan is scheduled for March 18, the company said.
 

genejockey

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Aug 22, 2002
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Can anyone shed some light on this development? Does the $44 million include the previous disclosure of $19 million in Airbus defaults? I am assuming the $44 million is considered restricted cash and therefore does not factor into the $480 in unrestricted cash balance. At what point does U not have enough cash to continue operations?
 

AP Tech

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Sep 4, 2002
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That will give U the opportunity to return the planes that coming up on heavy checks to the leasing company, they in turn will vendor out the checks and then renegotiate the lease terms with U and return the "fresh" airplanes thus bypassing the heavy maintenenace.
 

sfb

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Aug 21, 2002
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Well, as far as I can tell, the $44.5 million is separate from the $19 million owed on the A330's, since an update today quoted a US Airways spokesman: "These are airplanes that currently are flying. There are 14 A-319s, three A-320s, and six A-321s," US Airways spokesman David Castelveter told Reuters.

I don't have any clue how the roughly $63 million relates to the reported cash balance, since the balance sheet isn't broken out in the 8-K's filed with the SEC. I'd imagine, though, that these payments would come out of the cash balance or they would have been made. One sign of good news is that the company's cash balance (though this is the "total consolidated cash balance" versus the "unrestricted cash position," so they may represent different things) only went from $512.7 million to $480 million in February, so the daily cash losses slowed in February (by comparison, "total consolidated cash balance" was $633 million on 12/31).

I realize this is a game of brinksmanship, but the clock is still ticking on the A330 payments which were missed on 2/20; i.e. 8 business days ago. The grace period ends Thursday, and there's no news of a settlement yet.
 

genejockey

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Aug 22, 2002
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Airbus says its all part of reorganization plan:

Airbus says exposure to US Airways unchanged
Reuters, 03.04.03, 8:04 AM ET

PARIS, March 4 (Reuters) - European plane maker Airbus SAS [EAD.PA] [BA.L] said on Tuesday that its exposure to bankrupt U.S. airline US Airways was unchanged following news the carrier had not made payments of $44.5 million related to 23 Airbus aircraft.

Airbus also said in a statement that its share of the financing for the planes represented only 15 percent of the total amount.

"These payments are to be recovered as part of the reorganisation of the airline, currently under Chapter 11 proceedings," Airbus said.

"As a result, Airbus does not envisage changing its assessment of its financing exposure to US Airways."

News of the payment delays pushed shares in Airbus parent EADS [EAD.PA] down over seven percent in morning trade.

Copyright 2003, Reuters News Service
 

luv2fly

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Reuters
US Airways payment delay puts pressure on unions
Tuesday March 4, 3:18 pm ET
By Jonathan Stempel


NEW YORK, March 4 (Reuters) - Bankrupt US Airways Group Inc.'s (OTC BB:UAWGQ.OB - News) failure to make $44.5 million of aircraft payments could pressure its already reeling pilots into agreeing to more concessions, analysts said.
ADVERTISEMENT


"It probably makes them feel like they are not the only ones to make big sacrifices," said Bill Rochelle, a bankruptcy partner at Fulbright & Jaworski LLP in New York. "It could be an affirmative step to get the pilots to make concessions on (their) pension plan."

US Airways, based in Arlington, Virginia, on Monday said it delayed payments on so-called enhanced equipment trust certificates backed by 23 Airbus planes.

It expects to reach agreement on payments relating to the 14 A-319, three A-320 and six A-321 planes during a five-business-day "cure period," spokesman David Castelveter said.

The airline announced the missed payments two days after a federal bankruptcy judge said the airline may terminate its $1.6 billion pension plan covering 4,700 pilots. US Airways wants to replace it with an $850 million plan.

"Missing a payment here or there puts additional pressure on the pilots," said Joseph Luzinski, senior vice president at Development Specialists Inc., a New York management consulting firm specializing in bankruptcies.

"Once you pull the ripcord and things start popping out, it's very difficult to keep everyone in line," he added.

While bankrupt companies often delay or miss debt payments, US Airways runs a risk of being unable to make its payments in time and of having lenders take back its planes. That could cause its mainline fleet to fall below the minimum 279 aircraft it agreed to maintain in exchange for pilot wage cuts and productivity improvements. US Airways has 280 aircraft, its Web site shows.

"The $44 million is minuscule in the overall restructuring plan, but what they're risking is the possibility that EETC lenders might foreclose," said Stephen Kane, portfolio manager at Metropolitan West Asset Management in Los Angeles, which owns EETCs of bankrupt UAL Corp. (NYSE:UAL - News) unit United Airlines Inc. but not US Airways. "It's a bit of a dangerous game of chicken."

An Air Line Pilots Association spokesman, Roy Freundlich, did not immediately return calls seeking comment.

TIMELY EXIT NOT GUARANTEED

US Airways must now resolve whether pension changes would violate the pilots' contract. A hearing before the National Mediation Board is slated for March 13, five days before a hearing to confirm the Chapter 11 plan is scheduled to begin.

The airline, which sought bankruptcy protection in August, said resolving the pension liability issue is the last big hurdle it faces in its Chapter 11 reorganization.

It needs to exit bankruptcy by March 31 to obtain a $900 million federal loan guarantee, which in turn would back $1 billion of private financing.

The missed payments may reflect overall business weakness. US Airways lost $98.6 million in January on $476 million of operating revenues, short of its projections.

"They avoided negotiating with the (Airbus EETC) holders because they thought the economics would allow them to run the airline without impairing the debt on the Airbus fleet," said Rochelle. "If operations are below plan, they may have to take a bite out of holders who had managed to get through the case unscathed."

When it first sought protection from creditors, US Airways planned to maintain an all-Airbus fleet, and rejected leases on Boeing Co. (NYSE:BA - News) aircraft. Airbus is 80 percent owned by European Aeronautic Defense and Space Co. (Paris:EAD.PA - News; XETRA:EAD.DE - News) and 20 percent by Britain's BAE Systems Plc (London:BA.L - News).

Even if US Airways resolved the EETC issue, it's far from clear that it would emerge from bankruptcy on schedule.

"I wouldn't say it's absolutely certain that they will emerge by March 31," said James Corridore, an airline analyst at Standard & Poor's. "They now need to show their operations are now less costly or can be profitable."

Luzinski, who worked on Pan Am Corp.'s liquidation, said US Airways has much work ahead of it.

"In the next 30 days, will a lot of things be up in the air?" he asked. "Absolutely."
 

Pacemaker

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Sep 3, 2002
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If they're having trouble paying their bills I know a good place where they might be able to get their hands on $35 million.
 

coolflyingfool

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I am just guessing here but, I would say that U is just a little uneasy about coughing up 15% of their remaining cash to keep just 30 planes in the air. Airbus is letting them continue to fly the planes, which is good, but at some time here it gets to the point of put-up-or-shut-up!
If all the cash left is $480MM and it will cost $66MM to keep just 30 planes around and it appears that U may still be losing $1MM a day, something has to give here, either sooner or later.
 

genejockey

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It appears to me that the $60+ million dollars in defaults are categorized under "restricted cash" (cash on hand targeted for servicing specific debt). So apparently, the $60+ million will not come out of the $480 million in unrestricted cash. Can anyone confirm this?
 

Bear96

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Aug 20, 2002
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I'm confused.

Is this how U is planning to purchase all the UA assets (as others are posting on this board)-- by not making payments on their own aircraft?

Chip? Can you shed some light on this?

 
C

chipmunn

Guest
Bear96:

Bear96: Is this how U is planning to purchase all the UA assets (as others are posting on this board)-- by not making payments on their own aircraft? Chip? Can you shed some light on this?

Chip answers: Bear96, US Airways is not making payments on these aircraft not because they cannot afford to, but instead because they are forcing the hand of the final lessors to get EETC relief or the aircraft can be returned.

This action must be complete by the March 18 deadline for the beginning of the confirmation hearing on the disclosure statement, which is less than two weeks away. John Lutz and the Seabury Group have done a masterful job of reducing US aircraft lease obligations by nearly $500 million and Dave Siegel is trying to obtain one last material cost reduction before exiting bankruptcy.

Finally, US is not going to buy UA assets, if it occurs RSA will buy the assets and merge them into US, if it occurs. Therefore, a potential "interesting corporate transaction" would not effect the US balance sheet because of the third party financing.

I believe I have written at length about David Bronner's comments in two different interviews where he told the news media RSA is interested in acquiring UA assets for US, if they become available. Did you miss that?

Furthermore, did you see where Greg Taylor, UA vice president of planning, who I have said for months was one of the key architects of the "unique corporate transaction", told the bankruptcy court on February 21 the UA creditors committee wanted the airline to divest of its IAD, DEN, and LAX hubs?

Bear96, these were public comments made by key players from US and UA, not speculation or a specific comment by me.

Regardless, does this shed some light for you?

Chip
 
C

chipmunn

Guest
Bear96:

Just one more thing...any material change in these aircraft lease payments could be a way to bridge the gap to reach a settlement on the pilot pension issue, which would be a huge lift to the airline.

Chip

The March 5 Airline News Update has been posted at www.chipsplace.com under Rumor Control.
 

stewbear

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Jan 28, 2003
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[blockquote]
----------------
On 3/3/2003 11:58:10 PM Lou wrote:

Reuters
Us Airways defaults on $44.5 mln Airbus payment
Monday March 3, 8:59 pm ET


ARLINGTON, Va., March 3 (Reuters) - Bankrupt US Airways Inc. (OTC BB:UAWGQ.OB - News) said on Monday it did not make certain payments due on trust certificates related to 23 Airbus aircraft totaling about $44.5 million.

The company, based in Arlington, Virginia, said it is in discussions with interested parties regarding the payments and it expects to reach an agreement during the five-business-day cure period allowed under the certificates.

As of Feb. 28, the No. 7 airline said its unrestricted cash position was about $480 million.

On Jan. 17, the bankruptcy court approved the company's disclosure statement with respect to its amended reorganization plan and authorized a balloting and solicitation process that began on Jan. 31, and will end on March 10.

A hearing on confirmation of the amended plan is scheduled for March 18, the company said.



----------------
[/blockquote]
Let's add shall we? 35million plus 6 million equals 41 million. Now add 10%...Mr Airbus....I think I know where you can find your money.
 

Bear96

Veteran
Aug 20, 2002
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[blockquote]
----------------
On 3/5/2003 8:13:31 PM chipmunn wrote:

Bear96:

Chip answers: Bear96, US Airways is not making payments on these aircraft not because they cannot afford to...
----------------
[/blockquote]
Riiiiight..... That's what I told my landlord last month when I didn't feel like paying the rent on time. For some reason, he didn't buy it. Could you explain it to him?

[blockquote]
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Finally, US is not going to buy UA assets, if it occurs RSA will buy the assets and merge them into US, if it occurs.
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[/blockquote]
So you believe he's really gonna spend even more millions of dollars on UA's assets and then I suppose just "donate" them to an airline on the verge of shutting down once war starts or once the pilots get fed up enough about the pension situation. OK, sure.

[blockquote]
----------------
...interesting corporate transaction...
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[/blockquote]
Oops, didn't think you could get a thread in without including that phrase! Thanks for not letting me down.

[blockquote]
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I believe I have written at length about David Bronner's comments... Did you miss that?
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[/blockquote]
"At length" may be a bit of an understatement. "Miss" them? No. One I think I responded to; and the other(s) I probably just rolled my eyes and thought, "There he goes again, pushing only one side of the story as usual," as doubtlessly many others here have as well. And there have been other articles about the current UA cash blance situation being not quite as bad as people had expected by now (not to say it isn't bad, of course!), or at least as bad as you seem to be hoping, but you have managed to ignore those "at length."

[blockquote]
----------------
Furthermore, did you see where Greg Taylor, UA vice president of planning, who I have said for months was one of the key architects of the "unique corporate transaction", told the bankruptcy court on February 21 the UA creditors committee wanted the airline to divest of its IAD, DEN, and LAX hubs?
----------------
[/blockquote]
This was already discussed, and quotes were provided by others (interestingly, not by you though... hmmm, imagine that) showing how this is not something being seriously considered by senior UA management at this point, but rather it is being looked into in more of a theoretical way at the request of the creditors to cover all bases and contingencies. Did you miss that? I won't rehash all that here, but simply scroll back to last week for the full discussion.

[blockquote]
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Bear96, these were public comments made by key players from US and UA, not speculation or a specific comment by me.
----------------
[/blockquote]
"Not speculation?!?!" Please, Chip. There are many ways to define "speculation." Let me provide one of those definitions: Quoting one set of sources; ignoring those that don't support your preconceived notions; combined with mysterious, unnamed "sources" and "reports" and "interesting developments" to reach far-fectched conclusions, from a speculator who has rarely been accurate in the past. Sound familiar?

And again let me emphasize that I think "the Chicago-based airline" is history in a few months, more likely than not, so I am not trying to deny the seriousness of the situation at UA. But your incessant one-sided slant and endless pounding at the same theme continues to amaze me.

Of course, I only offer these pointers as a friend, to help you in your dream job of investigative journalist when your U pilot job disappears in a few months. [img src='http://www.usaviation.com/idealbb/images/smilies/12.gif']
 

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