Us Airways Obtains Second $125 Million

[Rico]

Hey 700UW, thanks for your concern on my welfare...

But first things first...

The way I read this is that they have first obtained another equity investment, with the option to sell the current amount of 70 seat MDA aircraft and DCA/LGA slots if they have to for additional capital. (But either way, Republic will get to operate at least the 28 E-170's for US Airways in return for their investment right now).

A couple of points for to add to the discussion. First it is my understanding that U owns two Simulators, not just the one mentioned. The first is located in the CLT training Center, and the other is located in the YUL facility in which both sims were built.

Second, LOA 93 does allow E-190's to be flown by an affiliate company, but only 1/3rd the total amount that could be operated by MDA if it still exists in house. As the stated desire of U managment is to add 90 seaters in the future, this limitation will dampen such efforts unless the MDA Division is kept active.

So to "write off" the MDA Division is premature at this point, as it may yet very well serve a even larger role in U's future than it does today, albiet in a possibly different, E-190-ish form...

And finally, thank God it is Republic, and not Mesa that has secured this flying. That makes all the difference in the world. In the long run this might turn out to be much more positive a thing than many on here would like those of us at MDA to think.

So I will believe "the sky is falling" when I actually see it happen, in the mean time, I will just continue to go to work, do a good job, and enjoy myself. (which is the reason I, and most of my co-workers are there).

 

[MCI transplant]

Considering that the assets in question are DCA and LGA slots and considering that US Airways is willing to let them go at all, why the heck didn't they just put them up for bid on the open market? Lord knows, my airline covets those particular assets.

If cash is the issue right now, that would have raised a LOT of unencumbered cash...unlike the CHQ deal which has all the "if this and if that and if the wind is from the south and the sale occurs on the second Tuesday of the month" kind of clauses.

[post="255714"][/post]​

<_< jimntx------ This deal, it sounds to me, is not totaly about money. It's also about keeping these slots out of our hands!

 

[Rico]

Because those slots are to be used as US Airways Express slots.

Would be less useful to us if the company that bought them decided to use them for DAL, or CAL, or AAL.

Anyways, the sale of those slots is a last ditch option, to be done only if they have to do so to survive. That sale would be true "fruniture burning", rather than the original deal, which is equity investment and an expanded RJ service agreement for Republic into 70 and 90 seaters.

 

[whlinder]

Because those slots are to be used as US Airways Express slots.

[post="255722"][/post]​

That doesn't answer my question. What guarantees are there that once those slots become the possession of Chautauqua they will be operated as US Airways Express slots? What guarantees are there that Chautauqua won't sell them to AA or operate them as DL if DL is willing to pay more?

 

[usairways_vote_NO]

Remember when I said that MDA assets, PSA, and/or Allegheny could be sold to obtain additional liquidity.

[post="255604"][/post]​

I am not sure but I remember at least 100 different of scenarios you said would happen that didn't. How about posting all those again?
Oops actually I did find this:

I understand the potential to sell MDA assets, PSA, and Piedmont has been reduced

[post="254719"][/post]​

Is that it where you said the opposite? If not how about you pointing it to us.

 

[usairways_vote_NO]

I guess I was right about the POR extension and GE participation too.

[post="255620"][/post]​

Lets get this straight once and for all.

if I state a personal comment I state something like “I believeâ€￾ or “In my opinionâ€￾.

[post="255578"][/post]​

Ok when you predict things with those words if they don't happen all is well because you didn't actually say they would happen but if the one in a thousand finally happens we are to address you as the board guru and pat you on your back as you beat your chest silly? I am glad for you it doesn't happen very often or your chest would be hurting from how hard you beat it.

 

[USA320Pilot]

UVN:

I was told about the potential to sell MDA assets, PSA, and Piedmont on February 4. Negotiations have been fluid with a number of parties interested in participating in US Airways' restructuring and exit financing. The driving factor behind this decision is energy prices, thus what can be valid today may be different tomorrow.

If you remember last week I wrote that “We have a lot of interested parties that want to help us and are trying to tell us how to run our business. The ATSB, GE, affiliate (carriers), EDS,â€￾ Bruce Lakefield told the ALPA MEC last week.

Moreover, I understand we can expect more financing news in the not-so-distant future.

Regards,

USA320Pilot

 

[usairways_vote_NO]

UVN:

I was told about the potential to sell MDA assets, PSA, and Piedmont on February 4. Negotiations have been fluid with a number of parties interested in participating in US Airways' restructuring and exit financing. The driving factor behind this decision is energy prices, thus what can be valid today may be different tomorrow.

If you remember last week I wrote that “We have a lot of interested parties that want to help us and are trying to tell us how to run our business. The ATSB, GE, affiliate (carriers), EDS,â€￾ Bruce Lakefield told the ALPA MEC last week.

Moreover, I understand we can expect more financing news in the not-so-distant future.

Regards,

USA320Pilot

[post="255737"][/post]​

Stop with all the double talk crap. Give a link. I want proof. The last quote I gave showed you said it
(QUOTE(USA320Pilot @ Mar 11 2005, 02:58 PM) I understand the potential to sell MDA assets, PSA, and Piedmont has been reduced)
wasn't looking good for it happening. You have no credibility with your word.

Holy cow we can expect more financing?? Well lets give credit to you on that ahead of time. You are on a roll now!!! lolol that is a prediction? You better hope for more financing or you won't be here to talk about not getting it.

 

[funguy2]

OK... Here is the big picture, painted so far...

US Airways is forcing its regionals to ante-up to play in the game... A rather clever way to find exit financing in light of there being no independent exit financing. I would call this "dependent" exit financing since Republic's future depends on US Airways future... Thus Republic is willing to help ensure US Airways has a future to ensure that Republic has a future.

Second, as US Airways has secured some DIP financing from Air Wisconsin, and some exit financing from Republic/Chautauqua, you can bet conversations have taken place with Mesa and Trans States... Since it appears that $125mil is the amount required to stay in the game, it is plausible that both TSA and Mesa will come up with the entry fee. Should this happen, then US Airways likely has 70 new RJ's coming from Air Wisconsin. Should this not happen, US Airways may reject Mesa and/or Trans States... Which combined may have around 70 aircraft in US Airways Express fleet. Anyone know the details on how many jets each contractor operates for US Airways?

Next - burning the furniture. Whlinder makes a great point... what prevents CHQ from using those slots for another major partner. Also, those slots are probably worth far more than CHQ is paying for them... So even if US Airways goes CH7 tomorrow, CHQ has already secured some kind of future providing service, either independently or with a different major partner, at DCA.

Additionally, the EMB-170 operation has essentially been sold. This is the (ill-advised, in my opinion) growth area of the company. Addtionally, 36 mainline aircraft have been returned to lessors... So now, US Airways group has shrunk by around 48 aircraft + sacrificed at least 5% of the profit on the growth of the company...

In my opinion, this does not seem like a good deal for US Airways. It looks to me like continued shrinking of the company. Also, these actions seem to better position CHQ for a future with or without US Airways... a position which Mesa and Trans States probably wish they were in.

Oh, and nothing has structurally changed from the deal for US Airways, except a guaranteed profit of 5% to CHQ on EMB-170 flying has just been added to US Airways cost structure.

This is a short-term survival move by US Airways and a long-term survival move by CHQ.

 

[whlinder]

Moreover, I understand we can expect more financing news in the not-so-distant future.

[post="255737"][/post]​

Yah, either it will be news if you get financing or news if you don't.

 

[DCAflyer]

That doesn't answer my question. What guarantees are there that once those slots become the possession of Chautauqua they will be operated as US Airways Express slots? What guarantees are there that Chautauqua won't sell them to AA or operate them as DL if DL is willing to pay more?

[post="255725"][/post]​

It's prabably in writing.

 

[funguy2]

You know, now that things are beginning to occur, a thought that I have had in the past is resurfacing, and it is an interesting one.

With US Airways Group continuing to shrink, however cleverly devising financing options which keep flying in the US Airways brand, I am beginning to wonder if US Airways will be the first almost completely franchised airline in the country, maybe world.

Think about how a franchise works. The mother company, like McDonalds, operates few stores (if any), but requires other companies to purchase a franchise, and then operate to the mother company's standards. The mother company makes its profits from selling supplies to the franchises... like napkins, hamburger patties, etc... And the franchise makes its profits from operating the retail outlets.

Now, with the probably sale of "MDA Assets" + the shrinking of the mainline fleet (and more is predicted by USA320Pilot...), it seems more and more like US Airways will become a franchised company. What we know as US Airways today will operate reservations centers and distribution applications (like the website, and supplying data to Sabre, etc), run some hub airports, sell napkins and other branded to supplies to the regional airlines, etc. Meanwhile, the regional airlines will actually fly the system. The way revenue, costs, and the regional's "guaranteed profit" margins are managed will make this a distinctly different franchise system than the one developed for retail, but the idea is similar.

This is something that has been occuring more and more over time, as code-sharing relationships (both the Express type and the Alliance type) have become increasingly common. But I would not have thought an airline could be more than a 50% franchise system. I am beginning to think US Airways will be the first... Assuming it successfully completes BK proceedings.

Now, this seems far-fetched... Yes absolutely. Possible... Yes absolutely. Probable... more-so every day (even if unlikely, less unlikely every day).

 

[jimntx]

Old news, but interesting paragraph

The last paragraph reads "The $125 million equity financing from Republic Airways is contingent upon US Airways securing $350 million in cash to cover its reorganization. "

Now, if they had to give up 25% of the company for $125 million in DIP financing, and most of MDA for $125 million in exit financing, what's it going to take to "secure" $350 million in cash? Particularly since they burned through almost $200 million in January alone.

By the way, have the February cash numbers been announced yet?

 

[Winglet]

The flying public will appreciate the $125 million gift that allows Lakefield to sell tickets way below cost of delivering the service, and the oil companies will appreciate selling Lakefield $55 a barrel oil . . . . at least for another few months.

 

[BoeingBoy]

By the way, have the February cash numbers been announced yet?

[post="255750"][/post]​

No, but USA320 posted something interesting on that point. Without going back and finding the quote, it was basically that the AWAC deal kept U from violating the ATSB cash requirement for Feb 28.

Of course, you have to ignore the fact that there was no minimum cash requirement for Feb 28 - only Feb 25 & Mar 4.

But assuming the requirement for either date or a straight-line interpolation between the two to arrive at a Feb 28 number, that would mean a Feb cash burn of $175 to $200 million minimum.

If he was correct.....

Jim