Us Airways Seeking Tax Increases

There are reliable reports the Pittsburgh hub negotiations are being held hostage to United Airlines on-going bankruptcy problems and the potential to move US Airways mainline, MDA, and other Express assets westward, to airports such as Chicago and Denver.

On Friday the U.S. bankruptcy court rejected the United's request for a six month extension to have exclusive rights to file its Plan of Reorganization (POR) and instead authorized only five additional months for the company to file its POR.

United chief financial officer Jake Brace told reporters following the Omnibus hearing the company has four major bankruptcy obstacles. The Chicago-based company must find a solution to its enormous pension problem, obtain a satisfactory resolution to its Dulles hub and Atlantic Coast Airlines problem, resolve municipal bond litigation with the UCT airports (San Francisco, Los Angeles, Denver, and Chicago; as well as the Port Authority of NY and NJ), and rejection of aircraft leases.

ALPA International President Captain Duane Woerth addressed the US Airways MEC in Open Session for two hours on September 11, with his main focus on the proposed Air Line Pension Act. Woerth told the ALPA MEC United is having the same bankruptcy problems as US Airways that included NPC's efforts to reject the credit card processing agreement, the company has been unable to get anybody to provide exit financing, and the government has changed their loan guarantee demands three times.

The ATSB is the only form of exit financing available, Woerth said. What's important to note is the exit financing must be used to repay up to $1.5 billion in debtor-in-possession (DIP) financing provided by J.P. Morgan, Citigroup, CIT Group, and Bank One.

Woerth told the MEC that United has been very close to violating the DIP covenants a number of times and the company had a little better summer than forecast. He is concerned about the airline financially this fall.

In addition, Susan Carey of the Wall Street Journal wrote on, Thursday, September 18, that "United wants to raise $2.5 billion in exit financing", which is $500 million more than the previous $2.0 billion guarantee denied by the Air Transportation Stabilization Board. Carey said the amount depends on the company's cash position and the price of the funding, quoting an unidentified source.

In fact, after the hearing Brace told reporters there was no specific timetable by which United, planned to file the updated plan with the ATSB, which I find interesting.

United's DIP covenants require the airline to be revenue and cash flow positive in October and have a cumulative October EDITDAR of $46 million and a November EDITDAR of $112 million, which could be very difficult to obtain.

Thus, based on Woerth's comments to the MEC, Carey's unidentified source, and the bankruptcy financing requirements, many observers have become much more sanguine about United's chances of emerging from its formal reorganization without an asset divestiture -- to raise exit financing.

Interestingly, Reuters reported on Friday Brace also said United may seek to raise more than $2 billion in financing through other means, but declined to specify in what form or through what capital markets.

Meanwhile, Pittsburgh Tribune Writer Jim Ritchie reported today Allegheny County Chief Executive Jim Roddey told a gathering of Pittsburgh business leaders yesterday at the St. Barnabas Health System's Kean Theatre in Richland, Pennsylvania; despite the best efforts of county and state negotiators, the airline's hub at Pittsburgh International could be doomed. "The carrier needs to merge," he said.

"We face losing the hub either way," Roddey said. "But we will keep it as long as we can."

Also noteworthy, US Airways chairman of the board David Bronner previously speculated to Charlotte Observer business writer Ted Reed that United has a 50-50 chance of surviving. Bronner said that if United were to sell assets, he would consider backing the purchase of some "if it would be beneficial to US Airways."

It's unclear how a potential corporate transaction could occur between the long-time potential marriage partners. However, in my opinion, we could see United divest of assets to US Airways. Any potential deal could be similar in scope to the Pan Am and TWA POR's, which could permit United to emerge from bankruptcy as a smaller airline, with the US Airways Domestic and Star alliances the "revenue umbrella" that would United to file an updated ATSB application that reasonably projects a 7% profit margin in 7 years.

Respectfully,

Chip

P.S. As a Miami (Ohio) grad, go MAC!

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Clue,

Regarding your post above, I understand your sentiments exactly. And for once, you and I can finally agree that we agree.


Hippie,

You watch...it will work out, and one thing about we folks in PIT...we will survive with U or without U.

No state should wrap their entire economy for survival around one ill managed company.
 
Chip Munn said:
There are reliable reports the Pittsburgh hub negotiations are being held hostage to United Airlines on-going bankruptcy problems and the potential to move US Airways mainline, MDA, and other Express assets westward, to airports such as Chicago and Denver.

On Friday the U.S. bankruptcy court rejected the United's request for a six month extension to have exclusive rights to file its Plan of Reorganization (POR) and instead authorized only five additional months for the company to file its POR.

United chief financial officer Jake Brace told reporters following the Omnibus hearing the company has four major bankruptcy obstacles. The Chicago-based company must find a solution to its enormous pension problem, obtain a satisfactory resolution to its Dulles hub and Atlantic Coast Airlines problem, resolve municipal bond litigation with the UCT airports (San Francisco, Los Angeles, Denver, and Chicago; as well as the Port Authority of NY and NJ), and rejection of aircraft leases.
Let's address this from a rational viewpoint for a second.

UA asks for 6 and the judge gave them 5. Whoa. Earth shaking.

They have 4 problems:

1. Dulles and the ACA problem: this, my friends, is where the PIT hub might move to, except that US has probably learned it's lesson about having hubs 100 miles or less apart once (I give you BWI and PHL). UA's plan to feed Dulles will probably begin and end with US Express. The writing is on the wall. And if U won't do it, I'm quite sure that Johnny O and the boys at Mesa will be more than willing.

2. Pensions. Chip, you of all people should know _exactly_ where this one is headed. I raise the issue only to point out the obvious about how that score is going to be settled.

3. Aircraft leases. I've been told that there are several A320 class aircraft that once wore U colors that are now parked in the desert. Perhaps our friends at UA will even go so far to mimic U as to have the paperholders on a few aircraft become their exit financiers? Failing that, they will park them.

4. The airport scenario. I'm sure that UA will resolve these matters in a very similar manner to what US did to PIT if push comes to shove. I doubt it will, with the possible exception of Denver. See below.

US bailed on the West Coast once already. Post-reorg, the CASM is still several cents above Southwest and Jetblue, both of whom have invaded that part of the country in force, particuarly Southwest. U is scaling back those markets as-is. U is not about to enter a market or markets that would require flying mainline jets. Frontier as at Denver, which causes the same problem, and U will be in a bidding war for Chicago (and the rest, quite frankly--CO in Denver, AA in SFO. U might some of LAX).

Nevermind the fact that reliable reports indicate that Bronner is balking about the MAA idea--what makes you think he's going to finance a major expansion into LCC laden markets in which U now has minimal presence?

Regarding the ALPA president--if he were an airline executive, he'd be running an airline. As things stand, I'm sure that he would rather not see anything happen to UA, since it would impact ALPA's income substantially. In addition, you could count down the days until yet another Duty of Fair Representation lawsuit was filed in the event of a UCT.

Regarding the economic impact to PIT: I ran the numbers once when I was group lead for a group of about 6 PIT based employees, and I would have saved almost $80,000 IN ONE YEAR on airfare if the fares were similar to CLE. That's a headcount, folks. Fortunately, Roddey and Rendell are not in the business of propping up failing businesses.

And, as PITbull points out, the jobs that Dave and Dave are talking about keeping, save for a shrinking group of mainline pilots and FAs are express positions, which start out at slightly above the poverty line. That reduces the number of mainline line mechs and other staff, leaving PIT with the maintenance facility as the biggest source of decent jobs, and we all know what Dave and Dave want to do with mainline maintenance.

I work for a firm that cut almost 1000 positions in PIT in the last few years. I don't see Fred's, the Sea Shell, or the Andretti folks running for cover. The hardest hit will be the hotels in the Cherrington and Beers School areas. Those firms, while hard working and reputable to be sure are simply not worth $500 million.
 
ClueByFour, spoken like a true manager! Folks, this attitude is exactly why our country is quickly becoming a two-class system. Go ahead, farm out airline work to Mexican mechanics and reservations call centers in Calcutta, India. Where have the ethics and respect gone in business?
 
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FlyingHippie Posted on Sep 21 2003, 02:39 PM

Folks, this attitude is exactly why our country is quickly becoming a two-class system. Go ahead, farm out airline work to Mexican mechanics and reservations call centers in Calcutta, India. Where have the ethics and respect gone in business?
--------------------------------

FlyingHippie,

Ethics and Respect were murdered by Selfishness and Greed.

And we're partly to blame. After all, where were the cloths on your back manufactured?
 
repeet, you're right. So, how do we stop this landslide? Seems to me the American public is so fixated on being "thrifty" no matter what the true costs are. I guess someday the true costs will become crystal clear. The managers that sent all the work overseas reap the rewards of the "that-a-boy" salary, while more average Americans find themselves with lots of choices in low-paying jobs. Folks, just look at the U.K, it's pretty much a two-class system. It's not working for them!
 
FlyingHippie said:
ClueByFour, spoken like a true manager! Folks, this attitude is exactly why our country is quickly becoming a two-class system. Go ahead, farm out airline work to Mexican mechanics and reservations call centers in Calcutta, India. Where have the ethics and respect gone in business?
At no point did I say I supported any of that happening, particularly Mesa invading the world or anymore pension losses.

You guys need to realize that predicting bad things is not the same as supporting or advocating it.

And Hippie, if it makes you feel any better, I've lost 50 or so co-workers in the last 6 months to Indian outsourcing firms. I guess they don't count, as they were not members of a union, which in your warped mind must make them management.
 
FlyingHippie said:
ClueByFour, spoken like a true manager! Folks, this attitude is exactly why our country is quickly becoming a two-class system. Go ahead, farm out airline work to Mexican mechanics and reservations call centers in Calcutta, India. Where have the ethics and respect gone in business?
Don't shoot the messenger.

Reading CB4's post I didn't at all get the impression that that's what he wanted to SEE happen, nor any smug glee if it did. I just found his predictions to true for comfort. Regarding the present team at the helm; If one extrapolated from the past year or so...through the present...and throw in a few micsellaneous rumblings from same- It's not the least bit unlikely.
 
Toobad it wasn't a Pennsylvania pension fund that bailed out US Airways. That would have been the cheapest solution to preserving PHL and PIT. And if the pension fund lost money, the folks who would pay probably live in Florida anyway.

I'm only half kidding with this comment.
 
PineyBob said:
Not to mention the Steelers, Phillies & Eagles, Kavearner Shipbuilding (foriegn company), the tradition of "bailing out" of failing or marginal industries has been long established Especially when the industry has a "High Profile" like say sports teams, or airlines! It's more of a prestige thing than a dollars and cents one. You don't want to be know as the Governor who lost a mjor hub. Not when you have national political aspirations.

If you think Siegel, Spector, Santorum & Rendell give a fat rat's arse about any of you or the paying customers then you have been royally snookerd
So does this post show a true blue and very cynical point of view or what! So there is no such thing as my brothers keeper, it's all about me me me. Well then, lets shut down the boards because we all know where everyone is coming from, his own selfish wants needs and aspirations making these boards a chat room and moot.
 
So many places to point fingers and so many to blame...so i will add my 2 cents
worth.

Lets start with Frank Lorenzo and Carl Icahn who started the merger craze.
It was either eat or be eaten thereby forcing carriers like usair,psa,piedmont
to do things they never would have concidered.

Next we can go to the tax act of 1986 that turned managements from being
industry builders into caretakers and leasees. This is the act that made it more
profitable for a company to lease than to own its aircraft.

How about the pension laws that allowed usair to contribute zero (0) dollars
to the pilot pension plan in 4 of the last 6 years of the plan existence.

How about those tax rulings that allow a bigger corporate write off by outsourcing
than by doing work inhouse.

Todays culture....labor friendly is out.....bashing employees is in vogue.

Gone are the Sam Waltons who spent 3 out of every 5 workdays visiting his
stores....in is relyng on statistics and walling youself up in the corporate
headquarters.

The only transaction this company is capable of revolves around a lie,cheat,
and steal mentality with skewed statistics. Forget the redeployment that Chip
eludes to...this group isn t capable of pulling it off. It would be like going over
Niagra Falls...without the barrel....no long range plan...no vision.


I apologise in advance for spouting off.

kindest regards
 
Chip Munn said:
There are reliable reports the Pittsburgh hub negotiations are being held hostage to United Airlines on-going bankruptcy problems and the potential to move US Airways mainline, MDA, and other Express assets westward, to airports such as Chicago and Denver.
Chip:

Don't you think that those "reliable reports" that you cited might not be very accurate now (if they ever were) in view of: a.) United just receiving an extension of its exclusive period to file a POR until early March 2004, two months AFTER US Airways must decide on its course of action at PIT but prior to which United is exceedingly unlikely IMHO to sell any significant part of its operation; and b.) United's announcement last week that its LCO operation will begin in February 2004 in DEN, one of the cities you mention as a potential destination for some of US Airways' mainline and Express equipment that is now feeding the PIT hub?

BTW, can you provide any links to those "reliable reports"?