US Airways will post $600 million loss.
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BoeingBoy
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They announced that they'll have $600+ million in non-cash writeoffs for the 2nd quarter, mostly from reducing "Goodwill" to zero. That will be in addition to any "normal" profit/loss for the quarter - first call consensus calls for a $70+ million loss before special items such as the writeoff.
Jim
Jim, will you come out of retirement and RUN for President soon?? You are awesome! 🙂 😉
allstrike
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Ditto,Ill vote for Jim,Ill even buy stock.....
heres the link to the uhhhummm story.
http://www.marketwatch.com/news/story/us-a...95749CD9FA09%7D
N965VJ
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Jim’s a nice guy, so why would you wish something so horrible on him, LOL?
YVINTERN
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Cuz only golden agers like Jim could really turn this airline around back to the good ole' USAir days before Siegel.
does this plane go to paris
Senior
Jim and or any other sane voice of reason,
The Stock price of LCC is quickly dropping and at last trading at 1.55.
Do you think this is Wall Street's seeing the hand writing on the wall, the write down of the goodwill, high gas price's? I find it amazing that during the attempted DL take over that the stock was over 60.00 and now the dramatic drop.
The Stock price of LCC is quickly dropping and at last trading at 1.55.
Do you think this is Wall Street's seeing the hand writing on the wall, the write down of the goodwill, high gas price's? I find it amazing that during the attempted DL take over that the stock was over 60.00 and now the dramatic drop.
YVINTERN
Veteran
The stock price was grossly inflated during the DL takeover...now we're seeing the result of that overdemand 😉
That will be in addition to any "normal" profit/loss for the quarter - first call consensus calls for a $70+ million loss before special items such as the writeoff.
Jim
[/quote]
$70 million dollar loss was much less than I was expecting, considering all the gloom and doom reports about how all airlines are bleeding with oil prices where they are.
Jim
[/quote]
$70 million dollar loss was much less than I was expecting, considering all the gloom and doom reports about how all airlines are bleeding with oil prices where they are.
hp_fa
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I am wondering if the write-off of the goodwill is, at least in part, due to the reaction of the FF'ers who have become, shall we say, upset at the way they believe they are being treated? $622M is a lot of making folks unhappy and could have paid for 62.2 years of IFE (at current prices) or a lot of soda and water.
Here's more details:
Background on Today’s 8-K Filing
July 14, 2008
Today, US Airways filed a Form 8-K with the Securities and Exchange Commission (SEC). Our filing today is similar to communications by several other airlines, including United, Northwest, Delta, American and Continental.
What today’s filing communicates to investors is that when we report our second quarter 2008 results (Tuesday, July 22), they should expect to see several non-cash accounting charges. It is important that employees understand that a write down does not mean this is cash out the door and so we’ve put together the following information to help translate today’s filing for all of us non-accountants out there.
Write Down on Goodwill and Parts
First, the down and dirty on what we’re announcing. Basically, we are anticipating writing down $622 million related to goodwill generated from the merger in 2005, as well as approximately $18 million related to the decline in fair market value of certain spare parts associated with our Boeing 737 fleet.
A Quick Primer on Goodwill
Goodwill is an intangible asset that can be found on a company’s balance sheet. It represents the excess of the fair market value of a company (e.g., what a third party would be willing to pay) over the fair market value of the company’s net assets (e.g., things like cash, receivables, airplanes, buildings and equipment minus its liabilities, or what we owe to others).
At the time America West and US Airways merged, the excess fair market value of US Airways over its net assets was $622 million and was recorded as goodwill. Accounting rules that govern publicly-traded companies state that if goodwill exists on a company’s balance sheet, it must be tested every year. This is done to ensure that the value reflected on the balance sheet accurately reflects its current market value. If the current market value is less than the value on the balance sheet, then the goodwill is considered to be impaired and must be reduced.
Fast forward to today’s record-high fuel prices. With our auditor’s concurrence, we recently performed the impairment test described above to determine if the value of goodwill and some of our other assets was in line with the market’s value. The result was no, and thus, our filing today communicates this information to investors.
If it’s not cash, what is it?
Although not taking cash out of the company, the write down does mean that both our assets and shareholders equity will be reduced by $622 million for goodwill and approximately $18 million for parts. Again, because it is a non-cash charge, the write-off does NOT affect our total cash balance.
Other airlines taking similar steps
As stated above, US is not the only airline impacted by a non-cash goodwill impairment charge. Some airlines started taking write downs on goodwill in the first quarter 2008, including Northwest Airlines, who reported a $3.9 billion non-cash goodwill impairment charge and Delta Air Lines, who reported a $6.1 billion non-cash goodwill impairment charge. Also just last week United Airlines filed a Form 8-K announcing they expected a non-cash goodwill impairment charge of between $2.2 billion and $2.3 billion in the second quarter. Delta has also reported that they expect an additional non-cash goodwill impairment charge in the second quarter.
In addition, American expects an aircraft equipment and spare parts impairment charge of $1.1 billion to $1.2 billion and Continental expects aircraft impairment charges of approximately $58 million.
We also announced that we expect to record additional accounting charges in future quarters related to our recently announced capacity reductions. These will include severance and other costs associated with fleet reductions. Because we don’t know what those charges will be at this time, we simply communicated that investors should be aware that this will be coming.
Thanks for taking the time to read this (for those of you interested and still reading this far!) and we’ll do our best to continue communicating financial information that is often hard to understand without advanced degrees in accounting, etc.
This message was sent to all employees.
Please post for those who don’t have access to company email.
Background on Today’s 8-K Filing
July 14, 2008
Today, US Airways filed a Form 8-K with the Securities and Exchange Commission (SEC). Our filing today is similar to communications by several other airlines, including United, Northwest, Delta, American and Continental.
What today’s filing communicates to investors is that when we report our second quarter 2008 results (Tuesday, July 22), they should expect to see several non-cash accounting charges. It is important that employees understand that a write down does not mean this is cash out the door and so we’ve put together the following information to help translate today’s filing for all of us non-accountants out there.
Write Down on Goodwill and Parts
First, the down and dirty on what we’re announcing. Basically, we are anticipating writing down $622 million related to goodwill generated from the merger in 2005, as well as approximately $18 million related to the decline in fair market value of certain spare parts associated with our Boeing 737 fleet.
A Quick Primer on Goodwill
Goodwill is an intangible asset that can be found on a company’s balance sheet. It represents the excess of the fair market value of a company (e.g., what a third party would be willing to pay) over the fair market value of the company’s net assets (e.g., things like cash, receivables, airplanes, buildings and equipment minus its liabilities, or what we owe to others).
At the time America West and US Airways merged, the excess fair market value of US Airways over its net assets was $622 million and was recorded as goodwill. Accounting rules that govern publicly-traded companies state that if goodwill exists on a company’s balance sheet, it must be tested every year. This is done to ensure that the value reflected on the balance sheet accurately reflects its current market value. If the current market value is less than the value on the balance sheet, then the goodwill is considered to be impaired and must be reduced.
Fast forward to today’s record-high fuel prices. With our auditor’s concurrence, we recently performed the impairment test described above to determine if the value of goodwill and some of our other assets was in line with the market’s value. The result was no, and thus, our filing today communicates this information to investors.
If it’s not cash, what is it?
Although not taking cash out of the company, the write down does mean that both our assets and shareholders equity will be reduced by $622 million for goodwill and approximately $18 million for parts. Again, because it is a non-cash charge, the write-off does NOT affect our total cash balance.
Other airlines taking similar steps
As stated above, US is not the only airline impacted by a non-cash goodwill impairment charge. Some airlines started taking write downs on goodwill in the first quarter 2008, including Northwest Airlines, who reported a $3.9 billion non-cash goodwill impairment charge and Delta Air Lines, who reported a $6.1 billion non-cash goodwill impairment charge. Also just last week United Airlines filed a Form 8-K announcing they expected a non-cash goodwill impairment charge of between $2.2 billion and $2.3 billion in the second quarter. Delta has also reported that they expect an additional non-cash goodwill impairment charge in the second quarter.
In addition, American expects an aircraft equipment and spare parts impairment charge of $1.1 billion to $1.2 billion and Continental expects aircraft impairment charges of approximately $58 million.
We also announced that we expect to record additional accounting charges in future quarters related to our recently announced capacity reductions. These will include severance and other costs associated with fleet reductions. Because we don’t know what those charges will be at this time, we simply communicated that investors should be aware that this will be coming.
Thanks for taking the time to read this (for those of you interested and still reading this far!) and we’ll do our best to continue communicating financial information that is often hard to understand without advanced degrees in accounting, etc.
This message was sent to all employees.
Please post for those who don’t have access to company email.
US Oringinal
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So it seems to me that all the airlines are taking this write-down on goodwill at the same time--and my guess it is because they want to run to Washington for help saying "look at all the money we're losing" while at the same time having passengers write Congress for some type of action or relief. IN addition there are probably some very good tax reasons to post huge losses and take as much of these write-downs as possible at or near the same time. Does anyone know?
So what is the REAL number we should be looking at in the next few weeks to determine what's really going on with the airlines. Is it the operating loss figure(not including special charges?)
Would appreciate any insight anyone can offer--I think the more we all know about this the better we can be prepared for what's to come......
Just in case, I'm gonna dig out my resume and update it
...oh yeah, I forgot, I've been doing the same thing for the past 24 years
HEY SHANNON--can you put in a good word for me at Wendy's?? Their kitchens kinda look like galleys.....
So what is the REAL number we should be looking at in the next few weeks to determine what's really going on with the airlines. Is it the operating loss figure(not including special charges?)
Would appreciate any insight anyone can offer--I think the more we all know about this the better we can be prepared for what's to come......
Just in case, I'm gonna dig out my resume and update it
...oh yeah, I forgot, I've been doing the same thing for the past 24 years
HEY SHANNON--can you put in a good word for me at Wendy's?? Their kitchens kinda look like galleys.....
YVINTERN
Veteran
So it seems to me that all the airlines are taking this write-down on goodwill at the same time--and my guess it is because they want to run to Washington for help saying "look at all the money we're losing" while at the same time having passengers write Congress for some type of action or relief. IN addition there are probably some very good tax reasons to post huge losses and take as much of these write-downs as possible at or near the same time. Does anyone know?
So what is the REAL number we should be looking at in the next few weeks to determine what's really going on with the airlines. Is it the operating loss figure(not including special charges?)
Would appreciate any insight anyone can offer--I think the more we all know about this the better we can be prepared for what's to come......
Just in case, I'm gonna dig out my resume and update it
...oh yeah, I forgot, I've been doing the same thing for the past 24 years
HEY SHANNON--can you put in a good word for me at Wendy's?? Their kitchens kinda look like galleys.....
Why would you wanna work at Wendys when DiG's 5 star restaurant is hiring 😉 Check your PM dude...
ClueByFour
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Q2 is the strongest quarter typically, right? Additionally, they sold a bunch of tickets in Q1 and Q2 at prices that won't support the actual price of gas.
Why are they doing it? For tax reasons? No. As a "let's make things look worse than they really are so Washington might give us money" conspiracy? No.
Simply put, when the accountants are told that the underlying asset no longer has any value, they write it off as worthless. The FASB publishes detailed rules governing the treatment of worthless assets like goodwill, and US (like the other airlines) is facing the grim reality that their intangible assets like goodwill have become worthless.
BoeingBoy already posted the real number before you posted this question. Look farther up in this thread.
IMO, the only thing that matters is how much cash US either generated or burned from operations in the second quarter. In the first quarter, US burned $25 million from operations, while every other legacy except for UA generated Positive operating cash in the first quarter. That should tell you something.
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