What Else Is United Selling? Raising Cash

[RowUnderDCA]

In regard to UALs conspicuous selling of assets, Ive seen at least two promotions in my email from UAL that amount to 'give us cash right now, for lower fare next year' or 'give us $100 now and we'll give you double ff miles and extra credit for status later'

I'm no expert, but I've never seen that in my email from any airline before. I get promotional stuff from AMR, NWA, U and UAL.

C'mon guys, clearly UAL is looking to pump up earnings NOW. I don't have any theories, but many posters on this board lose credibility when they keep thinking that we're all 'contributes' and can't see the simple truth.

 

[novaqt]

Factoid!

UA is not going to continue to hold onto surplus parts inventory in warehouses where we have outsourced maintenance and stores. Why not sell it and raise some cash. Ebay was founded on people housecleaning and selling excess inventory at auction. Even stores are selling unsold merchandise they want to move off the floors and warehouses on Ebay.

Even large department stores are now adopting a new strategy of having customers order clothes and/or merchandise which takes a few weeks to deliver so as not to have surplus inventory lying around for the end of season sales.

If UA is rescheduling to match our flights into and out of LHR, then making some money by trading away a couple of slots that we do not run full planes makes sense.

Every business during the good times invests money in new ventures only to sell them to raise capital to carry them through the down cycle and the cycle starts again. Selling our investments in Hotwire and Orbitz is a good thing. We already sold our interest in Gallileo a couple of years ago.

All of what UA is doing now has been planned as part of the bankruptcy to bring us to the second quarter of next year when United emerges. Not to worry!!!

 

[Busdrvr]

In regard to UALs conspicuous selling of assets, Ive seen at least two promotions in my email from UAL that amount to 'give us cash right now, for lower fare next year' or 'give us $100 now and we'll give you double ff miles and extra credit for status later'

I'm no expert, but I've never seen that in my email from any airline before. I get promotional stuff from AMR, NWA, U and UAL.

C'mon guys, clearly UAL is looking to pump up earnings NOW. I don't have any theories, but many posters on this board lose credibility when they keep thinking that we're all 'contributes' and can't see the simple truth.

Don't confuse "pumping up earnings" with pumping up CASH. UAL accounts for fro "earnings" from FF accounts ONLY when the awards are used. IOW's, when UAL offers a "promotion" that includes "freebies", they debit the books for the amount of the "value" of the award. Cash flow gets improved, but "earnings" do not.

 

[767jetz]

Let's take a wait and see attitude.

Now that I will agree with.

 

[767jetz]

jetz no one is saying that UAL is selling assets to "keep the doors open." However we may be about to start busting the DIP covenants during this coming winter,

Actually PineyBob did say we were selling asset to keep the doors open. Those were his words not mine.

Although he did later he did clarify and say it was not currently a big deal, but could become one if we sell more significant assets.

As for DIP covenants, USAir missed every one of theirs while they were in BK. No one shut the doors there. Although I understand they were close to that just prior to exiting, hence their rushed exit and subsequent difficulties since. UA wants to exit on it's own time frame. As Novaqt points out, this whole thing has been carefully planned and executed. Everyone knows that this is the slowest season for the airline. Everything is planned to bring us to Q2 2004 and an emergence from BK going into the busy summer season.

 

[767jetz]

Getting rid of prime LHR slots means we cannot figure out how to use the slots

That's my whole point Bear. These were not PRIME slots. If I'm not mistaken I think they were early morning EWR Takeoff slots. Whatever they were, we were not using them, and probably never will.

As for the 747-400's. The company started parking them a long time ago. Several management teams ago, it was decided that the 777 would be our biggest airplane, and the 400's days were numbered. Now in some cases the 400 has become more economical than a 777. So some are being brought out of storage, and some will still be sold. I don't see selling an airplane that will otherwise sit in a desert as a bad sign.

 

[USA320Pilot]

767jetz:

767jetz said: "As for DIP covenants, USAir missed every one of theirs while they were in BK. No one shut the doors there. Although I understand they were close to that just prior to exiting, hence their rushed exit and subsequent difficulties since."

Chip comments: 767jetz, with all due respect, I believe you are wrong. US Airways never had DIP financing revenue and cash flow targets. If I am incorrect, can you provide me with specific information on the Arlington-based company's DIP requirements?

In regard to the need to exit bankruptcy by March 31, US Airways' credit card agreement with NPC required emergence by the end of the first quarter, according to bankruptcy court testimony, which I heard in person.

This was the primary motivation, closely followed by exit financing. By the way, United has the same problem with NPC, but Duane Woerth believes that can be satisfactorily handled.

Meanwhile, I believe there are risks associated with staying in bankruptcy in that the debtor is not in total control of the new business plan and the debtor is subject to the desires of the unsecured creditors committee and bankruptcy court. Furthermore, the longer a company stays in bankruptcy the more likely the debtor could lose its exclusive right to file its POR and Disclosure Statement.

Regards,

Chip

 

[767jetz]

According to Paul Whiteford, Master Executive Chairman and member of the UA board of directors, USAir missed it's DIP financing hurdles and was forced to exit bankruptcy or face liquidation.

Since you have established the precedent of quoting ALPA executives, I figure my source is just as reliable as yours.

 

[Busdrvr]

According to Paul Whiteford, Master Executive Chairman and member of the UA board of directors, USAir missed it's DIP financing hurdles and was forced to exit bankruptcy or face liquidation.

Since you have established the precedent of quoting ALPA executives, I figure my source is just as reliable as yours.

Excellent point!! 😀 , but don't you mean "former MEC chair"?

 

[oldiebutgoody]

According to Paul Whiteford, Master Executive Chairman and member of the UA board of directors, USAir missed it's DIP financing hurdles and was forced to exit bankruptcy or face liquidation.

Since you have established the precedent of quoting ALPA executives, I figure my source is just as reliable as yours.

Excellent point!! 😀 , but don't you mean "former MEC chair"?

Chip is correct on that one. U never missed any DIP covenants, but the Dave's held them over the employees heads numerous times in order to gain contract concessions. The major issue they used was the "necessary" 7% profit margin required to get an ATSB loan. A couple of times, the DIP covenant "deadlines" were shifted to allow for such things as employee ratification of contract changes. Frequently, the covenants seemed to change in order to force more cuts on all employee groups.

 

[Busdrvr]

Oldie,
As closer as i can figure with trusty old google, U's DIP requirements were only the wage cuts, and the ability to get the loan.

 

[USA320Pilot]

767jetz:

I attended a number of US Airways bankruptcy hearings and discussed the company’s Chapter 11 hurdles (a number of times) with Dave Siegel via email or personally in Washington at the airport when I was based in DCA.

The US Airways hurdles that forced a rapid emergence were the NPC credit card agreement and exit financing requirements (ATSB loan guarantee). The company had revenue targets that Oldie accurately described, which were audited by Fitch Rating to secure the loan guarantee.

Maybe that's what you and Paul Whiteford discussed, however, these financial targets were different than what J.P. Morgan, CIT Group, Citigroup, and Bank One required of United for its DIP lending.

Regardless, as I said before, the DIP lenders are probably not interested in repossessing the company's assets that are collateral, because the used aircraft market and associated assets are weak. Instead, these lenders have told other key Wall Street institutions they would grant waivers in exchange for higher fees.

In fact, in the article UnitedChicago posted, Dow Jones reported the modified DIP agreements also call for the lenders to consent to restructuring some of UAL's existing debts and to payment of a deposit under the airline's fuel supply agreement. Among the fees UAL would have to pay to the lenders are an amendment fee that wouldn't exceed $895,000 and a $500,000 total arrangement fee to lenders J.P. Morgan Chase Bank and Citicorp USA Inc. UAL would pay a $300,000 amendment fee to Bank One, the motion said.

Nonetheless, United is selling assets (some that are likely excess), but the key point is the company is not meeting its DIP requirements even with these sales. The DIP requirements continue to tighten going forward and the winter season (revenue) looks as if it's going to be difficult for the entire industry, therefore, the company may have to sell further assets to meet its bankruptcy lender requirements.

Regards,

Chip

:blink:

 

[oldiebutgoody]

Oldie,
As closer as i can figure with trusty old google, U's DIP requirements were only the wage cuts, and the ability to get the loan.

That's what I understand as well. These two items had shifting deadlines as negotiations continued, but they never passed a deadline without an extension being given. These "deadlines" were extended in an effort to allow management to secure more cuts through contract concessions from ALL labor groups. :blink:
Also, the amount of necessary paycuts changed in the middle of the restructuring, leading to the "round two" contract amendments.

 

[Busdrvr]

"but the key point is the company is not meeting its DIP requirements even with these sales."

Chip,
Did somebody up your prozac? 😉 i must say, your last couple posts have been a little more on the "real" side, and exhibit a balance you have not previously been known for. However.... I must take issue with the above quote as it is COMPLETELY false. UAL hasn't missed a DIP "target" yet. Please tell us what dip requirement you are refering to, and please also back up the statement with concrete numbers (not "little dave says" or "sources at the ORD post think"). something like "UAL has a cumulative EBIDTAR of X dollars, and unless UAL has an EBIDTAR of x dollars in the months of oct, nov, and dec which would require an operating profit of X dollars...." I challenge you to show your predicted DIP failures in hard, verifiable data (bet ya won't).

Additionally, your remark, by mentioning the sale of assests, exhibits a lack of understanding of the definition of "EBIDTAR" (ie, none of the initials stand for "plus the money you can get hawking your stuff..."). Was this intentional?

 

[USA320Pilot]

Busdrvr:

I was not correct because United has not missed its DIP requirements yet, but it's likely to occur this month with the company seeking waivers to its covenants. Are we not splitting hairs here, while the Titanic is sinking?

I have said all along the violations would likely occur in October due to information from ALPA International and Wall Street Analysts, who are in constant contact with J.P. Morgan, CIT Group, Citigroup, and Bank One. Moreover, without the IRS tax refund of $365 million and TSA $300 million payment, the DIP financing requirements would have been violated.

These payments gave the company a six month reprieve, however, reality could set in on October 31 when United announces its third quarter financial results. Coincidentally, that's Halloween.

Regards,

Chip

😉