What parts of UAL will end up with USAir?

[Light Years]

Cosmo- I agree. I wouldnt suggest that US look to aquire ORD or the LHR rights. Hopefully, at the loss of UA, the Star Alliance might push for BMI to have rights fot LHR-North America. I dont think either government is that bothered as to whether Pittsburgh, Charlotte, or even Philadelphia (which already has a BA nonstop) has Heathrow service. As for ORD, aside from starting frequent service from LGA BOS and DCA, there is no point in trying to ramp up so large an operation to compete directly with AA, and indirectly with SWA and ATA at MDW. By the same token, perhaps U could begin BOS-SFO and LAX- this would be a logical expansion of our focus cities. Internationally, I dont think U should try to enter the complicated and costly transpacific market. The Star Alliance carriers have plenty of service. US may see opportunities for growth in PHL transatlantic, and possibly even South America at some point in the future.
The post UA opportunities for US, I think are in Denver. This is a viable hub with a good airport, great geographic location, built-in feed from Air Wisconsin and Great Lakes, and little international service. The Airbus fleet, along with RJ replacments in the East Coast network (and eventual RJ replacements on some UA 737 routes) would not require US to stray from it standardized fleet goal. It would also spread the network not all of the eggs are in one basket so to speak. Finally, another benefit would be Atlantic Coast Airlines looking for a new dancing parner- thats nearly 200 RJs on the loose in Airways territory. Imagine if all other Express operators were moved to the hubs, and ACA could become the exclusive Express operator ar DCA BOS and LGA. U could reclaim those important and competitive markets, while using its other resources at its hubs. Again, this would free up aircraft fot DEN. And we all no that there is no shortage of employees, both furlouhed mainline and wholly-owned employees to staff ant growth the airline may see.


Anyhow, thats my rant for today.

 

[chipmunn]

UAL Mulls Hub Closures in Reorganization

CHICAGO (Dow Jones) - An executive for UAL Corp. said Monday that the airline is mulling the closure of its hubs in Los Angeles, Denver and Washington as part of its reorganization plan.

Senior Vice President Gregory T. Taylor said in court testimony that UAL, parent of United Airlines, was asked by its board of directors to consider the hub closures as an alternative. The board also asked the company to look into the possible sale of the airline's Pacific operations, he said.

Separately, the judge overseeing UAL's bankruptcy case here denied Atlantic Coast Airlines Holdings Inc.'s (ACAI) motion to force UAL to assume or reject a contract between the two companies.

Atlantic Coast, of Dulles, Va., provides regional airline service for UAL under the United Express brand. United Express generates about 85% of Atlantic Coast's revenue.

Among other things, the contract calls for Atlantic Coast to add 47 regional jets and retire 30 older turboprop planes by April 2004 at a total cost of $940 million.

Attorneys for Atlantic Coast said that such capital spending, particularly without any assurances from United, put an undue financial burden on the company.

But attorneys for UAL said that the company shouldn't have to make any decisions about the Atlantic Coast contract because of the evolving nature of the reorganization plan.

In his ruling, Judge Eugene R. Wedoff said that United's need to keep its reorganization free of any early obligations was greater than Atlantic Coast's need to have answers about the contract. He said that Atlantic Coast still has a number of options, including negotiating new terms with the planes' manufacturer, Bombardier Inc. (BBD.B)

In court testimony, Atlantic Coast Chief Financial Officer Richard J. Surratt said the uncertainty surrounding UAL could make it difficult to obtain outside financing for the new planes.

Though the company has one of the best balance sheets in the industry with $ 189 million in cash and $44 million in deposits, that position could be threatened by the burden of the upgrades, he said.

He declined to comment on the judge's ruling after the hearing.

UAL's Taylor said UAL's reorganization plan is still very much in the formative stages. The company continues to evaluate several options in addition to the creation of a new, low-cost airline, he said.

 

[chipmunn]

At today's bankruptcy hearing US Airways CFO Neal Cohen told the court that US Airways will enter into a code share relationship with Lufthansa prior to entering the Star Alliance.

Chip

 

[Bear96]

I certainly wish you all the best at U but...

Didn't U just skip a $20M payment for assets (planes) they already have?

How sure is it now that U will emerge from Ch.11 by March 31? Are the ATSB and RSA still itching to give U multi-million dollar checks on April 1 for exit financing to make these dreams of grandeur come true? Even if the court shoves management's terminated pension idea down ALPA's throats, the pilots are threatening to turn around and strike in a matter of months. Who is going to give U money with that threat hanging over the whole situation?

And U has less than $500M cash left, according to testimony in court yesterday. What is the daily cash burn rate now? What will it be when war starts? I wonder how much cash is needed to simply carry out an orderly shutdown of operations? At least a couple of hundred million, I would guess.

 

[chipmunn]

Bear96:

In testimony yesterday US Airways CFO Neal Cohen said every bankruptcy hurdle has been cleared except the pilot pension issue. The creditors committee is endorsing the Plan of Reorganization, the court is expected to rule on the pension issue as early as Friday evening, and the company said it will cure the $20 million Airbus aircraft public debt default during the 10-day cure period.

US Airways has the money to make the payments and most observers believe the announcement and action was timed with the start of the pension Omnibus hearing.

Moreover, management has "sweetened" the pilot pension pot, but after yesterday's news ALPA is "digging its feet" in even more over the company's efforts to terminate the pilot pension plan.

The next move is up to Siegel because after yesterday’s testimony it appears there may be ways to fund the pilot pension plan and still qualify for the loan guarantee, DIP financing, and equity investment. It's my hope Siegel completes this last piece of the puzzle and can come to a mutually acceptable agreement with ALPA, which it appears the company desperately wants.

If Siegel can provide an acceptable retirement plan to a pragmatic group of union employees, US Airways will receive $1.24 billion in exit financing five weeks, and when war kicks off, will immediately improve its cash flow when another difficult 5 percent employee W-2 paycut kicks in, which will improve liquidity by about $75 million per year. US Airways now has the lowest employee expense out of any network carrier when war kicks off in the middle of March.

In regard to the amount of cash needed for an orderly shutdown, I have seen the company's liquidity and cash flow targets and the airline has sufficient funds to operate for five more weeks until the $1.24 billion equity infusion occurs on April 1, provided the pension situation is resolved.

Meanwhile, today the Boston Globe reported that this Friday, United will have its first test of its financial performance in bankruptcy. The company must meet monthly cash flow performance goals set by its debtor in possession financiers and show a positive cash flow in the second half of the year. That is a considerable hurdle for a company that said after filing for bankruptcy in December that it expected its daily cash burn rate to exceed $20 million a day in December and $10 million a day in January.

The newspaper reported 'The covenants were initially set with some slack, and the company should not have too much difficulty meeting the 2/28 requirement,' said a Feb. 20 J.P. Morgan aerospace analyst report on the potential liquidation of United. 'However, the covenant will become progressively more difficult to meet as time goes on, particularly if a war in Iraq begins or another terrorist attack occurs. Cost savings and an improving air traffic environment will be necessary for the airline to satisfy the covenants in the second half of 2003.'

Seprately, RSA has reiterated its interest in acquiring UAL assets and to my knowledge during this industry-wide financial crisis, maybe the only party with the financial resources to acquire UAL assets, now that Greg Taylor, who I believe is one of the "unique and/or interesting" corporate transaction author, told the bankruptcy court just yesterday the airline is considering disposing the IAD, DEN, and LAX hubs.

Meanwhile, it was announced yesterday in court that US Airways is close to reaching an agreement to begin code sharing with Lufthansa, which will add previously unforecast revenues, before formally joining the Star Alliance later this year. Would you care to speculate why Lufthansa is seeking to almost immediately reach an agreement with US Airways, when the German carrier has an agreement with United, before US Airways enters Star?

By the way, do any of those hubs listed above match some of my previous comments?

Finally, for all UAL employee groups, maybe the only way to keep employment is to embrace the LCC concept so that these employees could be transferred to the acquiring airline if this division is "spun off".

Chip

 

[funguy2]

In another thread (forget which one) I outlined what I thought would happen to all the different pieces of UAL should it liquidate. In it, the only parts I thought USAirways would get were: A hub in DEN (doesn't make sense for most of the other carriers) and a focus city at IAD (concentrating on long-hauls and international traffic to supplement its already strong Washington area frequent flyer base). AirTran would also move into IAD, focusing on short-haul low-fare stuff. USAirways keeps its short haul at DCA and used IAD differently... USAir and AirTran can co-exist at IAD in my opinion (they would not fly head to head much).

I think most of the other assets will be fought on by everybody. My guess was that CO gets ORD (closes CLE), DAL gets LHR, AA gets the pacific and other 'odd-ball international rights' South America is relatively weak right now, not sure anybody wants it. Maybe NW gets the route authorities and they lie dormant. I also predicted that Star w/o UAL adds DAL as their USA partner, leaving US Airways to SkyTeam. LAX/SFO get jumped on by LUV.

But this is just a pie-in-the-sky dream... at this point.

 

[genejockey]

[blockquote]
----------------
On 2/25/2003 7:49:35 AM Bear96 wrote:

I certainly wish you all the best at U but...

Didn't U just skip a $20M payment for assets (planes) they already have?

How sure is it now that U will emerge from Ch.11 by March 31? Are the ATSB and RSA still itching to give U multi-million dollar checks on April 1 for exit financing to make these dreams of grandeur come true? Even if the court shoves management's terminated pension idea down ALPA's throats, the pilots are threatening to turn around and strike in a matter of months. Who is going to give U money with that threat hanging over the whole situation?

And U has less than $500M cash left, according to testimony in court yesterday. What is the daily cash burn rate now? What will it be when war starts? I wonder how much cash is needed to simply carry out an orderly shutdown of operations? At least a couple of hundred million, I would guess.
----------------
[/blockquote]
Bear,

My sentiments exactly! U is in a horrible position at present. U is burning cash just like I burned firewood during the recent snow storm....and at least I got some enjoyment out of it. Their cash position is unsustainable, they have the pension mess, the strike possiblity, revenues in the dumper, ineffient operations as far as the eye can see, and a management team that does not have a clue (except for more management bonuses). And U is going to be buying up a fragmented UAL? Poppycock! According some on this board, they are looking forward to a 5% savings from war clause payroll snatch and the $1.24 billion in cash (debt) infusion on April 1. How long will the April 1 "cash" infusion last? My guess is NINE months. This thread is completely ridiculous! I am still waiting for the punch line.........

 

[DCAflyer]

Genejockey said:

Bear,

My sentiments exactly! U is in a horrible position at present. U is burning cash just like I burned firewood during the recent snow storm....and at least I got some enjoyment out of it. Their cash position is unsustainable, they have the pension mess, the strike possiblity, revenues in the dumper, ineffient operations as far as the eye can see, and a management team that does not have a clue (except for more management bonuses). And U is going to be buying up a fragmented UAL? Poppycock! According some on this board, they are looking forward to a 5% savings from war clause payroll snatch and the $1.24 billion in cash (debt) infusion on April 1. How long will the April 1 "cash" infusion last? My guess is NINE months. This thread is completely ridiculous! I am still waiting for the punch line.........

DCAflyer replies:

Well, Gene, I don't think David Bonner would have said he is willing to pay for UAL assets if he didn't mean it. And he undoubtedly knows more about U's financial position than you since he spends ample time in the executive suite these days. Okay, Smartypants, answer me this. Who else is going to go after UAL assets? AA? Not when they are asking for concessions and next in line to Wizard of BK. What about Northwest. Oops, they're asking for concessions too. Their unions would NEVER agree to concessions if NW went after UAL assets. How about CAL... maybe they'll want some of the assets, but DEN doesn't make sense. IAD doesn't make sense for CAL either. The only carrier who might have the wherewithall to take UAL in its entirty is DAL, and that won't happen if it means taking their union employees with the package.

If UAL decides to shed some assets, including DEN, IAD, and LAX, which it has indicated it may, I believe these assets may very well go to U in order to "keep it in the family" and maintain revenue generation possibilities to UAL through the codeshare.

 

[chipmunn]

Genejockey:

The revised business plan, with reduced revenues, was presented to the bankruptcy court yesterday and the creditors committee on February 13.

US Airways told the court the company will obtain $1.24 billion in exit financing on April 1 and the airline projects the following year end financial results:

2003 - $225 million pre-tax loss (most of this will be in Q1)

2004 - $100 million pre-tax loss (nearly break-even)

2005 - $388 million pre-tax profit

These financials have been endorsed by the creditor’s committee, RSA, and the ATSB. Do you know something they do not?

In regard to acquiring assets, US Airways is not purchasing them, RSA as the principal owner of the Arlington-based airline said it would acquire the assets, according to CEO David Bronner, per his comments to Ted Reed of the CLT Observer and Tom Olson of the PIT Tribune-Review.

Can you tell me what is "poppycock" about this and who "on this board is looking forward to a 5% savings from war clause payroll snatch?"

Chip

 

[chipmunn]

Bear96:

I do not wish any ill will against UAL ot its employees, but if the US Airways pilot pension issue is resolved, which it could be, RSA, the ATSB, and the creditors committee have indicated they would endorse the Plan of Reorganization and the Disclosure Statement.

Therefore, the ball is in Dave Siegel's court on whether or not he can solve the pension issue to ALPA's satisfaction. If Siegel does solve the problem, then I believe a UAL-RSA transaction could occur.

If Siegel does not solve the problem, then US Airways could quickly liquidate.

Finally, US Airways is not "purchasing UAL assets at this time", RSA presumably would after April 1, according to Bronner.

Chip

 

[chipmunn]

In regard to IAD, let’s not forget US Airways recently shed itself of its neighboring BWI hub and is opening a new $600 million terminal just up the road in PHL in May. As such, I doubt US would be interested in IAD, plus there could be an antitrust objection due to the common airport issue with DCA.

Regardless, US Airways doesn't need another East Coast hub, but LAX, DEN, & ORD would work well within the existing network and create geographic diversity. These hubs along with SFO, would create what the the UAL and US Airways Marketing Department's call ORD West and when combined with the US Airways triangular hub pattern, mold into the ORD East.

Also noteworthy, if UAL divests of IAD or liquidates, I believe we could see Atlantic Coast move up the road into the somewhat unused new PHL Regional terminal and join the US Airways Express network.

Previously Atlantic Coast announced it was in discussions about partnering with other major airlines to protect itself against UAL liquidating. These conversations may heat up, which could include Atlantic Coast and US Airways, that according to Dow Jones in light of yesterday's decision by the bankruptcy court to deny the regional company's bid to force UAL to decide whether to reject or take on the burden of adding scores of new jets to regional routes.

The news agency reported The denial -- part of UAL's bankruptcy proceedings Monday -- prolongs uncertainty over the fate of the contract, which calls for Atlantic Coast to add 47 regional jets and retire 30 older turboprop planes by April 2004 at a cost of $940 million.

This transaction could almost instantly help each airline generate significant new incremental revenue by taking advantage of the new PHL facilities, growing US Airways international presence, and Atlantic Coast’s established system. If UAL fails in the spring by missing revenue and cash flow targets, as described by the Boston Globe above, where else could Atlantic Coast go and have the ground facilities available to almost immediately feed a major airline hub?

Chip

 

[Bear96]

Chip, thanks for regurgitating (for the umpteenth time) more of today's news clipings, and misrepresenting parts of them to make your point.

I understand fully well that U "intends" to emerge from Ch. 11 on March 31 with gobs of exit financing. I am just suggesting that perhaps the people with that money are getting cold feet now that ALPA is threatening to strike some time in the next few months should the court rule against them on the pension issue. Remember all that exit financing is contingent upon satisfactorily resolving that little elephant in the room. A court ruling against ALPA would just shove the showdown off for a couple of weeks-- hardly a "satisfactory resolution" to the problem from the point of view of someone about to hand over a few million dollars. If I were one of those lenders or investors, I would certainly be checking the fine print in the agreements to see if ALPA's threat is grounds for not providing the exit financing.

And you are misrepresenting the recent news about UAL evaluating their LAX, DEN, and IAD hubs. At this stage, I would hardly characterize it as "considering disposing" them. UA senior executives maintain that they do not want to close any hub. The BOD, on the other hand, wants to downsize UA by 25% and sell assets, and at this stage are merely asking senior management to consider looking at certain hubs to achieve that goal. Of course in the end the BOD might very well end up getting their way, but it is not an accurate characterization to imply that UA is actively planning to close three major hubs right now.

In any case, don't get me wrong: I fully believe that UAL will be toast in a few months, and I am planning my life accordingly. My point is that having a discussion about U purchasing UA assets at this time, while all energy and resources from CCY are concentrated on almost daily court appearances with the singular goal of surviving the pilot pension issue, is as funny to me as a conversation about UA buying AA's assets would be. Both U and UA are total basket cases right now trying to survive day-to-day. Any talk about either of them taking over the world is just hilarious.

It is especially hilarious when, as in U's case, such talk comes from the very people who are threatening to shut the place down if they don't get their way. In one thread, the pension issue seems to be the make or break, line in the sand, straw that will break the camel's back issue that will bring Dave and Dave to their knees and teach them the mother of all lessons. In the next thread, when talk of snapping up OAL assets are discussed, the pilot pension issue is strangely just background noise that is sure to sort itself out to everyone's satisfaction in short order and will be of no consequence, whatever is ultimately decided, so U can just get about its business of taking over the UA world.

Well Chip, which is it?

 

[chipmunn]

Atlantic Coast shares fall on UAL concerns

NEW YORK, Feb 25 (Reuters) - Shares of Atlantic Coast Airlines Inc. fell as much as 31 percent on Tuesday after a U.S. bankruptcy judge said on Monday that United Airlines Inc. need not immediately decide to renew a service agreement with Atlantic, its largest regional partner.

Shares of Atlantic Coast, which is based in Dulles, Virginia, traded down 98 cents, or 14. 1 percent, to $5.95, after falling as low as $4.78. A year ago the shares traded at $29.37.

Atlantic Coast provides regional service to, which both sought bankruptcy protection last Dec. 9, under the United Express brand.

The company derives 85 percent of its revenue through United Express agreements, and has an agreement with UAL to provide 47 regional jets by the middle of 2004 and retire 30 turboprop aircraft, court documents show.

United, the world's second large airline, and UAL has been expected to seek changes in the agreements that could cut Atlantic Coast's profit margins.

At a Monday bankruptcy hearing, a United executive said the airline's creditors committee has asked United to consider closing hubs. One such hub is at Washington Dulles International Airport, where Atlantic Coast operates many United Express flights.

 

[ClueByFour]

[blockquote]
----------------
On 2/25/2003 12:54:41 PM chipmunn wrote:

Regardless, US Airways doesn't need another East Coast hub, but LAX, DEN, & ORD would work well within the existing network and create geographic diversity. These hubs along with SFO, would create what the the UAL and US Airways Marketing Department's call ORD West and when combined with the US Airways triangular hub pattern, mold into the ORD East.
----------------
[/blockquote]

US will never move into DEN. The airline has run from low cost competition for years. F9 would eat US' lunch.

LUV already did this to U at LAX, SFO, and everywhere else along the east coast. Let's not forget PSA just yet.

 

[AirwAr]

[blockquote]
----------------
On 2/25/2003 12:54:41 PM chipmunn wrote:

....

Regardless, US Airways doesn't need another East Coast hub, but LAX, DEN, & ORD would work well within the existing network and create geographic diversity. These hubs along with SFO, would create what the the UAL and US Airways Marketing Department's call ORD West and when combined with the US Airways triangular hub pattern, mold into the ORD East.

....

Chip
----------------
[/blockquote]


Does anyone think US would like a STL hub? In the post UA liquidation scenario, I see AA moving a lot of capacity to ORD. Growing ORD quickly would help to discourage others from squatting there. An option for increasing capacity may be to return retired aircraft to service. However, in an era when there is nearly limitless capacity available in ORD for AA to grow, I would bet that AA would move the capacity from the STL hub. If AA left STL open, would US be interested?