Why doesn''t the airline seek additional investors instead of bullying the unions?

Aug 23, 2002
406
0
Couldn''t USAIRWAYS sell part ownership to a large investor besides The Texas Air Group...Saw an article that says that money group also has plenty of dough to buy Burger King and Del Monte Foods, too....Hmmmm...Think their in this airline ownership thing for the long term???? Not me...[:0]
 

UAL777flyer

Veteran
Aug 20, 2002
730
0
Well, considering the seriousness of US Airways present situation, and considering that their survival is very much in doubt, investors probably aren't lining up taking numbers to put their capital into your company. Unions tend to scare off investors, especially unions that appear defiant.
 

sfb

Veteran
Aug 21, 2002
771
1
www.usaviation.com
Yep...the idea behind "investing" is to actually make some money in the end after everything is said and done. Given that consideration, would YOU invest a billion dollars in a company which has $500 million in cash and is losing $250 million PER QUARTER without knowing that there would be a significant reduction in the company's largest cost -- labor?

They can just take their money and invest it in something which actually might make money. US Airways' employees have the option of accepting the company's requests for reduction in compensation *or* hoping that the company will somehow stay alive with its current cost level. Personally, I don't think that's a terribly good bet.
 
C

chipmunn

Guest
Rez Agent:

Investors are not going to put money into a company who cannot get its unions to provide required concessions to obtain the contractual DIP financing, emergence financing, and the loan guarantee. Why throw away your money on a failing enterprise?

In fact, the company has gotten investors to provide money: TPG, CSFB, & BOA. The problem is all three of these investors have contractual exit clauses that state without the company getting target labor concessions from all groups, there investment will not occur, which would prevent the company from having the funds to operate, restructure, and emerge.

Therefore, the only other possible options are for the creditors committee to find another investor like Marvin Davis and Carl Icahn, who will seek a strong ROI, and/or fragmentation/liquidation. Simply put, would you invest into a small compay who you believed would seek Chapter 7 liquidation?

Chip
 
Aug 25, 2002
57
0
www.usaviation.com
What a truly sophompric idea -- just run out and recruit a new investor!!

The problem with civil aviation in general for most of the last quarter century (at least from an investment perppective) is that the deck is almost hopelessly stacked against capital. For the last fifteen years, deregulation and other recent market-driven phenomina have relentlessly pushed down on airline unit revenue, even harder and faster than these businesses (including USAir) have been able to introduce more efficient equipment or implement more productive operating strategies. The industry's wage structure was bound to (and has) suffered as a consequence; but the airlines haven't yet been able to cut labor costs far enough or deep enough to compensate for the permanent loss of unit revenue. But the antiquated regulatory framework governing labor relations in civil aviation has buffered that process to the point of making airline equity capital the real sponge in absorbing the momentary effects of most of these shocks. And the effect has been almost predictable -- actual decapitalization of the industry.

Only relatively short term opportunists like TPG have any real interest in equity investment in the airline biz today. Better to come up with a new business model, like running USAir as a not-for-profit and then going to the UnitedWay or public TV telethons for fundraising (over and above the ticket price). Hey -- come to think of it, maybe we've stumbled onto something here.
 

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