Bk#2

[usair_begins_with_u]

I have been looking at some interesting data, specifically fundamentals like Q1-04 statement of cash flows, and BTS Q1 2004 Airline Financial Data. What is particularly disturbing is the negative trend in cash flow generated from operating activities. In the short term, I don’t see how this can be reversed, and now with the higher avg fuel costs, and lack of meaningful cost reduction most of the way through Q2. I don’t expect much of Qtr over Qtr increase in cash flow from operating activity, in what should be a great Qtr. This spells a real liquidity problem going into Q3, which almost guarantees the need to sell assets by the fall to maintain reserved cash balances. Furthermore, with the reduction of fares "Go Fares", I expect even more negative pressure on cash flow from operating activities, albeit mainly in the short term, 3-6 months. I don’t know if UAir can survive or move forward with "the new plan" while playing catch up for 3 or 6 more months. What’s more scary about Q1, is that the company posted it's highest first quarter load factor 70.1% ever on record, and yet still posted OPERATING loss of over $100 Million. I really think a turn around at this point may be too late. I expect the stock will waffle between $1-$2 until 2Q results are posted.. If there is an equal or greater loss posted for Q2, I expect liquidation plans to move ahead full steam.

An abnormally strong Q2, and accounting games may buy an extra quarter of time, but cash suffocation will send UAir back into a BK I doubt it will ever climb out of.. I expect a sell off/absorption exit strategy much like TWA.

 

[USAirUnited]

What else does that crystal ball say... Your going to go to flordia on us airways for 69 dollars?

 

[usair_begins_with_u]

Pop Quiz:

Seems like Mgmt is caught in a Catch-22... Post a profit, and kiss all hopes of further consessions good-bye... yet, post another loss and destroy what little confidence your potential creditors may have left in you...

What do you do?

 

[mweiss]

If they can post a profit in the current market, they don't need concessions. <_<

 

[to much time to quit]

If they can post a profit in the current market, they don't need concessions. <_<

😀 That is by far the most logical and educated post I ever read from you. 😀 😀 😀

 

[oldiebutgoody]

Pop Quiz:

Seems like Mgmt is caught in a Catch-22... Post a profit, and kiss all hopes of further consessions good-bye... yet, post another loss and destroy what little confidence your potential creditors may have left in you...

What do you do?

The answer is, you run the business and STOP playing games with the hired help!

 

[mweiss]

'Course it's hard to say how things are right now, but Q1 2004 was so far away from being profitable that it'd be laughable if it weren't so sad.

 

[Harry Callahan]

If they can post a profit in the current market, they don't need concessions. <_<

way to go Michael we are proud of you

 

[mweiss]

Hey, you've all just misunderstood me all this time. I'm not in favor of concessions for the sake of concessions. I just don't want to see the airline disappear yet.

Contrary to the opinion of many union employees around these parts, I'm not anti-labor.

 

[insp89]

Pop Quiz:

Seems like Mgmt is caught in a Catch-22... Post a profit, and kiss all hopes of further consessions good-bye... yet, post another loss and destroy what little confidence your potential creditors may have left in you...

What do you do?

Tell the Truth ????

 

[insp89]

'Course it's hard to say how things are right now, but Q1 2004 was so far away from being profitable that it'd be laughable if it weren't so sad.

Come on, mweiss,, We've been all over this before.. This is the quarter that the company reported BREAKEVEN cash flow,, PREPAYED the ATSB loan [$250 mil] and posted a [177 mil loss]. Hard to tell from all these numbers how far away they REALLY were from a profit..

 

[mweiss]

Come on, mweiss,, We've been all over this before.. This is the quarter that the company reported BREAKEVEN cash flow,, PREPAYED the ATSB loan [$250 mil] and posted a [177 mil loss]. Hard to tell from all these numbers how far away they REALLY were from a profit..

Cashflow, as I told you before, is only useful in telling if the bills get paid this month/quarter. Not useful in the context of profitability.

Prepaying the ATSB loan doesn't show up in operational costs. Operationally, the company lost nearly two cents every time a seat moved a mile. That's not profitable by any stretch of the imagination.

 

[funguy2]

insp89:

While 1Q04 may have been break-even, excluding the "Prepayment", I have shown way back in March that on an annualized basis, US Airways was losing, on average $.8mil per day in unrestricted cash reserves... In order for that to be an average, some days will be better, some days will be worse... Since Sept/Oct are the worst months of the year for demand, and folks buy airplane tickets 2-3 months in advance, that means cash-inflow begins to deteriorate in late July and August... In other words, US Airways will be nearing its peak cash reserves for the year in the next few weeks. (In late July/early August, when inflows from tickets decline, the airline must continue to pay employees, buy fuel, etc, thus the outflow is not reduced.)

Also, "Prepayment" is just a nice way to say "Forced repayment to prevent default on Loan Covenents". In other words, the fact that US Airways had to pre-pay on the guaranteed loan is not necessary a positive.

The other thing that folks forget is that it takes money to go BK... You don't enter Ch.11 when the bank account is at $0. US Airways first BK occured when US Airways had $500mil to $600mil of unrestricted cash. At last report, they had $978mil unrestricted. We will have to see how the current quarter goes... If cash declines significantly from $978mil, I believe US Airways will be in trouble, as it will begin to experience problems paying bills in early 4Q, in my estimations. I am sure US Airways management has better cash projections than mine, based on averages...

 

[WorldTraveler]

While PIT is an expensive hub to operate, it was less cyclical than the Caribbean markets US is serving. Europe and the Caribbean both deliver very little cash in the fall while the traditional fall business markets are all under attack from LCCs or are being abandoned. Pan Am had the same cash flow problems in the fall because their network was very similar to US'. It is a given that US will start burning cash within the next couple months - and that doesn't include any cash required for new equipment or debt repayment.