Continued Losses

[mrfish3726]

#1 Reason RAT BOY would be to reduce their costs futher since they won't find any bank or financial isnstitution DUMB enough to help them with DIP financing. Do you think it was coincedance that the ATSB wouldn't float UniTED a 1.8 billion dollar loan? What makes you so certain that any bank would be that DUMB to lend them 2 billion in DIP financing?????

So even besides the Pensions being cancelled, Tilton getting into your wallet AGAIN and AGAIN! Nothing UniTED will be able to do but continue reducing their domestic service to try to gain some stability in their luiquidity situation. And, RAT BOY don't forget that UniTED is not off the hook here for paying thier lease obligations to the city of Denver. That is still in the appeals process which more than likely won't get over turned since Weidoff himself wouldn't let then off the hook for those payments. And their tax obligation continues to grow to the city and state of Colorade, and taxes is one thing UniTED won't get out of either.

So besides screwing you the employee, they continue to screw every hub that they operate at! WHAT A GREAT COMPANY!!!!

 

[casual rat]

Uh, by getting into the employee's wallets, UA is reducing its costs. I'm sure Denver will cut a deal with UA to resolve the tax issue. I still don't see a reason (other than your crossdressing cheerleader dreams) why UA would pull out of its Fortress Hub. There's little competition here for us in DEN. It's not like ORD where AA gives us a run for our money. Wait, that's right, there's you guys. When your passengers figure out that the 'figure-head' Frontier Maintenance Management guy spells like a seven year old, and swears like a twelve year old, they'll run over here, then our revenues should increase some. I'm writing Tilton a letter to tell him to keep UA here just to spite you. Maybe you're important enough to keep us here Chum. Rats, foiled again! Colorado is spelled C-o-l-o-r-a-d-o...not the (I guess Latin?) Colorade, work on it. Couldn't be a typo, since the 'e' key is on the left hand side of the keyboard, while the 'o' key is on the right. How's that inflatable girlfriend of yours anyhow? Did you two have a nice time at your fete? I missed seeing the news of it in the paper.

 

[WorldTraveler]

Fish,
DL is DFW is quite different than any other hub situation. DFW is the only other hub besides ORD that is shared by two legacy carriers. DL never has made DFW work in large part because AA has aggressively expanded DFW when doing so for DL would have made no sense for ATL or SLC. ORD will be the only 2 legacy airline hub left and it continues to exist because it is protected from additional service by any carrier because of air traffic constaints. DL was simply overhubbed, a condition that is unnecessary particularly in light of the increase in the number of regional jets with their longer ranges when compared with turboprops before them.

Cosmo,
You are right on the revenue and traffic percentages for domestic vs. international. I stand corrected. Although 55% of revenue is certainly an improvement compared with 65%, United is and will continue to derive the MAJORITY of its revenue from the domestic marketplace. My position is unchanged that UA will continue to be vulnerable to revenue shrinkage in the domestic marketplace. If United can increase international revenues faster than the losses grow on the domestic revenue and enough to cover the current system losses, then UA clearly wins. Although United has a substantial headstart on its way to becoming an even larger international carrier relative to its domestic operation, other carriers are pursuing a similar strategy but are not necessarily shrinking their domestic operations in order to become more international.

The arguments that you, driver, and others make are all factually accurate. It should be obvious that I am looking at the future in light of the past along with a look at the present. I believe I am justified in saying in light of the history of other airlines and even other businesses in other industries that once a company shrinks its presence in a particular geographic region, it most often leads to further losses rather than a financial improvement. Since I cannot predict what will happen with United any more than anyone else can, I can only make a prognostication and stand by it. We’ll have to compare notes a few years down the road and see what we both have learned.

Turning attention to another reorganization related issue, I am struck by how willingly folks like ualdriver are willing to accept termination of the defined pension plan. As has been posted before, I believe the PBGC will use every legal move not only to delay UAL’s ability to terminate its defined benefit pension plans but will also seek to recover the payments which have not been made but which are legally due until the plans are terminated. Either one of those two efforts by the PBGC could keep UAL in bankruptcy for months if not years longer than planned which provides the creditors with more time to shop for new homes for UAL’s assets.

Further, I don’t think it is any mistake that Grinstein at Delta has quickly turned his attention from securing DL’s in-house finances to petitioning for pension relief for the legacy airlines. The PBGC is likely to end up w/ some additional pension obligations simply by virtue of one or more legacy airlines being unable to survive. Everyone recognizes that it is very dangerous to allow airlines that are trying to reorganize but are still operating to terminate their pension plans if for no other reason than it provides a huge incentive for other airlines to “stumble†in their attempt to reorganize so they too can get rid of their pension obligations. DL, with the second largest pension obligations, and the other legacy carriers have a very keen interest in obtaining pension relief for themselves solely to ensure their survival. DL’s pleas for pension relief certainly have competitive implications as well. If DL and other carriers are able to convince the government to help them, UAL will find it harder for them to pawn off their obligations on the PBGC. It is probably more likely than not that the other legacies will receive some help from the government given the very real risk of them being unable to pay such huge pension obligations in light of their own turnarounds which are tenuous at best. Even if the solvent legacy carriers are successful in stretching out their pension obligations, UAL may still be forced to pay their current pension obligations and will have larger near-term pension payments due by virtue of UAL’s total pension obligations which are the largest in the industry. While the whole pension issue is far from stable, Congress could well act to change pension funding regulations. UAL and US are clearly trying to move as fast as possible before laws are changed; it is possible UAL and US could succeed at terminating their pension plans while the other legacies are left with either current or revised pension funding regulations or be forced to quickly move themselves toward bankruptcy (highly unlikely given the huge difficulties US airlines have in getting out of bankruptcy).

Regardless, it is not at all certain that UAL will succeed at terminating its pension plans and wipe out its now past due pension obligations. Even if they do succeed at both of those exercises, UAL (and US) may not end up with a competitive advantage if the other legacies are allowed to spread their obligations out over a much longer period of time. Again, there is a tremendous amount of uncertainty regarding UAL’s future. Actions by the government and by competitors will certainty have an impact on UA’s ability to succeed in the future.

Again, your position are based on interpretation of current facts while mine includes an element of how the world could look based on very possible scenarios. I think the approach I take reflects prudent business planning and part of what I incorporate in my business and personal planning.

Since family is now descending on the house and I may be preoccupied for the next several days, let me wish you all a most blessed Christmas and, soon thereafter, a joyous and hopeful New Year.

 

[uafa21]

To look at revenue in the domestic markey I think you will soon have to point to the wn and ata codeshare through mdw.

This thing could be a blow to domestic fares in the NE. This will put wn in markets they currently were not in. This will definately hurt Ua and u.

Wn anounced yesterday that one of their managers will be going to ata to hepl run the airline. Don't think that this isn't a blind purchase. It is. Wn will be calling the shots at ata since they will be putting the funds in the company. This was a great move by wn as they will be able to deveole markets without the risk normally associated by going into a new market. Since ata is in bk they will be able to dump stations which do not perform to wn's liking. This is a good plan by wn. God forbid another 9/11 or oil prices don't get to crazy wn will be a market leader domestically for a long time.

 

[ualdriver]

World-

"The arguments that you, driver, and others make are all factually accurate. It should be obvious that I am looking at the future in light of the past along with a look at the present............. Since I cannot predict what will happen with United any more than anyone else can................."

Now that's a statement I can live by. I agree that you and I can't determine what is going to happen in the revenue environment years from now. You're saying that revenue will continue to decline. That's great. UAL will cross that bridge (again) if they get to it. I'm going to say that I don't know what revenue is going to do, but looking at the numbers that UAL has put out so far, I don't see a decline in revenue year over year. And UAL has big banks with cubicles full of financial analysts who are willing to loan UAL a couple of billion to exit bankruptcy once we get our short term affairs in order. I would imagine they would disagree with your revenue assessment as well, or they wouldn't be willing to loan us buckets of money to exit bankruptcy or money to allow us to operate in bankruptcy for 2 years in the first place. So I'm not even going to go by your opinion or my opinion. I'll let the opinion of the big banks speak in the up and coming months.

"Turning attention to another reorganization related issue, I am struck by how willingly folks like ualdriver are willing to accept termination of the defined pension plan.......................which provides the creditors with more time to shop for new homes for UAL’s assets. "

Folks like ualdriver are not willing to accept termination of the defined pension plan. Folks like ualdriver attend union meetings, question ALPA's financial advisors, read UAL's financial statements, take guesses at what would be required to save the pension in the future, and realize that our pensions are a financial lost cause. We can fight the company, jump up and down, scream, yell, #### on usaviation.com, but a simple analogy concerning our pensions is this: it would take all the profits we made from 1990-2000 to "fix" our pension problem. Since I realize that even if the PBGC and/or the unions "won" every argument they would ever make to the judge, there's simply no money to fix the problem. So after becoming educated on the matter, folks like ualdriver see two choices concerning the pension: 1) Fight the company tooth and nail and even if we "win" (which we won't in my opinion), UAL liquidates because no bank is going to lend UAL a couple of billion bucks to exit bankruptcy and then not have a pension anyway, or 2) Fight the company in negotiations and negotiate a C fund and a 500M convertible bond and at least get something and then not have a pension. Ummm, I'll bitterly take door 2.......

And FYI, UAL is not "pawning" their pension obligations on the PBGC any more than if you wrecked your car and had an insurace claim against Allstate. No one would argue that if you unintentionally wrecked your car that you'd be "pawning" your financial responsibilites on Allstate and its customers. The PBGC is a government entity that insures pensions against catastrophic failure. Right now our pension plans have failed due to a perfect financial storm and the insurance company (who we had no choice but to pay premiums to all these decades) has a claim that they're going to have to deal with.

And unlike the Canadian government, which took strong legislative steps to save Air Canada's pension, I suspect that our good friend Bush will do little if anything to help those remaining airlines with defined benefit pension plans. They had the opportunity to "stretch" payments out months ago, but chose to do little. Oh well.

 

[mrfish3726]

Hey RAT BOY, WHY don't you point out others spelling mistakes Like Drivers last post? I could give to shits if I mis-spelled something because I didn't run it through spell checker! Write Tilton he won't give a #### what you write him, PERIOD! He hasn't listened to any of the employees suggestions so far. You watch, if any thing gets axed as far as HUBS are concerned it will be Denver. And I doubt that Denver is interested in cutting ANY deal with UniTED here. They think that they can do what ever they want here in Denver, but in truth they are screwing Denver EVERY CHANCE they get and the city is getting tired of their bullshit, PERIOD. If the judgment in the appeal is that UniTED MUST pay the 75M in back lease payments that they owe Denver, I could see them packing a lot up here and moving on. Especially YOUR maintenance job there RAT BOY!!!

 

[WorldTraveler]

The financial institutions that support UAL – and every other airline - are doing so because they can continue to make money by loaning money and because they have few other airlines that can take responsibility for their assets and obligations. No bank or financial institution has said that UAL or any legacy airline’s business plans are profitable – only that they are viable. Viable from the bank’s perspective simply means there is a likelihood that they will get paid for the funds they have loaned. Given that most of what has been loaned is secured, there is little incentive for them to pull the plug.

Your auto accident analogy doesn’t quite work. When a car is wrecked, there is an assessment that at least part of the car is permanently damaged and it must be repaired or replaced in order to be functional. There is absolutely no consensus of opinion that United’s ability to fund all of its pension obligations is irrevocably damaged. And that point will be the focus of the PBGC and competitors’ efforts to limit UAL’s ability to “pawn†its obligations on the PBGC and potentially the American taxpayer. Lots of people can accept it if the PBGC has to take over UAL and US’ pensions if they cease flying but there is far less support for taking over those obligations in order to allow UA and US to remain in the skies while others bear UAL and US’ burdens.

As always, thank you for the good debate you and Cosmo provide.

Merry Chistmas

 

[Fly]

I heard that United is the #1 employer in Illinois, #2 in California, and #1 in Virginia. Is that true?

PBGC is never going to make it look easy to dump pensions but they can't MAKE United pay something they don't have money to pay for. Wouldn't a forced pension payment ensure liquidation AND still force PBGC to pay the pensions? (not mentioning all the unemployment for those above states)

 

[ualdriver]

"The financial institutions that support UAL – and every other airline - are doing so because they can continue to make money by loaning money and because they have few other airlines that can take responsibility for their assets and obligations. No bank or financial institution has said that UAL or any legacy airline’s business plans are profitable – only that they are viable.........."

Well, if these banks are going to loan UAL billions of dollars that will take UAL years to pay back, then UAL's business plan must be pretty "viable" then, huh? Despite these significant revenue declines you're expecting as soon as the summer of 2005? I'd say that if UAL can survive the next few years, which will arguable be some of the most difficult years UAL will ever see, and our lenders feel we'll be around in a few years to finish off our payments, I'd say we'd be doing quite well. My opinion, of course.

"Your auto accident analogy doesn’t quite work. When a car is wrecked, there is an assessment that at least part of the car is permanently damaged and it must be repaired or replaced in order to be functional. There is absolutely no consensus of opinion that United’s ability to fund all of its pension obligations is irrevocably damaged...........but there is far less support for taking over those obligations in order to allow UA and US to remain in the skies while others bear UAL and US’ burdens. "

I think the analogy works great, so we'll agree to disagree. The PBGC is a giant insurance company that one way or the other (either if we liquidate or exit bankruptcy) is about to start paying UAL's pension benefits. Since they're now on the creditor's committee, maybe they'll even get a "piece" of UAL upon exit, if we do ultimately exit. More power to them. But under current ERISA guidelines, the money that UAL owes its pension plans far exceeds any amount of money it currently has in its treasury. Unless federal law changes concerning the funding of pension obligations (and I doubt it will any time soon, see my previous post), UAL's ability to fund its pension obligations IS IRREVOCABLY damaged.

And it doesn't matter if ther is any "support" for taking over those obligations. The money ain't there, it won't be there, and you can't suck blood from a rock. The PBGC is about to pay an insurance claim (unless the government allows this entity to fail), and there may be more pension obligations to follow. But look at it this way- the consumer is going to get what it wants.......cheap airline tickets on United Airlines! Isn't that what is most important?

 

[whatkindoffreshhell]

And it doesn't matter if ther is any "support" for taking over those obligations. The money ain't there, it won't be there, and you can't suck blood from a rock. The PBGC is about to pay an insurance claim (unless the government allows this entity to fail), and there may be more pension obligations to follow. But look at it this way- the consumer is going to get what it wants.......cheap airline tickets on United Airlines! Isn't that what is most important?

[post="230919"][/post]​

How arrogant for you to presume that cheap airline tickets on UA should be subsidized by the PBGC and Joe Taxpayer.

The PBGC will rebuff UA's schemes simply because the alternative is to absorb every other discarded pension plan by mismanaged businesses is not an option for the PBGC.

You are delusional.

 

[ualdriver]

How arrogant for you to presume that cheap airline tickets on UA should be subsidized by the PBGC and Joe Taxpayer.

The PBGC will rebuff UA's schemes simply because the alternative is to absorb every other discarded pension plan by mismanaged businesses is not an option for the PBGC.

You are delusional.

[post="230926"][/post]​

The PBGC can rebuff all day and night. The PBGC, one way or the other, will be assuming UAL's pension obligations if the PBGC continues as an ongoing entity. If the PBGC did not charge enough premiums to cover the potential risk of default on the part of its insured entities, then that's an argument between you, the PBGC, and the US Government, not between you and me. It's not arrogance- it's the way it is whether I like it or you like it or anyone else for that matter.

 

[ualdriver]

I heard that United is the #1 employer in Illinois, #2 in California, and #1 in Virginia. Is that true?

PBGC is never going to make it look easy to dump pensions but they can't MAKE United pay something they don't have money to pay for. Wouldn't a forced pension payment ensure liquidation AND still force PBGC to pay the pensions? (not mentioning all the unemployment for those above states)

[post="230912"][/post]​

Don't know abou the employment data, but the answer to the second part from what I understand is a big "YES." Either way, whether we liquidate or exit bankruptcy, the PBGC will be paying UAL's pension obligations. That's assuming, of course, that the PBGC continues to exist if all other legacy airlines eventually kill their plans.

Now perhaps the PBGC, which I'm pretty sure now sits on the creditor's committee, will be able to cut some sort of "deal" upon UAL's exit from bankruptcy that will give it a piece of the company or something. I don't know, however, where the PBGC sits on the creditor food chain as every creditor on the committee wants the most for themselves. The more the PBGC gets, the less they get!

 

[whatkindoffreshhell]

The PBGC can rebuff all day and night. The PBGC, one way or the other, will be assuming UAL's pension obligations if the PBGC continues as an ongoing entity. If the PBGC did not charge enough premiums to cover the potential risk of default on the part of its insured entities, then that's an argument between you, the PBGC, and the US Government, not between you and me. It's not arrogance- it's the way it is whether I like it or you like it or anyone else for that matter.

[post="230934"][/post]​

The PBGC is not going to subsidize a going concern. Refer to the LTV case: the PBGC took LTV to the Supreme Court (a case that lasted seven years) and ultimately prevailed.

Again UA is placing one big (misguided) bet on the federal government to rescue their butt. Familiar theme, is this the advice of all those high-priced BK consultants?

 

[whlinder]

I heard that United is the #1 employer in Illinois, #2 in California, and #1 in Virginia. Is that true?

[post="230912"][/post]​

I'd be shocked if UAL was #1 in Virginia.

 

[Cosmo]

There is absolutely no consensus of opinion that United’s ability to fund all of its pension obligations is irrevocably damaged.

OK, please provide just one quote from a respected industry analyst that claims that United CAN fund all of its pension obligations within the currently-required timeframe of four-to-five years. Now, if you're talking about an extended period of 20 or 25 years, as some carriers (like Delta) are proposing, then that's a different story.

Lots of people can accept it if the PBGC has to take over UAL and US’ pensions if they cease flying but there is far less support for taking over those obligations in order to allow UA and US to remain in the skies while others bear UAL and US’ burdens.

If the PBGC is able to prevent United from terminating its pension plans, all that such a "success" will have accomplished is to cause United to liquidate, in which case the PBGC still takes over the carrier's pension plans. Except now 62,000 employees are also without a job. So in this scenario, what has the PBGC actually gained, other than the ability of a few senior managers at the agency being able to say "We sure showed them"?

As always, thank you for the good debate you and Cosmo provide.

You're welcome, and Happy Holidays to all!