USA320Pilot
Veteran
- May 18, 2003
- 8,175
- 1,539
It is my understanding that US Airways has exit financing available.
It’s unclear where the financing will be obtained, but Bruce Lakefield has been telling employees throughout the system that he continues to work here to protect David Bronner’s investment. Moreover, US Airways does not have to cancel the common stock, although that normally occurs in a judicial reorganization, and Bronner has said the carrier still has investment value.
Before I discuss exit financing, I believe it is important to note there seems to be more to the story that runs deep into an industry-wide restructuring, which is probably why we are still operating. For example:
Why has the ATSB and their auditors, Moody’s and Lazard, approved 6 ATSB applications or amendments?
Why did the Bush Administration and the ATSB permit US Airways to have access to guaranteed loans until the target bankruptcy exit date, June 30, surprising many of the pundits?
Why did GE provide bridge that is effectively DIP financing?
Why did Govco & Citigroup replace BOA as the “at risk†financiers to lower US Airways’ interest expense?
Why has Bombardier, Embraer, and DVD Bank agreed to supply and finance more RJs during bankruptcy?
Why did Airbus agree to provide the company with $6 million and restructure delivery positions and cancel options?
In my opinion there are two reasons: US Airways’ route network has a very large footprint and the company is leading the legacy carrier transformation into LCC’s. Each of the financiers above, along with the Bush Administration (Andrew Card & Norm Mineta), recognize US Airways is the test case to fix an industry-wide problem and that is how can a critical industry finally become profitable for the long-term.
Interestingly, US Airways has some advantages to transform itself because it can provide point-to-point service in large population markets using EMB-170s, EMB-175s, and EMB-190s first, followed by Broup 2 aircraft, and is a smaller company that will be easier to “turn aroundâ€. US Airways is more like a Cruiser versus a Battleship, and the inertia to fix American, United, Delta, and others will be difficult because of their scope of operations.
US Airways' single most important point regarding its future? According to David Bronner in an interview last week the airline will have costs less than Sothwest when the Transformation Plan is fully implemented.
The next step is exit financing, the plan of reorganization, and bankruptcy exit, I believe David Bronner’s RSA or the Retirement Systems of New York will provide exit financing. If its RSA I believe Bronner will take the company private and have total control of a corporation that produces $5.5 billion in revenue for less than $500 million.
Following bankruptcy exit, I believe the company could be involved in a corporate transaction, which could occur before Labor Day. Do not be surprised if J. P. Morgan is the Investment Banker, because just like in the Steel and Railroad industries, the next step in the industry’s revolution could be consolidation to create further economies of scale.
Meanwhile, I believe US Airways could be the surviving business enterprise because as former US Airways ALPA Negotiator told me what drives airline industry chairman and CEO’s is one thing: ego’s. Bronner loves being the underdog as well as being interviewed by people like Maria Bartoromo, Susan Carey, and Michelline Maynard, thus in my opinion he will step up to the plate and not only invest more money in US Airways, but finance the next corporate transaction. For the industry to consolidate there must be venture capital because no U.S. airline has the resources for a financial transaction.
With that said, US Airways is not out of the woods and my concern is that the cost cuts will not come out of the company fast enough. For example, even though the IAM-Trainers approved their TA, and the IAM-FSA and IAM-M approved the company’s proposals, the IAM costs will increase in the short-term because the 21% pay cut will be eliminated and replaced by a lower number. Thus, the problem is three-fold: rapidly rising energy prices, no hedge positions, and Delta’s SimplFares implemented before US Airways has a competitive cost structure.
Therefore, the question could be what does US Airways have to do next to remain in business while the cost cuts takes place and revenue deteriorates until the company can fully obtain all of the negotiated cost savings?
Regards,
USA320Pilot
It’s unclear where the financing will be obtained, but Bruce Lakefield has been telling employees throughout the system that he continues to work here to protect David Bronner’s investment. Moreover, US Airways does not have to cancel the common stock, although that normally occurs in a judicial reorganization, and Bronner has said the carrier still has investment value.
Before I discuss exit financing, I believe it is important to note there seems to be more to the story that runs deep into an industry-wide restructuring, which is probably why we are still operating. For example:
Why has the ATSB and their auditors, Moody’s and Lazard, approved 6 ATSB applications or amendments?
Why did the Bush Administration and the ATSB permit US Airways to have access to guaranteed loans until the target bankruptcy exit date, June 30, surprising many of the pundits?
Why did GE provide bridge that is effectively DIP financing?
Why did Govco & Citigroup replace BOA as the “at risk†financiers to lower US Airways’ interest expense?
Why has Bombardier, Embraer, and DVD Bank agreed to supply and finance more RJs during bankruptcy?
Why did Airbus agree to provide the company with $6 million and restructure delivery positions and cancel options?
In my opinion there are two reasons: US Airways’ route network has a very large footprint and the company is leading the legacy carrier transformation into LCC’s. Each of the financiers above, along with the Bush Administration (Andrew Card & Norm Mineta), recognize US Airways is the test case to fix an industry-wide problem and that is how can a critical industry finally become profitable for the long-term.
Interestingly, US Airways has some advantages to transform itself because it can provide point-to-point service in large population markets using EMB-170s, EMB-175s, and EMB-190s first, followed by Broup 2 aircraft, and is a smaller company that will be easier to “turn aroundâ€. US Airways is more like a Cruiser versus a Battleship, and the inertia to fix American, United, Delta, and others will be difficult because of their scope of operations.
US Airways' single most important point regarding its future? According to David Bronner in an interview last week the airline will have costs less than Sothwest when the Transformation Plan is fully implemented.
The next step is exit financing, the plan of reorganization, and bankruptcy exit, I believe David Bronner’s RSA or the Retirement Systems of New York will provide exit financing. If its RSA I believe Bronner will take the company private and have total control of a corporation that produces $5.5 billion in revenue for less than $500 million.
Following bankruptcy exit, I believe the company could be involved in a corporate transaction, which could occur before Labor Day. Do not be surprised if J. P. Morgan is the Investment Banker, because just like in the Steel and Railroad industries, the next step in the industry’s revolution could be consolidation to create further economies of scale.
Meanwhile, I believe US Airways could be the surviving business enterprise because as former US Airways ALPA Negotiator told me what drives airline industry chairman and CEO’s is one thing: ego’s. Bronner loves being the underdog as well as being interviewed by people like Maria Bartoromo, Susan Carey, and Michelline Maynard, thus in my opinion he will step up to the plate and not only invest more money in US Airways, but finance the next corporate transaction. For the industry to consolidate there must be venture capital because no U.S. airline has the resources for a financial transaction.
With that said, US Airways is not out of the woods and my concern is that the cost cuts will not come out of the company fast enough. For example, even though the IAM-Trainers approved their TA, and the IAM-FSA and IAM-M approved the company’s proposals, the IAM costs will increase in the short-term because the 21% pay cut will be eliminated and replaced by a lower number. Thus, the problem is three-fold: rapidly rising energy prices, no hedge positions, and Delta’s SimplFares implemented before US Airways has a competitive cost structure.
Therefore, the question could be what does US Airways have to do next to remain in business while the cost cuts takes place and revenue deteriorates until the company can fully obtain all of the negotiated cost savings?
Regards,
USA320Pilot
