Exit Financing & The Future
- Thread starter USA320Pilot
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usairways_vote_NO
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- Sep 9, 2002
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What is there to envy about you two? Seriously. I don't pretend there is anything to envy me about on a message board.
ClueByFour
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- Aug 20, 2002
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PineyBob said:
Let me give you another example: $250 million for an $8 billion enterprise just a few short years ago. That would be RSA grabbing US (version 2).
I don't have to. Facts and a bit of reason (as opposed to undying Kool-Aide comsumption) make this one a pretty easy call. It's the same plan as before, nothing in the way of nonlabor costs has been touched in a meaninful way, operational practices are still horrid, etc. A trained monkey can beat costs from labor in Chapter 11, but it takes some acumen to run the rest of the enterprise. Much like the last time, that acumen is sorely lacking at CCY.
I'm a unpaid moderator on a bulletin board, and I have a conflict of interests? This coming from a guy who admitted to massive ethical violations in the workplace of a very concrete nature? You lack the credibility to hurl that kind of invective, nevermind the laughable lack of substance to what you imply.
If it makes you feel any better, I was burning my US miles long before any travel pundit advised it.
I find it amusing that because I don't drink the Kool-Aide, and because Randy did not choose to contribute to FFOCUS or show up for roachfest that you try to connect the two, but I do urge you to continue: watching a lunatic rant makes for great entertainment.
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Gee, I am trying to think what is different about U between now and the last year...
Oh, yeah, 1 Billion/yr in cost savings...
Plus MDA, and PSA were built up (rather than sending that growth off proprty to Mesa/CHQ), PIT was downsized further, and DCA was upsized... All in the past year.
So yeah, there is a difference.
And yes I am sure that there HAS BEEN an exit financier, just waiting for the right time to present themselves. The ATSB and other creditors would not have allowed things to proceed this far unless that were the case.
OK... Just a few points here... Besides the fact that Boeing Boy has repeatedly refuted all of USA320Pilot's claims about "financial sector support"... Let's look at this another way.
I am not sure if its USA320Pilot's argument, or senior management's argument, that US Airways' costs will be comparable to lower than other LCC's... But, let's say this is what senior management is telling potential investors...
What do you think potential investors will do when they learn that this claim is simply not true. With a fleet of relatively high CASM RJ's, and several other structural issues, it is simply not possible for US Airways to achieve LCC costs. Not at this time. That is my belief. I think I will be proven right over the next 6 months or so as the financials come out, but we'll have to wait and see on that...
And these potential exit financiers will be watching too... And if Lakefield's claims are not true, those financier's will simply not step up. US Airways would be much smarter to claim that they will have costs at the low-end of the legacy scale (which is around 8.5-9 cents). This might at least be attainable. The worst thing US Airways could do is to tell investors what they "want to hear" and then not deliver on the goods. And if, as USA320Pilot says, the company is claiming to have LCC costs, well then, the financiers will not participate when US Airways fails to deliver. A very real possibility in my mind.
I am not sure if its USA320Pilot's argument, or senior management's argument, that US Airways' costs will be comparable to lower than other LCC's... But, let's say this is what senior management is telling potential investors...
What do you think potential investors will do when they learn that this claim is simply not true. With a fleet of relatively high CASM RJ's, and several other structural issues, it is simply not possible for US Airways to achieve LCC costs. Not at this time. That is my belief. I think I will be proven right over the next 6 months or so as the financials come out, but we'll have to wait and see on that...
And these potential exit financiers will be watching too... And if Lakefield's claims are not true, those financier's will simply not step up. US Airways would be much smarter to claim that they will have costs at the low-end of the legacy scale (which is around 8.5-9 cents). This might at least be attainable. The worst thing US Airways could do is to tell investors what they "want to hear" and then not deliver on the goods. And if, as USA320Pilot says, the company is claiming to have LCC costs, well then, the financiers will not participate when US Airways fails to deliver. A very real possibility in my mind.
RowUnderDCA
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- Oct 6, 2002
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funguy2 said:
A lot of folks use as evidence of U's inability to achieve lower costs, it's RJ FLEET. But didn't U cancel the Seigel orders? What are U's commitments to its RJ contract carriers? On what basis are you arguing that U's CASM will be higher because it is paying for all these RJs? Which rjs?
BoeingBoy
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- Nov 9, 2003
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"Which rjs?"
Well, there's the one's already here. I suppose 100 or more of them operated by PSA, MDA, and affiliates.
There's the 9 new ones in the Embraer and Bombardier agreements.
There's the 31 new ones in the GE agreement (which may end up at some point including the 9 above ).
And then there's the Siegel orders/options. To the best of my knowledge those have not been cancelled. They're just on hold until U can come up with the financing (and the GE deal may end up including some of them).
Jim
Well, there's the one's already here. I suppose 100 or more of them operated by PSA, MDA, and affiliates.
There's the 9 new ones in the Embraer and Bombardier agreements.
There's the 31 new ones in the GE agreement (which may end up at some point including the 9 above ).
And then there's the Siegel orders/options. To the best of my knowledge those have not been cancelled. They're just on hold until U can come up with the financing (and the GE deal may end up including some of them).
Jim
funguy2 said:
What do you think the potential investors will think when USAIR telss them that all their most junior workers are gone, the average age is probably well over 40, and all the workers have taken huge cuts in pay so the only ones that are going to stay are those who cant go anywhere else and stay at USAIR because the "Just cause" clause, one of the few things they did not give up, makes it hard to fire them?
USAIR is doomed, all you have done by accepting more and more concessions is take away from what you could have put in somewhere else.
Sure they got enough Yes votes, only because there was no leadership, but will they be able to get anyone to really care?
RowUnderDCA said:
I have discussed, a lot, that US Airways still has large structural issues which will prevent lowering CASM further than the latest round of concessions. These include, but are not limited to: Too many fleet types (2 fleets for every mission), lack of increased utilization (so far), where are the new point-to-point flights to increase utilization that were supposed to be part of the PHL rolling hub, etc.
Oh, And I thought recent agreements w/ GECAS firmed up the 70-seat RJs (relatively higher CASM) and planned a return of 25 B737/A319 aircraft (relatively lower CASM)... That is what I read from sources on these forums. If all else were equal, this move would produce higher CASM (yes I understand not all else is equal).
Now, furthering that point, if management is promising LCC CASM when they are not implementing the moves to make that true, well, that seems foolish to me.
RowUnderDCA
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- Oct 6, 2002
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Well, I guess that's my point. All you 'fact folks' are kind of stretching your real position: "We don't believe that U management will actually DO the things they say they'll do or actually DO the things that are implied by what they say they will do" into these stats and facts and circumstances. It seems to me your making a leap without including the main ingrediant: "WE DONT BELIEVE THEYLL DO (or can do) IT."
Whereas I think your opinion about the reduced credibility of people who have the title of U management after their name (even if they aren't the same actual people) might be perfectly valid, I think you're failing to convince me, because you're so avoiding saying it.
I could buy the argument that it isn't a matter of will but actual ability: It is too late for U to make the changes necessary. They flew too close to the sun to extract labor savings to leave sufficient time and financial credibility to achieve the rest.
But I just dont buy the simple argument that because of rjs and fleet mix today that they are doomed. There's got to be more to it.
Whereas I think your opinion about the reduced credibility of people who have the title of U management after their name (even if they aren't the same actual people) might be perfectly valid, I think you're failing to convince me, because you're so avoiding saying it.
I could buy the argument that it isn't a matter of will but actual ability: It is too late for U to make the changes necessary. They flew too close to the sun to extract labor savings to leave sufficient time and financial credibility to achieve the rest.
But I just dont buy the simple argument that because of rjs and fleet mix today that they are doomed. There's got to be more to it.
BoeingBoy
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- Nov 9, 2003
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Here's another look at what's really behind one of those company's "showing their support". This from Aviation week (I can't remember if S&P's Baggaly is one of the "annointed" analysts or not):
"Industry analysts say it would make little sense for Gecas to pull the plug on US Airways because it would have to take possession of--and find new users for--all of those aircraft. Dumping so many jets on the market at once also would depress prices for Gecas, which leases 1,300 aircraft to more than 200 airlines around the globe."
"Instead, Gecas is buying time by helping US Airways stay afloat while it reduces its exposure to the airline in an orderly fashion. The deal providing the carrier with $140 million in liquidity requires US Airways to return 25 high-value aircraft to Gecas that can be remarketed to other customers: 15 Boeing 737-300s and 10 Airbus A319s. In return, Gecas agreed to lease up to 31 less costly regional jets to US Airways. The airline also must raise $100 million from another investor as part of the deal."
"Gecas is very well secured, as is usually the case," says Philip Baggaley, airline credit analyst for Standard & Poors. "The long and short of it is they can probably afford to have a fair amount of patience." S&P is a unit of The McGraw-Hill Companies, as is AW&ST."
I know we're not on the "annointed" list of seers, but that sounds like what funguy and I have been saying.....
Jim
[edit by me - forgot to add that the quotes are from Aviation Week & Space Technology]
"Industry analysts say it would make little sense for Gecas to pull the plug on US Airways because it would have to take possession of--and find new users for--all of those aircraft. Dumping so many jets on the market at once also would depress prices for Gecas, which leases 1,300 aircraft to more than 200 airlines around the globe."
"Instead, Gecas is buying time by helping US Airways stay afloat while it reduces its exposure to the airline in an orderly fashion. The deal providing the carrier with $140 million in liquidity requires US Airways to return 25 high-value aircraft to Gecas that can be remarketed to other customers: 15 Boeing 737-300s and 10 Airbus A319s. In return, Gecas agreed to lease up to 31 less costly regional jets to US Airways. The airline also must raise $100 million from another investor as part of the deal."
"Gecas is very well secured, as is usually the case," says Philip Baggaley, airline credit analyst for Standard & Poors. "The long and short of it is they can probably afford to have a fair amount of patience." S&P is a unit of The McGraw-Hill Companies, as is AW&ST."
I know we're not on the "annointed" list of seers, but that sounds like what funguy and I have been saying.....
Jim
[edit by me - forgot to add that the quotes are from Aviation Week & Space Technology]
mweiss-
I'll take a stab at it, although it is difficult given that the company seems to go out of its way to obfuscate the numbers. In Q3, the company reported mainline CASM of 11.59 cents/mile; to reach this number, you have to read the company's statement of operations for the quarter, take the US Airways, Inc. operating expense total ($1,946 million), subtract the amount for Express capacity purchase ($327 million) AND a footnoted cost of $27 million for Midatlantic (which is, in reality, part of US Airways, Inc.), to arrive at a net operating expense of $1,590 million. Divide by 13,715 million mainline ASM's and voila, $0.1159 cents/mile.
Now, the most recent raw numbers available for the company are contained in the November Monthly Operating Report filed with the Bankruptcy Court and the SEC; unfortunately, though, the numbers are reported for Group, so you have to make some assumptions which aren't great given that there's poor visibilty into what's going on at the wholly-owneds. November should reflect improvements in cost due to the emergency paycuts. For November, Group reported Operating Expenses excluding capacity purchase agreements with contract carriers of $520.8 million. A back-of-the-envelope calculation says that Group expenses (including wholly-owneds) run at $51 million/month, and MDA is $9 million/month, giving US Airways, Inc. (mainline) expenses of about $461 million for November. Mainline ASM's were 4,221 million for November, giving CASM of 10.92 cents. Excluding fuel, I calculate CASM to be 8.55 cents. Excluding fuel AND labor, I calculate CASM to be 5.33 cents. And just as a point of reference, Southwest's CASM for the fourth quarter excluding fuel was 6.22 cents; excluding fuel and labor it was 3.16 cents. If US Airways manages cut labor costs by about 73% from November, they should get to rough cost parity with Southwest.
I'll take a stab at it, although it is difficult given that the company seems to go out of its way to obfuscate the numbers. In Q3, the company reported mainline CASM of 11.59 cents/mile; to reach this number, you have to read the company's statement of operations for the quarter, take the US Airways, Inc. operating expense total ($1,946 million), subtract the amount for Express capacity purchase ($327 million) AND a footnoted cost of $27 million for Midatlantic (which is, in reality, part of US Airways, Inc.), to arrive at a net operating expense of $1,590 million. Divide by 13,715 million mainline ASM's and voila, $0.1159 cents/mile.
Now, the most recent raw numbers available for the company are contained in the November Monthly Operating Report filed with the Bankruptcy Court and the SEC; unfortunately, though, the numbers are reported for Group, so you have to make some assumptions which aren't great given that there's poor visibilty into what's going on at the wholly-owneds. November should reflect improvements in cost due to the emergency paycuts. For November, Group reported Operating Expenses excluding capacity purchase agreements with contract carriers of $520.8 million. A back-of-the-envelope calculation says that Group expenses (including wholly-owneds) run at $51 million/month, and MDA is $9 million/month, giving US Airways, Inc. (mainline) expenses of about $461 million for November. Mainline ASM's were 4,221 million for November, giving CASM of 10.92 cents. Excluding fuel, I calculate CASM to be 8.55 cents. Excluding fuel AND labor, I calculate CASM to be 5.33 cents. And just as a point of reference, Southwest's CASM for the fourth quarter excluding fuel was 6.22 cents; excluding fuel and labor it was 3.16 cents. If US Airways manages cut labor costs by about 73% from November, they should get to rough cost parity with Southwest.
You know, the idea that the company could obtain another 1 Billion in concessions on a third time seemd impossible a year ago too.
But they did it.
IMO there exists as much a chance now for them to retool our organization and route structure to maximize our advantages. Getting out of the "Worst East-West Hub in the Northeast", and instead turning PIT into a good point to point market is a great start (that many on here are way too biased to accept).
Many fail to see the changes in the Northeastern markets, that favor high density point to point flying from larger markets, rather than having our larger aircraft sit around waiting for connections from Altoona, Hagerstown, or Elmira. Costs can be driven down substantially by concentrating upon those markets that can fill planes throughout the day... Making better use of the assets and people we have is what will drive costs down the fastest. And changing our route structure is the best way.
No, there is room aplenty to change the way we do things for the better, and now is the best time.
Why now, not before...?
Well, ask DAL, ask AMR, ask the rest of our competition. Would we be able to pull off FLL as easily if AMR was healthy and aggresive...? Would CLT, DCA, LGA, and BOS be as easy to retool if DAL was the 800lb Gorilla of the past rather, than the multi-billion dollar losing animal it is now...?
Can the LCC's grow fast enough to counter our moves without endangering their own cost structures or established expansion plans...? Not really.
Some might look at this as a glass half empty situation, but IMO we have already turened the corner, and can now take advantage of things to turn it into a glass half full situation instead.
But they did it.
IMO there exists as much a chance now for them to retool our organization and route structure to maximize our advantages. Getting out of the "Worst East-West Hub in the Northeast", and instead turning PIT into a good point to point market is a great start (that many on here are way too biased to accept).
Many fail to see the changes in the Northeastern markets, that favor high density point to point flying from larger markets, rather than having our larger aircraft sit around waiting for connections from Altoona, Hagerstown, or Elmira. Costs can be driven down substantially by concentrating upon those markets that can fill planes throughout the day... Making better use of the assets and people we have is what will drive costs down the fastest. And changing our route structure is the best way.
No, there is room aplenty to change the way we do things for the better, and now is the best time.
Why now, not before...?
Well, ask DAL, ask AMR, ask the rest of our competition. Would we be able to pull off FLL as easily if AMR was healthy and aggresive...? Would CLT, DCA, LGA, and BOS be as easy to retool if DAL was the 800lb Gorilla of the past rather, than the multi-billion dollar losing animal it is now...?
Can the LCC's grow fast enough to counter our moves without endangering their own cost structures or established expansion plans...? Not really.
Some might look at this as a glass half empty situation, but IMO we have already turened the corner, and can now take advantage of things to turn it into a glass half full situation instead.
