Financial Analysis

[Fly]

Right! Delta is whom I hope our airlines follow by example. :blink: :unsure:

 

[Just Plane Crazy]

How is comparing cash loses between two airlines like comparing apples and oranges? Are we talking different currency? It doesnt matter what the airline revenue is. The only thing that matters is how much cash each airline has in the bank. And then You can figure how long the airline can go before that cash runs out.

When comparing #'s we should look at more than just the cash loss. And on top of that it is all a matter of prospective.

For exsample what would these #'s tell you:


Month RPM* ASM* LF Airline *= in billions
Feb/04 7.46 10.88 68.6% DL
8.04 10.99 70.2% UA
2.85 4.16 67.1% US

Jan/04 7.73 11.49 65.9% DL
8.41 11.67 72.1% UA
2.80 4.35 62.2% US


Feb/03 5.32 7.65 66.5% DL
7.43 10.58 69.7% UA
2.46 3.66 67.1% US

Jan/03 7.71 11.70 63.3% DL
8.50 11.99 69.1% UA
2.59 4.16 62.2% US


So which of the airlines look better? It is all a matter how you look at it. I can manipulate the way you look at a company by what I give you as information. Only a few know the real facts and by just comparing some bits and pieces we are just driving our self crazy.

Give me the P&L, Balance sheets and some additional confidential and closely held numbers and I will be able to let you know how sick (or healthy) the airline is.

Matter of fact is, we should be hoping for all of the carriers to survive. One carrier closes down and a large number of people will have to stand in line at the unemployment office. Not every one will get a job with some other carrier. So at the end there are going to be a lot of loosers out there.

 

[ClueByFour]

1. Unfortunately for UAers, I'm NOT joking - even a weak solvent company has that much better of a chance at survival/decent endgame than one mired in bankruptcy proceedings. While solvent firms attempting to merge are focused on obtaining premiums for their shareholders (and ideally, rewarding employment terms for their employees), insolvent firms struggle to sell their assets at a decent fraction of their actual value while praying that at least some of the employees get hired on by the buyers.

UA fundamentals are better than US, while still in Chapter 11. This has everything to do with a structured trip thru Chapter 11, as opposed to the trip US took.

Moreover, it seems like the "solvent" entity is probably going to shed assets after their emergence from Chapter 11, whereas UA seems to be trying to get the ducks in order before emergence.

In short, UA is doing this correctly from the get-go. That speed (and clear lack of any strategic vision on Seigel's part) is exactly why US is on the brink less than a year after exiting Chapter 11.

 

[mweiss]

One carrier closes down and a large number of people will have to stand in line at the unemployment office. Not every one will get a job with some other carrier. So at the end there are going to be a lot of loosers out there.

You're right in one sense, and wrong in another. What I mean is, if the industry is running at capacity right now and a significant airline ceases service, then there's a capacity shortage. The other airlines will have to take up the slack. How? By recalling furloughed employees. The net change of airline employment is roughly zero...it's just a game of musical chairs.

I'm sure that's not much consolation to those who do end up in the unemployment line. At the same time, I'd imagine it's heartening to those who end up being recalled.

 

[avek00]

1. Unfortunately for UAers, I'm NOT joking - even a weak solvent company has that much better of a chance at survival/decent endgame than one mired in bankruptcy proceedings. While solvent firms attempting to merge are focused on obtaining premiums for their shareholders (and ideally, rewarding employment terms for their employees), insolvent firms struggle to sell their assets at a decent fraction of their actual value while praying that at least some of the employees get hired on by the buyers.

Even though US Airways is "solvent", two analyses above showed that US Airways could be in bankruptcy again soon (within a year), and its second bk in 3 years (assuming the one of the scenarios above occurs, which are theoretical). Furthermore, US Airways is making moves to sell assets, the same assets which are critical to its "Going Forward Plan". Specifically they have gathered offers, and amended loan covenants to allow movement on those offers. Financing on the EMBRAER order seems likely to dry up based on deteriorating credit conditions. Hardly sounds solvent to me.

While UAL is no "bankruptcy darling" the revenue their system creates, the power of their hub markets, and significant overseas flying makes UAL more likely to survive in my opinion. UAL has not publicly concidered closing a hub, they instead are making moves to defend their hubs (Ted, ACA replacement). UAL has not offered any "division" or operating unit up for sale. UAL is not racing through bankruptcy in order to meet a deadline, rather its taking the time they say they need. They do not have a "rogue" Chairman operating seemingly independently of the CEO. UA's worldwide network also acts as a diversification tool, where US Airways is largely "stuck" on the East Coast, and with whatever happens there.

While I'm no fan of UAL's bankruptcy proceedings (for example, I think Ted is a joke), they at least seem more in control than US Airways.

CB4:

"Correctly from the get-go"!? Hardly. How quickly you forget that United:

1. Was essentially FORCED into BK with a gun behind its head when the ATSB denied UAL's second loan application, whereas US had ATSB guarantee APPROVAL prior to its BK filing;

2. Has made only modest adjustments to its fleet and route network when most industry observers maintain that more radical adjustments are necessary.

 

[Bear96]

Says who? Last time I checked, US was the one that successfully obtained an ATSB guarantee and emerged from bankruptcy, not UA. While I believe that neither US nor UA will last for much longer (no more than 12 months) in their current avatars, the fact that US is a solvent entity will place the company in a FAR more favorable position vis-a-vis endgame financial and labor terms than an airline trying to sell/merge/radically revamp itself in the midst of bankruptcy proceedings.

I can't drink the UA Kool-Aid on this one - having US as your employer might be bad, but having UA as your employer is far worse from an overall job security standpoint.

Says me.

I am speaking strictly in terms of which company is closer to actually closing the doors and turning off the lights. U is much closer to that than is UA.

Avek you profess to know soooo much about the airline biz. Then you should know that it takes a LONG TIME for a large airline to die. U's death process started before UA's, and it is a smaller airline.

UA is larger, and it still has to go through the emergence-from-Ch.11 drama and the post-Ch.11-period drama, all of which U has gone through or is currently going through. I would agree with you that U might not be around in 12 months, but I would be willing to bet a good amount of money that UA will still be around for at least 12 more months. In what state, or for how much longer past 12 months, is anyone's guess. But I do feel confident that UA will be here in some form or another on March 15, 2005. I guess we'll know in a year from now. (And may I point out your track record of predicting UA's demise on the Flyertalk boards so far has been, ahem, less than visionary? [I guess that is why you are trying to take refuge over here. You are hoping no one here is aware of your previous life.] Kinda like a certain U Captain. But that is a different story.)

BTW-- U "successfully" emerged from Ch.11 and is "solvent?" Guess we have different definitions of "success" and "solvency."

But, what else can we expect from Avek. He and USAirways320Pilot's hatred of UA is irrational and knows no bounds.

 

[Bear96]

[United...]

1. Was essentially FORCED into BK with a gun behind its head when the ATSB denied UAL's second loan application, whereas US had ATSB guarantee APPROVAL prior to its BK filing;

2. Has made only modest adjustments to its fleet and route network when most industry observers maintain that more radical adjustments are necessary.

1. Oh my, "forced" into Ch.11 "with a gun behind its head?" Heavens, how terrible and melodramatic.

But wait a minute... aren't most companies "forced" into Ch.11 by some unfortunate chain of events? Couldn't most Ch.11 filings be described this way (the company filed because it had a "gun behind its head" and no other options)?


2. "Most industry observers maintain that more radical adjustments are necessary." That was the fashionable view at one point a year or so ago when things looked particularly grim for UA. Could you post any RECENT quotes from "industry observers" that still support your statement? Or are you using the USAir320Pilot strategy of seizing onto an old, out of date quote and repeating the mantra over and over even though it no longer is relevant or makes sense in terms of more recent events.

And, out of curiosity, which "adjustments" to UA would you make? Please specify... selling LHR or Pacific or NRT operations? Would something like that be a good strategy?

 

[ojxux]

avek00 @ Mar 15 2004, 11:45 PM)

having US as your employer might be bad, but having UA as your employer is far worse from an overall job security standpoint.

LMAO - Bartender give me one of whatever he's drinking!

 

[ITRADE]

One quick question.

On United last SEC form or status form with the Bankruptcy Court, what was the company's reported cash burn rate?

 

[ClueByFour]

1. Was essentially FORCED into BK with a gun behind its head when the ATSB denied UAL's second loan application, whereas US had ATSB guarantee APPROVAL prior to its BK filing;

2. Has made only modest adjustments to its fleet and route network when most industry observers maintain that more radical adjustments are necessary.

1. And? You have twisted the truth more than a bit here: The US loan application was contingent upon certain things which management could not manage outside bankruptcy. Moreover, US was only granted conditional approval until well into the bankruptcy process, and Bronner was going to pull the DIP financing had US not obtained the ATSB loan. Ultimately, history will probably show that both US and UA needed both Chapter 11 and the ATSB loan. Going into Chapter 11 with conditional ATSB approval is not indicative of any healthier financials than going without--Chapter 11 clearly indicates problems with any organization that has to declare it (ask Continental, for instance, who has been in and out of Chapter 11 twice).

2. Who are "most industry observers?" Unnamed sources quoted in a vague way do nothing to bolster your initial statement. If we are going to go there, I'd suggest that "most industry observers" are currently saying that United's vast route networks and strong hubs are far better positioned to allow the airline to continue as a going concern than those of US. "Most industry observers" seem to think that UA is going to get their ATSB loan. "Most industry observers" correctly note that UA is taking the time to properly restructure the entire organization rather than sprint thru the cost-out (half baked, I might add) exercise that US turned Chapter 11 into.

As an aside, there are many more facets to the success and failure to an enterprise the size of UAL than the route network. Solid operations, supplier management, IT and business process and practice, marketing and the like are often more important to the bottom line than the route network or fleet. Just ask Southwest.

 

[avek00]

And, out of curiosity, which "adjustments" to UA would you make? Please specify... selling LHR or Pacific or NRT operations? Would something like that be a good strategy?

Mind you, I'm not getting paid millions like Tilton et. al. to come up with innovative solutions, but the biggest thing I would do to help save United is take the airline back to its core strength -- namely, primarily catering to domestic and international business travelers. Instead of wasting $$$ on TED, I'd much rather see the capex go towards immediate improvements in the International C & F cabins, which have deteroriated to uncompetitive quality evels. I'd also turn Economy Plus into a revenue generating tool in its own right by compartmentalizing it into a separate product on international and transcon flights. Additionally, as part of the company's emergence from BK and with an eye towards growth, I'd consider an A332/333 order that would allow the company to trim (but not necessarily eliminate) the 777/763 fleet while offering a much greater level of range/capacity flexiblity to Europe/S. Amer./intra-Asia than the current UA 777/763 fleet mix provides. Finally, I would fully de-hub IAD in favor of a narrow O&D transcon operation, with the IAD assets being redeployed in markets ex-ORD and ex-DEN where United can regain market share from the likes of AA and F9.

Those are just some ideas off the top of my head, but you get my point: instead of launching half-baked ideas that are virtually doomed to fail from the outset, I would try to return UA to doing the things that it does (or, at least, did) best.

 

[mweiss]

avek00,

Granted, this isn't the UA forum (though sometimes it's hard to tell ), but...

take the airline back to its core strength -- namely, primarily catering to domestic and international business travelers

UA's fleet is too large for this. There simply aren't enough business travelers to go around. CO's fleet is about the right size...too bad half of their planes don't have any FC seats.

Yes, catering to the business traveler made UA gobs of money in the late 90s. Now it's costing them gobs of money.

I'd consider an A332/333 order that would allow the company to trim (but not necessarily eliminate) the 777/763 fleet

Oh, yeah. They sure need another type in the fleet.

Finally, I would fully de-hub IAD in favor of a narrow O&D transcon operation, with the IAD assets being redeployed in markets ex-ORD and ex-DEN where United can regain market share from the likes of AA and F9.

Oh, so the problem in DEN is insufficient capacity? You don't beat the LCCs by throwing more metal on the routes. You beat them by having low enough costs to compete. Keeping the same cost structure while flooding the routes is the classic "lose money on every sale, but make it up in volume" strategy.

 

[BoeingBoy]

mweiss,

"lose money on every sale, but make it up in volume"

Hey, they can't do that - it's my investment strategy (patent pending)

Jim

 

[Just Plane Crazy]

And, out of curiosity, which "adjustments" to UA would you make? Please specify... selling LHR or Pacific or NRT operations? Would something like that be a good strategy?

Mind you, I'm not getting paid millions like Tilton et. al. to come up with innovative solutions, but the biggest thing I would do to help save United is take the airline back to its core strength -- namely, primarily catering to domestic and international business travelers. Instead of wasting $$$ on TED, I'd much rather see the capex go towards immediate improvements in the International C & F cabins, which have deteroriated to uncompetitive quality evels. I'd also turn Economy Plus into a revenue generating tool in its own right by compartmentalizing it into a separate product on international and transcon flights. Additionally, as part of the company's emergence from BK and with an eye towards growth, I'd consider an A332/333 order that would allow the company to trim (but not necessarily eliminate) the 777/763 fleet while offering a much greater level of range/capacity flexiblity to Europe/S. Amer./intra-Asia than the current UA 777/763 fleet mix provides. Finally, I would fully de-hub IAD in favor of a narrow O&D transcon operation, with the IAD assets being redeployed in markets ex-ORD and ex-DEN where United can regain market share from the likes of AA and F9.

Those are just some ideas off the top of my head, but you get my point: instead of launching half-baked ideas that are virtually doomed to fail from the outset, I would try to return UA to doing the things that it does (or, at least, did) best.

mweiss you are correct on the forum.


avec00

I have to agree with you on fleet reduction. Even though I might suggest some other alternatives.

Retire all B737 and replace with A320/A319
Retire all B757 and replace with A321
Retire all B767 and replace with B777
Retire all B747 and replace with B777

Why bring a new aircraft in. That will not be economical. Two types of fleet A319/320/321 and B777. That would leave to deal with only two types of certification for crews and easier for maintenance.

Close SFO as a hub and concentrate all of the International West Coast Hub activity @ LAX. DIA and IAD both of them have their pros and cons. And no question about ORD.

I also have to grant you the point of A330 which would bring UA closer to US in regard to common equipment etc.

 

[mweiss]

"lose money on every sale, but make it up in volume"

Hey, they can't do that - it's my investment strategy (patent pending)

Hey, Jim, go after them for patent infringement! (once they emerge from bankruptcy, anyway...you probably wouldn't get anything now)