Ge A White Knight For Us Airways

[ClueByFour]

Clue?ByFour, Risk Management, Evidently GE cannot do better with it's planes elsewhere.

GECAS has a huge exposure to US. They now have their most re-leasable assets returning, and in turn are owed a crapload of money by US at loanshark-like interest rates, get a ton of equity, and get superpriority over everybody except the ATSB--meaning that they can pull the plug and probably recoup what they might lose even if they cannot re-lease the non-Airbus aircraft.

GE will win no matter what. Assuming US survives, it'll be paying GE forever.

Common sense would tell you that they would take the Airbus aircraft first. So What ?

They are reducing their exposure. Common sense indicates they are taking a class of asset they can still easily re-lease, and taking it away from US. Not a vote of confidence, now is it?

It all depends what the price of oil will be in the future if it even makes sense TO hedge fuel..If you are a prophet, please let us in on what the price of oil will be 3 months from now...

You just don't get it--the point of hedging is not to ensure that you are paying "X" for fuel--it's to ensure that you know what you will pay for fuel and to take the swings of the market out of play. I don't need to know what oil will cost 5 years from now, but LUV's strategic planners do. Unlike US, LUV knows to a certain extent what their fuel costs will be years out.

Tell me a little about your "Reality" I do not know if Usairways will survive or not, But I do know a lot of people would like to see Usairways go away for their own self-serving interest..

[post="263079"][/post]​

My reality is that the firm I work for has been reducing it's travel exposure to US--as have I. That's no skin off my back. The firm I work also makes a particular class of equipment that US needs to keep the planes in the air--but we'll just sell to somebody else if US goes under, so that's no skin off my back, either.

So, I've really go nothing to gain from US going under (except losing about 100k DM miles).

 

[insp89]

GECAS has a huge exposure to US.  They now have their most re-leasable assets returning, and in turn are owed a crapload of money by US at loanshark-like interest rates, get a ton of equity, and get superpriority over everybody except the ATSB--meaning that they can pull the plug and probably recoup what they might lose even if they cannot re-lease the non-Airbus aircraft.

GE will win no matter what.  Assuming US survives, it'll be paying GE forever. 
They are reducing their exposure.  Common sense indicates they are taking a class of asset they can still easily re-lease, and taking it away from US.  Not a vote of confidence, now is it?
You just don't get it--the point of hedging is not to ensure that you are paying "X" for fuel--it's to ensure that you know what you will pay for fuel and to take the swings of the market out of play.  I don't need to know what oil will cost 5 years from now, but LUV's strategic planners do.  Unlike US, LUV knows to a certain extent what their fuel costs will be years out.
My reality is that the firm I work for has been reducing it's travel exposure to US--as have I.  That's no skin off my back.  The firm I work also makes a particular class of equipment that US needs to keep the planes in the air--but we'll just sell to somebody else if US goes under, so that's no skin off my back, either.

So, I've really go nothing to gain from US going under (except losing about 100k DM miles).

[post="263121"][/post]​

Clue?By Four states "GECAS has a huge exposure to US". Well now, Clue, That's awfully Obvious...Nothing new here.....
.
......Your comments on Fuel Hedging are almost Laughable..What good does it do to "ensure that you know what you will pay for fuel and to take the swings out of the market",

IF [and thats a big IF] the cost of fuel were to drop below the price that you Hedged ??? It's rather Obvious that Fuel Hedging comes with a element of risk...Southwest's past hedging successes does not ensure future successes...[Maybe it's you that does not GET it..]

You stated, "GE will win no matter what"........ Win What ?? Obviously it is in GE's best interest that Usairways survives...

Sorry to here you and your illustrious "firm " have decided to limit your "exposure" to Usairways. But Hey , it's a free country...Usairways will just sell your seats to someone else...No skin off of Usairway's back...

 

[ClueByFour]

Clue?By Four states "GECAS has a huge exposure to US". Well now, Clue, That's awfully Obvious...Nothing new here.....

Very nice. You cut the meat of the statement, which I shall now repost in bold. They now have their most re-leasable assets returning, and in turn are owed a crapload of money by US at loanshark-like interest rates, get a ton of equity, and get superpriority over everybody except the ATSB--meaning that they can pull the plug and probably recoup what they might lose even if they cannot re-lease the non-Airbus aircraft.

So, how do you want to address it. GE wins either way. They get a huge chunk of US equity, a note with terms that would make a loan shark jealous, their most "re-leasable" assets elsewhere, and so forth.

......Your comments on Fuel Hedging are almost Laughable..What good does it do to "ensure that you know what you will pay for fuel and to take the swings out of the market",

You must work for US, for it's clear that you don't understand strategic planning--if I know that 3 years from now my price of fuel is going up to a known amount, I can plan to reduce costs or increased revenue over a period of years, instead of a period of weeks, like US has had. This exposure is much easier to deal with and less ugly than even getting caught with a hedge that's not in the money when it comes due.

Now, once you graduate from "debate fallacies 101," I'll be happy to explain a hedge, a cross-hedge, cash-and-carry, and the hedging paradox. And, if you don't believe me, LUV's CFO says thusly:

Dallas-based Southwest Airlines Co. is another organization that takes a consistent, disciplined approach to its hedging activities. "We focus not on forecasting where prices are going but on managing costs," says Laura Wright, senior vice president of finance and CFO. Most of the company's hedges are geared toward smoothing volatility in its fuel costs, which constitute its second-largest expense category behind salaries and benefits, according to Wright.

http://www.bfmag.com/channels/businessStra...articleID=14350

IF [and thats a big IF] the cost of fuel were to drop below the price that you Hedged ??? It's rather Obvious that Fuel Hedging comes with a element of risk...Southwest's past hedging successes does not ensure future successes...[Maybe it's you that does not GET it..]

The decrease in volatility outweighs the risk. And they are very good at it and can afford to take the hit even if it does.

You stated, "GE will win no matter what"........ Win What ?? Obviously it is in GE's best interest that Usairways survives...

If US survives, they get to play loan shark for ever. If they don't, they now have a superpriority claim that is junior only to the ATSB, and they can still try to release those assets. They get a relatively early crack at the carcass, or US is GE's b!tch for years to come. Sounds like a win-win to me.

Sorry to here you and your illustrious "firm " have decided to limit your "exposure" to Usairways. But Hey , it's a free country...Usairways will just sell your seats to someone else...No skin off of Usairway's back...

Sure it is. U still can't sell enough seats to breakeven. Or did you miss the fact that no money is being made?

 

[eolesen]

I think the best analysis of the situation I've hear was from Holly Hegeman (even though I usually disagre with her).  She has noted that each time GE does a deal it reduces exposure to the effected airline.  In USAir's case, they got some A/C back to lease elsewhere.  Any further deal will accomplish the same thing until all GE's aircraft are placed with other companies.

[post="263085"][/post]​

Bingo!.... GE couldn't take back all the aircraft without causing serious fleet mix damage, but I'd say that the merged fleet could be cut by about 10-15% without hurting the overall route structure (that's just taking into account some of the barbell overlap).

The only common fleet type? -- Rolls powered 757s. Aside from that, it's a nightmare....

HP's A320's are IAE VT2500 powered. US's are CFM56 powered (GE...).

US's 733's are round dial, right? No idea about HP's, but they're probably EFIS....

Then you've still got a mixed bag of long haul aircraft with the 321 and a now even bigger 757 fleet.

If GE were smart, they could take a disproportionate number of the CFM powered aircraft so that they're not only reducing their exposure in terms of leased airframes, but also reducing their exposure to engines and related spares. It also allows them to spread the GE love elsewhere -- even if they sell the airframe outright to another carrier, they're still going to be able to sell engine parts...

 

[insp89]

Very nice.  You cut the meat of the statement, which I shall now repost in bold.  They now have their most re-leasable assets returning, and in turn are owed a crapload of money by US at loanshark-like interest rates, get a ton of equity, and get superpriority over everybody except the ATSB--meaning that they can pull the plug and probably recoup what they might lose even if they cannot re-lease the non-Airbus aircraft.

So, how do you want to address it.  GE wins either way.  They get a huge chunk of US equity, a note with terms that would make a loan shark jealous, their most "re-leasable" assets elsewhere, and so forth. 
You must work for US, for it's clear that you don't understand strategic planning--if I know that 3 years from now my price of fuel is going up to a known amount, I can plan to reduce costs or increased revenue over a period of years, instead of a period of weeks, like US has had.  This exposure is much easier to deal with and less ugly than even getting caught with a hedge that's not in the money when it comes due.

Now, once you graduate from "debate fallacies 101," I'll be happy to explain a hedge, a cross-hedge, cash-and-carry, and the hedging paradox.  And, if you don't believe me, LUV's CFO says thusly:
http://www.bfmag.com/channels/businessStra...articleID=14350
The decrease in volatility outweighs the risk.  And they are very good at it and can afford to take the hit even if it does.
If US survives, they get to play loan shark for ever.  If they don't, they now have a superpriority claim that is junior only to the ATSB, and they can still try to release those assets.  They get a relatively early crack at the carcass, or US is GE's b!tch for years to come.  Sounds like a win-win to me.
Sure it is.  U still can't sell enough seats to breakeven.  Or did you miss the fact that no money is being made?

[post="263802"][/post]​

Clue?ByFour, This post is nothing more than a repeat of your last one..

Thanks for your offer of "explaining" the finer points of hedging..I will respectfully decline your offer due to your lack of common sense...

Clue states,....... " If I know that 3 years from now my price of fuel is going up to a known amount, I can plan to reduce costs or increase revenue over a period of years"......

Clue,, How are you or anyone else [even Southwest] going to "know" what the price of fuel is going to be 3 years from now ???? I thought we've been over this already..There is an element of gambling and risk in hedging fuel...You don't need a Phd to figure that out..BTW, I have my Phd, { Post Hole Digger }Impressed ?

I need to correct you on another point, you seem to like the phrase "loanshark-like interest rates"...Hopefully you are aware that during the bankrupcy process, Usairways Re-Negotiated their leases with GECAS along with every other creditor on the property...Hardly "loanshark-like rates".....

At the risk of repeating myself. GECAS evidently CANNOT find a better place to put the Boeing aircraft if they are NOT taking them back from Usairways...

Let me "clue" you in on another point.., Usairways is not the only airline that GECAS is working with...Ever hear of America West, or Independence Air ?

In fact, it is "rumoured" that GECAS is the main reason behind the merger talks between Usairways and America West...I thought all this was common knowledge.

One more correction to your post, Usairways is not having any problems selling seats, They just recently had the highest load factors in the companies history..I believe you already know this [hopefully],, FUEL COST is the only thing standing between a profit at Usairways, [Once they get past some bankrupcy related costs such as Severence pay to the retired workers].

You want to talk about "pulling the plug", Delta just lost 1.1 Billion last quarter..

 

[ClueByFour]

Thanks for your offer of "explaining" the finer points of hedging..I will respectfully decline your offer due to your lack of common sense...

Based on what you write below, your declining makes all the sense in the world--you clearly would not get it.

Clue states,....... " If I know that 3 years from now my price of fuel is going up to a known amount, I can plan to reduce costs or increase revenue over a period of years"......

Clue,, How are you or anyone else [even Southwest] going to "know" what the price of fuel is going to be 3 years from now ????]

Well gee, pilgrim, maybe I'll hedge at X dollars a barrel, due on X date. And presto! I know what my price of fuel will be (or, I know the figure that I have to deal with, anyway).

I thought we've been over this already..There is an element of gambling and risk in hedging fuel...You don't need a Phd to figure that out..BTW, I have my Phd, { Post Hole Digger }Impressed ?

Based purely on your postings in this thread, I'd say that you have a PhD like Jerry Glass has a union card.

Really. Reread the part about controlling smoothing volatility (out of the mouth of Southwest's CFO, not mine). Repeat. Rinse when you finally get it.

I need to correct you on another point, you seem to like the phrase "loanshark-like interest rates"...Hopefully you are aware that during the bankrupcy process, Usairways Re-Negotiated their leases with GECAS along with every other creditor on the property...Hardly "loanshark-like rates".....

Apparently you are not aware of the interest rates at which profitably companies can float paper these days. It's many, many fewer points than the LIBOR + loanshark that U signed on for.

And no, not every creditor on the property went for it. Not all the shrinkage in U's fleet is a result of GECAS.

At the risk of repeating myself. GECAS evidently CANNOT find a better place to put the Boeing aircraft if they are NOT taking them back from Usairways...

At the risk of repeating myself, GECAS is finding a place to lease the "valuable" assets, and charging U an arm and a leg to keep the boeings (less desirable). Tell me again how that is not a win-win for GECAS (bearing in mind that if things don't work out on that front, they have a superpriority claim)?

One more correction to your post, Usairways is not having any problems selling seats, They just recently had the highest load factors in the companies history..I believe you already know this [hopefully],,

Are you serious? U is running a fare sale every other week. They admit (in BK filings) that these sales are necessary for revenue generation.

FUEL COST is the only thing standing between a profit at Usairways, [Once they get past some bankrupcy related costs such as Severence pay to the retired workers].

Wrong. The non-labor CASM is, and will be, U's problem. They are still way off either LUV, B6, or even HP in CASM, and fly shorter average stage lengths to boot (thus making the CASM difference worse).

But let's take the "fuel cost" thing at face value: that's why you hedge fuel--so that one does not get "suprised" by commodity fixed costs.

You want to talk about "pulling the plug", Delta just lost 1.1 Billion last quarter..

[post="264022"][/post]​

DL does not have taxpayer money backing at-risk loans. As a bonus, most of the DL loss was on paper, whereas the majority of U's losses have been operational. DL also did not have a bankruptcy 4 quarters ago to wipe all interest, depreciation, amortization, and goodwill off the balance sheet.

 

[TheLarkAscending]

Clue, you're right on the mark in every single way. I'm not sure I would have taken the time to explain it as well, and twice at that, that you've been kind and patient enough to do.

 

[RowUnderDCA]

wow.... right? yes, patient? yes.....


kind?... oh my gosh... i think that Clue and Lark are MADE for each other! writers of some of the meanest posts on the board!

 

[oldiebutgoody]

Bingo!.... GE couldn't take back all the aircraft without causing serious fleet mix damage, but I'd say that the merged fleet could be cut by about 10-15% without hurting the overall route structure (that's just taking into account some of the barbell overlap).

The only common fleet type? -- Rolls powered 757s. Aside from that, it's a nightmare....

HP's A320's are IAE VT2500 powered. US's are CFM56 powered (GE...).

US's 733's are round dial, right? No idea about HP's, but they're probably EFIS....

Then you've still got a mixed bag of long haul aircraft with the 321 and a now even bigger 757 fleet.

If GE were smart, they could take a disproportionate number of the CFM powered aircraft so that they're not only reducing their exposure in terms of leased airframes, but also reducing their exposure to engines and related spares. It also allows them to spread the GE love elsewhere -- even if they sell the airframe outright to another carrier, they're still going to be able to sell engine parts...

[post="263844"][/post]​

With virtually all maintenance farmed out, and "power by the hour" purchased from GE, this is a nonissue. It will make NO difference from an aircrew standpoint, aside from a very minor cost associated with initial training, which may only consist of changing a few manuals and accomplishing a "home study" course. I see this sort of thing brought up any time someone needs to find reasons against a merger, but the reality is that it's a nonissue in today's airline environment.

 

[insp89]

Based on what you write below, your declining makes all the sense in the world--you clearly would not get it.
Well gee, pilgrim, maybe I'll hedge at X dollars a barrel, due on X date.  And presto!  I know what my price of fuel will be (or, I know the figure that I have to deal with, anyway).
Based purely on your postings in this thread, I'd say that you have a PhD like Jerry Glass has a union card.

Really.  Reread the part about controlling smoothing volatility (out of the mouth of Southwest's CFO, not mine).  Repeat.  Rinse when you finally get it.
Apparently you are not aware of the interest rates at which profitably companies can float paper these days.  It's many, many fewer points than the LIBOR + loanshark that U signed on for. 

And no, not every creditor on the property went for it.  Not all the shrinkage in U's fleet is a result of GECAS.
At the risk of repeating myself, GECAS is finding a place to lease the "valuable" assets, and charging U an arm and a leg to keep the boeings (less desirable).  Tell me again how that is not a win-win for GECAS (bearing in mind that if things don't work out on that front, they have a superpriority claim)?
Are you serious?  U is running a fare sale every other week.  They admit (in BK filings) that these sales are necessary for revenue generation.
Wrong.  The non-labor CASM is, and will be, U's problem.  They are still way off either LUV, B6, or even HP in CASM, and fly shorter average stage lengths to boot (thus making the CASM difference worse).

But let's take the "fuel cost" thing at face value:  that's why you hedge fuel--so that one does not get "suprised" by commodity fixed costs.
DL does not have taxpayer money backing at-risk loans.  As a bonus, most of the DL loss was on paper, whereas the majority of U's losses have been operational.  DL also did not have a bankruptcy 4 quarters ago to wipe all interest, depreciation, amortization, and goodwill off the balance sheet.

[post="264088"][/post]​

ClueByFour states,,...." Well gee, pilgrim, maybe I'll hedge at X dollars, due on X date. And presto! I know what my price of fuel will be (or, I know the figure I have to deal with, anyway".

Clue?, ...... Well, Here we are again,..... at square one..While it might be nice if you knew what the price of your fuel will be for a particular time period...[or "smoothing" volatility],

The BOTTOM LINE is that Fuel Hedging involves GAMBLING on what the price of fuel will be in the future....

What will be the advantage of Hedging fuel (other than knowing what your price of fuel will be for a specific time period), if your COMPETITION IS ABLE TO BUY FUEL for the same cost or at a CHEAPER price WITHOUT having to tie up their money in fuel hedges......Repeat, Rinse, When you FINALLY get it..... :huh:



Clue, I would be interested in seeing your copies of Usairways re-negotiated leases with GECAS...Believe it or not, They are NOT "loanshark" rates..


The non labor CASM will NOT be that big of a deal going foward....First, Usairways is a totally different animal than the "so-called" low cost carriers..

While it costs more to run a Hub compared to a "Point to Point " system, The Hub and spoke system can generate more revenue...[If run Correctly]. Usairways is FINALLY starting to "ROLL" their Hubs, and at the same time is starting to fly more Point to Point routes.

Usairways also has the advantage of being part of the STAR alliance. and has the backing of several regional airlines..

Also, Time will Tell what will become of the "Talks" with America West...

Clue, How long can Delta stay OUT of Bankrupcy ???