Industry Consolidation?

[iflyjetz]

Well, my prediction is not pretty. My apologies in advance to anyone who's offended by my post.
I think that UAIR either gets sold in pieces or goes chap 7 and the assets are acquired by surviving carriers. I expect very few (if any) UAIR employees to go with the assets.
As for UAIR's management lobbying government officials for consolidation, I read it as another method of selling UAIR as a going concern.
I don't expect UAIR to exist by 2007.
For all of the UAIR employees out there, you'd be wise to dust off your resumes.
You can put lipstick on this pig and fly it from PHL to SEA in first class, but at the end of the day, it's still a pig.
Again, my apologies to anyone I've offended.

 

[Expectorant]

I think 2007 is quite optomistic. I believe changes, massive changes, are just around the corner.

 

[RWerksman]

I think 2007 is quite optomistic. I believe changes, massive changes, are just around the corner.

I agree.

Try by the end of the year.

 

[USA320Pilot]

US Airways will either restructure with a consensual restructuring or I understand a pre-packaged Chapter 11. If the formal restructuring is unsuccessful then the company could move to a Chapter 7 liquidation proceeding.

According to an article published by the Beaver County Times on May 9, US Airways' assets will not be sold out from underneath the employees, their leader assured them Friday. "I am not interested in breaking up the company and selling it off in chunks," said Bruce R. Lakefield, chief executive officer and president of US Airways, who continued the Friday tradition of taping phone messages for employees. "I want to save it, because there's a lot here worth saving."

However, according to the Pittsburgh Post-Gazette in an article written on May 8, without union cooperation, the company said it will be forced to "re-examine" options, including the potential sale of assets or a "judicial restructuring" -- a reference to bankruptcy. Thus far, only the pilots have agreed to new contract talks. The union's spokesman dismissed the bankruptcy talk. "I don't see that happening," said Jack Stephan. "Failure," he added, "is not an option."

Meanwhile, US Airways is 35% fuel hedged for 2004 at 83 cents per gallon with spot fuel for airlines at United and other carrier's about $1.10 per gallon. Fuel prices will eat up seasonal travel revenues and then after Labor Day when traffic drops, major U.S. airlines will find their financial picture very gloomy.

US Airways' Transformation Plan implementation target date is for the fall, probably in October when the company wants to have a LCC unit cost in place. If this occurs, then the company will restructure without the assistance of the court.

Moreover, David Bronner has indicated in private to ALPA and in four public interviews that he would like for RSA to fund asset acquisitions for US Airways if the company has a competitive costs structure.

In regard to the Dow Jones report I simply sighted another example. However, the Pittsburgh Post-Gazette recently published an article written by Frank Reeves on the subject of a US Airways corporate combination and in addition to David Bronner's comments, Dave Siegel has repeatedly said US Airways will be involved in a corporate transaction prior to his departure.

Regards,

USA320Pilot

 

[USA320Pilot]

Local 12 proud:

By the way, in Reeves' article both Mike Boyd of the Boyd Group and William Lauer of Allegheny Captial, both long-time industry observer's, each said in the article that US Airways could be involved in a corporate transaction with United Airlines.

Obviously, they know what continues to be discussed inside the CCY and WHQ executive suites, but for the sake of US Airways I hope the Arlington-based company does not integrate with United. Why? After all of their deep cost cuts, United lost more money than any airline in the world in the first quarter and they cannot hedge fuel -- not that buying energy futures or option contracts is a smart idea today.

By the way, do you always provide such informative posts?

Regards,

USA320Pilot

 

[funguy2]

UAL will be able to hedge fuel when they emerge from BK. They cannot currently hedge fuel because only an idiot would sign a contract with a company who is going through a BK proceding, which expressly allows them to cancel contracts. Thus, the other party would have no leverage to enforce its contract should fuel prices decline.

Whether or not UAL can hedge fuel is a non-issue in a UAL/UAIR merger scenario, since one requirement of such an action is UAL's emergence from BK. The problem with the UAL/UAIR merger is simple and clear:

1. Neither airline has revenues which exceed costs on an annual basis.

2. Neither airline has a stock-pile of cash to spend. One may argue that UAL may be on the verge of acquring a stockpile of cash as it emerges from BK, however, that stockpile of cash should be used by UAL to fund operations while continuing to work on its cost problem (much like UAIR has done unsuccessfully thus far).

3. Does RSA have the cash to acquire things and merge them together? Yes. Why won't RSA do it? See point 1.

Like any investment, you can win or lose with a fuel hedge. If you expect fuel prices to continue their dramatic rise, a fuel hedge may be a good idea. The problem is that if fuel prices decline, those carriers that hedged are locked into a higher price (thus lose on the hedge). Hedging is only a guaranteed "win" in the sence that you can create predictable fuel future fuel prices in an unstable market. That might not be bad, even if the price declines. I suspect that is Southwest's bet.

If something unexpected happens tomorrow, and the price of Jet A drops to $0.75/gallon, UAL's unhedged position will help them, and Southwest will be holding a money-losing hedge. This is unlikely, but possible.

 

[700UW]

And Bronner also said he will not put another penny into this airline!

Print the whole truth, not YOUR spin!

 

[USA320Pilot]

700UW:

That's true, however, with a competitive cost structure he said he would be interested in acquiring assets for US Airways and to grow the company.

Did you miss that too?

Respectfully,

USA320Pilot

 

[700UW]

Nope just being like you and not telling the WHOLE story.

 

[ClueByFour]

Bronner won't sink a dime into this bad boy, and here's why:

1. You will see at least one labor group ride the alleged S1113 motion right into the self-help option. Goodbye airline.

2. You will see this because the vast majority of the current management group is the same group of brain trusts (presumably including Lakefield as an advisor to Bronner) who managed to screw the proverbial pooch with the first "pre-packaged" Chaper 11 filing.

3. Bronner is not the only creditor. GECAS has something to say, as well, and if things turn around and the US assets (namely planes/engines) they are on the hook for could be sold/transferred in a Chapter 7 proceeding, they'll do it in a heartbeat.

4. Sooner or later (probably sooner, based on the fact that while Bronner has speculated about acquisitions, he's actually gone out and SHOPPED THE AIRLINE AROUND) Alabubba Dave is going to get bored of the game and take the money and run.

 

[767jetz]

Looks like I’ve been sensored twice :down: , so let me try to make my point as delicately and politically correct as possible...

With respect to all this “industry consolidationâ€￾ talk, IMO it would be wise for everyone to consider the source before getting all wound up. In other words, what are the chances that the speculation of one person will actually come to pass?

Let’s review some speculations (that were stated as fact) from the recent past:

- UA will default on its DIP covenants. (Hasn’t happened. Not once.)
- UA is unable to get exit financing. (Not just 1, but the 2 biggest financial institutions in the world have backed UA’s business plan and will provide the necessary exit financing.)
- UA is unable to articulate a POR. (The ATSB is currently reviewing UA’s application, which includes a detailed articulation of UA’s POR.)
- UA will need to sell assets in order to emerge. US will move westward (Hasn’t happened.)
- Pittsburgh negotiations are being held hostage by UA. (We all know how that turned out.)
- UA will need an equity investor like RSA. (Wrong again.)
- UA is unable to resolve its Airport Municipal Bond issues. (They are now resolved.)
- UA is unable to resolve its 1110 proceedings and will likely turn over aircraft to its business partner. (1110 is now resolved. RSA did not take any UA aircraft over to US.)
- UA will have to cancel the pension plans because congress will not pass relief legislation. (Pension issues are now resolved.)
- UA is unable to resolve the ACA issue in Dulles. (UA’s feed in Dulles is resolved.)

Oh, and by the way… US is still considering a Merger/Acquisition scenario with UA, even though someone prefers it didn’t happen… yada yada yada…

Yeah, right. (P.S. Who was the first to say that the above speculations were all false? That's right folks... the one and only 767jetz! )

The evidence is obvious. Need I say more? I think diogenes said it best:

“Those who have the inside track cannot disclose.

Those who disclose, don't have the inside track.

Simple, when you think about it.â€￾

 

[Fly]

Beautiful summary!!

 

[iflyjetz]

USA320pilot, if you're counting on a prepackaged bankruptcy (where somehow, some way, investor is preserved ... talk about smoking crack!), you're pi$$ing in the wind.
UAIR had a difficult time finding DIP financing last time around. Only loan sharks would touch UAIR this time around.
Just look at Wall Street's confidence in UAIR as a going concern.
The fact that Lakefied carefully worded his statement regarding the liquidation of UAIR should tell everyone that's where CCY is headed. If they can get rid of all government roadblocks to selling the company lock, stock, and barrel, they will be in a better position to sell off UAIR. However, I expect no takers for UAIR as a whole. There are too many impediments to buying UAIR as a whole.
PHL is now being invaded by LUV. How long before another airline goes after UAIR's CLT hub? The buzzards are circling overhead.

 

[N924PS]

USA320pilot, if you're counting on a prepackaged bankruptcy (where somehow, some way, investor is preserved ... talk about smoking crack!), you're pi$$ing in the wind.
UAIR had a difficult time finding DIP financing last time around. Only loan sharks would touch UAIR this time around.
Just look at Wall Street's confidence in UAIR as a going concern.
The fact that Lakefied carefully worded his statement regarding the liquidation of UAIR should tell everyone that's where CCY is headed. If they can get rid of all government roadblocks to selling the company lock, stock, and barrel, they will be in a better position to sell off UAIR. However, I expect no takers for UAIR as a whole. There are too many impediments to buying UAIR as a whole.
PHL is now being invaded by LUV. How long before another airline goes after UAIR's CLT hub? The buzzards are circling overhead.

Jetz,

Don't know if you work for a so called "Legacy Carrier" or not. All such carriers are at peril presently to be the next "USAirways".

You know the industry is in the tank when the likes of conservatively managed, financially astute, Delta Air Lines is whispering the "B" word. And it's not just chest beating to extract concessions from its ALPA Pilots.

If USAirways does disappear into oblivion, it won't be because the good employees didn't do all in their power to keep it alive. In fact, operationally you will find that USAirways is providing a superior product, thanks to the efforts of their employee groups.

Of course people are offended by your negativism towards the survival of Airways.

 

[diogenes]

Bronner won't sink a dime into this bad boy, and here's why:

1. You will see at least one labor group ride the alleged S1113 motion right into the self-help option. Goodbye airline.

2. You will see this because the vast majority of the current management group is the same group of brain trusts (presumably including Lakefield as an advisor to Bronner) who managed to screw the proverbial pooch with the first "pre-packaged" Chaper 11 filing.

3. Bronner is not the only creditor. GECAS has something to say, as well, and if things turn around and the US assets (namely planes/engines) they are on the hook for could be sold/transferred in a Chapter 7 proceeding, they'll do it in a heartbeat.

4. Sooner or later (probably sooner, based on the fact that while Bronner has speculated about acquisitions, he's actually gone out and SHOPPED THE AIRLINE AROUND) Alabubba Dave is going to get bored of the game and take the money and run.

Cx4,

Concur, and would like to expand on point 1.

If labor again conceeds, they lose the leverage of self-help. While entering BK is risky for labor, having the self-help leverage puts some risk on CCY. Given the value of the last S.1113 letter (nil), and the fact there is no end in sight to CCY demands (they said last time was enough), I would have to consider taking my chances with the judge. At worst, we'd get to the bottom line (CCY may drag this drama out for years). Then labor would have the option of accepting it, or walking.

As far as the judge giving the Palace whatsoever their heart's desire, didn't ALPA get some consideration during BK on their pension the last go around? In front of the judge, no less.

Agents are already making less than their peers. If we go where CCY wants us to go, Home Depot becomes a viable option.

Lastly, where does anyone think agent/attendant/mech pay is going to be in 10 years? 15?