New alliance with US Airways gives United rare boost

[chipmunn]

[P][A href=http://www.usatoday.com/travel/news/2002/2002-10-04-alliance--reax.htm][FONT face=Times New Roman size=3]http://www.usatoday.com/travel/news/2002/2002-10-04-alliance--reax.htm[/FONT][/A][/P]
[P class=inside-copy][FONT face=Times New Roman size=3]Whether the nation''s second-largest carrier can avoid following US Airways into a Chapter 11 filing still hinges on the outcome of a cost-cutting plan being worked on by United and its unions. The two sides remained mum on the progress of their talks Thursday. United chief executive officer Glenn Tilton still has not commented on whether he thinks the unions'' plan to cut labor costs by $1 billion annually is sufficient to secure a critically needed federal loan guarantee.[/FONT][/P]
[P class=inside-copy][FONT face=Times New Roman size=3]Credit Suisse First Boston analyst James Higgins said code-sharing better positions airlines to better operate in a lower-demand environment, offering the potential for significant financial leverage in a presumably recovering economy. But he cautioned in a research note that the revenue benefits United and US Airways anticipate from the deal could be largely offset if the government approves a pending code-share request by Delta, Continental and Northwest airlines.[/FONT][/P]
[P class=inside-copy][FONT face=Times New Roman size=3]Hal Rosenbluth, chairman and CEO of Philadelphia-based Rosenbluth International, a travel and management consulting company, said the two carriers might yet formally merge in the future as the airline industry consolidates under economic pressure. I think we''re moving to a de facto oligopoly of the carriers in the United States, he said, disputing the notion that that''s bad for travelers or competition.[/FONT][/P]

 

[Taipan]

Were is the part about US taking over Uniteds entire domestic operation I dont see that part

 

[ohcaptainron]

I agree, some form of asset purchase by UAL is very likly, only those assets which will augment UALs existing strengths would be fragmented from US Airways. Gates and aircraft: BOS, CLT, PHL, A320s etc, nothing will happen until the second quarter of next year however. The downsizing at US Airways should be completed by that time, with the regional model fully developed.

A emergence from Chapter 11 would most likly be concurrent with the above assets sales. As would some guaranteed revenue stream which would be very attractive to US creditors, this type of agreement is currently used by UAL with the other regional feeder carriers.

By that time the effects of the upcomming war with IRAQ will be deminished and the economy will begin to see the light of day.

All parties at UAL are working very hard in negotiating an agreement that will address the low cost problem, satisfy the ATSB, address the asset aquistion of some of US Airways including a seniority prenup if required, restructure the capital base, including new funding options, think overseas, garner support on Wall Street, while recognizing the employee contributions in the long run, without the complete resignation and failure associated with bankruptcy. The STAR alliance partners are supporting this effort and may become more visable as we move ahead.

We look foward to helping as many displaced US workers as possible. Best of luck to all of us.

 

[dfw79]

I find it interesting how you automatically assume almighty and financially challenged United will be the airline aquiring parts of US Airways. Bigger they are the harder they fall...or so they say. United new agreements with lessors and unions will make them a more favorable company over United. If Siegel stays on course...U employees won't need any help from other airlines -- U will be helping other displaced airline employees out with new jobs.

 

[chipmunn]

What I find interesting is it has been 10 days since the UA Labor Coalition provided management with its concession proposal, but there has been no public UA or union response.

I suspect the company and its unions are negotiating; however, why are the pilots silent? The UA ALPA Code-A-Phone Update did not mention negotiations, the ERP, or if discussions with management have begun. The AFA Update was vague and did not provide any new information. Moreover, Glenn Tilton has not provided a weekly message.

The silence is deafening, which makes me think there are behind the scene discussions occuring, which the parties appear to not want the rank-and-file to know exist, until major news is available. But why?

There is exactly six weeks or 42 days remaining until November 17 when UA has to make a $375 million payment or likely file for a formal restructuring. Where's the urgency?

In regard to Ohcaptainron's scenario, if UA does not have the funds available to pay its $875 fourth quarter obligation, needs ATSB funds to pay its $1.4 billion in debt due in the next six months, and per the company has no access to the capital markets, how could the Chicago-based airline acquire US assets?

Chip

 

[chipmunn]

October 1, 2002 - United Airlines IAM Update

The presidents of Districts 141 and 141-M met with other representatives from the United Airlines Union Coalition and United Airlines CEO Glenn Tilton yesterday in Chicago, IL to discuss the Coalition’s framework designed to avert a United Airlines bankruptcy. The Coalition has proposed $5 billion in cost reductions over 5 years. United Airlines has not given a response to the Coalition’s proposal, but a positive and productive dialogue has been initiated and will continue.

No agreements have been reached in regards to how the allocation of the savings will be divided among the unions, nor have any specific cost saving initiatives been identified. If United responds favorably to the Coalition’s proposal, these items will be the subject of further discussions with the carrier.

Members will be advised of any developments that result from our discussions, and will be able to exercise their voice and their vote on any proposed changes to their collective bargaining agreements.

Scotty Ford
President and General Chairman
District 141-M

S.R. (Randy) Canale
President and General Chairman
District 141

 

[ohcaptainron]

[blockquote]
----------------


Captainron says: How you been dog? ubonics sic
Chip says:
What I find interesting is it has been 10 days since the UA Labor Coalition provided management with its concession proposal, but there has been no public UA or union response.

Captainron says:
Yes that is correct, and do not expect any public announcements until the parties have a complete agreement, the parties are talking 24/7.
Chip says:
I suspect the company and its unions are negotiating; however, why are the pilots silent? The UA ALPA Code-A-Phone Update did not mention negotiations, the ERP, or if discussions with management have begun. The AFA Update was vague and did not provide any new information. Moreover, Glenn Tilton has not provided a weekly message.
Captainron says:
that is correct, the parties have agreed not to negotiate in public. While frustrating for many, the parties believe this is the best way to handle these critical matters.
Chip says:
The silence is deafening, which makes me think there are behind the scene discussions occuring, which the parties appear to not want the rank-and-file to know exist, until major news is available. But why?
Captainron says:
See above. However, when the information is finally availble all labor groups will vote on a very expidited schedule.

Chip says:
There is exactly six weeks or 42 days remaining until November 17 when UA has to make a $375 million payment or likely file for a formal restructuring. Where's the urgency?

Captainron says:
The dates are correct, there is reason to beleive that discussions with the parties involved are moving foward in a mutually agreeable fashion and include creditors as well as lessors.
Chip says:
In regard to Ohcaptainron's scenario, if UA does not have the funds available to pay its $875 fourth quarter obligation, needs ATSB funds to pay its $1.4 billion in debt due in the next six months, and per the company has no access to the capital markets, how could the Chicago-based airline acquire US assets

Captainron says:
The revised business plan includes comprehensive renegotiated terms with all vendors, lessors, lenders which will save the company close to the 1.5 billion annual target that management had previously outlined, in addition there is reason to beleive that the labor cost savings will be north of the 1 billion originally offered by the union groups, the business plan anticapates another 1 billion in additional revenue inhancements. In addition to the ATSB loan there are provisions for additional captial infusions and increased access to capital markets. The business plan also anticapates a war with IRAQ. When the plan is announced it will also include a low cost component. The total cost savings on an annual basis will be in excess of 2.5 billion a year. In addition to the increased revenue projects, productivity gains, dramatically reduced costs, the STAR Alliance, the code share with US Airways, increased RJs, the result of which would enable UAL to purchase those US Airways assets which offer some synergy and allow those assets to be used in a much more efficent network with what is argubly the best route system of any carrier.

Captainron says: good to be back, dog.

Chip before you get to upset ( dog ) as used in this context is a term of endearment.
----------------
[/blockquote]

 

[N628AU]

This is unreal. First, a thread goes ten pages on a US/UA merger, or unique corporate transaction, or whatever. Then the second thread on the same topic goes to page three. And now a third thread evolves itself into the same topic. Read my lips, THERE WILL BE NO MERGER/SALE/COMBINATION/WHATEVER. If something happened with the two trying to get together on who flies what, I have a feeling the government would look at this as collusion. They must still compete with each other as a condition of approval of the codeshare. Can we please get off this pipe dream and move on to something else?

 

[AOG-N-IT]

[blockquote]
----------------
On 10/6/2002 1:59:39 AM N628AU wrote:

This is unreal. First, a thread goes ten pages on a US/UA merger, or "unique corporate transaction", or whatever. Then the second thread on the same topic goes to page three. And now a third thread evolves itself into the same topic. Read my lips, "THERE WILL BE NO MERGER/SALE/COMBINATION/WHATEVER." If something happened with the two trying to get together on who flies what, I have a feeling the government would look at this as collusion. They must still compete with each other as a condition of approval of the codeshare. Can we please get off this pipe dream and move on to something else?
----------------
[/blockquote]
I agree!!....a merger between US and UA would be the airline equal of merging North Korea with Iraq. I agree again. This will never happen...nor should it!!! I agree again...This is someones Pipe-Dream....and it's sounds inspired by a Crack-Pipe. Both of these companies have mountains of issues to resolve...and combining the issues will only increase what are currently seperate problems. The best that can be hoped for in a Logical State of Mind...is for US to emerge from BK as a stronger yet smaller airline in the short term. Then allow UA it's time to resolve it's issues , which are numerous by any stretch of the imagination. Merger talk will only overshadow the actual root of the problems...and later compound them!! Hopefully both sides are smart enough to see the seperate needs of individual resolve....and work like mad-dogs at allowing the Codeshare to make some positive strides for both companies. A Merger or any Sell-Off of Assets by one to the other , will Idle more employee's than anyone should fear to calculate. Mergers only benefit those at the very top!! Both UA and US should have seen enough evidence of that during the Wolf/Goodwin era. Those that do not learn from history?....are doomed to repeat it!!!

 

[avek00]

United and US Airways will be able to remain independent for the forseeable future PROVIDED meaningful restructurings are carried out at both airlines.

In the case of U, the workgroups have offered meaningful concessions, and the company is renegotiating its debt to reasonable levels. If things stay on track, U has the potential to emerge as a powerhouse, with the ability to negotiate a lucrative merger/acquisition when circumstances warrant.

Unfortunately, the restructuring attempts haven't gone as smoothly at UAL. At this point, the workgroups have proposed a deal which only provides for 55% of the concessions management requested to secure the ATSB guarantee. Given the ATSB experience with U, IMHO, it's a safe bet that labor will have to cough up at least 75% of what management requested, or else the ATSB will throw UAL's request in the garbage.

Should UAL be unable to obtain the necessary concessions as a solvent entity, a successful reorganization in Chapter 11 is not assured. For one, UAL has many choice assets/operations (NRT, LHR, SFO) that have been sought for years by DAL, among others. Second, the government could take a different attitude with a UAL BK than a U BK. In the case of U, a shutdown would have caused major economic harm to scores of smaller communities primarily or exclusively served by the airline. With UAL, the government may believe that a partial fragmentation combined with a liquidation would help the industry as a whole to recover, as well as place the aforementioned assets in the possession of carriers worthy to operate them.

 

[767jetz]

[P]ohcaptainron,[/P]
[P]Excellent posts! Keep up the good work![/P]
[P] [/P]
[P]To everyone else,[/P]
[P]Please notice that ohcaptainron's scenario does not speak of a merger, but a purchase of assets that probably will not fit well in the Regional plan US seems to be adopting, but can be put to better use in a larger network like UA's, AFTER an out-of-court restructuring and infussion of capital via the ATSB AND outside sources.[/P]

 

[Art at ISP]

Although no one knows for sure how this is going to play out, I see more of a cooperative venture rather than an outright merger. The difference is that US Airways would be purchasing some of UA assets instead of the other way around.

There is talk of US Airways taking over much of UA's domestic flying, which would allow UA to concentrate on international routes. Although the old PAN AM has shown us that an airline cannot survive on international only, I think this scenario must be considered. The fact is that UA does not have the money right now to be purchasing anything, and US just might if their investment and reorganization schemes work out.

Today's article in the New York Times about United's problems seem to say that the employees are alot less likely to help UA than those at US did for their company. Although there is no shortage of hard feelings at US between workers and management, at UA I think it's 10 times worse. I am a US 1 passenger as well as a 1P at UA--in fact these are basically the only 2 carriers I fly--US for domestic and UA for international (Japan). My experience is that US employees seem to have a much better attitude (outward to the customer).

Again, I don't pretend to know it all, but just express my opinion from where I sit, which is usually seat 2A on US metal.

I wish the best to all my friends at US Airways and United and hope that both companies have a bright future without too much more pain on the backs of those who work for them.

 

[AM49AAA]

I think you'll see U buy UAL's JFK, IAD and MIAand associated Heathrow and Latin American divisions and become the total East Coast partner in the codeshare alliance. With the cash infusion UAL may be able to limp back to health.

 

[Oliver Stone''s Apprentice]

I suspect the only reason this thread popped again was so Chip could continue to push this conspiracy theory with a clean slate...

Ain't gonna happen, Chip.

 

[diogenes]

The tsunami sized repurcussions from the AL/PI/PSA mergers have just subsided to ripples after 12 years of acrimony. That deal was Sunday school compared to a U/UA get-together. Please, God, no.

On the other hand, the U MO has been to piss off most of the people most of the time, so it could be!?!