S&p Downgrades Us Airways Again

[funguy2]

FWAAA:

Glad I am at least not out all by myself in left field!

I am also wondering of the Debt Rating Downgrade will impact the ATSB and/or any other debt out there? Generally, if your debt rating goes down, your interest rate on unsecured debt increases, and therefore would equate to higher interest expense going forward? Is this true? Anyone know the effect on interest expense? Maybe it will be offset by the reduced interest expense for the ATSB Loan (i.e. less principle to pay interest on)?

 

[USA320Pilot]

S&P cuts US Airways' credit rating

Analyst: Failure to secure new concessions "could force US Airways to undertake significant asset sales and/or file for bankruptcy a second time"

PITTSBURGH (Business Times) - Standard & Poor's on Wednesday cut its credit ratings for US Airways Group Inc. deeper into junk status and warned that the No. 7 airline must successfully cut costs or face another downgrade.

See Story

Regards,

USA320Pilot

 

[funguy2]

Could the last quarter loss have anything to do with the $250 million ATSB PREPAYMENT ????

insp 89:

I have already explained to you at least once, that the answer is no, the ATSB Loan Prepayment does not impact the loss...

If anything, it made the loss slightly less, as interest expense would be reduced due to less outstanding principle. For example, if you pay down your credit card, you pay less interest on the lower balance? Right? Right.

 

[Cosmo]

funguy2:

FWIW, I'm also with you on the issue of RJ purchases and ATSB loan repayments not having any material impact on US Airways' income statement for the first quarter of 2004. And IMHO, it's everyone else that's out in left field on this issue, not you (or FWAAA).

 

[javaboy]

a320 wrote......

S&P cuts US Airways' credit rating

Analyst: Failure to secure new concessions "could force US Airways to undertake significant asset sales and/or file for bankruptcy a second time"


US Airways downgrade threatens big aircraft deal

Analyst: "The economics are getting uglier by the minute"


now i appreciate your feeling the sense of urgency. but of course you being the well educated, savy, inside, financial analyst type certainly must realize that those to events have absolutely nothing to do with labor. it is a direct result of mismanagment. period.

i should further like to remind you (as i'm sure you are well aware) that while your pension plan was terminated " because we just couldnt afford it" mr Seigels and mr Cohen's are still in tact.

an while proposing further cuts to without a doubt "save the company" since it is in such dire financial straights (which i truely believe exsist) on one hand and with the other shake the hands of two people while handing them some what 7 million dollars CASH combined? PLUS STOCK?

what am i missing here.

oh yeah Mr Gangwalds retirement still being paid over 1.0 million per year too!
(no doubt for the fine shape in which he left the company) (rewards for jobs well done).

:down:

we all know the seriousness of the situation, posting headlines and IMPLYING that the employees are at fault is simply wrong, and does not help.

 

[funguy2]

Thanks Cosmo. I thought I was right here, but since I am not fully versed on the latest GAAP, or have full knowledge or the inner workings of US Airways, I don't ususally presume to be correct.

That leaves the "Other" expenses as really interesting to me then... If these could have been reduced by 1/2, US Airways would have been break even. Makes we wonder what was there and how it could have been reduced. Anyone know? I still have not listened to the conference call... Maybe I will later, and see if they mention it.

 

[savyinvestor]

savyinvestor, we know what side you butter your bread on. Problem is, your bread is stale and moldy. Get over yourself.

Obviously one of USA320 colleagues. I feel sorry for you kind of. Savy :down:

 

[SpinDoc]

Well, I don’t think any of this news is a surprise but certainly USA320PILOT response is lackluster why does this guy post this negative stuff then sugar coat it with don’t shoot the messenger.

USA320PILOT here is some news for you CWA will not give so if you think posting your add on babble (cut and paste) will scare us your wrong it will come from the pilots and USAIR will post it’s first profit maybe next quarter and if the fuel cost come down witch I don’t think they will it could be a great quarter.

OH and by the way if they hadn’t bought all those RJ’s we would have squeaked out a profit this quarter you should read the hole 1st quarter report.

You are the biggest gloom and doom guy I have ever had the misfortune of reading….

P.S …..I may buy a few shares just throw the dice and see what happens.

Doc:

It's time to stop the posturing. The CWA will give or
everyone will lose. It's that simple. US Airways is
a seriously deficient concern right now and the only
way to fix this is to have union participation in the
going forward plan. I'm really tired of the "me, me,
me" attitude of the union posters on this board.
As it has been said many times, if you don't want
to participate in the going forward plan, then it is
time to move on and let those who do want to
participate handle the negotiations. If the company
is able to get costs to an acceptable level, 2 years
from now, US could be thriving like America West
is doing now, and some of the profits could be
given back to the employees. I think all of the
union posters on this board should understand
one basic business principle, it takes money to
make money. The company temporarily needs
money from the union contracts to position for
a long term future and when the profits are
realized, the money will be returned to the
unions.

 

[crazyincanton]

The company temporarily needs
money from the union contracts to position for
a long term future and when the profits are
realized, the money will be returned to the
unions.

Since when? It is not the job of the unions to be the bank for the company. Besides, where did the other $2 billion a year go?

 

[Winglet]

Profits coming back to lost compensation in a few years???? What are you smokin'? With so much debt, it won't be in your lifetime that US Airways will give anything back to employees.

 

[PITbull]

Doc:

It's time to stop the posturing. The CWA will give or
everyone will lose. It's that simple. US Airways is
a seriously deficient concern right now and the only
way to fix this is to have union participation in the
going forward plan. I'm really tired of the "me, me,
me" attitude of the union posters on this board.
As it has been said many times, if you don't want
to participate in the going forward plan, then it is
time to move on and let those who do want to
participate handle the negotiations. If the company
is able to get costs to an acceptable level, 2 years
from now, US could be thriving like America West
is doing now, and some of the profits could be
given back to the employees. I think all of the
union posters on this board should understand
one basic business principle, it takes money to
make money. The company temporarily needs
money from the union contracts to position for
a long term future and when the profits are
realized, the money will be returned to the
unions.

Hog Wash!

 

[jbragg476]

Pass that bong my way!!! Geez... read a few airline books Doc.... Profits would never come back to the employees no matter what they promise. (this guy ain't got no clue) Sniff some more glue!

 

[funguy2]

Ok then... I have now listened to the Q1 Results Conference Call...

For the "We would have been profitable except for the RJ Order" Crowd: Listen up.

According to Neil Cohen, recently departed CFO, at the beginning of the conference call, he stated "...About $4mil was expensed related to the startup of Mid Atlantic Airways..."

Let's assume, for argument's sake, that there were also $4mil in startup expenses for the PSA CRJ-700's even though this was not mentioned.

Then, as I see it...

Net Loss: $177mil
MAA/PSA Expenses $8mil (note this is double what Cohen said)
Net Loss Excluding MAA/PSA Expenses: $169mil

Also, at the end of the call, one of the analysts asked if something unusual had occured in the cash balance. I presume this was based on the fact that on March 13th, the company published that it had $925mil unrestricted, and with Q1 results (i.e. as of March 31st), the company said it had $978mil unrestricted cash, a gain of $53mil. I also thought this seemed unusual.

CEO Bruce Lakefield replied that the company was working with aircraft suppliers to minimize aircraft deposits, which resulted in a return of "$30-$40mil" cash back to the cash flow (however these are not income statement items).

Therefore, I say with confidence, The company would not have been profitable or even break-even had RJ orders not been placed. Also, the company seems to be ensuring the RJ orders do not remove any more cash than necessary from the unrestricted cash balance.

I don't think RJ's will save US Airways, but I do think they need them to compete, and are doing what it takes to get back in the game. Time will tell if its "too little too late."

 

[USA320Pilot]

Funguy2 & Spindoc:

I agree with your last posts and analysis'. To compete, US Airways or any company must match costs across-the-board. It's no different in any business.

Respectfully,

USA320Pilot

 

[Borescope]

S&P lowers US Airways' debt rating at crucial time
By Barbara De Lollis, USA TODAY

Standard & Poor's on Wednesday lowered its rating of US Airways' (UAIR) debt, putting in jeopardy the airline's financing for new regional jets central to its turnaround plans.


The bump by the influential Wall Street credit rating agency — to CCC+ from B — allows GE Capital Aviation Services to withdraw its financing commitment for regional jets, says S&P credit analyst Philip Baggaley. (Related story: Southwest's bold entry into Philly has rivals quaking)


GE Capital spokesman Eric Jones says the company is in discussions with US Airways about its financing. He would not elaborate.


Baggaley, in the S&P report on the downgrade, cited US Airways' decision to cut fares in response to competition from low-cost carriers. Discount leader Southwest (LUV) begins service Sunday from Philadelphia, a major US Airways hub.


Industry experts, including Baggaley, say GE is unlikely to pull US Airway's financing while the airline is attempting to transform itself into a lower-cost airline. GE is the airline's largest single creditor. "As long as they feel there's hope to turn around the airline, they still have a vested interest," he says.


Also, he says, GE, through a separate subsidiary, is providing engines for the regional jets. The airline has ordered 170 small jets at a cost of about $4 billion. Twenty-eight have been delivered.


Regional jet manufacturers Bombardier and Embraer have been discussing their financial arrangements with US Airways in light of the downgrade, an airline spokesman says.


The S&P downgrade came on the day that newly installed airline CEO Bruce Lakefield briefed leaders of the company's unions about a new business plan intended to restore the financially struggling airline to profitability.


The airline would not comment on specifics of the plan, but in a recorded phone message to employees it said it is seeking to become a lower-cost airline with a simplified, lower fare structure.


In an e-mail to members, the flight attendants union Wednesday said management is looking at cuts in pay rates and seniority benefits, work-rule changes, subcontracting and an increase in automated passenger service to reduce costs.


Jack Stephan, spokesman for US Airways' pilots union, declined to describe Lakefield's plan. Stephan, however, said it holds promise for a turnaround of the airline, which exited bankruptcy reorganization more then a year ago and continues to lose money.


"We like what we see so far — it's upbeat, it's brash and bold," Stephan says.




This is going to make it hard to get money at a decent price. Management is going to say to the employees BOHICA.