UAL and U Loan Feedback: WSJ Article

[UAL777flyer]

According to Tilton, AA and DL Are lobbying hard behind the scenes for the ATSB to reject our application. Doesn't surprise me. If the shoe were on the other foot, we'd do the same thing. So I can't say that I fault them. They're just protecting their interests. This one is simply too close to call. However, in the end, I believe we're going to file for bankruptcy. Hope I'm wrong.

 

[767jetz]

oops

 

[767jetz]

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On 11/18/2002 8:58:11 AM UAL777flyer wrote:

According to Tilton, AA and DL Are lobbying hard behind the scenes for the ATSB to reject our application. Doesn't surprise me. If the shoe were on the other foot, we'd do the same thing. So I can't say that I fault them. They're just protecting their interests. This one is simply too close to call. However, in the end, I believe we're going to file for bankruptcy. Hope I'm wrong.
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UAL777flyer,

What happened to your optimism? I thought you were leaning toward a last minute approval by the ATSB after all labor groups get onboard with the ERP. HAs something changed your mind?

 

[Busdrvr]

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On 11/18/2002 12:01:44 PM 767jetz wrote:

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On 11/18/2002 11:35:51 AM Rhino wrote:

As I understand it the ATSB has questions regarding the UAL plan to assure a 7% margin three years hence, a precondition of loan approval.

WS and the ATSB view the proposed cost savings offered thus far by employee groups as insufficient. Thus the continual comparison with U concessions.

That's just the facts of the matter.
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[/blockquote]

Well, UAL says they expect to be profitable in 2004 and pay off the loan by 2007. Again, comparing UA to US is simply not comparing apples to apples.

That's just the facts of the matter.
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[/blockquote]


UAL's plan also has lots of slop They anticipate profits of around 12% per year by 2005. It's ironic that the ATSB ahs given approval to airlines that performed poorly the last time the economy was good (ATA, FRNT, AWA), while being stingy to UAL, who was EXTREMELY profitable as recently as two and 1/2 years ago. If you think there is ANY airline that can guarentee a 7% profit 3 years or even ten years from now, you're on crack. The facts of the matter are that the ATSB is extremely short sighted and are looking at business plans that worked last week, not those that have worked year after year in the past.

 

[UnitedChicago]

I question the wisdom of AA wanting UA in BK. UA would emerge as a lean, mean, fighting machine (hopefully). AA would be forced to match UA but is it worth the probable 12-18 months of trying to wringe savings from labor? Meanwhile, UA would be profitable (hopefully) and growing again (hopefully).

Carty himself said that the pay cuts for UA pilots result in wages a little above what AA pilots are paid currently.

I don't know...just rambling.

 

[UAL777flyer]

767jetz,

I was optimistic up until a week or so ago. But the way I'm reading the tea leaves doesn't give me a warm and fuzzy feeling. I hope that I'm wrong. But I think the best we'll do is get approval conditioned upon such steep cuts that the employee groups wouldn't agree and we'd be forced into Ch.11. I hope that doesn't happen. Our paycut came out today. I'm smart enough to realize that in bankruptcy, it'll be much worse.

 

[Rhino]

As I understand it the ATSB has questions regarding the UAL plan to assure a 7% margin three years hence, a precondition of loan approval.

WS and the ATSB view the proposed cost savings offered thus far by employee groups as insufficient. Thus the continual comparison with U concessions.

That's just the facts of the matter.

 

[767jetz]

UAL777flyer,

Let's hope your tea-leaf-reading skills are rusty.

 

[767jetz]

[blockquote]
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On 11/18/2002 11:35:51 AM Rhino wrote:

As I understand it the ATSB has questions regarding the UAL plan to assure a 7% margin three years hence, a precondition of loan approval.

WS and the ATSB view the proposed cost savings offered thus far by employee groups as insufficient. Thus the continual comparison with U concessions.

That's just the facts of the matter.
----------------
[/blockquote]

Well, UAL says they expect to be profitable in 2004 and pay off the loan by 2007. Again, comparing UA to US is simply not comparing apples to apples.

That's just the facts of the matter.

 

[UAL777flyer]

767jetz,

I hope so too. I tend to waver back and forth each week. Right now, I'm leaning towards the pessimistic side. But the week is still young, right? Maybe I'll feel better once the IAM deal is done, which we're hearing could be imminent.

UnitedChicago,

AA's wisdom is that they'd much rather see UA in bankruptcy than get the ATSB and restructure out of court. Why? Simple. In bankruptcy, UA loses control over their ultimate destiny. The creditor's committee and bankruptcy judge have the final say. Also, the level of cuts UA will have to undertake would be much deeper in bankruptcy, which benefits AA from several perspectives, including marketshare and customer book-away. Also, numerous financiers would most likely throw their hat into the ring to invest in a restructured UA, which has the potential of creating a lot of chaos and labor unrest which AA could capitalize on. Think about it. If UA is able to pull off an out-of-court restructuring, we'll be able implement chnages and new innovations quicker. And the damage we'll need to inflict on ourselves will be much less. I think either way, AA is fearful because they know one way or another, UA will lower their costs and restructure. But because bankruptcy is a much bigger unknown in terms of the eventual outcome, such a scenario is easier for them to take advantage of. That is why both AA and DL are lobbying extensively behind the scenes for the ATSB to reject UA's loan guarantee application.

 

[UnitedChicago]

Good point UAL777Flyer. I'm confident that UA would survive CH11 and emerge strong. Either way, we'll get back at AA and DA. Let's kick their ass!

I'm with you also on the back-and-forth. After reading the WSJ article last night...i was like great...it's all over.

But who knows. Keep the faith!

 

[UAL777flyer]

Actually, I don't pay any attention to what people are saying in the WSJ, Tribune, etc. Those fools don't know how to accurately report this industry. I read the stories, but take them with a silo full of salt, if you know what I mean. But, my wavering feelings just come from my gut instinct based upon the give and take with the ATSB and the little bit of intel that is hitting the public from respected trade publications like Aviation Daily and Aviation Week. I've heard that the ATSB is a little peeved about the pressure they're getting from UA in the form of the 30,000-plus letters of support from employees, as well as congressional lobbying, hence the leaked letter to Jake Brace last week. I could see this going one of two ways: either the ATSB gives conditional approval of our application, but conditions it upon much steeper requirements than we currently meet, thereby throwing into question whether we can meet them, or they'll simply play the time card to their advantage and drag this out. Arguably, we only have about 2-3 weeks before we'll be forced to file for Ch.11. So if the ATSB simply stalls on making a final decision, it might force us to file for bankruptcy because we simply run out of time.

However, I still think it's possible we get the loan. I think Tilton and the employees have made miraculous progress in a very short period of time. He has laid the foundation for solid leadership and direction that this airline has lacked for many years. I only wish we had him here when Creighton was given the reigns. I'm convined we wouldn't be discussing bankruptcy as an option if that were the case. But, we must deal with the hear and now. Will the ATSB cave in to UA's considerable political pressure? Will they acquiesce to the lobbying of AA and DL to reject our application? Who knows. I think our application is solid. But it ALWAYS worries me when non-airline industry people are in a position to make decisions that have severe ramifications for airlines.

 

[Taipan]

Some, like the Business Travel Coalition, which represents business travelers, maintain the ATSB should grant UAL's request because it needs to ensure the stability of the airline industry. A UAL bankruptcy [could] produce a 20% to 25% cost gap between UAL and [AMR unit] American Airlines ... forcing American to seek bankruptcy, said the BTC in its analysis of the ATSB application. Never in our commercial history has the U.S. had two major airlines -- two powerful national economic engines -- in bankruptcy at the same time.

Interesting

 

[UnitedChicago]

That's why I question AA's wisdom of wanting a UA BK. I know UA management loses control in CH11, but odds are that as long as the biz plan is viable, they'd emerge intact - albeit smaller.

AA would be screwed...excuse my french.

Either way, these so-called analysts should start to turn their srutiny towards AA. I don't think people realize how deep their problems run as well.

Bottom line, if they do file ch11...I won't be able to stand the probable clever headlines in the press:

probable headling 1: United flies into bankruptcy
probable headling 2: United lands in bankruptcy court
probable headling 3: Friendly skies are broke

 

[Rhino]

Jetz/Bus,

You missed the point. The bizplan presented the ATSB must demonstrate a 7% profit margin.

If the assumptions, either in cost or revenue, used to derive this are questionable or incomplete, the ATSB will require more detail, as they did with UAL.

BTW, FRNT and ATA did just fine during the last few years.