United Needs New Plan

[casual rat]

I'm wondering how much Capital is available to an Industry who sells its product for less than it costs? There is only a finite amount of money available for Investment isn't there?

 

[JungleClone]

The fact that UA's POR doesn't mention anything about an aircraft acquisition or plans for future capital expenditures is not necessarily a bad sign. As has been pointed out by others, no company is going to tip their hand regarding their future plans, especially in an industry that is hyper-competitive. It's basically the old adage of "don't volunteer information". The POR will include only what it HAS to include, and probably not much else.

My big problem with the POR is that the numbers are not realistic. The plan assumes oil at $50 per barrel which hasn't been realistic in the last month, let alone for the future. UA should bake into their plan oil in the $65-$70 per barrel range. That should be the near-term target. Longer term, that price is going to climb much higher. The simple fact is that world oil production can no longer keep up with demand. The situation is going to get a lot worse. But in the meantime, UA needs to take a train back to reality and understand that oil will probably never go back to $50 per barrel.

 

[767jetz]

The plan assumes oil at $50 per barrel which hasn't been realistic in the last month, let alone for the future. UA should bake into their plan oil in the $65-$70 per barrel range.

[post="302452"][/post]​

What many people are missing is that the "$50" oil plan is an average and based on UA's fuel hedge. Believe it or not UA is hedged to some degree. (Not sure the exact number, but it's somwhere around 25-30%) So $50 is more realistic than some are assuming.

 

[ualdriver]

My big problem with the POR is that the numbers are not realistic.  The plan assumes oil at $50 per barrel which hasn't been realistic in the last month, let alone for the future.  UA should bake into their plan oil in the $65-$70 per barrel range.  That should be the near-term target.  Longer term, that price is going to climb much higher.  The simple fact is that world oil production can no longer keep up with demand.  The situation is going to get a lot worse.  But in the meantime, UA needs to take a train back to reality and understand that oil will probably never go back to $50 per barrel.

[post="302452"][/post]​

I think many on this forum are reading WAY too into the plan in this sense- IT'S JUST A PLAN.

Have you ever heard the old military addage, "The best laid war plans never survive first contact with the enemy."? When you read this POR, think about that saying. As soon as we exit bankruptcy, we'll be making first contact with the enemy. Just about anything (within reason) goes, whether it's in this plan or not. That includes buying airplanes, mergers and acquisitions, the price of oil, etc., etc.

It is absolutely IMPOSSIBLE to predict what the price of oil will do next week, never mind in 2009. If you read the UAL "BIG PLAN," (I have not read all of it I admit) it pretty much says that Wall Street feels that oil will fall into the mid $40 to 50 per barrel range. Since Wall Street gives us the big bucks for exit financing, and they think oil will fall into that range, then Tilton and the boys are going to base their business plan on that assumption.

The BIG PLAN also states, ".......if long term oil prices are significantly higher than are contemplated today, they will drive industry fare increases or structural changes, such as capacity reductions...........Carriers have stated that sustained high oil prices will cause the industry to raise fares - as is occuring in 2005.......The debtors believe that the reorganized operations will allow the Reorganized Debtors to be fully competitive with the major network carriers in the face of higher fuel prices." Will the above be true? Who knows. The guys with the fat wallets giving us exit financing seem to think so!

 

[JungleClone]

Wall Street? I hate to break it to you, but Wall Street is not exactly the place to go to seek accurate information. You have to look at the entire geo-political situation to size up where oil is headed. Don't just read the industry info and opinion. Research the data coming forward from numerous oil industry folks, especially those whose reputations are solid. $40-$50 per barrel oil? You're never going to see oil prices that low ever again. We all might as well just face it. We are on the brink of peak world oil production, if we haven't reached it already. That's the point at which demand finally outpaces production. The only folks who can even hint at production increases are the Saudi's. And even their ability to raise production raises eyebrows because of the disagreement on how much oil is left in the Ghawar field, the largest on earth. Keep in mind that OPEC countries forbid audits of their oil fields from outside entities. They're basically state kept secrets. Therefore, we must take the word of OPEC that reserves they're carrying on their books are accurate. Hmmmmmmmmm, wasn't it just Shell who was recently caught grossly overstating their booked reserves? The bottom line is that you have to take anything OPEC says with a huge grain of salt.

Once the notion of Peak Oil has finally been acknowledged by the mainstream, including Wall Street, the effect on the global economy will be devastating.

This industry is only just beginning to feel the impact of an oil crisis. It's going to get MUCH MUCH worse going forward.

Even with a 25-30% oil hedge for 2006, baking $50 per barrel oil into UA's POR is beyond realistic.

 

[UALDC767]

Jungle,

"Don't just read the industry info and opinion. Research the data coming forward from numerous oil industry folks, especially those whose reputations are solid. $40-$50 per barrel oil? You're never going to see oil prices that low ever again."

So you would agree that a 30 year oil industry worker who was CEO of one of the largest Oil companies would have a pretty good, educated idea of where oil is going for the next five years.....can't get much more insider than that. Right?

I mean jeez......Tilton got lambasted, and still does, since he wasn't an airline insider when he took the helm. (looks like a lot of those other companies with career airline execs are doing just dandy) And now he gets crap for supposedly having no clue about oil pricing? Just who in the airline business would have a better grasp of the subject and contacts in the Oil world than Tilton?

And never ever again is a long time........will I ever see .78$ for a gallon of unleaded....I highly doubt it but I wouldn't ever say never ever again.

DC

 

[ualdriver]

Wall Street? I hate to break it to you, but Wall Street is not exactly the place to go to seek accurate information.s are solid. $40-$50 per at production increases......Even with a 25-30% oil hedge for 2006, baking $50 per barrel oil into UA's POR is beyond realistic.

[post="302771"][/post]​

Aaahhh. I get it. You're the peak oil'er, Hubbert's Peak, etc., type of guy. Well, if you really think the world is at peak oil production right now, I assume you have massive shorts in just about every financial market in the world, have gold bars in your safe deposit box and you have a few years of rations in your basement right next to your fully stocked gun case? 🙂 Sorry, I don't think we're at peak oil....yet! But that's certainly an interesting discussion for the peakoil.com forums....

Like I said before, UAL's business plan is based upon what Wall Street thinks about the future price of oil. Whether you or I or Hubbert agree with those assumptions
is irrevelant since the big banks have all the cash for our exit!

 

[novaqt]

Jungleclone:

With all the geo-political and oil industry research you are doing to arrive at or believe we are at peak production right now, I would like to point out that may be the case today. The oil refineries have not built any new ones or updated the old ones with new equipment for many, many years. What the oil companies are doing price wise is build up their bottom lines so that they can invest in new refineries and more technologically updated equipment. It takes money. It also means to change the laws that environmentalists previously pushed through to protect the environment and wildlife. This means that the oil companies want to be able to drill deeper than current day equipment allows. Explore and build new refineries in locations around the world so we are not so dependent on storm damaged Texas and Louisiana. This means we drill in Alaska. Explore for oil in Africa, India, China, etc. Also, it looks like the railroad industry might be coming back.

 

[casual rat]

Price-wise, 'the gouging' also provides 'Bonus Money' and PAC funds as well....Just my thoughts...