Us Airways Said To Be Pursuing Big Asset Sales

[jimntx]

Question...
What's to "sell" in the Shuttle? As we have "open skies" domestically (in theory at least), there are no "routes" to sell with the exception of certain airports like DCA. And, god knows, there are enough a/c parked in the Western deserts to start up 2 new major airlines. So, I don't see that the a/c themselves have that much value.

Are there "valuable" routes in the East that only the Shuttle serves? I know that here in Texas there are some fair to middling size cities that wouldn't have service at all if it weren't for American Eagle. But the Shuttle is not really a "regional" is it?

As a furloughed AA employee, I follow what is happening to all of you at US Airways with a lot of sympathy. I'm afraid that this looks like (as some have said) the first step down the "slippery slope". How many great airlines of the past initiated the beginning of the end by paying the bills with an asset sale? Rumors abound at AA about AE being for sale.

Let's all hope that for you it's just mgt blowing smoke to get its way with the unions. Unfortunately they have what AMR did to us with their bankruptcy threats as an example. In our case, the huffing and puffing worked like a charm.

 

[jack mama]

What are the competitive concerns to spilling all the details to the employees without the union leaders on board? If they spill all the beans, our competitors could act to make sure it can't happen.

They are walking a fine line...

 

[USA320Pilot]

PineyBob:

PineyBob said: "The problem is that right now he may be executing phase one of the plan. I smell "Labor Attorney" all over this."

Chip comments: I agree, good point.

Chip

 

[Frontier69]

Isn't it also interesting that Mesa backed out of their pursuit of ACA? I wouldn't be surprised if Dave told his pal J.O. to hold steady for a better investment of DCA/LGA slots once the ATSB loan is paid off. It's just a matter of time before USAirways is a subsidiary of Mesa!

 

[Hula Girl]

This is a fine example of The Golden Rule. He who has the gold, makes the rules.

 

[7.5victim]

When labor did not budge he sold the flight kitchens and then sold off Air Wisconsin, to prove his point about selling the airline.

Chip, Air Whisky was sold off after the AFA grieved UA's purchase of the carrier. AFA fought the purchase because it violated Scope. All flight attendants on UA flights operated by a UA owned carrier must be on the AFA seniority list. Selling Air Whisky was going to happen, no matter what.

 

[ClueByFour]

Isn't Dave trying to present the plan to employees through their unions? If the unions are unwilling to come to the table to talk, then how does the plan get presented?

He goes on the road and presents the plan. If enough pressure is brought to bear by the membership of each respective union, negotiations will presumably commence and some type of "plan" gets a vote.

I'd almost be willing to wager he's not presenting the "plan" and blaming it on the labor leadership because he knows the rank and file will shoot down "the plan" and all of this is simply FUD and CYA type stuff.

 

[ClueByFour]

Oh he has a plan. As an observer, one thing I have noticed is that he may be wrong but he NEVER ill prepared in his planning.

How then do you characterize the failure to adequately transform the airline inside of Chapter 11 protection?

 

[MarkMyWords]

The "Business Plans' have never been presented by the unions. The union leaders are members as well and only act as the "voice of the members". The plan must be presented to the members first. A +B = C.

Dave is looking for the leadership to endorse and promote his paln. That is not the leadership's role.

I thought that the chain of command for any changes to a Contract flowed from the company to the union to the employees for vote.

I agree that Dave could bring the plan to the masses, but to get anything changed in the Contract, then it has to work through the union, doesn't it?

 

[MarkMyWords]

I'd almost be willing to wager he's not presenting the "plan" and blaming it on the labor leadership because he knows the rank and file will shoot down "the plan" and all of this is simply FUD and CYA type stuff.

Good point. Thanks

 

[AP Tech]

Well boys and girls the plot thickens!!!!! Like his predecessor Stephen Wolfe, Dave will leave the airlines with millions in his pocket......but in his mind like Wolfe's, he will consider himself a failure for not getting the job done!!!!!

 

[ss278]

...I would not doubt that jetBlue would love to get a hold of the Shuttle as much as AA once did...



The Shuttle is not nearly as valuable as it once was. Since 9/11 traffic is down for both US Air and Delta. I would be surprised if either company is making the kind of money on it as they used to. Perhaps no one is making money on it. There might only be room fpr one player here instead of two.

There are simply too many other desirable choices these days.

 

[Piedmont4US]

...I would not doubt that jetBlue would love to get a hold of the Shuttle as much as AA once did...



The Shuttle is not nearly as valuable as it once was. Since 9/11 traffic is down for both US Air and Delta. I would be surprised if either company is making the kind of money on it as they used to. Perhaps no one is making money on it. There might only be room fpr one player here instead of two.

There are simply too many other desirable choices these days.

Very true.

I agree there needs to only be one player at LGA.

Which means Delta must go. Plus they have an inconvienent location for their shuttle.

 

[ITRADE]

Uhhhhh.....There are basically three Shuttles now, not two. AA, DL, and US.

 

[DHC8Driver]

Chip said:

...but the issue is Brooner and his 51% voting power will not see his investment go into bankruptcy where he will become just another creditor. He can't because he has a fiduciary responsibility to his retirement fund


DCAflyer observes:

Chip, interestingly, as a board member, he also has a fiduciary duty to the investors of UAIR. I wonder if this potential (and now seemingly mounting) conflict of interest has Dr. B beginning to feel that he's painted himself into a corner. Unless I'm wrong, all of UAIR's debt burden to RSA was converted to a superior-class stock, which puts the system's placement for payback below creditors and above general-class stockholders. This could get really ugly. It couldn't have happened to a nicer guy!

I don't think it is as cut-and-dry as Chip proclaims.
Bronner does indeed have a fiduciary responsibility to the share holders of USAirways. That he has a responsibility to his "fund" for the employees of the state of Alabama is moot to those Usairways shareholders. As the majority of the BOD, he has the responsibility to protect the value of the shares of Airways stock. If he decides his "investment" in Airways was a bad one, he can't just liqudate to recoup his investment and to hell with everybody else. USAirways is a public company and has a whole lot of people not named Bronner who own Airways stock and have a vested interest in the long term prospects for this company and their investment. If Bronner does decide to liquidate the company, he just doesnt take his and everybody else be damned. He would open himself up to enormous share holder lawsuit potential.

Also, Bronners investment has been converted to a stock with very favorable terms. This company needs to survuve for Bronner to realise that investment. see below, taken from the Airways stock filing withe the SEC:

In exchange for its $240 million investment, RSA received 20,652,593 shares of Class A Common Stock, 5,000,000 shares of Class B Common Stock, 75,000 shares of Class B Preferred Stock (see below), 1,380,570 Class A-1 warrants and 1,380,570 shares of Class A Preferred Stock. The fair values reflected in the above table as of March 31, 2003 related to RSA's equity securities were as follows: $152 million for the Class A Common Stock, $37 million for the Class B Common Stock, $48 million for the Class B Preferred Stock and $4 million for the Class A-1 Warrants.

The Class B Preferred Stock issued to RSA is subject to mandatory redemption on its maturity date, March 31, 2011. The Company's policy is to classify equity instruments with characteristics of liabilities and equity including those with mandatory redemption features as liabilities and corresponding dividends and accretion of discounts are recorded as interest expense. Accordingly, the Class B Preferred Stock with a fair value of $49 million and $48 million as of September 30, 2003 and March, 31, 2003, respectively is included in long-term debt. Upon its maturity, the Company will be required to redeem each share for $1,000, or $75 million in aggregate, plus accrued and unpaid dividends. Class B Preferred Stock holders are entitled to cumulative quarterly dividends at a rate of 8% per annum paid in cash by the Company. After March 31, 2006, the Company may redeem for cash each Class B share at a redemption price initially equal to $1,025 declining ratably to par value through March 31, 2010

So you can see it is in Bronners best interest to keep USAirways around. To liquidate means his 20.6 million common stock could be as worthless as everybody elses stock, his class B stock would not accrue interest at 8% and no dividends would be paid. Finally, his 48 million investment in class "B" preferred could not be redeemed for 75 million at maturity.

Bronner has indeed painted himself into a picture. Loose his money in Airways, he could be fired as head of the good people of Alabama's retirement fund, Screw Airways to try to recoup his money, if he even can, and incur the rath of the 49% of shareholders who don't want to loose their investment either.