USA320Pilot
Veteran
- May 18, 2003
- 8,175
- 1,539
There are reliable reports the Pittsburgh hub negotiations are being held hostage to United Airlines on-going bankruptcy problems and the potential to move US Airways mainline, MDA, and other Express assets westward, to airports such as Chicago and Denver.
On Friday the U.S. bankruptcy court rejected the United's request for a six month extension to have exclusive rights to file its Plan of Reorganization (POR) and instead authorized only five additional months for the company to file its POR.
United chief financial officer Jake Brace told reporters following the Omnibus hearing the company has four major bankruptcy obstacles. The Chicago-based company must find a solution to its enormous pension problem, obtain a satisfactory resolution to its Dulles hub and Atlantic Coast Airlines problem, resolve municipal bond litigation with the UCT airports (San Francisco, Los Angeles, Denver, and Chicago; as well as the Port Authority of NY and NJ), and rejection of aircraft leases.
ALPA International President Captain Duane Woerth addressed the US Airways MEC in Open Session for two hours on September 11, with his main focus on the proposed Air Line Pension Act. Woerth told the ALPA MEC United is having the same bankruptcy problems as US Airways that included NPC's efforts to reject the credit card processing agreement, the company has been unable to get anybody to provide exit financing, and the government has changed their loan guarantee demands three times.
The ATSB is the only form of exit financing available, Woerth said. What's important to note is the exit financing must be used to repay up to $1.5 billion in debtor-in-possession (DIP) financing provided by J.P. Morgan, Citigroup, CIT Group, and Bank One.
Woerth told the MEC that United has been very close to violating the DIP covenants a number of times and the company had a little better summer than forecast. He is concerned about the airline financially this fall.
In addition, Susan Carey of the Wall Street Journal wrote on, Thursday, September 18, that "United wants to raise $2.5 billion in exit financing", which is $500 million more than the previous $2.0 billion guarantee denied by the Air Transportation Stabilization Board. Carey said the amount depends on the company's cash position and the price of the funding, quoting an unidentified source.
In fact, after the hearing Brace told reporters there was no specific timetable by which United, planned to file the updated plan with the ATSB, which I find interesting.
United's DIP covenants require the airline to be revenue and cash flow positive in October and have a cumulative October EDITDAR of $46 million and a November EDITDAR of $112 million, which could be very difficult to obtain.
Thus, based on Woerth's comments to the MEC, Carey's unidentified source, and the bankruptcy financing requirements, many observers have become much more sanguine about United's chances of emerging from its formal reorganization without an asset divestiture -- to raise exit financing.
Interestingly, Reuters reported on Friday Brace also said United may seek to raise more than $2 billion in financing through other means, but declined to specify in what form or through what capital markets.
Meanwhile, Pittsburgh Tribune Writer Jim Ritchie reported today Allegheny County Chief Executive Jim Roddey told a gathering of Pittsburgh business leaders yesterday at the St. Barnabas Health System's Kean Theatre in Richland, Pennsylvania; despite the best efforts of county and state negotiators, the airline's hub at Pittsburgh International could be doomed. "The carrier needs to merge," he said.
"We face losing the hub either way," Roddey said. "But we will keep it as long as we can."
Also noteworthy, US Airways chairman of the board David Bronner previously speculated to Charlotte Observer business writer Ted Reed that United has a 50-50 chance of surviving. Bronner said that if United were to sell assets, he would consider backing the purchase of some "if it would be beneficial to US Airways."
It's unclear how a potential corporate transaction could occur between the long-time potential marriage partners. However, in my opinion, we could see United divest of assets to US Airways. Any potential deal could be similar in scope to the Pan Am and TWA POR's, which could permit United to emerge from bankruptcy as a smaller airline, with the US Airways Domestic and Star alliances the "revenue umbrella" that would United to file an updated ATSB application that reasonably projects a 7% profit margin in 7 years.
Respectfully,
Chip
P.S. As a Miami (Ohio) grad, go MAC!
On Friday the U.S. bankruptcy court rejected the United's request for a six month extension to have exclusive rights to file its Plan of Reorganization (POR) and instead authorized only five additional months for the company to file its POR.
United chief financial officer Jake Brace told reporters following the Omnibus hearing the company has four major bankruptcy obstacles. The Chicago-based company must find a solution to its enormous pension problem, obtain a satisfactory resolution to its Dulles hub and Atlantic Coast Airlines problem, resolve municipal bond litigation with the UCT airports (San Francisco, Los Angeles, Denver, and Chicago; as well as the Port Authority of NY and NJ), and rejection of aircraft leases.
ALPA International President Captain Duane Woerth addressed the US Airways MEC in Open Session for two hours on September 11, with his main focus on the proposed Air Line Pension Act. Woerth told the ALPA MEC United is having the same bankruptcy problems as US Airways that included NPC's efforts to reject the credit card processing agreement, the company has been unable to get anybody to provide exit financing, and the government has changed their loan guarantee demands three times.
The ATSB is the only form of exit financing available, Woerth said. What's important to note is the exit financing must be used to repay up to $1.5 billion in debtor-in-possession (DIP) financing provided by J.P. Morgan, Citigroup, CIT Group, and Bank One.
Woerth told the MEC that United has been very close to violating the DIP covenants a number of times and the company had a little better summer than forecast. He is concerned about the airline financially this fall.
In addition, Susan Carey of the Wall Street Journal wrote on, Thursday, September 18, that "United wants to raise $2.5 billion in exit financing", which is $500 million more than the previous $2.0 billion guarantee denied by the Air Transportation Stabilization Board. Carey said the amount depends on the company's cash position and the price of the funding, quoting an unidentified source.
In fact, after the hearing Brace told reporters there was no specific timetable by which United, planned to file the updated plan with the ATSB, which I find interesting.
United's DIP covenants require the airline to be revenue and cash flow positive in October and have a cumulative October EDITDAR of $46 million and a November EDITDAR of $112 million, which could be very difficult to obtain.
Thus, based on Woerth's comments to the MEC, Carey's unidentified source, and the bankruptcy financing requirements, many observers have become much more sanguine about United's chances of emerging from its formal reorganization without an asset divestiture -- to raise exit financing.
Interestingly, Reuters reported on Friday Brace also said United may seek to raise more than $2 billion in financing through other means, but declined to specify in what form or through what capital markets.
Meanwhile, Pittsburgh Tribune Writer Jim Ritchie reported today Allegheny County Chief Executive Jim Roddey told a gathering of Pittsburgh business leaders yesterday at the St. Barnabas Health System's Kean Theatre in Richland, Pennsylvania; despite the best efforts of county and state negotiators, the airline's hub at Pittsburgh International could be doomed. "The carrier needs to merge," he said.
"We face losing the hub either way," Roddey said. "But we will keep it as long as we can."
Also noteworthy, US Airways chairman of the board David Bronner previously speculated to Charlotte Observer business writer Ted Reed that United has a 50-50 chance of surviving. Bronner said that if United were to sell assets, he would consider backing the purchase of some "if it would be beneficial to US Airways."
It's unclear how a potential corporate transaction could occur between the long-time potential marriage partners. However, in my opinion, we could see United divest of assets to US Airways. Any potential deal could be similar in scope to the Pan Am and TWA POR's, which could permit United to emerge from bankruptcy as a smaller airline, with the US Airways Domestic and Star alliances the "revenue umbrella" that would United to file an updated ATSB application that reasonably projects a 7% profit margin in 7 years.
Respectfully,
Chip
P.S. As a Miami (Ohio) grad, go MAC!
