Us Airways U United Airlines Update

[usfliboi]

Chip! I for one agree something is in the works. I believe Bronner and seigal are working on something. With the remarks that Bronner has constantly mad about wanting to aquire some assets, i really believe he and his DEEP POCKETS will eventually aquire some of ual assets, if they ever decide to sell and raise money. I also believe we need to make sure our own finances are in order which right now they arent. Interesting to see when where and how. I have a feeling its gonna be sooner rather than later .....

 

[funguy2]

US Airways – United Airlines Update

Today US Airways Phoenix station manager Rob Rodrick told me US Airways will move its Los Angeles gates and facilities from terminal 1 to United’s terminal 7 in January.

Nothing earth shattering Chip!
We were told this would happen when the alliance started.
Not a valid point to try and prove yoiur merger dream.

Just like yesterday when, in another thread, Chip quoted an article (among others) which said that economies of scale would be created by potentially allowing US and European airlines to merge by 2010. This was also a sign of the UCT, dispite that it was not even about domestic mergers and alliances, and is still a pipe dream for 2010 given the current regulatory environment.

But that doesn't stop Chip from connecting it to the UCT.

Also, Chip connected the UCT with other recent, individual, vague comments about industry consolidation from folks at both UAL and UAIR. These are also signs of imminent UCT, even though we've been hearing about the likelihood of industry consolidation from almost everyone in the industry since 9/11/01. Further, we've heard about industry consolidation during every down cycle since 1978. But because this "news" came from UAL and UAIR, the UCT is coming any day now.

I guess the fact that alliance partners might want to create easier connections by co-locating at large airport could not possibly be the sole purpose behind moving gate locations. By Chip's logic, CAL's move into DAL's terminal at DFW would be a sign of an acquisition between these carriers.

Chip makes a case that almost every single piece of minor alliance or individual UAIR, or UAL news, is a sign of the imminent UCT.

Here is my theory: Two years ago, Chip heard from an inside source, or maybe even overheard while wandering around CCY, about a "Unique Corporate Transaction". However, about a year and a half ago, both companies decided to pass. However, they had no obligation to inform Chip because he shouldn't know about it anyway. So Chip continues to go on and on about the UCT sighting every possible minor quote about industry consolidation, because nothing specific is said because there is nothing specific for the companies to say.

Furthermore, if Chip did have direct information about an impending UCT, he would most likely be violating certain SEC disclosure regulations by telling us about it. Also, somebody who has direct knowledge, would know better than to discuss it on an internet chatboard. If Chip does have such knowledge, it would seem to me to be very similar to the current Martha Stewart investigations - Chip would have direct knowledge of something that could allow him to profit via manipulation of UAIR and/or UAL stock.

I am not trying to personally attack you Chip. But this UCT bit is beyond speculation. You offer no real information about it. You do not respond to questions about the specific benefits of the UCT, nor have you answered any questions about who would fund such a deal. You just keep telling us that in fact it is coming because somebody said that airline consolidation is likely.

I think airline consolidation is likely. I think UAIR will be involved. I do not think that UAIR holds any cards in this poker game. Rakesh and Wolf did a bad job bluffing (i.e. the lack of a credible Plan B), and Seigel hasn't drawn a useful card despite trying to do the 'right' things (lower costs, increase revenue, increase liquidity), but continues the bluff because he's playing the cards he was given - and is doing everything he can to avoid showing his hand. And thats where we are.

When you can tell me something useful about the UCT, please do. I will be interested to hear it. In the meantime, every small news item is NOT a sign of the UCT.

 

[USA320Pilot]

United posts October profit, meets financing terms

See Story

Regards,

Chip

 

[USFlyer]

Here's one quick way to reduce costs: In APOs where both UA and US have clubs, close the one of the smaller carrier. Then, UA-US agree to let the other carrier's club members use a club of the larger carrier regardless of who they are flying. For example, in LAX, close the US LAX club and let US members use a Red Carpet Club when flying EITHER US or UA. In PHL, close the UA PHL club and let UA members use a US Airways Club when flying EITHER UA or US.

 

[USA320Pilot]

Funnyguy2:

I’m not going to go tit-got-tat with you and the UCT information was told to me by a source that has direct access to the US Airways executive suite. You can believe what I write or not, it really doesn’t matter and it’s your choice.

The reason I post other public information is that people try to “shoot the messengerâ€￾, not with facts, but with emotion because they do not like the news.

Regardless, there is reason to believe the parties are moving away from the UCT plan because it does not lower unit costs, which will be a key going forward.

United is making progress in its restructuring and I have said all along they will likely emerge from Chapter 11 bankruptcy, but the airline has four enormous problems to over come before it can emerge, e.g. the pension, municipal bond litigation, EETC lease problems, and the Dulles/ACA/Mesa mess.

In regard to the pension, just look at today's New York Times article titled "A Plan to Postpone Pension Financing at United."

According to the Times, United's plan, which was described in general terms by company executives and people briefed on the deliberations, would require the federal agency (PBGC) that insures pensions to take on a significant risk, and the agency is expected to resist it forcefully.

See Story

Without a successful resolution to all four of these problems, United will have a difficult (if not impossible) time obtaining a loan guarantee and an equity investor. Furthermore, the dramatic LCC expansion will likely have a negative effect on the company’s loan guarantee application because Fitch Rating is likely going to forecast lower revenues to the ATSB due to the significant LCC expansion plans since US Airways received its loan guarantee approval.

For example, today Forbes reported AirTran Seen Doubling In Size In Four Years.

See Story

How do you think this and other LCC expansion news will effect future revenue forecasts, which must be containted in the loan guarantee application to meet the OMB guidelines of a 7% profit margin within 7 years?

Finally, if you have been following my recent thought process, it appears the parties are moving away from the UCT and evaluating some other form of an integration, although it’s unclear (maybe even to management) how this will end up. In my opinion, we could see RSA become an airline holding company for US Airways and United, similar in scope to Air France and KLM, which will eventually be merged once the economic climate improves.

Regards,

Chip

 

[Busdrvr]

The companies PR was a little clearer on the pension issue and the magnitude of the operating profit. Chip found a "more condensed" version.....



http://biz.yahoo.com/prnews/031120/cgth072_1.html

 

[767jetz]

Chip,

It appears that the number people who object to your constant speculation is growing. (Your fellow employees no less)

I'm curious if you intend to comment on UA's results for October. I'm sure you will have some negative spin, but I am curious nontheless.

Let me re-cap: $2.5 BILLION in cash. $7 MILLION per day operating PROFIT. Industry leading improvement YOY.

Oh yeah... and we met DIP covenants for OCTOBER and expect to meet them in NOVEMBER as well.

Wasn't it you who repeated over and over again how Duane Woerthe told you at some meeting that UA will not meet it's DIP requirements? Aren't we supposed to lose something like $400mil according to you? Will you now admit that your sources are often incorrect?


No one is shooting the messenger. We are just trying to point out that your sources always have been, are, and will continue to be wrong. <_<

 

[Busdrvr]

"Aren't we supposed to lose something like $400mil according to you? Will you now admit that your sources are often incorrect?"

Come on now, chip was only "reporting" the most negative numbers he could find... I was expecting a BE month (based on yoy Oct traffic numbers, and quarterly revenue numbers from 2002s Q4). Apparently, I wasn't optimistic enough.... Looks like a LARGE Q4 operating profit (net lost ONLY after significant NON CASH re-organization expenses)

 

[Fly]

Separately, in response to a New York Times article from November 20, 2003, regarding pensions, Brace stated, "Some people are trying to confuse our situation. (Do you think he's talking about Chip?) The facts are that we can fund our pension obligations on the standard, non-accelerated timetable; we intend to continue to fund our pension obligations ; and we do not want to shift this burden to the Pension Benefit Guaranty Corporation (PBGC) and the American taxpayer.

 

[Fly]

Chip Munn said:

Finally, if you have been following my recent thought process

Fly thinks:

Are you serious? :blink:

 

[funguy2]

The reason I post other public information is that people try to “shoot the messengerâ€￾, not with facts, but with emotion because they do not like the news.

Well, that's why I was asking for the FACTS.

Regardless, there is reason to believe the parties are moving away from the UCT plan because it does not lower unit costs, which will be a key going forward.

I agree. This has been evident to me for some time. Surely it has been evident to the Executive Suite for longer than I. This is why I have said that I believe the likelihood of the UCT has been dramatically reduced if not elimintated for some time. This did not happen this week. If this looked promising, it would have been done, pronto, when the opportunity presented itself. Maybe this horse didn't get shot until this week, but its been sick for a long time.

I agree that UAL is a mess... As is UAIR (although to a lesser extent).

How do you think this and other LCC expansion news will effect future revenue forecasts, which must be containted in the loan guarantee application to meet the OMB guidelines of a 7% profit margin within 7 years?

Its obvious that LCC Growth is a problem for both companies. It seems as though it is a bigger problem for UAIR, as UAIR seems to be the focus of several LCC's. However, UAIR has some valuable assets. This is why I believe UAIR will be an acquisition target, as I have stated many, many times. I also believe, with the right moves, and precision focus, UAIR can remain an independent, viable, profitable airline. However, the focus thus far hasn't seemed to be precise enough. Maybe a direct attack on PHL will galvanize management and rally the troops. One can only hope.

Finally, if you have been following my recent thought process, it appears the parties are moving away from the UCT and evaluating some other form of an integration, although it’s unclear (maybe even to management) how this will end up. In my opinion, we could see RSA become an airline holding company for US Airways and United, similar in scope to Air France and KLM, which will eventually be merged once the economic climate improves.

I think this situation has a very small chance at happening. The comparison is not exactly apples to apples, however. Neither KLM nor Air France are bankrupt. It is a lot less risky to merge two relatively strong airlines which are having problems because of a worldwide recession vs. two recently bankrupt carriers which are having extreme liquidity, labor, revenue, and competitive problems.

Furthermore, RSA is a retirement fund, not venture capital. If the manager of my retirement fund wanted to buy two bankrupt airlines and merge them, I would move my money into something more conservative. Does that mean Mr. Bronner won't do it? Not necessarily. If successful, the reward is high, but the risk is extreme. In my opinion, too extreme for a retirement fund. This risk/return ratio is more on par with a venture capitalist or bankrupcy specialist.

American acquired TWA a few year back. This move, along with 9/11 and the recession nearly forced bankrupcy. Texas Air tried to merge several bankrupt carriers in the late '80's. It was largely unsuccessful. While CAL is still with us today, the attempts at merging bankrupt Frontier, bankrupt Eastern, and almost bankrupt PEOPLExpress into Continental helped force Continental into bankrupcy during the recession of the early 1990's. I know there were many many other factors, and that is not a can of worms I am trying to open. I am merely pointing out that other recent attempts to acquire and merge bankrupt airlines have resulted (or nearly resulted in the AA case) with the owners of those companies losing the entire value of what they owned.

So your proposal for RSA to hold both carriers and merge at a later time is not outlandish. However, in my opinion, it is very unlikely. There are more rational solutions out there.

You have also repeatedly suggested that UAIR would be able to acquire UAL assets. Maybe. I believe that if UAL is going to shed assets (so far it looks like this will not happen), they will go to the highest bidder, not necessarily a code-share partner. While the partner link-up has some benefits for UAL (retaining the routes through alliance, for example), it does not serve the primary goal: Sell assets for highest return. Furthermore, there is no guarantee that UAIR and UAL remain partners forever... Remember UAIR and British Airways? Remember CAL and America West (which were both owned in part by TPG)? I would think that UAIR may not be able to out-bid some rivals without RSA help. Again, I think RSA pouring more money into a questionable company comes with extreme risk - not typical of a retirement fund. When you look at what assets UAL might shed for cash (i.e. Pacific routes/slots, LHR slots, etc), it seems obvious to me that UAIR would find a fight on its hands with most of them, and in my opinion probably be out-bid. In other words, not the slam dunk you continually suggest it to be.

The only support for RSA investing more money into UAIR, or into UAL, is that they have already been unconventional. And this is true. However, as I have stated, more RSA investment seems like an extreme risk to me.

-Funguy2

 

[767jetz]

duplicate.

 

[767jetz]

Let me re-cap: $2.5 BILLION in cash. $7 MILLION per day operating PROFIT. Industry leading improvement YOY.

I stand corrected on my previous post, so here it is again with the correct numbers:

Chip,

It appears that the number people who object to your constant speculation is growing. (Your fellow employees no less)

I'm curious if you intend to comment on UA's results for October. I'm sure you will have some negative spin, but I am curious nontheless.

Let me re-cap: $2.5 BILLION in cash. $60 MILLION operating PROFIT. $7Million per day POSITIVE cash flow. Industry leading improvement YOY.

Oh yeah... and we met DIP covenants for OCTOBER and expect to meet them in NOVEMBER as well.

Wasn't it you who repeated over and over again how Duane Woerthe told you at some meeting that UA will not meet it's DIP requirements? Aren't we supposed to lose something like $400mil according to you? Will you now admit that your sources are often incorrect?


No one is shooting the messenger. We are just trying to point out that your sources always have been, are, and will continue to be wrong.

 

[Cosmo]

Here's a Dow Jones article issued this evening that has a more in-depth discussion about the pension issues facing United, noting that the carrier intends to fully meet its pension obligations, albeit on the standard non-accelerated basis. Apparently, the only relief that United is seeking is that it doesn't want to be required to make accelerated payments into its pension plans, as it is directed to do by current Federal law.

 

[Busdrvr]

Meanwhile, the long-bond (30 year) gained another buck today (bad for pensions, mean even LOWER "discount rate")