US business parter UA plans to return to basics, Business blueprint presented to creditors

[avek00]

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On 6/21/2003 8:55:54 AM iflyjetz wrote:

I''ll say this one more time; I am hoping that it will EVENTUALLY sink into your cranium case. You''ve broken an unwritten rule in the aviation industry; talking about the liquidation of another carrier in PUBLIC. Many do it in private, but it is reprehensible to encourage this type of discussion in public masquerading as an ''academic exercise.''
Even more amazing is that your carrier has gone through similar rough times, yet lack any understanding of how your words effect the employees of the carrier that you pontificate on fragmenting.
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1. Unwritten rules be d*mned. If it ain''t in the contract, then no one has to worry about it .

2. Unlike US, UA did not enter into BK with a clear plan on how to get out. UAL mgmt. continues to give schizophrenic commentary on how UAL is going to emerge from BK (one day its an LCC, the next day its by focusing on high-end travelers). Heck, the CEO and CFO can''t even agree on when the company is likely to emerge from BK -- how does that inspire confidence in a company''s chances for survival?

3. At UA, the employees WERE part of the problem, until very recently. Though management bears primary responsibility, the ALPA and IAM contracts greatly accelerated UAL''s fall into the crapper. It''s no secret that many UAL employees didn''t give a d*mn about UAL one way or the other until Uncle Sam said no to smoke and mirrors and the company had to seek bankruptcy protection.

 

[USA320Pilot]

Iflyjetz:

Iflyjetz said: "I'll say this one more time; I am hoping that it will EVENTUALLY sink into your cranium case. You've broken an unwritten rule in the aviation industry; talking about the liquidation of another carrier in PUBLIC. Many do it in private, but it is reprehensible to encourage this type of discussion in public masquerading as an 'academic exercise."

Chip comments: In nearly 30 years in aviation I have never heard of this unwritten rule. In regard to a potential UA liquidation, I have primarily discussed a domestic fragmentation of the Chicago-based company to prevent a total liquidation, as a means of developing an acceptable plan of reorganization, which would permit the disclosure statement to be supported by the unsecured creditors committee and approved by Judge Wedoff. I believe AVEK’s comments regarding the business plan are accurate, which should be the real interest of the UA employees.

Regardless, I take great pride in providing accurate information and when I voice my opinion I say "in my opinion" or "I believe" and I truly empathize with the issues facing UA employees, but I believe it's better to have information than to be left in the dark, which is probably why the UA employees visit this site. Finally, the news media routinely talks about a potential liquidation of UA. Have they broken this so called unwritten rule as well?

Best regards,

Chip

 

[trollydolly]

Chip Wrote: What if the US Flight Attendants demanded a pre-nuptial seniority agreement with your employee group, the UA Flight Attendants? How would you react?

Trollydolly Responds: Being that both carriers are under the AFA, this could not happen. The reason why, is that both carriers are under protection of the constitutional by-laws which govern the AFA. In order for this to happen, the by-laws would have to be changed. Changed not within each seperate carrier, but for all carriers in the AFA. As it stands... any carrier being purchsed by another carrier, and both carriers are under AFA contracts, the flight attendants from the carrier that is being purchased or acquired retain 100% their bidding seniority.​

 

[novaqt]

"Chip comments: In nearly 30 years in aviation I have never heard of this unwritten rule. In regard to a potential UA liquidation, I have primarily discussed a domestic fragmentation of the Chicago-based company to prevent a total liquidation, as a means of developing an acceptable plan of reorganization, which would permit the disclosure statement to be supported by the unsecured creditors committee and approved by Judge Wedoff. I believe AVEK’s comments regarding the business plan are accurate, which should be the real interest of the UA employees.

Regardless, I take great pride in providing accurate information and when I voice my opinion I say "in my opinion" or "I believe" and I truly empathize with the issues facing UA employees, but I believe it''s better to have information than to be left in the dark, which is probably why the UA employees visit this site. Finally, the news media routinely talks about a potential liquidation of UA. Have they broken this so called unwritten rule as well?"

Novaqt responds: Since you enjoy pontificating your analytical skills. Now is the time to reveal to everyone your RESOURCES! I''ve enjoyed reading your spin on your company and United, however those of us who have followed your posts, know that most of your analytical predictions, have not come true, eg. United/USAirways merger and now United bankruptcy.

I have to believe that your doom and gloom on United means just the opposite. United will emerge from bankruptcy in the 4th quarter of 2003 or 1st quarter of 2004. I personally prefer 1st quarter of 2004. So put that in you pipe and smoke it!

 

[USA320Pilot]

Novaqt:

On July 12 UAL Corp. and US Airways jointly submitted their 21-day Hart-Scott-Rodino Act notice to the Justice Department. This notice advised the government of the airline’s intent to complete the proposed transaction and required the regulators to render an antitrust opinion by August 1. Regulators have told sources that UAL submitted the final requested documentation to the Antitrust Division on July 13 and the parties genuinely tried to complete the deal.

On July 23 all interested parties met in Washington at the Department of Justice and the airlines aggressively lobbied the federal government to not oppose the transaction. The parties in attendance included airline senior management (from UAL, US Airways, AMR, and DC Air) the company’s antitrust attorneys, States Attorneys Generals from Pennsylvania, New York, and Maryland, Senator Arlen Specter (R-PA), and the Justice Antitrust Division staff lead by Deputy Attorney General for Antitrust Hewitt Pate.

Reports indicate both UAL and US Airways aggressively sought to complete the deal, but no one knows for sure if UAL’s efforts were designed to complete the transaction or to avoid a potential breach-of-contract lawsuit. Nonetheless, Pate was said to be a “problem solver†versus “problem maker†and he tried to broker a deal that the federal government believed was within established M & A guidelines and case law. The airlines had no choice but to submit the original UAL-US Airways MOU, amended by the UAL-AMR Corp. January 9 agreement, to complete the transaction by the August 1 termination date, because any material change would require up to another four month regulatory review per present M & A law.

During the July 23 meeting at the Justice Department reports indicate Pate offered a solution for the deal to proceed with a government “no action†letter. The proposed changes included eliminating DC Air, selling Washington National gates/222 slots to an established carrier(s), if this carrier was AMR eliminate the Shuttle Joint Venture/limits on American Airlines growth to permit AMR to create its own independent Shuttle, and sell approximately 15 PHL gates to provide effective competition for both the post-merger route monopoly/duoply issue.

Reports indicate UAL was agreeable to the governments requirements provided their would by no labor interference. Why? Simply put UAL found itself in a “catch 22â€. The Chicago-based airline is projected to lose over $1 billion this year, is experiencing a serious increase in costs, like other airlines has witnessed a stunning year-over-year revenue loss of approximately 10%, and has limited access to capital markets. With open labor contracts for the mechanics and ramp workers, coupled with the AFA mid-term wage increase demands/scope clause issue, UAL could ill afford to complete the transaction and pay $4.3 billion for US Airways (minus the capital obtained from the post-merger divestitures) plus assume $8.1 billion in debt, if the airline was going to face continued labor unrest.

Reports indicate UAL Corp. Chairman Jim Goodwin approached the unions about UAL’s predicament and the IAM was generally agreeable, but the AFA was not. The AFA said they would support the transaction and waive their scope agreements provided the company would provide the Flight Attendants with pilot type wage increases of 20%. The company rejected the AFA demand and when the union filed its lawsuit in U.S. District Court on July 26, UAL could not accept the governments brokered plan to complete the merger transactions and the deals collapsed.

Faced with no alternative and the airlines request to have the regulators announce their decision by July 27, the government was forced to issue its press release announcing it would seek injunctive relief to block the merger if the airlines attempted to complete both the UAL-US Airways and UAL-AMR transactions. In response, the airlines elected to jointly terminate the MOU and US Airways agreed to accept the $50 million termination fee. These two steps eliminated a US Airways potential breach-of-contract lawsuit and there is widespread speculation US Airways will not seek damages because the airline does not want to jeopardize any future relationship with United Airlines. Nonetheless, immediately after announcing the deals joint termination UAL surprisingly issued a “curious†statement.
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The airline said, "UAL Corporation intends to work with US Airways to determine the appropriate steps that need to be taken now that US Airways has acknowledged that the merger with United will not go forward.†This statement has increased speculation the airlines may at some point revisit a corporate transaction and low and behold the two airlines announced the doestic alliance followed by US Airways' acceptance in Star. Was anybody really surprised this happened?

[/SIZE]
[SIZE= 10pt]These on and off again marriage partners seemed destined to once again revisit some form of a corporate transaction. US Airways' chairman of the board David Bronner has said in three independent interviews that he is interested in acquiring United assets and it will be interesting to see how events unfold.

Since Bronner controls $25 billion in assets, what's your opinion of our chairman's statements?
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Best regards,

Chip[/SIZE]

 

[Cosmo]

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On 6/22/2003 1059 PM Chip Munn wrote:

US Airways'' chairman of the board David Bronner has said in three independent interviews that he is interested in acquiring United assets and it will be interesting to see how events unfold.

Since Bronner controls $25 billion in assets, what''s your opinion of our chairman''s statements?
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Chip:

Bronner has been quoted (by you and others) as saying that he would be willing to spend up to $3 billion to purchase various unnamed United assets on US Airways'' behalf. The prime assets -- those that would be the most sought-after and thus likely to be the most expensive -- that he would presumably seek to purchase would be United''s LHR and NRT route authorities. But aside from the fact that he might very well be outbid by other airlines (Delta for LHR and American for NRT, for example), DOT has long ruled that only airlines can hold route authorities. So for US Airways to have any chance of acquiring one or both of these route authorities, Bronner would need to invest that reported $3 billion in the airline, and then US Airways would need to bid for these route authorities.

But a further $3 billion equity investment by Bronner in US Airways would amount to approximately 12 percent of all RSA assets, on top of the roughly one percent ($240 million) already invested in US Airways. Don''t you think he would be violating his fiduciary duty to the RSA, and the Alabama retirees dependent upon it, if he invested a total of 13 percent -- more than one-eighth -- of ALL of the RSA''s assets in the highly volatile airline industry (with its historically very poor rates of return) and, at that, only in one airline?

 

[USA320Pilot]

Cosmo:

Cosmo said: "Bronner has been quoted (by you and others) as saying that he would be willing to spend up to $3 billion to purchase various unnamed United assets on US Airways' behalf."

Chip asks: "Can you show me where Bronner and I said this?" I would be interested in seeing this for the first time, since I have never seen or said this. In regard to your speculation on assets, with all due respect, I disagree with your comments. Moreover, AA may not be able to avoid bankruptcy and it would surprise me if they bid for UA assets. Again, what makes US an attractive divestiture partner is that UA could code share with US on ony asset divestitures, which is significant revenue that could be included in the POR and loan guarantee application, which may be necessary for UA to obtain exit financing and emerge versus liquidate.

Best regards,

Chip

 

[Cosmo]

Chip:

I really thought that I had read one or more posts by you that quoted Bronner regarding his willingness to spend up to $3 billion to acquire United assets. I looked through a few recent United/US Airways liquidation/asset purchase/UCT threads without finding any such quote from you, so I accept your comment that you never said it. My apologies.

But IMHO, the basic thrust of my earlier comment still stands. You stated in a reponse to novaqt last night that:

"US Airways'' chairman of the board David Bronner has said in three independent interviews that he is interested in acquiring United assets and it will be interesting to see how events unfold.

Since Bronner controls $25 billion in assets, what''s your opinion of our chairman''s statements?"

The clear implication by Bronner is that he is willing to spend serious sums of money to acquire assets of United, which to me means anything up to several billion dollars when one considers which of United''s assets are the most desirable -- the LHR/NRT route authorities (which, as I mentioned previously, DOT will only allow airlines to purchase), gates and equipment at one or more of United''s hubs, slots at DCA/LGA/JFK, and perhaps some of United''s aircraft (like A320s and/or B777s). Thus, I still believe that any significant purchase of United''s assets by Bronner would bring up fiduciary responsibility issues involving too large a percentage of the RSA assets being placed in one highly volatile industry, thereby placing some limit on the amount of United''s assets that he could buy.

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On 6/23/2003 12:13:05 PM Chip Munn wrote:

Again, what makes US an attractive divestiture partner is that UA could code share with US on ony asset divestitures, which is significant revenue that could be included in the POR and loan guarantee application, which may be necessary for UA to obtain exit financing and emerge versus liquidate.
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You continue to maintain that US Airways is "an attractive divestiture partner" for United. Yet I (and others) have repeatedly pointed out to you that, according to the United/US Airways code-sharing agreement, all revenue for a flight goes to the carrier that actually operates the flight. So while keeping the revenue in the Star Alliance "family" is nice, how does it benefit United''s bottom line? How does it improve, or even maintain, United''s unit revenues? Indeed, there is an especially pernicious effect on United as its operations are reduced faster than its costs, increasing its unit costs as overhead items are spread across a smaller operation. Contrary to your assertion, such an asset divestiture could actually make it more difficult for United to emerge from bankruptcy.

 

[Bear96]

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On 6/20/2003 4:53:41 PM Chip Munn wrote:

Bear96:

Just one more thing...if you doubt what I say why don't you email Greg Taylor or Doug Hacker and ask them for the definition of Chicago East or Chicago West?

Best regards,

Chip

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Nahhh, I don't care that much. But my guess would be that it pretty much falls in line with how UA has been geographoncally delineating its domestic markets and services for years now-- as in, well before any U merger talk came on the scene: "midcon" service from ORD to the West Coast vs. (the now-defunct) Business One marketing concept, with hourly service from ORD to major East Coast cities, etc. Many internal UA departments have long been managerially organized into "West of ORD" and "East of ORD" units.

As has been pointed out before in reference to your prognostications, even a broken clock is right twice a day... throw enough mud at a wall and once in a while some will stick... pick your cliche. Maybe there is something to the idea that UA and U will eventually become one entity; maybe not. Who knows for sure? Probably not even Tilton or the Daves, at this point, and certainly not you, despite your implications to the contrary; but maybe you will end up being right.

As I have stated to you before, I agree with you that UA is in deep doo-doo and the pain for UA employees has only begun. There will be huge changes at UA in the year ahead, the depths of which most UA employees can't even conceive of yet.

So (as I have asked of you before), please stop lumping me in with the camp of those who are saying everything will be OK at UA or we will never see any kind of merger with U. My point is only about how you present your guesses about the future. I know you have a hard time listening to or discerning subtle points and differences of opinion from those who disagree with you, especially as you rail against the monolithic UA machine, but please try to recognize that not all UA employees think alike.

 

[PITbull]

Cosmo,

I will say this to your above thread regarding Dr. Boneheads further interest investment of an airline, if he acquires over 50% ot more of the Denominator Common Stock, OR 50% or more of the value of assets, OR more of Entity B''s Denominator common Stock control enitity A shall be deemed to "control" Entity B if Entity A, whether directly or indirectly, will constitue "change in control".

If that happens, (i''ll be waiting) AFA f/as will have their wages "snap back" all the way from June 30, 2002 rates. Soooooo, buy away!

 

[Dea Certe]

Piney''s got it right again!

 

[TheLarkAscending]

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On 6/23/2003 1143 PM PineyBob wrote:


This thread has denegrated into the just plain silly. Both entities have one foot in the grave and another on a banana peel and we had in excess of 100 posts arguing whose banana peel is more slippery.


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Ah, but the fun they''re having discussing the ever present possibilities while poised between the peel and the trench.​

 

[Fly]

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On 6/24/2003 6:46:33 AM PineyBob wrote:

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On 6/23/2003 11:25:56 PM TheLarkAscending wrote:

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Ah, but the fun they're having discussing the ever present possibilities while poised between the peel and the trench.​

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Good point! But can't we bash Delta and Mr. Mullins for a while. I think he is a more fun target. US & UA should be developing ways to kick his bean counting customer unfriendly ### back to the banking industry where he came from! The little [edited]!
Wait! I think calling an airline executive a [edited] is against the rules? But does it count if it is Leo Mullins?
Moderator Note- Yes it does Piney.

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Piney.......always cracking me up!

 

[USA320Pilot]

Deutsche Bank Securities Revenue Report


NEW YORK (Business Travel News) - Deutsche Bank Securities analyst Susan Donofrio, in a research note late last week, said the average lowest unrestricted business fare in U.S. markets was down 4 percent year over year for the second consecutive week. According to Deutsche Bank, US Airways'' 5 percent increase was the largest among major carriers, while the biggest decline, 15 percent, came from United Airlines.

Best regards,

Chip

 

[Cosmo]

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On 6/24/2003 4:52:58 PM Chip Munn wrote:

NEW YORK (Business Travel News) - Deutsche Bank Securities analyst Susan Donofrio, in a research note late last week, said the average lowest unrestricted business fare in U.S. markets was down 4 percent year over year for the second consecutive week. According to Deutsche Bank, US Airways'' 5 percent increase was the largest among major carriers, while the biggest decline, 15 percent, came from United Airlines.
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Chip:

The real issue is not the business fare levels themselves but instead the issue is the business revenues being generated by those fares at United, US Airways and the other carriers. In other words, has United''s 15% reduction in unrestricted business fares stimulated enough new traffic that it is revenue-positive? Conversely, has US Airways'' 5% increase in those business fares overcome their de-stimulative impact in order to be revenue-positive? Which of these two carriers revenues benefited more (or were hurt less) by their actions? I don''t know, do you? And unfortunately, the short paragraph that you posted also provides no insight into what''s happening to each carrier''s revenues. Moreover, it must be remembered that relatively few travelers actually use these types of fares -- IIRC, it is less than 10% of all passengers. So in the end, while the information is certainly nice to know, by itself it doesn''t really tell us anything significant about either carrier''s current revenue situation.