Us (core) Asset Sale At Airline No Longer In Focus

[USA320Pilot]

Asset sale at airline no longer in focus

US Airways, pilots looking at regional jets

PITTSBURGH (Post-Gazette) - In another sign of warming relations between US Airways and its unions, executives with the Arlington, Va.-based airline tomorrow plan to discuss with labor leaders how the company can meet its financial obligations without resorting to a sale of some hub operations, its Washington-New York-Boston shuttle or other assets.

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Respectfully,

USA320Pilot

 

[USA320Pilot]

In my opinion, with today’s news that Mesa Air Group will sell $100 million 20-year convertible bonds and plans to use net proceeds for general corporate purposes and to fund future regional jet deliveries, the Phoenix-based airline will use these funds to acquire PSA Airlines from US Airways Group. This could include the transfer of US Airways’ CRJ deliveries, however, there could be a scope clause issue that requires 25 CRJ-700 aircraft to be flown at a J4J participating “wholly owned†carrier. In addition, this clause requires the first 25 CRJ-700 large RJs to have 100% APL staffing, however, the PSA pilots never agreed to this clause.

US Airways will continue to consolidate Allegheny and Piedmont Airlines, with the regional airline ALPA dispute moved to be heard in front of president Captain Duane Woerth. In addition, if ALPA negotiations over the CRJ-700 participating “wholly owned†carrier break down, US Airways could place the CRJ-700s at Piedmont Airlines, provided that the regional pilots at the newly combined airline agree to J4J and the 100% APL staffing, unless mainline ALPA changes its scope clause per Tuesday’s MEC resolution.

Following the Allegheny and Piedmont Airlines integration, this airline could be spun off, which would remove US Airways from the “wholly owned: airline business, increase liquidity, and eliminate the UAL AFA scope clause problem, which was the final nail in the coffin of the previous merger attempt between united and US Airways that died.

Reports are circulating that US Airways could also transfer EMB RJ delivery positions to another carrier, with one option to provide delivery positions to United Express, to help the business partner emerge from bankruptcy. Moreover, the Wall Street Journal reported “US Airways company is exploring the idea of reducing the number of regional jets it has on firm order and offloading the extra planes to commuter carriers it doesn't ownâ€, presumably TSA, Mesa, or Chautaqua Airlines.

These moves would reduce US Airways capital obligations, future debt, and possibly change its credit rating to stable. In addition, the company could use the proceeds to pay down the federal loan guarantee and seek ATSB EBITDAR relief.

Regards,

USA320Pilot

 

[Diesel8]

If PSA is sold, is that not an asset sale? If Piedmont and Allegheny is sold, is that not an asset sale? What exactly are they then?

Also, it is sad to see, that U ALPA does not seem willing to get the E-170 onto mainline property, but instead allow outsourcing to Mesa. I am sure there are plenty of U pilots who would like to fly the 170.

Perhaps, U can outsource all flying to Mesa and just run a "virtual airline".

Interesting!

 

[USA320Pilot]

Diesel8, when discussing the "wholly owned" asset sale, the difference is that these companies are not considered core assets and their benefit to US Airways Group could be obtained from affiliate express operations.

In addition, with US Airways seeking capital to pay down the loan guarantee early, management may view the sale early a strong strategic alternative. Other corporate benefits would be to prevent RJ capital diversion to permit additional A320 aircraft financing, lower future debt service, and elimination of the United AFA scope problem, if the companies do in fact merge at a later date.

Regards,

USA320Pilot

 

[OldpropGuy]

As has been mentioned before......

Many years ago US ALPA scoped out the RJ's from the wholly owneds, refusing to allow them to replace their aging turbo props, as all the other now successful carriers did. The statement was "Any jets on the property must be flown by mainline pilots."

Later, when the company was so far behind that they claimed they could not afford to finance company owned RJ's, ALPA agreed to allow 35 RJ's to be flown by contract carriers. This was to allow the company to get some of the needed RJ's flying in the US Airways system. Later, the pilots agreed to increase the allowed number in exchange for certain other demands. Then again, even later many more were agreed to for more contract carriers.

Here we are today, being forced to give away even more of the flying, or shut the airline down. When do we reach the point that it is no longer worth the effort to save the jobs of only the most senior employees?

This company has become only a shell, which has unsuccessfully attempted to shrink into profitability, and is now just a clearing house for contract flying!

Where does it stop?

 

[Diesel8]

I certainly can understand that, but if Mesa runs a "fee per departure" service, that obviously is such that Mesa makes a profit, why not keep that money in house. IIRC isn't some of the W/O profitable?

Futher, if the 170 is "given" to Mesa, how far are U from sending the 737 or the A-319 over there, after all, the 170 is not that many seats short? A scenario that right now seems farfetched, but then........

What then are the core assets? While U has some Int'l flights, now being a member of he star alliance, will not allow any major expansion into Europe, since the airlines over there wishes to keep that inhouse. Case in point SAS and Washington. The shuttle is not a major moneymaker anymore. Sure, there are some slots that are valuable around the system, but, and I do not wish this, the "richer" boys could just sit around and wait for the firesale.

 

[Light Years]

I worry about the same thing Diesel. What is there left that has to be done by mainline? Carribbean, and Europe, and very far West Coast (not exactly our strong point anymore). Airways IS a regional carrier, granted in one the busiest, wealthiest, and most populated and powerful areas of the country (and likely the world).

The first time I saw an RJ up close I could not believe it was "a commuter." As they get bigger and bigger and with more and more range, as pay scales go lower and lower and more and more work is contracted out I worry.

Ten years ago you went to an airport and you saw USAir, Delta, United, American... now you see the same handful of "affiliates" under the guise of whoever they are this month. Here's Chautauqua off to PIT as US while another Chautauqa takes off for MCO as Delta, while thier American Connection taxis in from STL.

Where does it end? A couple years ago it was fifty seaters, now its seventy seaters. Who would have thought anyone would ever actually allow, or consider allowing a seventy seat jet (with 2000 mile range) to be operated by a commuter affiliate? Next are ninety seaters! Mesa's already got CRJ900s at America West. The new Embraer product is all you'd want in a mainline cabin and more, so customer discomfort on "RJs" will soon be a thing of the past.

Its a slippery slope. MidAtlantic and its insulting pay scales were already a can of worms opened, but at least it was with U employees. Contracting out more RJs and SJs to affiliates is the final kiss of death for US Airways. Why keep 250 120-150 seat aircraft around at mainline costs when you can get Bobby Jo's Flying Service to fly similar (and newer and more cost-efficient) aircraft for peanuts?

 

[BoeingBoy]

Light,

I'd compare us to a ship that's been torpedoed (economy, 0-11, LCC's, past mgt decisions) and is taking on water.

The Captain (Siegel) calls out "I'll save us, I have a plan. We need to lighten the load (costs) and we'll be ok." So all hands start throwing their personal possessions (wages, benefits, pensions) and cargo (furloughs) overboard.

But what's this, the water's up to our waist! The captain encourages us on. "Throw more overboard. If we can just lighten the load some more, everything will be ok." Again all hands respond and throw their heirlooms overboard.

But wait, the water's up to our necks. And listen, isn't that waves crashing on a reef (ATSB requirements). Again the captain's voice rings out. "More, more, throw more overboard. I know that if this ship gets light enough, we'll float over the reef." So we start throwing the women & children over (asset sales).

Oh no, the water is up to our chins. And what is that crunching noise? If only the captain had thought to plug the hole.

Jim

 

[High Iron]

Light,

I'd compare us to a ship that's been torpedoed (economy, 0-11, LCC's, past mgt decisions) and is taking on water.

The Captain (Siegel) calls out "I'll save us, I have a plan. We need to lighten the load (costs) and we'll be ok." So all hands start throwing their personal possessions (wages, benefits, pensions) and cargo (furloughs) overboard.

But what's this, the water's up to our waist! The captain encourages us on. "Throw more overboard. If we can just lighten the load some more, everything will be ok." Again all hands respond and throw their heirlooms overboard.

But wait, the water's up to our necks. And listen, isn't that waves crashing on a reef (ATSB requirements). Again the captain's voice rings out. "More, more, throw more overboard. I know that if this ship gets light enough, we'll float over the reef." So we start throwing the women & children over (asset sales).

Oh no, the water is up to our chins. And what is that crunching noise? If only the captain had thought to plug the hole.

Jim

I don't post many "what he said" type responses, but...BINGO.

Of course through all this morass, the same message was so often stated ( in so many words ) on this board, ranging from coy to blunt and everywhere in between, ( "naysayers"? ) but here it stands out in such brief clarity. Well done man.

 

[michael707767]

I know why the U pilots would be willing to send the E-170 to the regionals, they will do anything to protect those senior jobs. But what does U management hope to acheive? At MAA the pilots are working very low wages, largely because they are all on first year pay. I can assure you, the pilots at Mesa(for example) will not fly it on first year pay. The costs to operate the E-170 will actually go up if it goes to the regionals. Makes no sense.

 

[ktflyhome]

Well said Boeing Boy. Sad but True.

 

[OldpropGuy]

BoeingBoy,

An excellent analogy. I don't think it could have been said any better!

 

[DorkDriver]

"In my opinion, with today’s news that Mesa Air Group will sell $100 million 20-year convertible bonds and plans to use net proceeds for general corporate purposes and to fund future regional jet deliveries, the Phoenix-based airline will use these funds to acquire PSA Airlines from US Airways Group."

Or maybe they need to maintain a certain amount of cash on hand to keep their financing?

 

[d328pilot]

Maybe the 40 rj's they just ordered....100 Million for PSA is way to cheap.

 

[N628AU]

Following the Allegheny and Piedmont Airlines integration, this airline could be spun off, which would remove US Airways from the “wholly owned: airline business, increase liquidity, and eliminate the UAL AFA scope clause problem, which was the final nail in the coffin of the previous merger attempt between united and US Airways that died.

How nice of you to remind us it was the UAL AFA group that sunk the merger. I and everyone else thought it was the Federal Governement's opposition that was the final nail in the coffin. Once again, you said it first right here on this forum.