US Partner UA in play...how could this be?

[magsau]

Fatburger,

I would like to include myself in the group with iflyjetz. What Chip does on a daily basis is walk into a theatre full of people wearing gasoline underwear and yell fire. There is entertainment and there is that tenous line that is crossed. Most rational people will, when accused of crossing a line of good taste take a step back and think before they write. Others feed on this and it is to their entertainment and the degradation of others that they get their satisfaction.

Chip is a former UAL pilot. When Chip was hired at UAL he was among a group of pilots (called the 570 for the number of pilots involved) that was screened and hired to cross a picket line in 1985. ALPA was able to convince the majority of these pilots not to cross the picket line. The contribution that the 570 has made to the profession of airline pilots will be debated for years to come. However, I have flown regularly with the 570 pilots and find they and Chip share something in common. CONSPIRACY. The 570 at UAL are for the most part still saying we are not in any financial difficulty and that it is a great management ploy to extract concessions from the pilots. Their complaints go on and on. If I had to sum of my experience with the 570 I would have to say that for the most part they are only average aviators with very little working knowledge of business, let alone the airline business. The pilots like many children have been reared in a way that makes changing them now even more difficult. Fortunately for UAL they are a small minority in the overall seniority of our pilots, but on this forum a former 570 is waging a war and much like I see in our union politics they share similar tactics. Nothing is ever their fault or can they be held liable for anything. It did not hit me until this evening over dinner with my crew that I actually made the connection of Chip to the 570. Imagine what a case of heartburn I have now.....

 

[Busdrvr]

Chip,
One VERY important thing to keep in mind. UAL and LH came to the rescue of AC a couple years ago to the tune of 500 million to protect the oh so profitable canadian market. Do you honestly think LH, ANA, and Singapore would sit back and watch UAL get carved up in some sort of unique transaction by one of the raiders? Thats JUST what they want, Air France and BA sharing all the US feed... Not likely

 

[chipmunn]

Busdrvr:

Busdrvr said: BTW, Greenspan is NOT on the ATSB, one of his representatives is.

Chip comments: The voting members of the ATSB are the Secretary of Transportation, Secretary of Treasury, and Federal Reserve Chairman or their designees.

The designees are Chairman, Governor Edward M. Gramlich, Board of Governors of the Federal Reserve System. The additional voting members are Peter R. Fisher,Under Secretary for Domestic Finance, The Department of the Treasury and Kirk Van Tine,General Counsel, Department of Transportation.

I agree that Alan Greenspan does not directly vote, but he definately is involved in the process. In regard to how pension cuts would effect the loan guarantee process, today I attended the US ALPA MEC meeting where the retirement issue and yesterday's 50 basis point rate cut were discussed by ALPA International R&I and the US R&I Committee Chairman.

I discussed this issue directly with ALPA's recognized experts, for UA, US, & other ALPA carriers, and I can tell you this.

The interest rate cuts will further underfund all pensions and will make loan guarantee approval, by obtaining a 7 percent profit margin, more difficult for both UA and US.

Meanwhile, the DCA Post said today, the ATSB also asked for details on United's plans for capital spending on airport reconstruction and for funding its pension program.

Chip

 

[Busdrvr]

[blockquote]
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On 11/7/2002 11:39:00 PM chipmunn wrote:

I agree that Alan Greenspan does not directly vote, but he definately is involved in the process. In regard to how pension cuts would effect the loan guarantee process, today I attended the US ALPA MEC meeting where the retirement issue and yesterday's 50 basis point rate cut were discussed by ALPA International R&I and the US R&I Committee Chairman.

I discussed this issue directly with ALPA's recognized experts, for UA, US, & other ALPA carriers, and I can tell you this.

The interest rate cuts will further underfund all pensions and will make loan guarantee approval, by obtaining a 7 percent profit margin, more difficult for both UA and US.

Trust me Chip, I have a thorough understanding of the implications of the discount rate and market performance with respect to pension funding. those aren't the only factors either. For instance, the pension estimates a 4.2% annual rate of compensation increase. Our new ERP provides a BOOK RATE that is MUCH LOWER and freezes for the last 3 years of the agreement. That results in a LOWER PENSION LIABILITY. A short term change in the discount rate DOES NOT change the pension liability on the books. It is an ASSUMPTION. Also keep in mind that the market has gone up around 15% since our latest ATSB filing also. UAL will likely adjust the accounting charge for the pension to reflect less than expected performance over the last two years. This will only affect the shareholder equity and will have no bearing on profitability UNLESS the assumption for the fund are changed. It could however affect cash flow. Another little tidbit as far as the pension is concerned is that UAL pilot pension is based on the A/C you flew the last three years of you career. If you park half your 400s (the highest paying equipment), your pension liability just went down.

UALs plan is reported to provide a profit margin of 4% in 2004, 8.5% in 2005, 10% in 2006, 2007 and 12% in 2008. i think the plan has some slop built into it and the ATSB may be deciding if it is sufficient to approve without requesting an equity stake.



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[/blockquote]

 

[chipmunn]

[P][FONT face=Times New Roman size=3]Busdrvr:[/FONT][/P]
[P][FONT face=Times New Roman size=3]The pension issue is a problem and according to the ATSB letter to UAL, which if you haven't already done so you can read the Executive Directors comments at:[/FONT][/P]
[P][FONT face=Times New Roman size=3]http://www.ustreas.gov/offices/domestic-finance/atsb/press/ual11-6-02.pdf [/FONT][/P]
[P][FONT face=Times New Roman size=3]The problem for both US & UA is numbers. The loan guarantee application must provide a 7 percent profit margin in 7 years and with the industry wide revenue fall off, it appears at both of our companies costs must be cut further to make the numbers work and get the government backed financing.[/FONT][/P]
[P][FONT face=Times New Roman size=3]I suspect with multiple creditors all needing to agree to defer the December 2 $375 million payment, Brace stating the company needs ratified agreements from all unions by November 30 (about three weeks away), and the ATSB stating it needs a rather significant amount of information, UA is going to run out of time for an out-of-court restructuring, similar to the US situation.[/FONT][/P]
[P][FONT face=Times New Roman size=3]Chip[/FONT][/P]

 

[Busdrvr]

[blockquote]
----------------
On 11/8/2002 12:43:32 AM chipmunn wrote:



[FONT face="Times New Roman" size=3]The pension issue is a problem and according to the ATSB letter to UAL, which if you haven't already done so you can read the Executive Directors comments at:[/FONT][/P]


[FONT face="Times New Roman" size=3]The problem for both US & UA is numbers. The loan guarantee application must provide a 7 percent profit margin in 7 years and with the industry wide revenue fall off, it appears at both of our companies costs must be cut further to make the numbers work and get the government backed financing.[/FONT][/P]


[FONT face="Times New Roman" size=3]I suspect with multiple creditors all needing to agree to defer the December 2 $375 million payment, Brace stating the company needs ratified agreements from all unions by November 30 (about three weeks away), and the ATSB stating it needs a rather significant amount of information, UA is going to run out of time for an out-of-court restructuring, similar to the US situation.[/FONT][/P]


[FONT face="Times New Roman" size=3]Chip[/FONT][/P]
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[/blockquote]


Yeah I read it Chip, did you? It asks for DETAILS. Not once in that letter does it say we need more cuts in X area Pension assumptions can be complicated. As for the 375 million, do ya think that may be the payment that LH is willing to help on?

 

[chipmunn]

Today Aviation Daily reported in a column titled Many Holes Remain In UAL's Loan Guarantee Application --United's federal loan guarantee application, crucial to its recovery plan, still falls short in more than half a dozen areas, according to new feedback from the ATSB. Following the new comments, United is unlikely to get an answer from the board until next month at the earliest.

Chip

 

[chipmunn]

[BR][FONT face=Times New Roman size=3]Hi Busdrvr:[/FONT][BR][BR][FONT face=Times New Roman size=3]Busdrvr said: As for the 375 million, do ya think that may be the payment that LH is willing to help on?[/FONT][BR][BR][FONT face=Times New Roman size=3]Chip answers: Maybe, but Jürgen Weber's comments were made in Europe before the ATSB letter was sent to Jake Brace. Weber was cautious in his remarks, which makes it unclear whether or not Lufthansa will help, especially in light of the apparent reluctance of the ATSB to grant UA the loan guarantee.[/FONT][BR][BR][FONT face=Times New Roman size=3]In my opinion, UA will file for a formal reorganization and continue to follow a similar reorganization path as US. Why? Time is running out and the IAM is not negotiating. [/FONT][BR][BR][FONT face=Times New Roman size=3]On October 25, the IAM said on its website There have been no meetings with representatives of United Airlines and your Committee this past week, although discussions have taken place via telephone. We still have issues to resolve and have not reached agreement as to our level of parti****tion in the UAL Recovery.[/FONT][BR][BR][FONT face=Times New Roman size=3]Then November 6 on its website the machinists said, (the IAM) has no scheduled negotiations with UAL this week. [/FONT][BR][BR][FONT face=Times New Roman size=3]When is now a good time to start IAM negotiations, since Brace said he has to have ratified union agreements by all unions by November 30?[BR][BR]To add more fuel to the fire, today Dow Jones Newswires reported despite some recent positive headlines on debt restructuring and labor negotiations, UAL Corp., parent of United Airlines, is still likely to file for bankruptcy, analyst Sam Buttrick at UBS Warburg wrote in a research note Friday. Based on a weak revenue environment for airlines, United will be unable to survive, he said. And he now expects the airline industry to post bigger fourth- quarter losses than earlier expected.[BR][BR]If UA files, the question will become what will occur to the company? Beleive me, we at US know how this feels and you do not want to go to court.[/FONT][BR][BR][FONT face=Times New Roman size=3]Chip[/FONT]

 

[usfliboi]

UBS still sees UAL bankruptcy likely


NEW YORK, Nov 8 (Reuters) - UBS Warburg airline analyst Sam Buttrick said on Friday he still believes a bankruptcy filing this winter is most likely for United Airlines parent UAL Corp. [UAL.N], despite a recent cost cutting agreement with pilots and a debt restructuring.

Buttrick wrote that he believes the government board overseeing UAL's request for 90 percent backing of a $2 billion loan will find United's cost cutting plans fall short given the chronic weak yield environment. UAL cannot get access to sufficient capital without that loan guarantee, he wrote.

Neither of these views is swayed by events of the past week -- which we believe have bolstered the market more than close scrutiny merits, Buttrick wrote in a research note.

Shares of UAL, the No. 2 U.S. air carrier behind American Airlines parent AMR Corp., fell 32 cents, or 8.2 percent, to $3.59 Friday on the New York Stock Exchange. The shares have lost more than 70 percent of their value this year.

A letter from the government board to United on Nov. 6, which was also sent to the press, confirms that UAL has some heavy lifting to do with the federal panel, Buttrick wrote.

The Air Transportation Stabilization Board asked United to explain further assumptions underlying revenue forecasts and proposed labor concessions. It also sought more information on pension obligations and capital costs.

The stabilization board oversees the loan guarantee program established to help struggling airlines following the Sept. 11, 2001, attacks. It has demanded significant cuts from United before considering the airline's loan guarantees request.

United and pilots struck a tentative agreement last weekend for cuts totaling $2.2 billion over 5-1/2 years and United said this week that it has reached an agreement in principle with German development bank KfW agreed to restructure about $500 million of debt payments due in November and December.

Notwithstanding the positive headlines of the past week ... our view distinctly remains that a bankruptcy filing at UAL Corp this winter remains the most likely outcome, Buttrick wrote.

Buttrick also widened his forecasts for U.S. air industry losses in the fourth quarter to $2.4 billion from $1.8 billion and for all of 2002 to $7.3 billion from $6.2 billion.

The fourth quarter outlook is poor, at least from a profit perspective, Buttrick wrote.

Despite the forecasts, and volatile swings in U.S. airline stocks, Buttrick recommends buying shares of carriers he sees as likely to avoid bankruptcy and holding for two years to await an industry recovery.

His buy recommendations, in order, are Northwest Airlines [NWAC.O], Continental Airlines [CAL.N], American Airlines' parent AMR Corp. [AMR.N] and Delta Air Lines [DAL.N].

11/08/02 11:34 ET

Copyright 2002 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.

 

[767jetz]

[blockquote]
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On 11/8/2002 11:01:03 AM Busdrvr wrote:


Yeah I read it Chip, did you? It asks for DETAILS. Not once in that letter does it say we need more cuts in X area Pension assumptions can be complicated. As for the 375 million, do ya think that may be the payment that LH is willing to help on?

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[/blockquote]

Busdrvr,

Don't worry, this guy has all the answers. (yeah, right!) I've stopped trying to correct him. He is **** bent on spinning any info he can find in a negative manner to paint a gloomy picture of UA and scare our customers, employees and everyone else who may visit this forum. I think most people around here have figured out that he is full of it, and has a very specific agenda.

As for UA, we will pull out of this one. The ATSB will get the info they need, and the loan guarantee will be approved at the last minute. Tilton is a real leader and is well aware of the deadlines. I agree that we can expect Lufthansa and other Star partners to help out. There is so much going on behind the scenes, out of public view. Since Chip has absolutely NO inside info, he can't possibly have a clue as to what's really going on.

Personally I've decided to let him have his fantasy. When the courts are done with him and US, it will be all he has to hold onto anyway.

 

[Slam&Click]

[blockquote]
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On 11/8/2002 11:24:21 AM chipmunn wrote:

Beleive me.

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[/blockquote]

I believe absolutely nothing until it happens. Our collective faiths do not believe in your particular brand of speculation and forecasting.

 

[Retired1]

You know this ATSB thing is getting to be too big of a deal. They make you jump thru too many hoops, humiliate you, break your pride and then just maybe they will give a loan to U and UAL. Notice i said maybe because at U they are still after more and they arent near done at UAL the way it looks. They give away all this money to other countries, forgive big loans to them, and still even support the trains. I never hear of the train having to go thru so much to get more money. Should the money just keep coming forever? No. But at least give us a chance. Things have happened that we have never seen before plus pile more costs on us for security when we are down. I am beginning to think all this is a labor thing and when Washington thinks the employees of both airlines are making about what they think is reasonable then they will pull the trigger on the UAL loan.

 

[UAL777flyer]

Chip,

I gotte be honest. I try to give you the benefit of the doubt in most of your postings and theories, but there are times when I feel you go wayyyyyyyyyyyyyyyy overboard. This is one of those times. You're talking about things that are supposedly being discussed at the highest levels. Than you should also be aware of the volume of scenarios that get discussed and analyzed in situations like this. That doesn't mean they amount to a hill of beans or have a realistic potential for taking place. The UA being in play scenario is nothing new. It is merely par for the course given UA's situation and reflects the value of UA's franchise, even given a potential Ch.11 filing. It should come as no surprise that there are many investors looking to make a run at UA should they file for bankruptcy protection.

I could care less who Rono Rooter is consulting for. Any attempt to let him get his paws back on some type of control of UA will usher in a labor disaster at UA, in my view. Consulting is one thing. Controlling interest is another thing entirely. I'm confident that Glenn Tilton is doing what must be done to restructure UA successfully. Will he ultimately be successful? Yes, I think he will. However, only time will tell if it entails Ch.11 or not. I'm still hopeful we'll avoid bankruptcy. Time is indeed getting tight. T/A's need to be reached with the remaining unions by the end of next week in my view, or else we'll probably have to file for Ch.11, unless we manage to restructure the $375 million in EETC debt coming due on the 2nd of Dec. That could very well happen. Let's not forget that most gave UA zero chance of convincing KFW to refinance that chunk of debt, yet UA came away successful. Tilton has done a masterful job of convincing all parties involved with UA that their parti****tion in helping the company restructure is in their best interests.

The letter from the ATSB to Jake Brace is not surprising in my view. It was anti****ted that the ATSB would want more information and analysis in certain areas before passing final judgement on UA's application. So that letter didn't alarm me one bit. Is bankruptcy still possible? Absolutely. But is it still avoidable? Absolutely. Time hasn't run out yet. I'd feel much better if the AFA and IAM would just get their deals done already! Stop the posturing and politicking and get it done. All they need do for incentive is read about the various investor groups salivating at the prospect of making a run at UA in bankruptcy. They would crack labor in half. So I don't understand the delay, considering what's on the line. And every day that goes by without agreements pushes us closer to the precipice. Time wasted is simply time wasted.

 

[chipmunn]

UAL777flyer:

I believe the tension is getting extremely high at UA and I empathize with the employees. I also understand during stressful times how people can shoot the messenger, but the information I post is true to the best of my knowledge.

Just with my company, I have posted information on UA that some people do not like, however, the posts were sincere views with information that is to best of my knowledge.

Unfortunately, this industry is in a meltdown and there are going to be more difficult times ahead, but none of my comments are intended to be antagonistic or hurtful.

Regards,

Chip

 

[chipmunn]

[BR][SPAN style=FONT-SIZE: 10pt; FONT-FAMILY: Verdana][FONT face=Times New Roman size=3][STRONG]Mechanics give UAL cold shoulder[BR][/STRONG][/FONT][FONT face=Times New Roman size=3][BR]CHICAGO (Crains Business News) - Labor concession talks between United Airlines and its mechanics are bogging down. Negotiators for the machinists union broke off face-to-face talks three weeks ago and there have been no bargaining sessions since. [/FONT][BR][BR][FONT face=Times New Roman size=3]We walked away because of some disagreements, says Thomas Reardon, assistant general chairman of the International Assn. of Machinists and a member of the negotiating committee. [STRONG]We're not scheduled to go into talks.[/STRONG][/FONT][BR][BR][FONT face=Times New Roman size=3]Although the pilots union has tentatively agreed to a $2.2-billion cut in pay, mechanics are considered the linchpin of United's plan to obtain $5.8 billion in concessions from all employees in order to obtain a federal loan guarantee and avert bankruptcy. [/FONT][BR][BR][FONT face=Times New Roman size=3]Meanwhile, United's flight attendants union called a meeting of its leaders late last week as talks with the company intensified. A spokesman for UAL Corp., United's Elk Grove Township-based parent, says the parties are in frequent telephone contact.[/FONT][BR][BR][FONT face=Times New Roman size=3][STRONG]Analysts doubt United's ability to dodge disaster[/STRONG][/FONT][BR][BR][FONT face=Times New Roman size=3]DENVER (Denver Post) - Sunday, November 10, 2002 - Wall Street remains skeptical about United Airlines' ability to avoid Chapter 11, despite recent moves by the carrier to defuse its financial crisis, including the announcement late Friday that it plans to lay off an additional 2,700 flight attendants.[/FONT][BR][BR][FONT face=Times New Roman size=3]Few analysts believe United can steer clear of bankruptcy, and investors drove down UAL Corp.'s stock 26 percent Thursday and Friday after pushing it up 73 percent earlier in the week.[BR][BR]The road to bankruptcy is paved with good intentions, UBS Warburg analyst Sam Buttrick said Friday in response to United's positive developments.[BR][BR]Indeed, United's situation is grim: Its daily losses exceed $7 million, it must pay $445 million in debt and other obligations by mid-December from dwindling cash reserves, and government approval of a $1.8 billion loan guarantee is hardly assured.[BR][BR]Meanwhile, pay-cut talks with flight attendants and ground workers had not yielded agreements as of late Friday.[BR][BR]Yet during the past 10 days, the airline reached a tentative agreement with its pilots that saves $2.2 billion and deferred by up to five years $500 million in impending debt payments.[BR][BR]The deferral gives United breathing room as it negotiates a $5.8 billion, 5 1/2-year pay-cut package with the remainder of its unionized employees and works with the Air Transportation Stabilization Board to secure the loan guarantee it needs to avoid default.[BR][BR]United, which flies nearly two-thirds of Denver's air travelers and employs 7,800 here, also has identified between $1.4 billion and $1.8 billion in annual non-labor cost cuts and revenue enhancements.[BR][BR]Company officials say while United isn't out of trouble yet, it's making significant strides.[BR][BR]The pieces are starting to come together. What's happening is that the things we said we would do are in fact getting done, said Chris Bowers, United's senior vice president for marketing, sales and reservations.[BR][BR]In all my time with the company, we've never been this singularly focused as a group. We're pulling together as a unit, the 29-year United veteran said.[BR][BR]Stock analysts, however, who make a living assessing companies' financial health, aren't so sure. Just one analyst upgraded UAL's stock last week, noting that the probability of bankruptcy in the short term is sharply reduced. The remainder maintained their negative or neutral ratings.[BR][BR]Our bias remains that UAL will be unable to reach a restructuring plan as required by the ATSB to obtain government-guaranteed loans before being forced into bankruptcy, Credit Suisse First Boston analyst Jim Higgins said in a note to investors Thursday.[BR][BR]Though United officials say their talks with the ATSB are progressing smoothly, questions from the panel to the airline on Wednesday sparked doubts. In a letter, the ATSB requested additional information and explanations for six areas, including labor costs, revenue projections and capital spending.[BR][BR]The ATSB - facing a letter-writing campaign from United employees, lobbying from the company's customers and suppliers and pressure from elected officials - also sent the letter to the media, something it hasn't done in past communications with airlines.[BR][BR]Buttrick said the letter indicates the board doesn't consider United's new business plan sufficient.[BR][BR]We believe that the loan board will reasonably find that UAL's current proposed savings from labor and other sources fall short, he wrote in a report Friday.[BR][BR]Added Higgins: We see the ATSB's request as underscoring our view that UAL's headline cost savings and revenue-enhancing initiatives have debatable value.[BR][BR]Higgins said some of the savings in United's plan phase in over time while others are merely adjustments for lowered capacity. As such, the plan does not bring down United's unit costs, or how much the airline pays to fly each available seat 1 mile, he said.[BR][BR]The board is looking closely at unit cost as it doles out loan guarantees, analysts say, because it is an indicator of an airline's ability to earn profits. United's unit cost is more than 11 cents, while that of low-cost, profitable carriers like Southwest Airlines is 7 or 8 cents.[BR][BR]United's Bowers said there was nothing alarming or surprising in the ATSB's letter. During meetings Tuesday, panel members told United officials they would follow up with questions.[BR][BR]We fully expected to hear back from them with questions, given the breadth of information we covered, he said.[BR][BR]Regardless of which way the ATSB is leaning, some airline watchers believe there simply isn't enough time for United to get everything done that it must to avoid defaulting on its loans.[BR][BR]The ATSB took four months to conditionally approve Denver- based Frontier Airlines' loan-guarantee application. US Airways received conditional approval of its guarantee in July but has yet to secure its loans. The company, however, is in bankruptcy and is protected from its creditors.[BR][BR]In the meantime, flight attendants and machinists still haven't reached agreements on their share of the cost-cutting plan. If and when they do, workers must vote on the proposals, a process that will take up to three weeks.[BR][BR]United faces a $375 million debt payment on Dec. 2 that it is unlikely to delay for more than a week or 10 days. On Dec. 15, it must pay machinist-represented workers $70 million in retroactive wages.[BR][BR]According to Higgins, the Dec. 2 payment will force United to default because it will push United's cash reserves below safe levels for a company its size.[BR][BR]United had $1.7 billion in available cash on Sept. 30. It is burning through $7 million to $10 million a day. That means that after the payments and without gaining access to additional loans, United would have between $700 million and $900 million in cash available on Dec. 2, just three weeks away.[BR][BR]Cash below $1 billion is considered bankruptcy level for the airline, which faces additional debt payments early next year, by which time its reserve may have dwindled to as low as $300 million.[BR][BR]United officials point out that the company has $3.4 billion in unen***bered assets, mainly aircraft. The airline could sell those planes and lease them back but hasn't said whether it will do that.[BR][BR]As the deadlines approach, there are signs that United's various groups, traditionally at odds, are working in a new spirit of unity.[BR][BR]Employees have sent 30,000 letters to the ATSB supporting United's loan-guarantee application. The airline is putting posters up in its hubs displaying that unity to customers, who have been barraged by news of labor strife and potential bankruptcy.[BR][BR]We are united in our commitment to restore the profitability of a great airline, reads the poster, signed by United chief executive Glenn Tilton and the heads of each of the airline's unions.[BR][BR]With a reduced cost structure and 80,000 dedicated employees, you can count on United to be a strong competitor in today's marketplace and into the future.[/FONT][/SPAN]