US/UA Official Merger Thread II

[767jetz]

I hate to bust your UA bubble but most reports I have seen have US as the acquiring airline not the other way around

Really? Care to provide proof of that? Never mind. I think you should just re-read those "most reports." As Richard says, this is not a pi--ing contest.

But for the sake of clarity and accuracy, you should be aware that keeping Parker at the helm does not equal US being the acquiring airline. In fact it looks like the financial community doesn't think Parker is up the task since they are now saying he would be "groomed" as a potential successor.

If you notice, they talk about a stock swap, where UA pays a premium for US, and UAUA stock survives. Hence UA being the acquiring airline. Also notice the current reports that UA is in the driver's seat, and also that US and NW are more likely candidates for BK. Does it really matter? No. Because in the end IF it happens, it will be structured by the board in what they think is the most logical way.

Keeping a name is not an indicator either. Just look at how America West acquired US in bankruptcy but kept the name. Value Jet bought Airtran and kept their name. (People in that case would have clearly pointed to the fact that Airtran was stronger, considering Value Jet's precarious situation at the time. But Value Jet did indeed acquire Airtran.)

None of this of course really matters in the end, except in one's head. However your statement above is factually inaccurate and in need of correction.

 

[bigbusdrvr]

Keeping a name is not an indicator either. Just look at how America West acquired US in bankruptcy but kept the name. Value Jet bought Airtran and kept their name. (People in that case would have clearly pointed to the fact that Airtran was stronger, considering Value Jet's precarious situation at the time. But Value Jet did indeed acquire Airtran.)

None of this of course really matters in the end, except in one's head. However your statement above is factually inaccurate and in need of correction.
----------------------------------------------------------------------------------

Could you please explain this to the PBGC.....They dont seem to understand the "America West bought USAirways" bit.....

And yes this does matter in the end....end of my checking account. I would love to begin recieving my PBGC except they say my company (USAirways) was not bought by anyone??

Please buy us..........

 

[FlyDCJets]

JP Morgan says US is greatest risk of declaring bankruptcy...ahead of NW and UA.

http://money.cnn.com/news/newsfeeds/articl...55_FORTUNE5.htm


J.P. Morgan also listed the airlines it thinks are at Chapter 11 risk, from lowest to highest: Southwest Airlines (LUV), Alaska Air Lines (ALK), Delta Air Lines (DAL), AirTran (AAI), Continental (CAL), JetBlue (JBLU), American Airlines parent AMR Corp. (AMR), United Airlines parent UAL Corp. (UAUA), Northwest Airlines (NWA), and U.S. Airways (LCC).

Let's hope the elimination of pretzels from Y will save the day. :blink:

Take it for what it is, an opinion by an analyst of an investment bank, and not a reliable source of information.

 

[N965VJ]

Isn’t the 8 year anniversary of the first UA/US deal coming up?

I heard about it on the radio as I had just crossed the Texas – Oklahoma border in my pickup. I pulled into a rest area and bought a USAToday. No wireless internet on my laptop in those days, LOL.

 

[signals]

Lights on Lights off :down:
Lights confuse :blink:

 

[Richard]

let's turn this around, what does UA offer US? yeah some international presence but at what cost? the National Debt ? I hate to bust your UA bubble but most reports I have seen have US as the acquiring airline not the other way around
why not wait and when UA goes belly up then pick through the bones along with AA, CO and DL/NW

With reference to which airline acquired which, how many times have we warned about going down this path again? Don't do it.

The next post contributing to this argument gets a week off.

This thread is about a potential merger between US and UA. It will not become a rehash of a 3 year old argument that we warned you all to drop many times before.

Enough.

 

[USA320Pilot]

Last week when the Bloomberg first reported that United was considering a code share agreement and not pursuing the US Airways merger I suspected that the Chicago-based company’s public relations machine leaked the information. Why? To try to create leverage on Doug Parker and US Airways’ Board to accept terms United desires for the "corporate combination" to proceed.

I suspect some of these terms could be what Dan Fiztpatrick recently described as “social issues†and I believe his comments in the article below are accurate. Click onto the link below for more information:

See Story

Over the years I have found TheDeal.com to be the most in-tune source on corporate information and they are usually spot on. Click onto the link below for what I believe is an accurate analysis.

See Story

Separately, IAG did a financial analysis, which provides a clear picture of why US Airways and United need to merge to survive because the two companies may not have another reasonable option available.

See Story

In another report the AP indicated two points that I believe are germane and accurate:

1. “United is still pushing ahead with negotiations aimed at a combination with US Airways.â€

2. “Continental is also still in discussions about an alliance with AMR Corp.'s American Airlines and British Airways, said an official with knowledge of those talks. That person also was not authorized to discuss the matter and requested anonymity. The official said it would not be unusual for Continental to be considering alternatives, but that the British Airways-Continental-American talks are progressing and don't appear in jeopardy. British Airways publicly disclosed the talks April 30.â€

3. “Bob Mann, an independent airline consultant based in Port Washington, N.Y., said he doesn't think an alliance between United and Continental is likely because it wouldn't go far enough to solve the carriers' cost and capacity issues. ‘The United guys are very much heading in the direction of something that will really allow them to downsize the airline,’ he said. ‘We're talking about large capacity cuts. ... The alliance doesn't get to the point where you can really do the capacity-cutting.’"

See Story

In conclusion, I believe US Airways and United will merge because the two companies have to combine to get the $1.5 billion in cost cuss and revenue synergies to survive. The final questions may be the management “social issues†and the make up of the capital infusion. Once these decisions are made then the deal will apparently proceed.

Regards,

USA320Pilot

 

[USA320Pilot]

Today US Airways' and United's securities closed down 49 cents or 6.28% to $7.31 and $1.39 or 10.07% to $12.42, respectively, along with the rest of the sector in the deepening industry wide financial crisis.

In after market trading US Airways' stock rose 55 cents or 7.52% to $7.86 and United's stock climbed 13 cents or 1.05% to $12.55.

Regards,

USA320Pilot

 

[phx___it]

Today US Airways' and United's securities closed down 49 cents or 6.28% to $7.31 and $1.39 or 10.07% to $12.42, respectively, along with the rest of the sector in the deepening industry wide financial crisis.

In after market trading US Airways' stock rose 55 cents or 7.52% to $7.86 and United's stock climbed 13 cents or 1.05% to $12.55.

Regards,

USA320Pilot

Very good USA320Pilot. You and I know what that can mean. Not saying merge, but the unknown and indecision might be gone. Then again, I've seen after hours moves like this lately. Maybe not as big though.

 

[luvn737s]

Looking at the UA Balance sheet, Titlton ain't instilling a ton of confidence either.

You don't need to be a Wall Street hotshot to know that US & UA is a marriage destined for the BK Courts.

BK is the only way to squeeze out the "synergies". And it apparently has no ill side effects on the company, only the creditors and employees.

 

[nostradamus]

The only reason for merging your airline is to add air and gold to your golden parachute. The consumers do not benefit, the employees are not benefiting. The titans are justifying their gains by rationalizing whatever it takes to line their pockets.

This message board has obviously been feeling political heat, hence a loss of credibility as a source of the free exchange of ideas and facts.
Sticks and stones break your bones but words...............................

Good Day

 

[ThirdSeatHero]

The only reason for merging your airline is to add air and gold to your golden parachute. The consumers do not benefit, the employees are not benefiting. The titans are justifying their gains by rationalizing whatever it takes to line their pockets.

This message board has obviously been feeling political heat, hence a loss of credibility as a source of the free exchange of ideas and facts.
Sticks and stones break your bones but words...............................

Good Day

Just curious, what is the basis of this statement?

"....This message board has obviously been feeling political heat, hence a loss of credibility as a source of the free exchange of ideas and facts...."

 

[InternationalShannon]

Just curious, what is the basis of this statement?

"....This message board has obviously been feeling political heat, hence a loss of credibility as a source of the free exchange of ideas and facts...."

I'm glad someone else got hung up on that. I read it like three times and then chalked it up to my lack of sophistication and fancy vocabulary. Glad it wasn't that. Pneumonoultramicroscopicsilicovolcanoconiosis. Yep, defintely not lack of fancy words...

 

[USA320Pilot]

To view J.P. Morgan's Airline Industry Liquidity Report click here.

US Airways – Summary

LCC's new aircraft expenditures toward new aircraft are assumed at $770 million for 2008 and $800 million for 2009. We assume the company will raise 85% debt to fund these new aircraft. Somewhat unique to LCC's story is the minimal principle payments on debt and cap leases that are scheduled for the next couple of years ($236 for 2008, and $145 for 2009). We are not anticipating any asset sales. As of 1Q08, the company held auction rate securities with a fair value of $295 million, which are not included in unrestricted cash. In 1Q09, we have assumed that the company will be able to sell these securities at fair value, and we add this amount back to the unrestricted cash balance.

LCC's credit facility requires the company to maintain consolidated unrestricted cash and cash equivalents of no less than $1.25 billion, with not less than $750 million held in a control account, which would become restricted for use if certain adverse events occur. LCC's term loan does not currently contain a periodic fixed charge covenant. However, if LCC engages in certain merger activity, there is a springing test that would come into effect. Based on our projections, but excluding any incremental capital raising (a rather unrealistic scenario as management will likely raise capital in some form), LCC will fail to meet the minimum cash covenant in 4Q08.

LCC owns 25 unencumbered E190s worth approximately $500 million dollars which it has said it could sell or refinance to bolster liquidity. Additionally, LCC has valuable DCA slots (worth <$75 million, $2 million per slot) and also could reap the rewards of its strong vendor relationships with GECAS (a large lessor to LCC), Airbus (a top customer in order book terms), and others. A sale to United is much discussed and seemingly likely (please see our recent note, United-US Airways: 3rd Time’s the Charm?, published April 28, for details). LCC has the option, as do others, to engage in a forward mileage sale. The company also has the option to finance aircraft deposits through a PDP facility. Given LCC's relative absence of material liquidity levers, we actually ascribe a slightly higher Ch11 probability to LCC than to AMR and UAUA in this scenario (mirroring our thoughts on NWA).

UAL – Summary

For both 2008 and 2009, we are assuming $0 new aircraft capex for United. We do assume aircraft maintenance capex of $225 million and $150 million for 2008 and 2009, respectively, but recall that we assume the company will not debt finance such expenditures. We assume no pension cash adjustment and no asset sales. As of 1Q08, the company had $153 million available on its revolving credit facility, and we assume that in 1Q09 UAUA will fully utilize its revolver capacity.

As for credit facility covenants, UAUA recently amended its credit agreement, allowing the company to suspend the fixed charge covenant for four quarters, kicking back in for 2Q09. When the fixed charge covenant test returns in 2009, it will at first be a 3 months rolling test (2Q09), then 6 months, 9 months, and will revert to a full LTM test by 1Q10. An important change here, in addition to the change in the number of months covered, is that the definition of fixed charges has also changed. Previously, UAUA’s fixed charges included scheduled principal payments on its debt and capital leases. When the test is reintroduced in 2Q09, fixed charges will no longer include these scheduled principal payments in the calculation.

Also, it is important to note that there are material fresh start and other adjustments that need to be made to the covenant EBITDAR in order to properly perform the calculation. Although some information is available in public documents, UAUA management has made clear that the actual calculation (for both pre and post-amendment definitions) cannot be made using only publicly available documents. In our analysis, we assume an annual $325 million of fresh start addbacks ($81 million per quarter). There is also a minimum unrestricted cash balance covenant with a required minimum balance of $1 billion (this test remains in place even though the fixed charge has been temporarily suspended). Based on our projections, UAUA will not exceed the required 1.0x fixed charge coverage test in 2Q09 and will fall shy of the minimum $1 billion in unrestricted cash even before that in 1Q09.

UAUA has passionately advertised the fact that it has approximately $3 billion in unencumbered assets. The company has significant untapped value in its pool of unencumbered aircraft (110 in total, worth perhaps $2 billion) and spare parts/engines (could be worth another <$1 billion). UAUA's slots at LHR and NRT are quite valuable. LHR alone could be worth up to an estimated $500 million. UAUA's MRO has $280 million in annual revenues, yet a divestiture could only take place with labor approval. Then there is the much anticipated LCC purchase and potential outside equity infusion. UAUA has the option, as do others, to do a forward mileage sale. In the end, we do not believe that management will simply watch its cash balance decline. Rather, we believe management is likely to look to bolster cash by mortgaging or selling unencumbered aircraft assets and/or borrowing against the frequent flyer program.

 

[ableoneable]

The mergers that you hear about rarely seem to come to fruition while the mergers that no-one is talking about (AWA AAA) suddenly materialize.

This leads me to believe that UAUA/LCC will not be consummated.

I hope that I am wrong as I believe the long term prospects of this merger are good. The short-term, however, may indeed be painful. There will be carnage. I am sure some of us will be going to the street and some of us will be moving from left to right.

If no-one does hook up it does look like it will be an endurance contest to see who can stay out of chapter 7 longer than the next guy.

Of course open skies talks are ongoing as we speak and therein lies the greatest chance of upsetting our lives.

The relaxation of ownership rules may bring needed capital, organization and code sharing to our shores. It may not be all bad.

However there is still the dark possibility of cabotage which could spell the end of our industry as we know it. It is my belief that cabotage is more of a danger if either Clinton or McCain is elected but there are no guarantees either way.