UAL Rumor

[20sx]

After reading the ALPA letter to United pilots a month ago or so describing the coming $ crunch there....it's very believable. As we head into the winter months, and with maybe a billion left in shtuf to use as equity, it could get ugly there very fast.

Plan for the worst and hope for the best.

 

[ualdriver]

Well, that's 1.1B in equity and then probably another 1.5b-ish in cash we'd have to burn through before Chapter 11 or 7. That 1.1B in equity probably isn't worth 1.1B, but it's also not spare parts quality from what I understand either, so it's probably worth at least several hundred million I would bet. But for one to believe that our demise is imminent, you'd have to believe that the cash burn rate for the third (normally strongest) quarter is going to remain the same as the first two, that the cuts being made will do nothing to change the rate of cash burn (we're eliminating a fleet before the end of the year unfortunately), and that there will be absolutely no recovery in the up and coming quarters. Certainly possible, but unlikely.

I'm certainly no fan of UAL despite my screen name, but I'm not so sure we're in imminent danger of being unemployed..........yet.

 

[GhettoBeechjet]

If they don't make it on their own United Airlines who is the largest union employeer in the state of Illinois will be declared "too big to fail" and will become owned by the US taxpayer.

 

[funnyman12]

I've heard it is the credit card companies that could force UAL into Chapter 11. If they can't re-negotiate some terms with the credit card companies, I think it is nearly impossible for UAL to not file Chapter 11 this winter. I'm just a dumb pilot though.

 

[GhettoBeechjet]

I've heard it is the credit card companies that could force UAL into Chapter 11. If they can't re-negotiate some terms with the credit card companies, I think it is nearly impossible for UAL to not file Chapter 11 this winter. I'm just a dumb pilot though.

At which point they will be deemed too big to fail and owned by the taxpayers.

 

[ualdriver]

I've heard it is the credit card companies that could force UAL into Chapter 11. If they can't re-negotiate some terms with the credit card companies, I think it is nearly impossible for UAL to not file Chapter 11 this winter. I'm just a dumb pilot though.

The credit card companies absolutely could, but they won't- or at least not yet. When we exited bankruptcy, we negotiated contracts with the credit card companies so that we have a cash reserve against the tickets purchased by customers with credit cards. This protects the credit card companies against our ability to not fly those passengers as promised in the future. Undoubtedly, our cash values will dip below whatever threshold was negotiated when we exited bankruptcy, just like it probably will for other airlines. But it's not really in a credit card company's interest to put us into bankruptcy necessarily. JP Morgan/Chase, for example, would rather advance us payments for future miles and/or lower the cash trigger points and continue to collect their fat fees from their UAL frequent flier mileage cards. Obviously no company can continue to lose money forever, however.

If a major airline like United were to go bankrupt in this environment, I do wonder if the federal government will intervene in order to save jobs.

 

[bluechunks]

I've heard it is the credit card companies that could force UAL into Chapter 11. If they can't re-negotiate some terms with the credit card companies, I think it is nearly impossible for UAL to not file Chapter 11 this winter.

Connect the dots....and follow the money....

UA's largest credit card processor is also their largest creditor and also issues UA's Mileage Plus Visa thus also making them UAL's largest single customer since they buy all those miles from UA directly.

The company in question: JPMorgan Chase. Their banking division is on the hook for UA's debt and their credit card division is a UA partner. In simple terms: UA's largest customer and UA's largest creditor are one and the same.

Thus, UA is the the unique position of having a credit card issuer with an extreme vested interest in the viability of UA. A chapter 11 filing would only be forced by Chase if there were assets worth restructuring--like unencumbered aircraft, real estate, or pensions. Note that last time UA went through Ch 11, JPMorgan (along with Citi) provided the debtor-in-possession and BK-exit financing for UA. A forced bankruptcy resulting in liquidation does not benefit Chase.

Since UA really doesn't have much to restructure in 2009, Chase has the motivation to help UA avoid the courthouse. Will that be enough? I don't know, but note that actions speak loader than words and Chase has already pre-paid hundreds of millions for some miles to provide UA with additional cash.

For the conspiracy theorists out there, note that JPMorgan Chase has the exact same business relationship with one other major US airline.

The question is not what what could happen to UA, but what does Chase want to happen to UA? Whatever provides the best financial return to Chase in regard to UA such as status-quo, a merger, breakup, or even liquidation....that will be UA's destiny. And Chase is calling all the shots.

 

[ualdriver]

Connect the dots....and follow the money....

Looks like we posted the same concepts at the same exact time! The relationship JP Morgan/Chase has with us and Continental is certainly an "interesting" consideration as well. I'm sure they'd be very happy to be the credit card supplier for one of the largest airlines on the planet if such a merger were to occur.

 

[bluechunks]

Looks like we posted the same concepts at the same exact time!

Too funny!

 

[20sx]

Well, that was the worry I had seen presented, that of going below certain thresholds. If the credit companies don't mind lowering them, then UA definitely has more time. Like ualdriver said, they have to make money at some point. I would like nothing better to see them get their act together and become profitable.

 

[bluechunks]

Well, that was the worry I had seen presented, that of going below certain thresholds.

Yes.

After so many so-called 'analysts' and 'reporters' were blindsided when Frontier's bankruptcy resulted directly by their credit card processor changing the holdbacks on short notice, suddenly the issue is front and center industry-wide.

UAL is any easy target because:

a) they have been through BK and are 'on the radar'
b) they publicly stated their credit-card cash holdback requirements
c) unlike many other airlines, UAL actually publishes their cash flow statements quarterly along with their 'net' results​

As stated by ualdriver, no company can continue long-term without profits and UAL is no exception. The clock is ticking, but UAL might be the wrong canary in the coal mine to watch.

 

[Quimby]

This is getting back to the FI that I remember, predicting the demise of UAL. Finally a post not referecing the SWA, FAPA, RAH spectacle.

No FI thread is complete until G. Lee tells us how great he has it at Delta, and how SWA does 6 legs/day.

 

[C-150ETOPS]

If American were to file Chapter 11, AND attempt to dump its pensions on the PBGC, the PBGC believes that it can go back 5 years and reclaim those pensions paid out to pilots.

Not that I'm close to retirement, but if I was, my response would be "go ahead, try to get those account numbers from deaf, mute, illiterate early 20's Colombian harem who only understand hand gestures like "Mas Cerveza" and a few more obscene others.

 

[Saluki Dawg]

Looks like we posted the same concepts at the same exact time! The relationship JP Morgan/Chase has with us and Continental is certainly an "interesting" consideration as well. I'm sure they'd be very happy to be the credit card supplier for one of the largest airlines on the planet if such a merger were to occur.

That means absolutely nothing. We have a relationship with JP Morgan/Chase as well. Maybe that means we are going to buy UAL as well.

 

[Captain X]

Well if this REALLY from your "source", you might want to read it again.
Has to be the most illiterately written email there is.....count the words that are not spelled correctly...

Hook.
Line.
Sinker.