Credit analyst sees US Air liquidating

[Bill Nelson]

UPDATE 1-Credit analyst sees US Air liquidating by year-end
Tue Feb 1, 2005 04:53 PM ET
(Adds background)



NEW YORK, Feb 1 (Reuters) - US Airways Group Inc. (UAIRQ.OB: Quote, Profile, Research) will probably fail in 2005, one casualty of a year that may also see a Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) bankruptcy, an analyst at research firm CreditSights said on Tuesday.

"The 2005 outlook for our airline industry is dismal," Roger King, a debt analyst specializing in airlines, said in a conference call with analysts, portfolio managers, traders and journalists.

"High fuel costs and declining yields in particular should push US Airways into liquidation," King said.

Declining yields, or average revenues per passenger, are hammering major carriers along with high fuel costs, overcapacity, union battles and problems with underfunded pensions and a lack of access to capital, he said.

Bankrupt US Airways, widely seen by analysts as the weakest of a struggling industry, is particularly vulnerable because of its focus on the competitive northeastern market. But few have forecast that the No. 7 U.S. carrier would fail this year.

Told of King's comments on the conference call, US Airways spokesman David Castelveter told Reuters: "We have worked hard to overcome obstacles that many thought were insurmountable, yet like the industry, we still face a number of challenges."

"We are taking the next steps to build an airline that can be successful in a low-fare environment," Castelveter added.

US Airways said last year it was in danger of liquidating before it secured $1 billion in labor concessions.

The airline has said it has operating cash through June, when it hopes to exit bankruptcy, though it will need to find $250 million in equity to do so.

Delta, the No. 3 U.S. airline, secured $1.1 billion in financing from units of General Electric Co. (GE.N: Quote, Profile, Research) and American Express Co. (AXP.N: Quote, Profile, Research) , helping it to avert filing for bankruptcy protection. No similar rescues are likely this year, King said.

Delta officials were not immediately available to comment.

"Delta's own guidance indicates it will not achieve a positive operating margin in 2005, setting up a second liquidity event this fall," King said, adding that the airline's pension and debt loads make it particularly vulnerable.

"Manna will not fall from heaven 2 years in a row," he added. "Look for a bankruptcy this fall."

King said current industry turmoil would likely bolster low-cost carrier Southwest Airlines (LUV.N: Quote, Profile, Research) , already the industry's most valuable airline.

The strength of the Dallas-based airline and other low-cost carriers like JetBlue (JBLU.O: Quote, Profile, Research) is bad news for the sector's traditional carriers, which still have higher cost structures even after aggressive efforts to cut expenses, King said.

"They can just keep the pressure on the legacy carriers from the yield standpoint and force cash outflows that inherently destabilize the balance sheets," he said. (Additional reporting by John Crawley in Washington)

 

[On Your Six]

UPDATE 1-Credit analyst sees US Air liquidating by year-end
Tue Feb 1, 2005 04:53 PM ET
(Adds background)



NEW YORK, Feb 1 (Reuters) - US Airways Group Inc. (UAIRQ.OB: Quote, Profile, Research) will probably fail in 2005, one casualty of a year that may also see a Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) bankruptcy, an analyst at research firm CreditSights said on Tuesday.

"The 2005 outlook for our airline industry is dismal," Roger King, a debt analyst specializing in airlines, said in a conference call with analysts, portfolio managers, traders and journalists.

"High fuel costs and declining yields in particular should push US Airways into liquidation," King said.

Declining yields, or average revenues per passenger, are hammering major carriers along with high fuel costs, overcapacity, union battles and problems with underfunded pensions and a lack of access to capital, he said.

Bankrupt US Airways, widely seen by analysts as the weakest of a struggling industry, is particularly vulnerable because of its focus on the competitive northeastern market. But few have forecast that the No. 7 U.S. carrier would fail this year.

Told of King's comments on the conference call, US Airways spokesman David Castelveter told Reuters: "We have worked hard to overcome obstacles that many thought were insurmountable, yet like the industry, we still face a number of challenges."

"We are taking the next steps to build an airline that can be successful in a low-fare environment," Castelveter added.

US Airways said last year it was in danger of liquidating before it secured $1 billion in labor concessions.

The airline has said it has operating cash through June, when it hopes to exit bankruptcy, though it will need to find $250 million in equity to do so.

Delta, the No. 3 U.S. airline, secured $1.1 billion in financing from units of General Electric Co. (GE.N: Quote, Profile, Research) and American Express Co. (AXP.N: Quote, Profile, Research) , helping it to avert filing for bankruptcy protection. No similar rescues are likely this year, King said.

Delta officials were not immediately available to comment.

"Delta's own guidance indicates it will not achieve a positive operating margin in 2005, setting up a second liquidity event this fall," King said, adding that the airline's pension and debt loads make it particularly vulnerable.

"Manna will not fall from heaven 2 years in a row," he added. "Look for a bankruptcy this fall."

King said current industry turmoil would likely bolster low-cost carrier Southwest Airlines (LUV.N: Quote, Profile, Research) , already the industry's most valuable airline.

The strength of the Dallas-based airline and other low-cost carriers like JetBlue (JBLU.O: Quote, Profile, Research) is bad news for the sector's traditional carriers, which still have higher cost structures even after aggressive efforts to cut expenses, King said.

"They can just keep the pressure on the legacy carriers from the yield standpoint and force cash outflows that inherently destabilize the balance sheets," he said. (Additional reporting by John Crawley in Washington)

This guy sounds like a fun guy to be with. Look, as long as USAirways has a super-generous and benevolent Bankruptcy judge, it could continue into the very distant future... No credit analyst can predict how a judge will react.

Delta's situation could change too - it could improve its margins with recent cost cuts and then spin off Comair or ASA (it could happen...) and thus not require a serious liquidity injection this year. In the end, nobody knows what will happen... These credit analysts LOVE the attention though... How many times has Mike Boyd predicted UAL's quick demise?

 

[BeCareful!]

If I had a nickle for every time I'd heard that US Air was going out of business, I'd have, like, 40 nickles.

That's like, more that my retirement!

 

[lowecur]

This guy sounds like a fun guy to be with. Look, as long as USAirways has a super-generous and benevolent Bankruptcy judge, it could continue into the very distant future... No credit analyst can predict how a judge will react.

Delta's situation could change too - it could improve its margins with recent cost cuts and then spin off Comair or ASA (it could happen...) and thus not require a serious liquidity injection this year. In the end, nobody knows what will happen... These credit analysts LOVE the attention though... How many times has Mike Boyd predicted UAL's quick demise?

UAIRs future will be determined by 6/05. Investments bankers will either see a viable future or they won't based on costs from the 1st Q numbers. I am beginning to have my doubts that the RSA will throw anymore money into UAIR. FLYi has bought itself a ticket until June to see what will happen to UAIR. If UAIR is given exit money, then FLYi is history.

The rest of the pack will get liquidity injections based on their recent changes to their business models. Since UAL has done basically nothing, they may face a serious challenge in securing exit financing.

 

[FlyBoeingJets]

This will be all about the folks who own interest in the assets. GE Capitol in particular.

GE will continue let USAir limp along on just enough allowance to get by. When the liquidity "crisis" comes GE will offer a little of the profit they made off of USAir leases and exchange it for more equity. A condition will also be to lower worker wages even more.

If someone comes along with a great offer on a large number jets, like FedEx and their 737 plan, GE might just roll up the carpet and kiss USAir goodbye.

 

[Heavy Set]

Wouldn't Delta stand to benefit economically if USAirways liquidates? How does the ANALyst's theory hold up then?

 

[LearLove]

Thursday, February 03, 2005

By Dan Fitzpatrick and Mark Belko, Pittsburgh Post-Gazette

Sallijo Freeman, owner of Kennesaw, Ga.-based Legal Research Inc.,
has filed a document with U.S. Bankruptcy Court Judge Stephen
Mitchell expressing an "interest in the acquisition of US Airways."
Freeman, reached this week, said she is trying to put together an
investment group to purchase the nation's seventh-largest airline.
She declined to disclose potential partners but said "all of the
funds are coming from overseas." Freeman said she would need a
minimum of $1 billion to buy the airline, and her goal is to make it happen by May or June. She said Legal Research, founded in 1987,provides research and other services for law firms.
Branson I guess maybe??????