How's the Atmosphere/mood at UAL

[shon7]

Was at ORD twice last week and the UAL terminal seemed packed. Passenger numbers definitely seem to be going up. Add to that, UAL still does has not discounted tickets to some destinations.

So what's the general mood at UAL these days? How is this new management team being perceived?

 

[skykid]

shon7, the mood is good! United has a new program called Success Sharing, and it provides cash bonuses, up to 7 a year I think, for performance - mostly customer satisfaction and on time departures/arrivals. I was afraid the first payout a few weeks ago would be an insignificant amount - it wasn't. There has to be a culture change and this is a good step. That has people upbeat, but more than that is the fact United is going after revenue by adding destinations and adding frequency to economies that are booming, like Asia. The ad campaign is the best received to date with the "It's Time to Fly" Robert Redford voice-over, plus unprecedented overseas advertising. Confidence in the new mgt is high. Over $300 milion unrestricted cash set aside last qtr. United will come out of Ch11 around August, and I think will start bringing pilots back next year. Slow on retirements in 2004, but roughly 250 a year after that. A lot of the furloughees aren't coming back, so I think the picture is going to look much different in a few years. Think what you want about the loan guarantees. It was brilliant of mgt to keep the option alive by getting the decision deferred, and would be absolutely foolish not to pursue it now. The biggest risk for United at the beginning of this ordeal was a labor group taking their ball and going home. Go back and search the analysis pre-Ch11 and it all says the same thing - the pilots or mechanics could shut the whole thing down. Didn't even come close, the war and SARS had everybody willing to take the deeply concessionary 6 year contracts. In fact now is the most harmonious I've seen labor at United. This is the risk Delta is looking at now. Sure they only have one union, and the Delta pilots have been ready to talk cuts for a while, but does your average Delta mechanic or FA know that? Delta mgt needs to get this thing moving and get off their all or nothing posture.

 

[General Lee]

Skykid,

From a DowJones article:


Delta spokesman Anthony Black said the airline"wouldn't comment on speculation."Chris Renkel, a Delta pilot and spokesman for the pilots' union, said he was"100% optimistic"that the union and Delta could come to an agreement that would help the airline to avoid Chapter 11."No one wants to let a (bankruptcy) judge run the company,"Renkel said.

Bye Bye--General Lee

 

[storminpilot]

shon7, the mood is good! United has a new program called Success Sharing, and it provides cash bonuses, up to 7 a year I think, for performance - mostly customer satisfaction and on time departures/arrivals. I was afraid the first payout a few weeks ago would be an insignificant amount - it wasn't.

So I just want to understand this, BANKRUPT United pays bonuses and wants an ATSB loan to emerge from bankruptcy, all while still awash in red ink?

Geez. What a country!!!!!!!!!!!!!!!!!!!!!!!!!

 

[SWA/FO]

You have entered the "spin zone". welcome, and please wear your seatbelt.

 

[Ty Webb]

Well, they just announced two weeks ago that they lost $459 million in the first quarter, so the hemmorhaging continues.

 

[G4G5]

The bonus plan is a direct copy of what Bethune did at CAL when they were Ch11

 

[skykid]

storminpilot, just so I understand, how much money is the ATSB going to loan United? Thanks, I've missed this in the news.

 

[fracflyer]

storminpilot, just so I understand, how much money is the ATSB going to loan United? Thanks, I've missed this in the news.

The answer is zero. The ATSB will guarantee the loan that two big banks have already agreed to give United (Citibank and Fleet I think). It just enables United to get better conditions on the loan. No cost to the taxpayer.

 

[Heavy Set]

No cost to the taxpayer unless UAL tanks (as fuel prices increase)...

 

[Ty Webb]

What are you talking about? When UAL goes Chapter 7, the taxpayers will be on the hook for the whole thing.

Don't think it will happen? At the rate United is going, that loan won't last them 9 months.

In other words, our tax money will be used to allow them to dump a bunch of seats on the market, at prices they can't make money at, until they close the doors, and you and I get stuck with the bill . . . . .

 

[fracflyer]

What are you talking about? When UAL goes Chapter 7, the taxpayers will be on the hook for the whole thing.

Don't think it will happen? At the rate United is going, that loan won't last them 9 months.

In other words, our tax money will be used to allow them to dump a bunch of seats on the market, at prices they can't make money at, until they close the doors, and you and I get stuck with the bill . . . . .

I think you're wrong. The banks that finance the exit from bankruptsy will will get enough seats on the board of directors to control the company. Just like USAIR. As soon as they think the value of the assets held by the company are getting close to the loan amount they'll pull the plug and take it Chapter 7. The ATSB loan will be paid off first before anyone gets anything. The risk to the government is very small

 

[Ty Webb]

If it was so simple as that, Citigroup would have been in there already.

The difference at USAir is that the ARS already had a sizeable stake in USAirways, and by putting up the cabbage, they got the positioning to make it worthwhile.

Now, I am certainly not an expert about ATSB loans, but if you can post some info that describes what sort of collateral the taxpayers get, I would like to read it.

 

[skykid]

Ty, first you said last October was the UAL drop dead date because of the DIP covenants, then you gave another time frame of this past Spring. I'm not going to go get the actual quotes like I do for Boeingman, because you usually at least have some interesting arguements. Now you have decided not to give the actual date United will close the doors, but you have in fact demonstrated you don't understand much of what is going on. I guess the reason people want UAL to go Ch7 is becasue they believe it will result in some kind of personal gain for themselves. That's fine. If it is because you are a watch dog for government waste, I suggest also petitioning your own airline to give back the money it got from the ATSB. The loan guarantee is part of the same program, United has provided the documentation to the ATSB that shows the government can get its money back 2.5 times. Let's see your detailed analysis that shows this is not the case.

 

[Ty Webb]

You are really cracking me up.

Here's a news flash for you . . . AirTran doesn't need UAL's business, and I don;t have a personal stake nor an axe to grind, I am only pointing out the obvious. This is throwing good money after bad, and it is guaranteed by the taxpayer.

You didn't really address the gist of my post- why should the taxpayers help UAL continue to dump seats into an already saturated marketplace at a price they can't make money at?

 

[skykid]

Ty, speaking of pointing out the obvious, here's something you pointed out to us a while back:


"Because UAL employees still don't seem to get it- the fact that if you don;t make money by October (fat chance, indeed) you are out of the bankruptcy business, and I don;t mean in a good way, either."

Then you put off the doom until this Spring, and that didn't happen either. I must apologize for not reading your previous post closly enough, it looks like you do give another date - thanks! 9 months from now is next Feb, I'll copy that into my file.

I would like you to tell me which saturated marketplaces United is dumping seats in. Is it Zurich, Vietnam, China, Japan? I have seen United either pull out completely or turn over to Express dozens of domestic destinations that were not making money - Jacksonville, Nashville, Memphis, Milwaukee, Grand Rapids, Knoxville, and almost countless other places that mainline no longer flies. United has reconfigured seating on many destinations to add 18 more seats to the Airbus, TO PLACES ALREADY BEING SERVED. I wouldn't call that dumping seats, I would call it doing the same thing smarter. It has already been demonstrated that an airline can not give up domestic feed, only fly international, and survive.

 

[merikeyegro]

The name of the game is bailout

Guys, the ATSB was likely a ploy by the banks to get guaranteed cash. In the end, the taxpayers get screwed. Here's how it works:

1) Airline asks for a loan

2) Bank says no way

3) Gov't steps in, fearing a loss of jobs during a highly-political administration, and guarantees loans to "protect the public" from disrupted transportation

4) Banks give loans because there is ZERO risk

5) Airlines get low interest due to zero risk

6) Banks make money they would have otherwise not made on interest, all the while having zero risk

7) Airlines can operate with impunity, knowing they do NOT have to pay back the loans (the airlines AND the banks now have zero risk)

8) Healthy carriers get screwed by lower prices

9) Healthy carriers' BODs see the writing on the wall, thus they take more risky positions in the markets knowing that they can get a bailout with zero risk should all go to hell

10) Healthy carriers threaten bankruptcy and "prove" it by expensing many items in one fiscal period to make the balance sheet look worse than it is (I just wonder how NWA has survived this ENTIRE time without significant concessions...)

11) Carriers get concessions from ignorant labor factions, thus decreasing cost

12) Healthy carriers then compete with subsidized carriers.

13) At this point, ALL carriers can pay their loans with little to no risk, thus creating higher profits for the banks and creating a glut of cheap seats on the market. The companies and the workers get screwed while the banks party naked. The free market is disrupted, the banks laugh all...the way to the...bank, and the taxpayers end up footing the bill. It's the same way the government works. Banks will ALWAYS lend you money, even if you're a drug addict. They're protected by FDIC, which means they don't have to be prudent businesspeople...Be careful. They are never your friends.

This is all a way to nationalize the industry and create profits for bankers at the expense of inflation/taxpayers. They banks give out loans based on nothing (a promise to pay back, supported by the gov't) then loan other customers (you and me) more money based on this "asset" (the loan that is backed by the government - this is a very suspect asset, since it is not material). This puts more money into the supply, inflating prices - after all, the demand has not increased as quickly as the supply. The inflation makes average purchasing power decrease (for us), thus decreasing real disposable income for the consumer, thus decreasing demand for seats. This makes the loans less likely to be paid back (the carriers have lower profits/higher losses, and those in inflated dollars that the customers now earn). In the end, the consumer takes it in the pants twice - once by inflation, again by taxes. Guess who wins in the end? Banks. Quite simple. This is how the Federal Reserve System works. This is how Bank of America, Citibank, and JP Morgan Chase make their big dollars. This is how we all get screwed while a few at the top rake it in.

Ever wonder why banks "set" interest rates? I thought it was a free market? The Fed is a cartel, much like OPEC, and they have their hands in EVERYTHING. Google it. You'll see what I mean. It's why your dollar isn't worth anything other than the paper on which it's printed. Hidden taxation (inflation) gets you every time. It's called fiat currency...this is all for another thread. Anyway...

The ATSB was created to STABILIZE the industry after 9-11, not SUBSIDIZE it. Why on EARTH is it still alive today, 3 years later? It may be protecting jobs somewhere for a little while, but it's killing the industry as a whole. After all, is the industry in good shape today? There are as many if not more airlines on the brink of bankruptcy today as there were post-9-11. We will all pay for it in the end - not just pilots, but taxpayers. Whoever thought that this government today is pro-market is crazy. This is vintage FDR - socialism at its best. The Fed makes the money. After all, SOMEONE has to win, even in a socialist economy. $hit, I think even Lenin made out like a bandit in the 1920s...I don't remember communism really helping anyone...

All for four planes and 3,000 lives...Tragic, but this has got to stop...

 

[Mr.B]

"Now, I am certainly not an expert about ATSB loans"...

True.

 

[skykid]

Merikeygro, I thought that was a well thought out and written post. Did you know the ATSB loan guarantee program is over, and has been for quite some time? If Delta went Ch11, and I don't think they will, they have missed the deadline by quite a bit. I agree with most of what you wrote, i also think it would be stupid for United not to pursue the corrections the board gave for approving the guarantee in Dec 2002, just like it would have been stupid for whatever airline you fly for not to have taken their share of the cash the board gave out.

Ty, back to the saturated markets. Your posts have sarcasm, insults, predictions that seem to be based on your own analysis, and very little to back it up. I'm going to use some numbers you could check out yourself for my argument:

United mainline had approx 2200 daily flights 3 years ago.
United has approx 1650 flights per day now.
United has recently increased to more overseas flights than pre 9-11.
So I would argue United has dumped, roughly, (negative) 550 flights on the oversaturated domestic market.

United got rid of I think 22 737-200s, and approx 75 727s.
There are other 737s parked, don't know how many so I'll leave them out.
So I would argue United has dumped about (negative) 100 planes on the oversaturated domestic market.

The international carriers were paralyzed to do anything about the rapid growth of the LCCs after 9-11. The international carriers, which this country needs, got beat up bad the last couple of years, esp the ones that had murders on their flights. And yeah I already know United was losing money before that. Good business on the LCCs part to take advantage and speed up the growth, that's the way it goes. Don't get all upset now United and other carriers are going to try and compete in domestic markets.

 

[storminpilot]

storminpilot, just so I understand, how much money is the ATSB going to loan United? Thanks, I've missed this in the news.

I think they want a $1.6 billion loan.

http://biz.yahoo.com/rb/040508/airlines_united_loan_2.html