Huge Loss For United!!!

[acarpe3448]

I have just read that United lost close to a billion dollars in the 2nd quarter, and close to 2 billion in the first six months. I admit that I am not a business or bancruptcy expert, but how is this still being allowed to happen? Who is covering these enormous losses? Even with like close to $600 million in employee givebacks, and the government money, they still lost this much.

I sure hope things turn around for all of us, but I just can't see it being to long before creditors pull the plug and say the hel$ with this!

I don't know how others feel, but I am of the belief that if United were to fail, that it would not necessarly be a huge benefit to the other large majors. LCC will benefit the most of course!

 

[House_X]

I'm looking forward to ACA signing a new contract with UAL. (sip) We are partners through thick and thin and we will back them up all the way(sip)...afterall (sip), they looked out for us, (sip)especially during the last 6 months of contract negotiations after they filed Chapter 11 (burp)...

May I have another cup of that delicious Kool-Aid???????????

 

[LearLove]

LCC will benefit the most of course!

I guess the people have spoken.

 

[Chocks]

Accounting Magic

I still don't know how we can have a TWO MILLION dollars a day POSITIVE cash flow and still post a 600 Million loss for the quarter...

 

[ATR-DRIVR]

Can you say 'executive salaries/compensation'?

 

[bart]

Can you say depreciation and other non-cash expenses...

Earnings and cash flow are two entirely different things. Look at United's quarterly filings (as opposed to some journalist's opinion) and you will get a clearer picture of their financial situation.

Maybe a little research into the difference between the two will help you seem a little brighter in your next post.

 

[banned username 2]

Maybe a little research into the difference between the two will help you seem a little brighter in your next post.

Well??? How bad a shape are they in???

 

[Timebuilder]

Can you say depreciation and other non-cash expenses...

As Shakespeare said "there's the rub!"

You can have TONS of cash flowing into a business, but if you are faced with accounting for billions of dollars of aircraft and facilities (or other similar costs), then executive salaries which are no higher than other similar businesses become a non issue.

When all other obligations are met in an environment of rising receipts, you reach a point where you become profitable. Until then, you are operating "in the red", where you are kept afloat by investors that are "betting" that your situation will improve. If they stop "betting" on your future success, then you find yourself without cash for daily operations, and you close your doors.

In most businesses, this situation can only continue for just so long. "How long" is the question.

Time will tell.

 

[skykid]

Well??? How bad a shape are they in???

Good question. Started Apr 1st with about 1.6 billion cash and posted a 623 million loss. So that leaves about 1 billion. Not exactly. UAL ended with 2.3 billion in cash. There are 2 ways for United to wind up in Chap 7. #1, run out of cash. This is not happening. #2, break a EBITDAR covenant with the CH11 lenders and not get relief from it. For the past 5 months, United has set a target modestly above the EBITDAR requirements, and written off, and taken charges up to that target. Example - 1st qtr wrote off 137 million for exposure to Air Canada. Example - Jun 03 - 334 million charge for "reorganization expenses." United doesn't have a room full of accountants trying desperately to show a profit so the banks wont pull the plug. They do have a room full of accountants who are taking complete advantage of bankruptcy law to maximize tax and other benefits. This last quarter they started paying expenses for later in the year, such as retirement fund money, and taking the charges now. There are significant hurdles ahead, esp if there is another event that has a major impact on revenue. But, this 623 million loss announcement has little to do with progress, unless you are looking at the balance sheet and cash flow. If the cash balance had shrunk instead of growing 700 million dollars, that is when you would see the analysts screaming. Here's how you will know United is in danger of liquidating - return to a negative cash flow (last part of Jun was +3mill/day), shrinking cash reserves, selling of assets such as routes, or execution of a plan for emergency wage cuts (Tilton ordered up such a plan before the war, but wasn't even close to needing it). I was actually very happy about all the releases yesterday, most of the info of course doesn't make the papers, esp the Denver Post. On time performance and completion performance have been good, but customer complaints have lagged. UAL had the lowest complaint ratio of the biggest 6 carriers and that has been a tough nut to crack.
If you want United to fail, and alot of people do, you need to hope Osama and company have a few tricks left up their sleeve. That could definitley do the trick, but time is even running out on that.

 

[Chocks]

Maybe a little research into the difference between the two will help you seem a little brighter in your next post. [/B]

Hey bart....BLOW ME!!!!!

 

[jettypeguy]

The writing is on the wall

Maybe the UAL guys aren't reading the writing on the wall yet, but UAL is just one big slowly sinking ship.

just some points i've come across;

the cash buildup is due more to failure to pay(yet to record as an expense) many leases on property and aircraft. That plus depreciation alone would make any scenario positive in 2Q. What will things look like when they have to pay all their bills?

Paint the quarterly reports anyway you want. Talk about cash flow and one time charges and all the rest of the accountspeak, it all boils down to REVENUE. This precipitously steep decline (18% is a huge drop) in revenue is ongoing for 4 years now (compare 2Q03 with 2Q99) with no end in sight.
That is NOT good for any business.
Draw your own conclusions.

""United's loss from operations was $(476) million in the second quarter of 2003, compared to $(536) million in the second quarter of 2002""

I still don't see how this can be good news. It's not that much better than a year earlier when they didn't have to pay employees the agreed contract rates. If this is the extent of their improvement, aren't they in major trouble in Q$ and 04Q1?


The next chapter in UAL's book is Ch7......

 

[skykid]

jettypeguy, good arguement in my opinion. I think the thought that Ch11 allows a company to decide which bills to pay is a common misconception. Quick summary - 60 days from filing Ch11 to renegotiate leases/rent, if no new agreement or agreement to continue talks, repossesion can take place. Look in today's (Sunday) Denver Post, front section - not business, and you will see a typical example of a disputed debt. 13 or so million in pre-petition lease fees that are probably going to be negotiated away. That is what will happen to a lot of the small bills from around the country that are in dispute.
Revenue is key for United and every other airline. Airlines that flew to areas affected by the SARS bs got murdered in April and May. I heard, and I'm not positive about this, that traffic to the East was down over 60% for many weeks in a row. Add this to the war and there is the big traffic drop. June's domestic traffic unit revenue was up 4% from June 2002, which shows how strong the qtr finished for UAL and the industry.