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Is UAL next?

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Well-known member
Nov 26, 2001
So is UAL next? What will happen to the regionals which support these carriers? Will they grow because more work will be outsourced or will they shrink because routes will dissappear?

See below ----

Investors bid down UAL (UAL: news, chart, profile) skidded $1.40, or 27 percent, to $3.80, barely above its 52-week lows of late July.

The No. 2 carrier, which is losing about $1 million per day, has applied for federal loan guarantees under which Uncle Sam would essentially co-sign an IOU for about $1.8 billion -- money the airline needs to keep aloft.

While US Airways (U: news, chart, profile) successfully negotiated for a smaller package, with the help of concessions from its unions, at least one analyst regards United's chances of taxpayer assistance a longshot.

Deutsche Bank's Susan Donofrio thinks that "US Airways' bankruptcy filing may put some fire under [UAL's] labor unions' feet with respect to getting wage concessions in order to better qualify for their $1.8 billion ... loan guarantee."

However, Donofrio wrote in a report Monday, "this may not be enough to cause labor to cave in. As a result, we put the odds of United not getting their loan guarantee at 80 percent to 85 percent. We think that this would pave the way for a possible bankruptcy."

On the bright side, "we think that a United bankruptcy would give [it] the ability to become financially healthier by restructuring," Donofrio said. "This would certainly help the industry in the long run. In addition, this may force the issue of wage concessions which would, ultimately, also help everyone."
Two things,

I thought that UAL had been given the green light for the loans.

Second, didn’t UAL just report they had retained some mega bankruptcy firm out of SFO that was notorious for being able to “slice-n-dice” in a Federal Bankruptcy Court?

7:42AM UAL Corp cut to Sell from Buy at UBS on bankruptcy risks (UAL) 3.80: Firm slashes its price target to $1.50 from $20; given the increasingly likely event of a bankruptcy within the next six months, UBS would expect the stock to migrate irregularly towards zero.

UAL has certainly not been given the greenlight for government backed loans. Alot of politicians are backing the loans, but you can bet approval will be conditional on much deeper employee participation in the recovery plans. That AINT going to happen. United will eventually go Ch11. I hope they follow USAIR's example, and do it with as much cash on hand as legally possible.

Keep in mind the problems the bigger airlines are facing aren't even unique to airlines. Organizations will almost always get too big, bloated, or off-track (AMR, UAL, U). Someone else always comes up with a better idea, a niche, or a leaner and hungry approach (Southwest, Frontier, Airtran, Jetblue). It is real simple - change or die (look what Contenintal has been able to do).

Ch11 for UAL will be to protect itself from the employees, as sad as that sounds. Employees have to share in the hard times. It is much easier to keep blaming management than to realize the industry has changed already, to include compensation levels. This is what happens when you work for someone else! Don't like it, quit and go to work for yourself, instead of telling your flying partner for the 10th time how bad management is. UAL's unions will not share in the tough times or be part of change, until forced to so in bankruptcy court.
Agree with skykid...

About the fact that employees must share in the hard times.

I just wish that Goodwin would share some of his ungodly high retirement with the employees!!!

Tuesday August 13, 11:33 pm Eastern Time
Associated Press
United Stock Slides Again
By DAVE CARPENTER, AP Business Writer

United Stock Slides Again After American Airlines Moves, Downgrade

CHICAGO (AP) -- United Airlines' stock plunged another 28 percent to a 20-year low Tuesday, pressured by rival American Airlines' newly announced overhaul and a rare "sell" recommendation by a top Wall Street analyst.

A day after falling 27 percent in response to US Airways' bankruptcy filing, shares in UAL Corp. dropped another $1.06 to close at $2.74 in heavy trading on the New York Stock Exchange. The frenzied selling, spurred by increasing fears of bankruptcy, has wiped out 47 percent of the stock in two days and sent it to its lowest level, adjusting for stock splits, since January 1982.

American, which surpassed United last year as the biggest U.S. airline, slashed capacity, retired 74 planes and announced other cost-oriented steps in a restructuring it said other carriers will likely have to emulate to survive.

Analyst Sam Buttrick of UBS Warburg, while bullish on other airline stocks, called bankruptcy "increasingly difficult to avoid" for UAL. He said the company appears dependent on government-backed funding -- a requested $1.8 billion federal loan guarantee -- that he suggested may not be forthcoming because of stiff cost-cutting requirements by the Air Transport Stabilization Board.

Buttrick said that "in the increasingly likely event of a bankruptcy within the next six months (we) would expect the stock to migrate irregularly towards zero."

Responding to questions about how it will respond to rival American Airlines' decision to slash capacity and lay off workers, a United spokesman said late Tuesday the airline will cut flights by 9.1 percent in the fall. United currently operates 2,000 flights daily.

"We decided several weeks ago to cut flights for the winter," said spokesman Joe Hopkins. "We just did not make an announcement."

Hopkins said he could not say how the flight cuts would affect staffing levels.

Hopkins said it is common for the air carrier to cut the schedule after Labor Day so that there is some equilibrium between demand and capacity. Because of continued soft demand from business and leisure travelers in the wake of the Sept. 11 terror attacks, the cuts in capacity are steeper this year, he said.

Despite the free fall in its stock, United has a strong route network and billions of dollars in assets, and industry experts expect the nation's No. 2 carrier to keep flying even if it is forced to reorganize in bankruptcy court.

Aaron Gellman, a professor at Northwestern University's Transportation Center, thinks United is not in imminent danger of bankruptcy. "It's not just United, it's other airlines too," he said of the problems plaguing the Elk Grove Village, Ill.-based carrier.

But Gellman said United must do something soon about poor morale and soaring labor costs. If a government loan board grants United's request for a $1.8 billion loan guarantee, he said, it should stipulate that pilots must have their industry-leading wages rolled back to the level of August 2000 -- before they got 37 percent raises.

The pilots have agreed to 10 percent pay cuts but only if other United employee groups make similar concessions.

A bankruptcy filing would wipe out UAL workers' equity in the 55 percent employee-owned airline.

Sadly here's the latest: It is going to be interesting to see how many years it takes the industry to recover.

Reuters Company News
United Airlines changes tack, bankruptcy possible

CHICAGO, Aug 14 (Reuters) - UAL Corp. (NYSE:UAL - News), the parent of United Airlines, said on Wednesday it is changing its business plan and refiling a loan guarantee application with the federal government, along with possibly filing for bankruptcy this fall.

The airline faces nearly $1 billion in debt repayments in the fourth quarter, and says it has insufficient access to the capital markets to make that payment.

UAL, which has lost record amounts of money in the wake of the Sept. 11 attacks, is seeking federal government guarantees for $1.8 billion of a $2.0 billion loan. It said it has allotted 30 days to conclude discussions with stakeholders about additional participation in the financial recovery plan.
UAL: Bankruptcy may be 'only' answer
By Jennifer Waters, CBS.MarketWatch.com
Last Update: 4:21 PM ET Aug. 14, 2002

CHICAGO (CBS.MW) -- UAL Corp. said after the bell Wednesday that it is preparing for a possible bankruptcy filing by this fall while it steps up efforts to get a federal loan guarantee for $1.8 billion of a $2 billion loan.

In a press release, the parent of United Airlines (UAL: news, chart, profile) said it is setting "very short timeframe - 30 days -- to conclude" all discussions with the government, labor unions and other parties. In the meantime, UAL is "changing its business plan to build a strong, more cost-competitive airline," according to the press release.

"The changes we need to make are urgent, significant and immediate," Chief Executive Jack Creighton said in a statement. "Simultaneously, we are preparing for the potential of a Chapter 11 bankruptcy filing this fall, due to our fourth-quarter debt payments.

"Unless we lower our costs dramatically, filing for bankruptcy protection will be the only way we can ensure the company's future and the continued operation of our airline," he added.

Creighton's remarks came shortly after UAL touched new lows it hadn't seen in decades. Shares of the nation's second-largest carrier closed down 10.6 percent at $2.45, but not before hitting an intra day bottom of $2.08.

Shares tumbled in the after-hours, down 31.4 percent, to $1.68 - off 77 cents.

Creighton said he was responding to the changes in the airline industry and feedback its application for a loan back-up from the Air Transportation Stabilization Board

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