Looks like UAL Ain't gettin the Loan

[TrimixDeepDiver]

Aid for UAL won't fly?
Senator says carrier can't meet criteria for loan guarantee

By John Hughes, Bloomberg News
May 19, 2004

U.S. courts probably would block a federal loan guarantee for United Airlines because the carrier is ineligible for the assistance, said Republican Sen. Peter Fitzgerald of Illinois, the carrier's home state.

Competitors of UAL Corp.'s United would file a lawsuit if a government board backs a $1.6 billion loan guarantee for the Chicago-based airline, because the law that created the aid program says carriers may be compensated only for losses related to the Sept. 11, 2001, attacks, Fitzgerald said in an interview.

"I can't conceive of any airline making a persuasive demonstration that losses it is sustaining in 2004 are the result of those terrorist acts of 2001," Fitzgerald said. "It's just not believable.

Read it here

 

[On Your Six]

Oooh crap! On top of that say thanks to the Saudis for selling us out at the gas pump. How many more negative things can this company sustain?

 

[DrvA320]

>>"I can't conceive of any airline making a persuasive demonstration that losses it is sustaining in 2004 are the result of those terrorist acts of 2001," Fitzgerald said. "It's just not believable.<<

How lame. Just goes to show you don't require brains to be a politician.

United has never made an argument that its current shortfalls are the result of 9-11. I believe however that United would claim that 9-11 did help push it into CH11.

A valid reason to request (and receive) a loan "gaurantee" IMHO.

Obviously I am not a UAL hater like many others on this board!

 

[Extra300S]

Here is the rest of the story. Seems like Frontier is trying to put up a protest along with SURPRISE! SURPRISE! Airtran....





A United spokeswoman said Fitzgerald's comments are at odds with all other Illinois representatives, who support the Dec. 18 application to help the airline raise $2 billion to exit the industry's largest bankruptcy. The company, Denver International Airport's dominant airline, sought protection from creditors in December 2002 after the Air Transportation Stabilization Board rejected an application for a guarantee.

Fitzgerald, 43, who will not seek a second Senate term this fall, said he had refrained from lobbying the board on any United application and now might urge the panel to reject the request, citing the legal merits.

"If that board is actually considering doing this at a late date, it raises all sorts of questions because the board doesn't appear to have authority to compensate carriers just because they are unprofitable," Fitzgerald said.

The Air Transportation Stabilization Board is "evaluating the United application on its merits based on the statutory criteria," spokeswoman Anne Womack Kolton said.

United's application has won broad support from both political parties, said Jean Medina, a United spokeswoman.

"His views run counter to the rest of the Illinois delegation to the U.S. Congress," she said of Fitzgerald.

"We believe we meet the criteria, have a compelling application and should be approved," Medina said.

United rivals have said the carrier will be unable to meet the board's criteria.

United's financial losses resulted from decisions by the carrier, including creation of low-fare carrier Ted, repainting aircraft, buying new uniforms and paying higher fuel and security costs, said Ed Faberman, president of the Air Carrier Association trade group, whose members include Denver-based Frontier Airlines, Spirit Airlines and AirTran Airways.

"We've raised some questions to the board as to whether this is from 9-11," Faberman said. The terrorist attack on New York and Washington "was almost three years ago, and in the interim they are spending all kinds of money."

Faberman said he doesn't envision filing a lawsuit if the board approves United's request, citing the challenge of overturning an agency decision.

Tim Wagner, a spokesman for American Airlines, said, "We have no plans to sue anybody over the ATSB's decision, whichever way it goes."

Gordon Bethune, chief executive of Continental Airlines, said at the Society of American Business Editors and Writers annual meeting May 3 that United's application should be granted if the board thinks the carrier meets all the criteria.

He added: "It's a pretty tough criteria to meet three years later."

 

[bigred]

This article is mainly about one senator's "opinion." Who knows what the ATSB will actually do.

 

[House_X]

Here is the rest of the story. Seems like Frontier is trying to put up a protest along with SURPRISE! SURPRISE! Airtran....

You left out Independance Air, we would like to sign up for the protest as well...

 

[eaglefly]

The "ATSB" (Airline Transportation STABILIZATION Board) was created to assist airlines as a result of the Sept. 11 attacks.

Any damage from 9/11 is not now a factor in the airline industry.

Load factors are as high as ever, i.e. PEOPLE ARE TRAVELING.

UAL's primary problem is BAD MANAGEMENT combined with new economic reality.

The business traveler that previously accepted being overcharged is not now or ever going to pay that price anymore and as a result, yield is down.

Way down.

Whta is happening in the industry now is basically "Walmart-ization".

For the most part, people value PRICE more than any other factor, be it stereo equipment, beer, furniture or transportation.

Businesses are DEMANDING their people be VERY price concious when selecting air travel. Leisure travelers would rather get cheap tickets (with little "frills") and spend the money they saved WHEN they get to their desired destination NOT getting there.

IF UAL were to get this "loan" and default it would be you and I (the taxpayer) who would pay for it.

To give UAL a loan at this point is CORPORATE WELFARE subsidized by the TAXPAYERS.

That is NOT what the ATSB was established for.

Either UAL survives in the free market on its own or it does not.

The taxpayers should no longer bear the burden and bail-out INCOMPETENT CORPORATE MANAGEMENTS whether it is airline, computers or "widgets".

He is saying this because he has more inside knowledge of reality than us pilots.

....and that reality SHOULD NOT provide ANY airline, now or in the future any further assistance UNLESS another TERRORIST event were to strike the industry.

Stabilze means STABILIZE.

NOT support, coddle, nurture or assist INCOMPETANT MANAGERS WHO MAKE BAD DECISIONS AND FOLLOW FAILING STRATEGY.

 

[efiscompmon]

For the most part, people value PRICE more than any other factor, be it stereo equipment, beer, furniture or transportation.

At first I thought you meant airline supplied amenities...

To give UAL a loan at this point is CORPORATE WELFARE subsidized by the TAXPAYERS.

Either UAL survives in the free market on its own or it does not.

The taxpayers should no longer bear the burden and bail-out INCOMPETENT CORPORATE MANAGEMENTS whether it is airline, computers or "widgets".

One could make the argument that that already happens when an air carrier continues to operate while under Chapter 11 for an extended period of time and continues to price its product below its cost. I might submit that UAL has not been in the "free market"--DAL, CAL, NWA and others don't get to defer paying their bills.

Mike Boyd once suggested that air carriers should be forced to suspend operations (actually, he said surrender their certificates) once they are bankrupt. Where might DL, AA, CO, NW (and our average industry wages!) be if UAL and AAA were made to cease ops until reorganization was complete?

Not anti UAL and certainly not wanting anyone to lose their jobs--just asking an academic question: How have these two airlines affected YOUR career earnings?

 

[DrvA320]

>>You left out Independance Air, we would like to sign up for the protest as well...<<

House_x,

Don't worry. You are on "The List".

 

[skykid]

efiscompmon, I'm just curious because I haven't been following this very closely - which bills besides prepetition from Dec 2002 hasn't United paid?

Eaglefly you said:

"The "ATSB" (Airline Transportation STABILIZATION Board) was created to assist airlines as a result of the Sept. 11 attacks. Any damage from 9/11 is not now a factor in the airline industry."

Do you know when United applied for the guarantee, and what the ruling was exactly in 2002? A lot of people either don't know, or want to pretend they just asked for this guarantee, and its a little more complicated than that.

"IF UAL were to get this "loan" and default it would be you and I (the taxpayer) who would pay for it."

Can you back that up on paper? You would have to use United's balance sheet, have an advanced understanding of bankrupcty accounting and law, and see the specific terms of the guarantee which doesn't exist at this time. I've spent days studying this bankrupcty stuff and analyzing the numbers and I will admit I am not an expert. I can find however, after trying very hard, no dispute in the numbers United has for collateral, and have noticed the lobbists against the guarantee don't have any specifics either. Since you state your assertion as a point of fact, maybe you can.

"UAL's primary problem is BAD MANAGEMENT combined with new economic reality."

You are certainly entitled to that opinion. Could you also give some examples of some of the bad decisions the new mgt has made? Take care!

 

[B190Captain]

"IF UAL were to get this "loan" and default it would be you and I (the taxpayer) who would pay for it."

So what, we pay for alot more stupid sh!t than that.

 

[Pez D. Spencer]

Finally Six, we agree. Dead on it.

Corporate welfare, eaglefly?? OK -- granted it's called a bailout. But, to my knowledge that wasn't a Southwest, Jet Blue, or America West (which was approved for and took the bailout cash) jet that was flown into the towers... or the ground. They [United] have more of a claim to receive any bailout than any airline that has taken it. WTF are you thinking?

(edited -- I'm not saying that Southwest or Jet Blue took the bailout -- only America West -- Sorry if it looked that way in the original post.)

The actual BS they, United, have to go through to get the loan guarantee decries foul play on the part of our government. Meanwhile Japanese airlines receive BILLIONS of dollars in free money -- Billions more than the entire loan package approved for ALL US airlines -- where's your outrage there -- not your money??? No, not today, but when the majors fail and intercont flight is whored out to cabotage you might wonder, where, oh where are those great old legacy carriers that used to fly overseas. Gone... and just why is Ho Chi Minh making that guy's paycheck.

 

[Dizel8]

It should be noted, that the politician that is against UAL getting the guarantee, is not running for re-election. The rest of them are probably looking at votes for their re-election. Needless to say, there are potenially a lot of votes to gain

Yes, the new management seems to have a plan, to right a ship, that prior to 9/11 was listing. Summer from Hell, Choke the goose, buy USAirways, Avolar etc. It all cost bundles of money.

United, despite 9/11 would probably be doing okay, after all look at AMR, had it not been for the corporate dysfunctionality. Of course, when the LCC's are added to the mix, it gets really ugly. The fare levels are simply not there, yet UAL seems to be holding their own and seems to have a course firmly set for a viable future. Obviously, the LCC's do not want UAL to cushion the war chest, with money at a very low interest rate and cannot say I blame them.

"But, to my knowledge that wasn't a Southwest, Jet Blue, or America West (which was approved for and took the bailout cash) jet that was flown into the towers."

No it wasn't, it was UAL and AMR. AMR chose to go it alone, no Chapter 11 or ATSB loan, and seems poised for a strong comeback. They fought like hell and still do, Crandall would be proud! While my carrier competes with AA, I take my hat off to them, they sure don't ever let up.

Oh well, it comes down to 3 people in Washington to determine.

 

[skykid]

Pez, EVERYBODY took the bailout cash, and then the second government payout for security expenses. What we are talking about here is just the loan guarantee part, the money is actually going to come from banks. That's why it is a little ironic for this LCC lobby group to come out against the guarantee, when you could argue they used their "gov-ment cheese" to expand. I'm not complaining about that, just giving some perspective.

I would say the ATSB decision is definitely not assured either way and will be interesting. United will exit Ch11 either way. The congressman from the article will have little affect on the outcome, in my opinion. His comments show the ATSB he doesn't understand the process, and he is a little fish even in his own state. If the board goes on what their predecessors told United about the loan in 2002, they don't have a lot of wiggle room not to grant the guarantee.

More than likely, since this is an election year and the outcomes of the presidential race seems tight right now, I would say it could come down to which outcome pleases the greatest amount of people. Could be wrong, the ATSB will at least claim they were not affected by politics or the White House.

 

[Flying the Line]

United's Balance Sheet.

If it is so strong, then why do they need the ATSB loan guarentee?

They have lots of assets, yes, but they also have tremendous amounts of dept.

 

[100LL... Again!]

Free money for bad management is what t would amount to.

Many oher companies weathered 9-11 without govt money.

I guess poor planning should pay if your initials are UAL.

Hope they survive, but I hope they do it on their own.

Corp welfare. pfft.

 

[merikeyegro]

ATSB loan at this point is a gov't subsidy. The gov't should not be straddling taxpayers with this. The guaranteed loan means that banks make out like bandits if the company defaults. The banks are making a risk-free loan (in this case, JP Morgan Chase and Citicorp) with taxpayer assurance of payback. UAL can't pay, so we do instead. Great deal. Socialism, anyone?

UAL is in some trouble. They have almost $14B in outstanding debt that is currently "subject to compromise." Check in the annual report here, page 22:

http://media.corporate-ir.net/media_files/NYS/UAL/reports/UAL10K2003.pdf

Heck, read the whole thing. The company is in trouble, and it's not because of 9-11...

 

[G4G5]

Fact one:
The Tax payer does not wind up footing the bill. Show me where it says that they do? The loan is under written by the government. UAL inturn has to put up collatral. The same collateral that they would no doubt have to put up to any bank(s) that underwrite the loan.

What the ATSB loan does is. Gurantee that the loan will be paid. In essence the Uncle Sam is co-signing the loan for UAL. This gurantees that UAL will get a much better interest rate then if they went to the creditors/banks/sharks directly.

In NO WAY is the US tax payer left footing the bill. If UAL were to default the US govenrment would be left with the assets required to repay the loan amount (gates, slots, routes). They are the primary creditor, everyone else gets behind in line for repayment.

Unlike banks, the orignal intent of the ATSB loan was not to make money off of the failing carriers. This is the main reason that UAL prefers to go this route Vs directly dealing with the banks. The second reason is, UAL stands to get a "fair value" assement for their colleratal. Their are only a few banks in the world willing to underwrite close to $2 billion in debt. Those banks will no doubt have a very different value of what an asset like the Pacific or London is worth. They will also have a very different rate of interest and repayment schedule, if the US gov does not cosign.

Unlike Uncle Sam, the banks are in the business to make money and would love to set up terms that would make repayment difficult and costly for UAL. Then forclose and place the asset up for auction and get hypotheticly twice the money that they orignally valued the asset for.

All you need to do is look at the USAir situtation and the terms of their $900 million to fully understand how this works.

 

[Jack Schitt]

UAL stands to get a "fair value" assement for their colleratal.

Is this the same U.S. government that pays $10,000 for a toilet seat?

 

[House_X]

>>You left out Independance Air, we would like to sign up for the protest as well...<<

House_x,

Don't worry. You are on "The List".

GOOD, I was getting a little worried...after all, I'm just a regional airline pilot...I'm no better that a piece of street garbage.

Ohhh, by the way, did you see us on the front page of USA Today this week and numerous other newspapers around the country?

ooooo...that's gotta hurt....

 

[furloughfodder]

GOOD!

 

[freddriver]

G4G5...Thanks for the informed respones. I rerely post on this forum, but I constantly monitor. I don't always agree with you, but I always apprecitate your perspective. Jack S....please keep in mind that there are people who monitor these boards who, although are not always happy about our goventment's decisions, are out THERE flying where you don't want to go. Please keep a bit of perspective. Respectully, Freddriver.

 

[Ty Webb]

Originally posted by G4G5
Fact one:
UAL inturn has to put up collatral. The same collateral that they would no doubt have to put up to any bank(s) that underwrite the loan.

These are not facts, they are suppositions. You suppose that they have to put up assets, but please post facts to back that up, because it doesn't fit in with the other info I have seen.

For example, if UAL was offering security (collateral assets) as a guarantee for the loan, why wouldn't Chase or Citigroup make the loan without the guarantee? Answer: it is not a workable deal without Uncle Sam guaranteeing the funds.

Another reason it doesn't stand to reason that the US taxpayer is protected- UAL has no assets left to leverage. Everything is spoken for, they are in Chapter 11.

Everything I have seen indicates that this is NOT a secured loan, which means you and I are on the hook for a loan so shaky that even a "Buy Here, Pay Here" car lot wouldn't even sell them a car with that Balance Sheet.

 

[DrvA320]

>>I'm just a regional airline pilot...I'm no better that a piece of street garbage. <<

House_X,

Your words - not mine.

Don't try and turn this into something it isn't.

Among the people that I work with - it is known that ACA has only bad intentions for UAL. Therefore it is painfully obvious that you are on "The List" of those who oppose any help from the ATSB.

 

[merikeyegro]

The US gov't guarantees payback of the loans, hence the banks' willingness to lend with the guarantee. In case you hadn't noticed, there ain't much of a market for used, 150+ seat aircraft in today's market (or even tomorrow's), so UAL will likely not get much out of the deal. Many of their assets, at historical cost, are overvalued. The market value of these assets is lower due to the excess capacity in today's market. Airlines aren't exactly buying planes today, so I don't see where all of this money is coming from.

If the gov't underwrites the loan, it makes them a joint and several partner. It's no different than your parents co-signing a home loan so you can get a better interest rate. They are levering their assets along with yours to provide better chance for repayment. Since the US gov't has assets FAR greater than does UAL, this will guarantee a low-interest loan. If UAL had the assets to put up as collateral, they would not need a co-signor for the loan. So, your logic is flawed. This is a gov't bailout request, plain and simple. It's nothing against UAL. They have just made some bad decisions in the past and now it's time to pay the piper. I wouldn't bail you out if you decided to use your paychecks for strippers and booze and couldn't pay your credit card bill. The US gov't shouldn't be bailing out UAL because it chose to start Avolar, buy Hyatt, pay incredibly high pilot salaries, etc.

This is supposed to be a free market. If you want subsidies, move to Europe.

 

[G4G5]

Originally posted by G4G5
Fact one:
UAL inturn has to put up collatral. The same collateral that they would no doubt have to put up to any bank(s) that underwrite the loan.

These are not facts, they are suppositions. You suppose that they have to put up assets, but please post facts to back that up, because it doesn't fit in with the other info I have seen.

For example, if UAL was offering security (collateral assets) as a guarantee for the loan, why wouldn't Chase or Citigroup make the loan without the guarantee? Answer: it is not a workable deal without Uncle Sam guaranteeing the funds.

Another reason it doesn't stand to reason that the US taxpayer is protected- UAL has no assets left to leverage. Everything is spoken for, they are in Chapter 11.

Everything I have seen indicates that this is NOT a secured loan, which means you and I are on the hook for a loan so shaky that even a "Buy Here, Pay Here" car lot wouldn't even sell them a car with that Balance Sheet.

If you think that the US gov is going to just give a loan to UAL without out any backing you are smoking CRACK.

Just look at USAir's recent payback to the gov. What does that tell you? Oh, you probably missed that.

Time to play with my daughter, Biatch slap to follow.

 

[Ty Webb]

I asked you to post some facts if you have them. Obviously, you don't.

Don't bother just responding with more opinion stated as fact.

The way I understand it, until you can cite definite sources to the contrary, is that when UAL defaults on the loan, the loan is paid by us, the taxpayers.

Ergo, UAL should not get the guarantee.

 

[T-Bags]

http://www.unitedafa.org/news/news_article_20040504.asp

UAL is putting up 2 to 3 times the loan value in collateral. A320's, 777's, drastically depreciated 747-400's, LHR route authority, NRT slots, ect. Even an idiot with even a marginal ability to read would have seen the various articles that reported that there will be collateral put up against the loan.

 

[G4G5]

Ty,
You could have just shut up and let it go but No.

From the NTSB's web site
http://www.ntsbbar.org/getart.asp?id=20109

Item Seven:
"a reduction in the risk of default to the government by reducing the length of the loan, by pledges of collateral, and by other financial structures that minimize the Federal government’s risk and cost associated with making the loan guarantees."

BY PLEDGES OF COLLATERAL!!!!!!!!!!!!!!!!!!!!!

 

[G4G5]

Ty,
It's not my job to educate you but when you say something SO STUPID, you need to be corrected.

From the US Treasury:
http://www.ustreas.gov/press/releases/po666.htm

THE BOARD MUST ENSURE THAT THE FEDERAL GOVERNMENT IS COMPENSATED FOR THE RISK IT ASSUMES IN MAKING GURANTEES!!!!!!!!!!!

You know just a simple Google search would have saved you a tremendous amount of embarrassment.