G4G5 said:
You need to read the 11/20/2003 copy of Aviation Week. The new airline will be called independence air and according to Aviation week they expect to have completed the court process and be free from the UAL contract by April 2004. Or are you trying to tell us that AICA has gone out and started the process of creating Independence air, with no time line at all? They know exactly when they will be free from UAL, the reports have it as April of '04
G4G5, I haven't read the article. That date is almost certainly based on the expected date of UAL's emergence from chap 11. This 'loose end' will have to be tied up prior to UAL's emergence.
Here's an article stating S&P's position on ACAI's prospects (note how termination date of UAL/ACAI's contract is contingent upon UAL's emergence date):
DJN: PRESS RELEASE: S&P:Atlantic Coast Airlines Rtgs Off Watch
(Dow Jones 12/23 14:17:51)
The following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's) Dec. 23, 2003--Standard & Poor's Ratings Services said today it affirmed its ratings on Atlantic Coast Airlines Holdings Inc., including the 'B-' corporate credit rating, and removed them from CreditWatch, where they were placed Oct. 6, 2003. The outlook is negative.
"The ratings affirmation is based on the termination of regional airline holding company Mesa Air Group Inc.'s unsolicited offer to purchase Atlantic Coast Airlines Holdings," said Standard & Poor's credit analyst Betsy Snyder. "Mesa terminated its offer after United Air Lines Inc., Atlantic Coast's feeder partner at Washington Dulles airport, terminated its memorandum of understanding, under which both Mesa and Atlantic Coast would have operated as United Express carriers at Dulles," the credit analyst continued.
Ratings on Atlantic Coast Airlines Holdings Inc. reflect its relatively small size within the high-risk U.S. airline industry and substantial operating lease burden, mitigated to some extent by revenue stability that
has been provided by fee-per-departure contracts with major airline partners. Atlantic Coast currently operates two regional airlines that offer feeder service for both United and Delta, primarily along the East Coast and in the Midwest and Canada, under fee-per-departure agreements. Fee-per-departure flying enables both United and Delta to take full control of the seats Atlantic Coast flies for them as well as responsibility for all risks, including fuel and the sale of seats. These agreements reduce operating and financial risks for a regional airline in periods of economic weakness, resulting in more stable earnings and cash flow. However, in July 2003, Atlantic Coast announced that it planned to establish a new low-fare,
independent airline, to be called Independence Air, to be based at Dulles, anticipating that its relationship with United will end when United exits from bankruptcy protection. The transition to a low-fare, independent airline from a regional feeder airline for a large network carrier will entail several risks. While the company does benefit from its large market presence at Dulles, where there is presently no low-fare competition, it could find itself competing against other low-fare carriers at relatively nearby airports (e.g., Southwest Airlines Co. at Baltimore), and potential replacement United Express partners at Dulles. In addition, there will be less stability in the company's revenues and cash flow than it enjoyed under the fee-per-departure agreement it had with United. Under bankruptcy rules, United has the option to assume the existing fee-per-departure agreement with Atlantic Coast by agreeing to honor all terms in full or to reject the agreement. Atlantic Coast expects United to reject those terms, when it emerges from bankruptcy in mid-2004. Atlantic Coast expects to maintain its relationship as a Delta Connection partner under its new strategy.
Atlantic Coast's planned transition to an independent low-fare airline entails significant risks. Failure to execute the new strategy successfully could result in a downgrade.
