WHile a bankruptys allows a company to reorganize and lower its costs. It also requires a return to profitability. As of today U was still $300+ million away from this goal, this is after the announced furloughs.
Their are two big problems facing USAir
The obvious first one is, the economy. If you went BK two years ago(a la TWA) you would have a much simpler time proving an abitlity to return to profitability(higher yeilds available). In todays economy Seigle has his back against the wall. The only good thing I see coming out of this is a slim and trim U. If he can pull it off U will be set up for the long haul and once the economy turns they should be in a very good position(low costs). But that's a very big IF.......
The not so obvious second one is United. If UAL is forced to declare BK, then U will get lost in the shuffle. All of the creditors will be way to busy with UAL to deal with things like Seigle wanting to lower lease payments on 9-767 for the second time. Right now he is the only one they are dealing with, in a month or two their answer will be,"park them and call us when you want to pay our price, we're too concerned with UAL's fleet". He needs to pull this off quickly.
Their are two big problems facing USAir
The obvious first one is, the economy. If you went BK two years ago(a la TWA) you would have a much simpler time proving an abitlity to return to profitability(higher yeilds available). In todays economy Seigle has his back against the wall. The only good thing I see coming out of this is a slim and trim U. If he can pull it off U will be set up for the long haul and once the economy turns they should be in a very good position(low costs). But that's a very big IF.......
The not so obvious second one is United. If UAL is forced to declare BK, then U will get lost in the shuffle. All of the creditors will be way to busy with UAL to deal with things like Seigle wanting to lower lease payments on 9-767 for the second time. Right now he is the only one they are dealing with, in a month or two their answer will be,"park them and call us when you want to pay our price, we're too concerned with UAL's fleet". He needs to pull this off quickly.
