positive UA news

[jhill]

United Airlines reports first post-bankruptcy gain
Lender requirements met for 4th month, officials say
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Associated Press
Originally published June 28, 2003



CHICAGO - Noting its reduced costs, United Airlines said yesterday that it met its lenders' requirements for steady financial progress in bankruptcy for a fourth straight month in May and is on track to satisfy the June standards.
United reported a net monthly gain for the first time since filing for Chapter 11 bankruptcy protection in December - although its $64 million in earnings resulted from $300 million in emergency government compensation because of the Iraq war's impact on air travel.

It had an operating loss in May of $155 million, substantially improved from the $297 million deficit for April.

The world's second-largest airline noted the cost savings from the company's new labor agreements, which took effect May 1. In the second quarter, United expects that its labor costs will be $500 million less than in the corresponding period a year ago.

"United is continuing to produce very good results in our efforts to reduce operating costs across the board," Chief Financial Officer Jake Brace said in a statement accompanying the company's monthly filing with U.S. Bankruptcy Court. "On the revenue side, we continue to face a difficult economic environment, but we are seeing positive signs for our business."

He said that even without the federal assistance, the company's earnings before interest, taxes, depreciation and aircraft rent - the category being watched closely by United's creditors - were positive in May for the first time.

As the summer travel season nears high gear, Executive Vice President John Teague said, "We are encouraged by the steady demand against rising yields that we are currently experiencing."

United reported an increase in cash of about $456 million for May, ending the month with a cash balance of about $2.2 billion - more than $1.5 billion of it unrestricted. Excluding the government aid and one-time asset sales, its cash balance increased by $3.5 million a day.

 

[Heavy Set]

Sounds great but, are you paying for the leases on your planes yet? How would that affect your profits?

 

[Mugs]

They must be making some lease payments:

February cash flow results reflect the resumption of certain scheduled aircraft payments. The company reported that it made payments of $182 million during the month in connection with various aircraft financings, which included some payments for the period from December 2002 through February 2003. United began February with a cash balance of approximately $1.8 billion, including restricted cash. It reported a decrease in cash of approximately $300 million for February and ended the month with a cash balance of approximately $1.5 billion. This change in cash balance was better than previous company forecasts due to lower than expected aircraft payments in February.


March cash flow results reflect the resumption of certain scheduled aircraft payments and a draw-down of $92 million from additional DIP financing. The company reported that it made payments of $85 million during the month in connection with various aircraft financings, which included some payments for the period from December 2002 through March 2003. United began March with a cash balance of approximately $1.5 billion, which included $579 million in restricted cash (filing entities only). It ended the month with a cash balance of approximately $1.6 billion, which included $633 million in restricted cash (filing entities only). Excluding the draw-down of $92 million in DIP financing, the company's cash balance decreased approximately $18 million for the month, which is less than $1 million per day.

 

[Heavy Set]

I hope they are making the payments. It really is not fair that airlines can throw those payments aside while others continue. Sure, I know they had no choice, but there should be a time limit. I read that Midwest Airlines is currently doing the same, and right now the lessors have no choice but to accept it and hope for better days. I have plenty of friends at United and I only wish them the best. Let's hope they get a good business plan.

 

[skykid]

Under the bankruptcy law that applies there is a 60 day window to renegotiate lease contracts and catch up with payments. After that time period the lessor may repossess the planes unless an agreement is reached to continue negotiations. United reached this time frame in Feb and has since made 100s of millions in payments. There is no such thing as not paying for any amount of time after that without an agreement. Is United still negotiating on some leases - yes. The reason Wall Street is not worried about it is the lessors are getting raped. Combine the soft lease market with the fact that USAIR went first and United is able to play even harder ball than them and you see why the rates are coming down so much. Lessors either have to eat the lower rates or except getting the airplanes back to be parked in the desert. That's why corporations like G.E. and Disney wrote off obscene amounts of money last Dec. - they knew they were going to get murdered on leases. The target for United was 500mil a year savings on leases. I have seen estimates that this will be met and exceeded by 200 to 500mil.