Should your taxes pay for Ted?

[Ty Webb]

Sounds like Tilton is the conductor of the band playing on the deck of the Titanic . . . .

An equity investor? Without the federal guarantee? Doesn;t seem likely.

 

[furloughed dude]

Sounds like United and Ted have done so well that they won't need to apply for government assistance. Go out and borrow money like most everyone else has to.

Skykid, you are showing your ignorance once again by investing in airline stocks.

 

[Midnight Mike]

Furloughed dude, I agree 100%, about time for the ATSB loan
program to be cancelled, it served its purpose with helping out such airlines as American West & Aloha, just to name a couple. About time for United stand on its own two feet, 9/11 is no longer an excuse for an airline having trouble.

This is nothing personal against United Airlines, just don't want to see the ATSB loan program being abused.

 

[Xfr8dog]

Hi!

Our taxes already pay for TED, UAL, Comair, and every other airline. They also pay for all trucking companies, all automobile travel, and all shipping travel in the US.

We the US taxpayers, even subsidize the gasoline purchases of virtually ALL people on earth. I was reading an article by a high-level British official who said that US taxpayers subsidize British gasoline to the tune of $1 a gallon, $.70 of that dollar being military expenditures.

Our taxes pay for a lot of stuff, and often it's not easy to figure out where it comes from and where it goes. We pay about $2 now for gasoline, but the real cost is between $5-$15/gallon. Other taxes we pay (and the deficit) go to cover the difference in the cost of a gallon of gas between what we pay at the pump and the actual cost.

Cliff
DTW

 

[TrimixDeepDiver]

You're betting the losses will be big as usual? Me too!! I better hope so.

Well you got what you hoped for!

UAL reported a net loss of $459 million, or a loss per basic share of $4.17, which includes $143 million in special and reorganization items described in the notes to the financial tables. The majority of reorganization charges resulted from non- cash items caused by the rejection of aircraft. Excluding the special and reorganization items, UAL's net loss for the first quarter totaled $316 million, or a loss per basic share of $2.89.

 

[skykid]

Right, cash up to 2.6 billion! 600 million and change is restricted.

 

[spinup]

Ty,

Third- why should the government give guarantees to the airlines that have failed business models, so that they can keep capacity artificially high and prices artificially low, by flying routes and selling tickets at prices they can;t make money at.

I don't think you fully understand what is going on in today’s market. We don't have a capacity problem, we have a revenue problem. Pulling back UAL flying will solve nothing as someone will surely fill the gap. Example, AA pulls flights from STL, SWA adds. All you are doing is substituting carriers. Sure, for a short time supply will go down and prices will rise, but we will eventually be back where we are today. All legacy carriers have removed capacity from the market place, while most All LCC's have consistently added capacity further depressing revenue. So lets all stop with the "too much capacity" rhetoric, its tired and ironic that a LCC guy throws this around.

You bash Ted, and then you say UAL needs a new model. Which is it? By most estimates LCC capacity will continue to grow an additional 20% in the years to come. UAL wants some of this capacity and is willing to pursue it aggressively, to do otherwise would be negligent on their part.

Clearly the LCC's are concerned about the competition Ted brings to their door step, as is blatantly evident in the WSJ article titled Air Amtrak. LCC's have leveraged additional capacity thru this down turn, yet throw a tantrum when the tables are turned. To put that kind of fear into the LCC's, Ted must be doing something right.

The ATSB loan is black and white, either you meet its requirements or you don't. UAL is working to meet the requirements set forth by the ATSB and exceeds the matched dollars required by 10%, something no other applicant has done. Furthermore, the ATSB is not about codelling competition, it’s narrowly difined to specific in-house need.

 

[Ty Webb]

Spin-up:

Your analysis is way too subjective to really be taken seriously.

No one is concerned that Ted might be a long-term problem for anyone but UAL. What LCC's are concerned about is the fact that if the Government subsidizes UAL's continued losses, it allows them to offer flghts at prices that are below their cost.

You don;t just have a "revenue problem", you have a "failed business model problem". Your LCC competitors are making money at these prices, but UAL is losing an astounding $5 million a day in the same environment.

That's not a business, that's a charity, and the loan guarantee is just more good money after bad.

 

[spinup]

Ty,

No one is concerned that Ted might be a long-term problem for anyone but UAL. What LCC's are concerned about is the fact that if the Government subsidizes UAL's continued losses, it allows them to offer flghts at prices that are below their cost.

And this has been determined by LCC managers on the outside looking in, please. How magnanimous of the competition to have such concerns for UAL's long term validity. When the ATSB subsidized other applicants, they too had continued losses. As to offering prices that are below the LCC's costs, this seems to be a one way street. It's ok when the LCC's squeeze legacy carriers (SWA in PHL), but not the other way around. The LCC's are keeping ticket prices low making it difficult for legacy carriers to maintain market presence without loosing money. Yet, cry foul when they perceive the same tactic on the other side of the fence.

You don;t just have a "revenue problem", you have a "failed business model problem".

All legacy carriers have changed or are changing their business model to more closely match the present pricing environment. So I agree a business model problem exists for all of the legacy carriers, not just UAL. However, it's careless to compare the business model of the late 90's to the one that will be in place upon leaving CH11; this is the one that concerns the ATSB. Neither you nor I know its complete form, as it hasn't been fully revealed publicly. Those who have seen it, elected to loan UAL 400 million dollars of unsecured cash upon exit, that speaks far louder than the uninformed.

 

[Ty Webb]

Seems to me that the LCC "managers", as you put it (I think you mean "leadership"), are a hell of a lot more in touch with what is going on in the marketplace than the "legacy" leadership. Look the facts- the "brand within a brand" doesn't work. It didn;t work for CAL, UsAir, Delta, Delta again, or United in the past, and it won;t work in the future, yet UAL is devoting scarce resources to it, based on a stupid idea that they paid $10 million to McKinsey to come up with. Incidentally, the other two airlines McKinsey and Company had been peddling their high-priced nonsense to both went under (both of them European carriers, do a search if you want the details).

As to offering prices that are below the LCC's costs, this seems to be a one way street. It's ok when the LCC's squeeze legacy carriers (SWA in PHL), but not the other way around. The LCC's are keeping ticket prices low making it difficult for legacy carriers to maintain market presence without loosing money. Yet, cry foul when they perceive the same tactic on the other side of the fence.


You, like UAL fail to recognize one simple fact- the LCC's are selling tickets at prices they can make money at! What we are "crying foul" about is that you want a government subsidy to enable you keep dumping seats at prices that are below your costs to hold "market share"! What "market share"? If you can't make money at it, it's not your market.


Neither you nor I know its complete form, as it hasn't been fully revealed publicly. Those who have seen it, elected to loan UAL 400 million dollars of unsecured cash upon exit, that speaks far louder than the uninformed.


Look, the ARS upped their stake in UsAirways, too, but in order to obtain more of an "equity stake" in that carrier, so that they would be first in line in the event of a liquidation. I suspect that is the same thing at UAL. Unfortunately, those last in line will be the shareholders and the employees.

Very sad . . . and I repeat what I said about going out on a LOA and finding a secure position while leaving one foot in the door, in the unlikely event that they manage to make it.

Good luck.