Looks like there is a lot of skepticsm related to the "postive" cash flow statements made by the UAL CFO... Read below.
Analyst questions United cost update
By August Cole, CBS.MarketWatch.com
Last Update: 1:05 PM ET March 13, 2003
CHICAGO (CBS.MW) -- Credit Suisse First Boston on Thursday took issue with United Airlines' creditors update that indicated the bankrupt carrier generated cash flow of $1 million a day in January.
The company's top finance executive, Jake Brace, also said the No. 2 airline carrier is ahead of plan with the terms set by its lenders. A United spokesman confirmed the reported statement on Wednesday.
"While we have seen only the press reports, those figures do not come even close to adding up," wrote CSFB analyst James Higgins in a Thursday research report.
In recent action, shares of parent UAL Corp. (UAL: news, chart, profile) fell 5 cents to 86 cents as sector advanced.
In that same period, the No. 2 airline disclosed recently in an SEC filing earlier this month that it lost $382.13 million in January with operating revenue of $1.18 billion. Operating expenses for the month totaled $1.51 billion, according to the document.
"Our only surmise is that UAL is not making payments on many items that flow through the income statement. Other than that, we can think of no way that monthly cash flow could have been even close to positive, and of course, such decisions not to pay are unsustainable," he wrote.
Aside from labor costs, fuel costs are a near-term issue for the industry. In United's case, it is not protected from rising fuel prices with fuel hedges, which is common practice in the industry. Aviation gas prices have more than doubled from a year ago to about $1.30 a gallon, according to the latest information from Deutsche Bank.
Those pressures will be influenced almost certainly by Iraq's fate. In that climate, United filed on Tuesday for a 180-day extension to submit its bankruptcy plan as union members and management remain at odds over fundamental differences on how to restructure the carrier.
August Cole is spot news editor at CBS.MarketWatch.com in Chicago
Analyst questions United cost update
By August Cole, CBS.MarketWatch.com
Last Update: 1:05 PM ET March 13, 2003
CHICAGO (CBS.MW) -- Credit Suisse First Boston on Thursday took issue with United Airlines' creditors update that indicated the bankrupt carrier generated cash flow of $1 million a day in January.
The company's top finance executive, Jake Brace, also said the No. 2 airline carrier is ahead of plan with the terms set by its lenders. A United spokesman confirmed the reported statement on Wednesday.
"While we have seen only the press reports, those figures do not come even close to adding up," wrote CSFB analyst James Higgins in a Thursday research report.
In recent action, shares of parent UAL Corp. (UAL: news, chart, profile) fell 5 cents to 86 cents as sector advanced.
In that same period, the No. 2 airline disclosed recently in an SEC filing earlier this month that it lost $382.13 million in January with operating revenue of $1.18 billion. Operating expenses for the month totaled $1.51 billion, according to the document.
"Our only surmise is that UAL is not making payments on many items that flow through the income statement. Other than that, we can think of no way that monthly cash flow could have been even close to positive, and of course, such decisions not to pay are unsustainable," he wrote.
Aside from labor costs, fuel costs are a near-term issue for the industry. In United's case, it is not protected from rising fuel prices with fuel hedges, which is common practice in the industry. Aviation gas prices have more than doubled from a year ago to about $1.30 a gallon, according to the latest information from Deutsche Bank.
Those pressures will be influenced almost certainly by Iraq's fate. In that climate, United filed on Tuesday for a 180-day extension to submit its bankruptcy plan as union members and management remain at odds over fundamental differences on how to restructure the carrier.
August Cole is spot news editor at CBS.MarketWatch.com in Chicago
