On Your Six
Well-known member
- Joined
- Mar 8, 2004
- Posts
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Not trying to get flamed here, but how can UAL justify a loan guarantee (and I know it is just a guarantee) post 9/11 when European airlines like Sabena were forced into liquidation post 9/11 and not allowed support from the Belgian government? Sure, Alitalia of Italy will probably get some support, but Italty likes to break the rules.
I am hopeful that UAL gets the guarantee and continues to improve its cost structure until it reaches profitability - let's get the furloughees back. However, the logic of helping an airline that is currently burning through cash due to high fuel costs and intense LCC competition is a bit difficult to fathom given that other US airlines (like SWA and AirTran) are doing reasonably OK after 9/11... No wonder there are a few upset legislators out there who want to prevent the guarantee.
Read below:
UAL loan decision soon amid fuel, other worries
Thursday May 27, 10:57 am ET
By John Crawley
WASHINGTON, May 27 (Reuters) - United Airlines hopes to hear soon whether it will receive a $1.6 billion federal loan guarantee that is crucial to it exiting bankruptcy, but soaring fuel costs and renewed concerns about exposing taxpayers to struggling airlines have created new challenges.
Current and former government and industry officials who are familiar with United's bid and would only speak anonymously declined to say that these hurdles are insurmountable, but say they present problems that were not as apparent when the application was first considered in 2002.
However, one senior lawmaker believes UAL Corp.'s (OTC BB:UALAQ.OB - News) United, which is based in Elk Grove Village, Illinois, has positioned itself so well politically that approval by the Air Transportation Stabilization Board is inevitable despite the new developments and maneuvering by other airlines to derail the loan guarantee.
The stabilization board, set up to administer loan guarantees for airlines with losses related to the 2001 attacks, operates in near secrecy and would not comment on United. But industry and government sources agree that the groundwork is mostly complete and expect a decision soon.
United Chairman Glenn Tilton has lobbied extensively and has a powerful hometown supporter in House Speaker Dennis Hastert.
"It's a very large airline, it's an election year, and an airline directly attacked on Sept. 11th," one industry insider noted.
United hopes to exit Chapter 11 this summer and needs the guarantee to get $2 billion in private financing.
The board has been stingy but has not rejected a major carrier outright.
Officials familiar with United's application acknowledge that the airline has addressed most big conditions set by the three-member stabilization board, which denied the initial application because of an inadequate business plan.
But they also note concern with fuel cost estimates and worsening financial prospects at US Airways Group Inc. (NasdaqNM:UAIR - News), which received a loan guarantee last year during its bankruptcy and is weighing another Chapter 11 filing.
United's latest fuel estimate is $750 million more than projected at the start of the year and nearly double the figure of several weeks ago, bankruptcy court filings show.
Tilton said United would be profitable this quarter if fuel expenses were not so high, a statement that raised eyebrows.
"There is nothing in the law that says you can bail out airlines because their fuel costs are too high or labor costs are too high, or because they can't manage their low-cost competition," Sen. Peter Fitzgerald, an Illinois Republican and critic of United's application for federal aid, said in an interview.
With the federal board demanding big savings, United said it is considering furloughs to offset fuel expenses. It also raised its fuel surcharge by $5 on most fares.
US Airways, which got a $900 million guarantee, has restructured its loan repayment schedule in recent months. The potential value of US Airways stock warrants held by the government has plunged. Industry officials say the Bush administration is closely examining this scenario with regard to United.
Tilton argues that his airline has overhauled its business plan. United has achieved $5 billion in annual savings and, with congressional help, resolved questions about near-term pension deficits. It has also launched a low-cost carrier, Ted.
But Ed Faberman, president of a trade group for low-cost airlines who actively opposes the guarantee, says nothing is assured. "I think as time goes on there are more and more questions." (Additional reporting by Kathy Fieweger in Chicago).
I am hopeful that UAL gets the guarantee and continues to improve its cost structure until it reaches profitability - let's get the furloughees back. However, the logic of helping an airline that is currently burning through cash due to high fuel costs and intense LCC competition is a bit difficult to fathom given that other US airlines (like SWA and AirTran) are doing reasonably OK after 9/11... No wonder there are a few upset legislators out there who want to prevent the guarantee.
Read below:
UAL loan decision soon amid fuel, other worries
Thursday May 27, 10:57 am ET
By John Crawley
WASHINGTON, May 27 (Reuters) - United Airlines hopes to hear soon whether it will receive a $1.6 billion federal loan guarantee that is crucial to it exiting bankruptcy, but soaring fuel costs and renewed concerns about exposing taxpayers to struggling airlines have created new challenges.
Current and former government and industry officials who are familiar with United's bid and would only speak anonymously declined to say that these hurdles are insurmountable, but say they present problems that were not as apparent when the application was first considered in 2002.
However, one senior lawmaker believes UAL Corp.'s (OTC BB:UALAQ.OB - News) United, which is based in Elk Grove Village, Illinois, has positioned itself so well politically that approval by the Air Transportation Stabilization Board is inevitable despite the new developments and maneuvering by other airlines to derail the loan guarantee.
The stabilization board, set up to administer loan guarantees for airlines with losses related to the 2001 attacks, operates in near secrecy and would not comment on United. But industry and government sources agree that the groundwork is mostly complete and expect a decision soon.
United Chairman Glenn Tilton has lobbied extensively and has a powerful hometown supporter in House Speaker Dennis Hastert.
"It's a very large airline, it's an election year, and an airline directly attacked on Sept. 11th," one industry insider noted.
United hopes to exit Chapter 11 this summer and needs the guarantee to get $2 billion in private financing.
The board has been stingy but has not rejected a major carrier outright.
Officials familiar with United's application acknowledge that the airline has addressed most big conditions set by the three-member stabilization board, which denied the initial application because of an inadequate business plan.
But they also note concern with fuel cost estimates and worsening financial prospects at US Airways Group Inc. (NasdaqNM:UAIR - News), which received a loan guarantee last year during its bankruptcy and is weighing another Chapter 11 filing.
United's latest fuel estimate is $750 million more than projected at the start of the year and nearly double the figure of several weeks ago, bankruptcy court filings show.
Tilton said United would be profitable this quarter if fuel expenses were not so high, a statement that raised eyebrows.
"There is nothing in the law that says you can bail out airlines because their fuel costs are too high or labor costs are too high, or because they can't manage their low-cost competition," Sen. Peter Fitzgerald, an Illinois Republican and critic of United's application for federal aid, said in an interview.
With the federal board demanding big savings, United said it is considering furloughs to offset fuel expenses. It also raised its fuel surcharge by $5 on most fares.
US Airways, which got a $900 million guarantee, has restructured its loan repayment schedule in recent months. The potential value of US Airways stock warrants held by the government has plunged. Industry officials say the Bush administration is closely examining this scenario with regard to United.
Tilton argues that his airline has overhauled its business plan. United has achieved $5 billion in annual savings and, with congressional help, resolved questions about near-term pension deficits. It has also launched a low-cost carrier, Ted.
But Ed Faberman, president of a trade group for low-cost airlines who actively opposes the guarantee, says nothing is assured. "I think as time goes on there are more and more questions." (Additional reporting by Kathy Fieweger in Chicago).
