lowecur
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With todays numbers from January, United is far from certain to get the ATSB loan backing. They filed for it in December, and haven't heard a word. Let's hope the spring numbers show improvement.
United Airlines Still Awaits Word on $1.6 Billion Loan Guarantee Request
By Melissa Allison, Chicago Tribune
Feb. 27--Will the third time be the charm for troubled United Airlines?
Since filing for bankruptcy protection a little more than a year ago, United has deeply slashed labor and maintenance costs, paring overall expenses by 12 percent.
But one key piece of its recovery remains in play: Winning a $1.6 billion loan guarantee from the same government agency that has twice turned it away.
This time, United is far more certain its latest application, filed in December, will pass muster with the Air Transportation Stabilization Board, which has three voting members.
But approval is far from certain.
In the two months since United filed its request, the agency has remained mum about United's prospects.
Some say the board is being extra careful in mulling United's application, the last and largest request on its list, because of uncertainty in the industry. One major concern is the financial trouble again facing US Airways, which received a whopping $900 million federal guarantee in March 2003 when it emerged from bankruptcy.
Others question whether United will receive a guarantee as long as the airline, along with much of the industry, continues to suffer losses.
"If the board had to make a decision today, I don't think that decision would be favorable," said John Pincavage, an aviation industry financial advisor in Westport, Conn. "The bottom line is that the industry is not back to normal."
Indeed, United continues to post losses despite a major reorganization that includes $2.5 billion in annual labor savings and a $900 million annual reduction in aircraft ownership costs.
On Thursday, the airline reported a January net loss of $252 million, including $26 million in reorganization expenses. Its operating loss was $191 million.
The problems at US Airways, which is hemorrhaging so badly that it has begun to sell parts of the company to other airlines, might make members of the stabilization board warier about saying "yes" to United.
"If US Airways had really sailed through with no problem, I'd say the same thing will happen for United," said Pincavage, who believes United might get a federal loan guarantee later in the year if results improve at the company and industrywide.
Opinions vary about how United might obtain exit financing without a federal loan guarantee, from asking workers for more concessions to finding a deep-pocketed equity investor.
United officials decline to speculate publicly about the possibilities.
Jake Brace, United's chief financial officer, said the company remains on track to exit bankruptcy in the first half of the year.
"I hear people say we aren't where we need to be, but we're right where we said we'd be despite having gone through a war, SARS, and a prolonged economic downturn, none of which were predicted in the financial plan we gave banks back in 2002," Brace said.
He acknowledges that US Airways' recent troubles have affected United's image.
"It's natural for people to think about it," Brace said, but when they compare how each airline operates, "they'll find the similarities are that they're two airlines that start with the letter 'U.'"
Some experts believe politics will influence the stabilization board's decision.
"I suspect a lot of political pressure is being brought to bear on the White House to encourage the board to approve the guarantee," said Aaron Gellman, a professor at the Transportation Center in the Kellogg School of Management at Northwestern University.
Ray Neidl, an analyst at Blaylock & Partners, has heard about political pressures as well but said, "most people in the industry believe the board will use credit principals to make a decision."
Indeed, United's last bid for a guarantee failed despite intense lobbying in late 2002, including calls on behalf of the airline to Bush administration officials by House Speaker Dennis Hastert (R-Ill.).
"I've been impressed with the board's level of detachment from the realm of politics," said Joe Schwieterman, a transportation expert at DePaul University.
He puts United's chances of getting federal loan backing at "slightly less than 50 percent."
"We'd hoped to see some real profits by now," Schwieterman said. "The real question is whether the cost cuts have been deep enough, given the weakness of the airline industry."
The stabilization board has received 16 applications for loan guarantees since it was formed after the terrorist attacks of Sept. 11, 2001, sent the industry into a financial crisis. All applications were due by June 30, 2002.
The board has denied eight applications, approved six for a total of $1.8 billion, and conditionally approved one for Evergreen International Airlines which later withdrew its request.
United's is the last application under review.
The board includes three voting members, two of whom have been replaced since United's last request for a loan guarantee request was turned down.
Edward Gramlich, a Federal Reserve Board governor who voted against United's proposal in 2002, remains chairman of the stabilization board.
The other member who voted against United's request was Peter Fisher, then Undersecretary of Domestic Finance. He has been replaced by Brian Roseboro, Acting Undersecretary for Domestic Finance.
Kirk Van Tine, then general counsel for the Department of Transportation, voted to defer a decision. He has been replaced by Jeffrey Shane, Undersecretary for Policy at the Department of Transportation.
United Airlines Still Awaits Word on $1.6 Billion Loan Guarantee Request
By Melissa Allison, Chicago Tribune
Feb. 27--Will the third time be the charm for troubled United Airlines?
Since filing for bankruptcy protection a little more than a year ago, United has deeply slashed labor and maintenance costs, paring overall expenses by 12 percent.
But one key piece of its recovery remains in play: Winning a $1.6 billion loan guarantee from the same government agency that has twice turned it away.
This time, United is far more certain its latest application, filed in December, will pass muster with the Air Transportation Stabilization Board, which has three voting members.
But approval is far from certain.
In the two months since United filed its request, the agency has remained mum about United's prospects.
Some say the board is being extra careful in mulling United's application, the last and largest request on its list, because of uncertainty in the industry. One major concern is the financial trouble again facing US Airways, which received a whopping $900 million federal guarantee in March 2003 when it emerged from bankruptcy.
Others question whether United will receive a guarantee as long as the airline, along with much of the industry, continues to suffer losses.
"If the board had to make a decision today, I don't think that decision would be favorable," said John Pincavage, an aviation industry financial advisor in Westport, Conn. "The bottom line is that the industry is not back to normal."
Indeed, United continues to post losses despite a major reorganization that includes $2.5 billion in annual labor savings and a $900 million annual reduction in aircraft ownership costs.
On Thursday, the airline reported a January net loss of $252 million, including $26 million in reorganization expenses. Its operating loss was $191 million.
The problems at US Airways, which is hemorrhaging so badly that it has begun to sell parts of the company to other airlines, might make members of the stabilization board warier about saying "yes" to United.
"If US Airways had really sailed through with no problem, I'd say the same thing will happen for United," said Pincavage, who believes United might get a federal loan guarantee later in the year if results improve at the company and industrywide.
Opinions vary about how United might obtain exit financing without a federal loan guarantee, from asking workers for more concessions to finding a deep-pocketed equity investor.
United officials decline to speculate publicly about the possibilities.
Jake Brace, United's chief financial officer, said the company remains on track to exit bankruptcy in the first half of the year.
"I hear people say we aren't where we need to be, but we're right where we said we'd be despite having gone through a war, SARS, and a prolonged economic downturn, none of which were predicted in the financial plan we gave banks back in 2002," Brace said.
He acknowledges that US Airways' recent troubles have affected United's image.
"It's natural for people to think about it," Brace said, but when they compare how each airline operates, "they'll find the similarities are that they're two airlines that start with the letter 'U.'"
Some experts believe politics will influence the stabilization board's decision.
"I suspect a lot of political pressure is being brought to bear on the White House to encourage the board to approve the guarantee," said Aaron Gellman, a professor at the Transportation Center in the Kellogg School of Management at Northwestern University.
Ray Neidl, an analyst at Blaylock & Partners, has heard about political pressures as well but said, "most people in the industry believe the board will use credit principals to make a decision."
Indeed, United's last bid for a guarantee failed despite intense lobbying in late 2002, including calls on behalf of the airline to Bush administration officials by House Speaker Dennis Hastert (R-Ill.).
"I've been impressed with the board's level of detachment from the realm of politics," said Joe Schwieterman, a transportation expert at DePaul University.
He puts United's chances of getting federal loan backing at "slightly less than 50 percent."
"We'd hoped to see some real profits by now," Schwieterman said. "The real question is whether the cost cuts have been deep enough, given the weakness of the airline industry."
The stabilization board has received 16 applications for loan guarantees since it was formed after the terrorist attacks of Sept. 11, 2001, sent the industry into a financial crisis. All applications were due by June 30, 2002.
The board has denied eight applications, approved six for a total of $1.8 billion, and conditionally approved one for Evergreen International Airlines which later withdrew its request.
United's is the last application under review.
The board includes three voting members, two of whom have been replaced since United's last request for a loan guarantee request was turned down.
Edward Gramlich, a Federal Reserve Board governor who voted against United's proposal in 2002, remains chairman of the stabilization board.
The other member who voted against United's request was Peter Fisher, then Undersecretary of Domestic Finance. He has been replaced by Brian Roseboro, Acting Undersecretary for Domestic Finance.
Kirk Van Tine, then general counsel for the Department of Transportation, voted to defer a decision. He has been replaced by Jeffrey Shane, Undersecretary for Policy at the Department of Transportation.
