UAL Update: Hmmmm?

[A1FlyBoy]

United Said Consulting with Bankruptcy Lawyer
Updated 11:17 AM ET February 18, 2002

NEW YORK (Reuters) - UAL Corp.'s (UAL.N) United Airlines is in consultations with the head of its law firm's bankruptcy practice, Crain's Chicago Business reported on Monday, as the airline faces a potentially crippling strike.

Crain's reported that as part of United's contingency planning the company has begun consulting with bankruptcy attorney James Sprayregen, citing unnamed sources familiar with the situation.

Sprayregen, of UAL's longtime law firm, Chicago-based Kirkland & Ellis, was lead counsel for Trans World Airlines in its bankruptcy and sale last year, Crain's reported.

Asked about the Crain's report, a UAL spokesman told Reuters, ``We have hired no new counsel,'' but declined further comment.

Sprayregen and Kirkland & Ellis were not immediately available for comment.

United is facing a looming strike by 13,000 mechanics and cleaners, with a deadline on Tuesday. Some analysts have suggested that a strike could force the company into filing for bankruptcy protection.

The airline posted a net loss of $2.1 billion in 2001, an industry record

This doesn't sound to good. Could be to scare the mechanics. Who Knows?

 

[generaltso]

Yes this was a scare tactic, but it is not needed since UAL and the IAM settled today. Hopefully, this will delay bankruptcy for a few more months.

 

[publisher]

filing

Not a scare tactic nor does the settlement with the mechanics mean much...... Concessions not given they will be filing.

 

[TurboS7]

Look hard at their numbers and you will find that they may go under Chapter 11 even without the mechanic strike.

 

[Daysoff]

I do not believe they have settled yet. It is a tentative agreement which must still be ratified by the union. Even if they do agree to the contract, UAL is by no means out of the water and I am real curios to see what kind of concessions the CEO is looking for from all the labor groups, but mostly the pilots. I certainly hope that they are able to avoid Ch. 11, it will be bad for all the other carriers also.

 

[TurboS7]

In reality Chapter 11 could be a good thing for them, it sure would help increase their cash flow and get them out of some nasty leases. Since 911 their isn't that stigma with Ch11 that there has been in the past. They may not even have to furlough and if their plan is sound they could even expand through their bankrupcy.

 

[TWA Dude]

If UA should choose to go Chapter 11 then the other majors would be forced to follow in order to keep up with UA's reduced operating costs. It would be a huge mess and the government might be forced to step in, heaven forbid.

 

[publisher]

ludicrous

Think about this situation...... We have United Airlines, supposedly one of the largest, strongest, and best airlines on the world. They sit there and say that they want the pilots and mechanics to have the best contracts in the world.

But:

They are bleeding like a stuck pig at a barbeque. They are in dire need of concessions which of course means that those best contracts will not be. They cannot stand a strike because then they would not have any customers either and no airline. Without the government bailout, they would not exist now.

Then:

They will need no pilots or mechanics. The public will have wasted its money, and, the other carriers will get stronger.

What is wrong with this picture.

 

[skykid]

What is your point, publisher?

 

[TurboS7]

We can always go back to the CAB the ORS and divide the country into little airline kingdoms. Of course SWA would have to go back to their DAL-HOU-DAL run, and that's all.

 

[publisher]

b movie

I just find this to be a bit ironic.

We are going to give you a raise we cannot afford to give so that we can get the concession part underway that we desparately need and we, the public, are paying for this.

 

[skykid]

Publisher, I have to agree and disagree with your assesment of the government bailout. As far as limiting the liability of AMR and UAL, the bailout saved the entire industry. No carrier could afford to carry the kind of insurance that would be needed to cover what happened. It would have been interesting to see how anybody was at fault and what laws/regulations the terrorists broke before they took over those planes, but the gov didn't want to give the trial lawyers a chance. As far as the cash part of the bailout, UAL would have about 1.5 bil right now if they hadn't received any cash, and AMR would have even more. Plus 4 bil in assets. Saying UAL wouldn't exist is dramatic, but not factual. You have something against UAL - I couldn't care less. People in the industry with sense aren't wishing CH11 on anybody. Want to wish for something - hope the economy gets better quickly and the industry recovers, including the high paying jobs that some people out there might eventually like to have.

 

[kilomike]

Well said, skykid!!

 

[publisher]

Perhaps I should have been clearer. Exist from the standpoint that we perceive it.

The point here being that had not the public funds been infused into the industry, and I want you to know that I certainly thought they needed to do that, United probably would have gone to Chapter 11 right away.

They had the unfortunate situation where they had become involved in a failed merger, lost considerable marketshare during the slowdown, and, signed a very costly labor agreement.

What I am saying is that if they do not get substantial concessions from labor and vendors, Chapter 11 is likely and I personally think that it will be a major blow and what may come out in the end will not resemble the United that went in.

I sort of wonder what would have happened without the bailout. Had Airways and America West failed, American and United may have emerged stronger. I really do not know. We are six months into this thing and have only improved a very small distance in terms of capacity and loads.

 

[skykid]

Good points publisher. I also think its interesting that we are six months into this and all the dire predictions have yet to come true. Last Sep and Oct all we heard was about how many airlines were likely to fail, things will never be the same, and so on. Well, all we need is the economy to pick up and I'm not sure any others will fail. A wise Captain once told me - things are never as good, or as bad, as they might seem in the airline industry. I fly with an amazing amount of ex Eastern and PanAm guys who made good money with those companies, and are making good money now. The name on the side of the plane changed, but the lift didn't go away.

 

[1900laker]

Excuse me but wasn't United supposedly in a position as little as a year ago to try to buy out or merge with USAir and assume its 4 Billion dollar debt? Well, they didn't have to assume that debt and I would have to say that if they were prepared then, they are likely prepared now. Look for a turnaround of United's doom and gloom by end of the summer.

The unions at United are oldhats at playing the game with the company. I believe that while their current situation is not good, it is probably better than what management is trying to portray. I don't believe the mechs. would have pushed so hard as to demolish the company, esp. in light of the rest of the industry right now. I'm sure they calculated out with the union's financial experts exactly what they believed the company could afford.

Also, not all airlines benefitted from the industry bailout. I know for a fact that Delta did not accept any of the bailout money, since it already had loan guarantees that it secured on its own and they did not want the stipulations attached to the bailout to be forced on them.

 

[Tim47SIP]

1900 wrote "Also, not all airlines benefitted from the industry bailout. I know for a fact that Delta did not accept any of the bailout money, since it already had loan guarantees that it secured on its own and they did not want the stipulations attached to the bailout to be forced on them."

I think you are talking about the loan guarantees program, not the bailout here. Delta did get funds from the Gov for their losses in revinue for the period after 911 and the end of the year, but did not take the loan. AW is the only one that I know of who actually took the loan. Although I havn't been following this part of the industry very closely, I do know that Delta included the money received in their total loss for the fourth quarter of last year.

 

[publisher]

Thanks

Thanks Tim for pointing out that mistake. Delta did receive substantial funding under the program.

Secondly, if you think the deal with the United labor is done, you are saddly mistaken. They settled on the terms and conditions they did because they had little choice. The company cannot let messing with the mechanics contract take their focus from getting concessions from everyone including the mechanics who just got the raise.

Lastly, assumption of billions in debt means little if it is backed by assets of more value.

 

[1900laker]

So USAir has assets worth more than $4 billion?

 

[publisher]

Study

Well without looking I do not know how much they have.

Of the debt, obviously a certain amount is secured and some unsecured. Some debt may be subordinated.

One question is what is the hidden reserve or the value between current market and the depreciated book value.

Lastly, what is the debt to net worth ratio after the merger.

In short, there are a good many variables. Things worth X before September 11 may not be worth much now. That is what due diligence is for.

You also missed the point on the mechanic contract..... It had absolutely nothing to do with what the company could afford. The bottom line is that we are going ot demand more so when we give concessions, we will end up with more.