United Expects Friday To Be The Day

[tomcash]

Please provide me with the quote. this is the first I have seen of that figure.

I am quoting Jack Brace from Saturday's WSJ:
It also forecasts that long-term oil prices will be about $50 a barrel. Based on that scenario, UAL expects to report operating profit of $915 million this year

G4G5, get over it...

AA will always be second to United...

Anyhow, why do you support such a company that laid you off??

 

[Mugs]

A 25 billion loss with a $10 increase in the price of crude. Hmmmm. Has any airline in history ever spent anywhere near 20 billion for fuel in one year? That would have to be some extremely pricey fuel considering Delta uses 2.5 billon gallons a year. Crude has gone from 35 to 70 over the last 2 years. G4G5 I think you are using simple arithmetic to draw a simplistic conclusion based on numbers you are pulling out of the newspaper (not the first time you have done that trying to prove UAL was dead by the way). I think the big picture is far more complex than that. If your point is that the business plan of UAL or any legacy carrier has some real and obvious risks, then your point is taken.

 

[skykid]

G4G5, when is the PBGC going to liquidate United? That's what you said, isn't it? Let me know if it is going to be next month because WhiteClould's latest prediction for UAL liquidation is still next month.

 

[boeing747-800]

relax it's a new year and a new start for United...I'm optimistic about it doing well. It better

 

[G4G5]

Stick your head back in the sand. Yeah, it's just me or you could actually read the WSJ, USA Today(I have already posted) and the below Forbes article. Or any of the countless others.

When do Airlines report profits? After the summer. Not after the winter. So do any of you financial geniuses have a good reason why UAL mgt has decided to exit ch11 now and not wait a couple of months? I am sure that it has nothing to do with the fact that AMR and CAL have almost doubled over the past 9 months. How are they paid stock options. They want $15 a share. They weren't going to get it 6-9 months ago when AMR and CAL were selling at $11. Now that AMR and CAL are in the $18-22 range, $15 seems reasonable for UAL. Who cares if the company is not ready or the fact that you could lose $7+ billion in tax credits. They want to get theirs before the higher oil prices bring the airline stocks back to reality


http://www.forbes.com/business/2005/09/07/airlines-bankruptcy-united_cz_mt_0907ual.html
Airlines
UAL Bankruptcy Breakdown
Mark Tatge, 09.07.05, 6:30 PM ET
CHICAGO - United Airlines parent UAL (otc: UALAQ - news - people ) will leave bankruptcy a smaller airline, heavily leveraged, and should lose $250 million next year, according to a Forbes.com analysis of the documents filed Wednesday with the federal bankruptcy court.

The losses are predicated on crude oil prices remaining above $60 per barrel, a likely scenario given forecasts calling for a shortage of jet-fuel refining capacity for the next three to five years, well after the shockwaves of Hurricane Katrina fade. United could spend $4 billion next year on fuel--$600 million more than anticipated--wiping out the any profits the carrier might generate.
Filings show CEO Glenn Tilton has trimmed billions in costs, mostly by shrinking the airline. Annual salary and pension costs were trimmed $3.2 billion annually. Aircraft rents were reduced nearly $190 million. Tilton slashed United’s capacity or available seat miles by 20% since 2000, with passenger revenue only taking an 8% haircut.

United now has among the lowest operating costs of the major legacy carriers, estimated to be at 7.56 cents per available seat mile (9.98 cents with fuel), giving United a major advantage over AMR’s (nyse: AMR - news - people ) American Airlines, Delta Air Lines (nyse: DAL - news - people ), Northwest Airlines (nasdaq: NWAC - news - people ) and Continental.

But Tilton also faces major challenges. The three biggest: putting the brakes on fuel costs, boosting revenue and repaying debt.

Here’s the outlook for the airline based on an analysis of its long-awaited plan of bankruptcy reorganization, which has yet to be approved by the court.

Debt. United will be heavily leveraged once it leaves bankruptcy. Only 14% of UAL’s capital structure will be equity. And that figure hinges on raising $1.9 billion in new common equity. The rest is bank and aircraft debt totaling more than $9 billion. Interest payments will run some $500 million per year.

Fuel. United uses $45 to $50 per barrel crude oil to forecast profits through 2010, or about $1.55 for a gallon of jet fuel.

But prices should remain above $60 for West Texas Intermediate at least through 2007, says Vaughn Cordle, chief analyst with Airline Forecasts, an economic forecasting firm.

Jet fuel should run $1.89 per gallon next year, or 34 cents more per gallon than what United forecasts. At 2.2 billion gallons annually, that comes to an additional $748 million for fuel.

Cordle says the gap between a barrel of crude and jet fuel refined from that crude has only widened in recent weeks. Crude hit $70 per barrel, but jet fuel prices were running $100 per barrel. This difference isn’t expected to change given shortages in refining capacity. The spread between the crude oil and jet fuel is three times higher than it was 1990 to 2004.

Revenue. Next year, United forecasts 2.6% growth in core passenger revenue per available seat mile, or about half 2005’s increase. Much of the growth has come from shifting traffic overseas.

But the industry is raising prices to cover fuel costs. Higher ticket prices could result in more empty seats per mile flown as customers curtail flying. United forecasts mainline passenger revenue growing from $13.1 billion in 2006 to $14.4 billion in 2010.

Profits. United projects a profit, excluding special items from the bankruptcy reorganization, of $349 million next year.

But the airline could easily end up paying $400 to $600 million for fuel next year.

Viewed another way, higher fuel prices would consume more out half of the $916 million operating profit the airline forecasts. Profits are expected to grow to $1.5 billion on a pre-tax basis by 2010.

United, however, forecasts its fuel bill to be $3.4 billion, falling from this year’s $3.75 billion. (RED FLAG HELLO!)

But that presumes a moderation in fuel prices. If fuel prices don’t drop, they could jeopardize United’s ability to repay its debt, forcing yet another restructuring.

Taxes. The airline has $7.5 billion in tax losses that can be used to reduce future tax liabilities. But these losses are worthless to United if the airline doesn’t produce a profit.

But they could prove valuable to investors. Hedge funds or other private equity investors may want to take control of United to take advantage of these losses, in an effort to offset taxable income. The filing estimates United’s enterprise value at $10.3 billion.

The UAL Corporate Restructuring Information documents can be viewed at http://www.pd-ual.com/.

Yep it's just me.....

 

[WhiteCloud]

G4G5, when is the PBGC going to liquidate United? That's what you said, isn't it? Let me know if it is going to be next month because WhiteClould's latest prediction for UAL liquidation is still next month.

Right or wrong I'll stand by it. February 2006.

 

[G4G5]

G4G5, when is the PBGC going to liquidate United? That's what you said, isn't it? Let me know if it is going to be next month because WhiteClould's latest prediction for UAL liquidation is still next month.

Are you proud that your pension got dumped on the tax payers?

Forbes places the value for UAL at over $10 billion. I would have much rather seen UAL liquidated and that $10 billion given to the PBGC to distribute to the UAL employees. Here's a thought give the UAL employees the pension that they worked for. This goes beyond UAL, I would rather see that happen to USAir, Delphi, GM, whomever.

It's supply and demand. The folks who fly UAL would still keep flying. The industry would not lose those jobs. The pilots at UAL would be just like those at TWA pilots, who found jobs at AA, Fedex, UPS, Airtran, Jetblue, AmericaWest, SWA. I could go on. The difference is they would have pensions from UAL when they retire and companies would think twice about dumping their pensions.

No instead we now have a trend that companies like IBM, Verizon and soon to be countless others will be following. The dumping of the American pension system.

I am glad you can come on FI and gloat about it.

 

[WhiteCloud]

Are you proud that your pension got dumped on the tax payers?

Forbes places the value for UAL at over $10 billion. I would have much rather seen UAL liquidated and that $10 billion given to the PBGC to distribute to the UAL employees. Here's a thought give the UAL employees the pension that they worked for. This goes beyond UAL, I would rather see that happen to USAir, Delphi, GM, whomever.

It's supply and demand. The folks who fly UAL would still keep flying. The industry would not lose those jobs. The pilots at UAL would be just like those the TWA pilots, at AA, Fedex, UPS, Airtran, Jetblue, AmericaWest, SWA. I could go on. The difference is they would have pensions from UAL when they retire and companies would think twice about dumping their pensions

No instead we now have a trend that companies like IBM, Verizon and soon to be countless others will be following. The dumping of the American pension system.

I am glad you can come on FI and gloat about it.

All very good points. Over the past three years UAL has continued to burn through money they owed to others and misused the bankruptcy laws to beat up on their own people and contractors. Some of the gloating here can't be from real UAL pilots.....most of the pilots I know there are embarrased by their company's behavior.

 

[G4G5]

A 25 billion loss with a $10 increase in the price of crude. Hmmmm. Has any airline in history ever spent anywhere near 20 billion for fuel in one year? That would have to be some extremely pricey fuel considering Delta uses 2.5 billon gallons a year. Crude has gone from 35 to 70 over the last 2 years. G4G5 I think you are using simple arithmetic to draw a simplistic conclusion based on numbers you are pulling out of the newspaper (not the first time you have done that trying to prove UAL was dead by the way). I think the big picture is far more complex than that. If your point is that the business plan of UAL or any legacy carrier has some real and obvious risks, then your point is taken.

You hit the nail on the head, . All I was trying to point out is that I just don't see how you can come out of the old bk laws, protections, in the middle of winter, with Osama, with Iran and most importantly oil at $67. The dollar figure is irrelevant, what is relevant is the business plan is based upon $50 oil and no one thinks their will be $50 oil. Whats relevant is at current oil prices UAL will not turn a profit and will lose $7+ billion in tax credits.

Why? What's the rush! It's been 3 years, wait a few more months.

The only reason I can come up with is mgt watched the recent run on CAL and AMR stock and they got nothing. Now upper mgt wants to take their newly issued stock and cash out.

Look I harbor no ill will to-wards the UAL employees. My old man spent 25 years at Pan Am only to walk away with the PBGC guarantee, so I have an understanding of what is going on. This is not about the employees. Something about this smells funny. Good luck.

 

[FlyUnited]

But the fact is that United was abiding by the laws of the land. Simple really. You may not like it but as long as the law is followed, they were prudent to use the law in their favor...and they did.

CAL did this ten years ago and came out stronger for it, now it's Uniteds turn.

I'm sorry that you hold such a chip on your shoulder over this but perhaps it's time you took a deep breath and let it go. United is coming out a stronger carrier.