United may cancel 42 Airbus/forfeit $91M

[Schwanker]

United may cancel order for 42 Airbus aircraft

Thu Aug 7, 2008 11:30am EDT
CHICAGO, Aug 7 (Reuters) - UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz), parent of United Airlines, may cancel an order for 42 Airbus aircraft, forfeiting a $91 million dollar deposit and possibly heralding a wave of deferrals and cancellations for the major plane makers as their customers scale back growth plans.
The airline, one of Airbus' best U.S. customers, is currently committed to pay $2.2 billion for the purchase of 42 A319 and A320 single-aisle aircraft. If it does cancel the order, UAL would forfeit the advance deposit paid to Airbus.
It is "highly unlikely that (UAL) will take future delivery of these aircraft," UAL said in a July 24 filing with the U.S. Securities and Exchange Commission.
The U.S. airline industry, suffering under the weight of soaring fuel costs, is rapidly shrinking. United has said it would cut its fourth-quarter capacity of its main operations by up to 16.5 percent, meaning it will need fewer planes to serve its routes.
Some analysts have said Airbus, a unit of Europe's EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), and rival Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) could lose a quarter or more of the plane orders on their books as carriers cut back growth plans in the face of high fuel costs.
Airbus has had 43 order cancellations so far this year, according to its website, but some of those are accounted for by shifts to a new version of its A350 model. It said earlier this year that U.S. low-cost carrier JetBlue Airways Corp (JBLU.O: Quote, Profile, Research, Stock Buzz) will defer some deliveries.
Boeing has had no cancellations this year, but has said Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) and AirTran Holdings Inc (AAI.N: Quote, Profile, Research, Stock Buzz) have deferred some orders. (Reporting by Kyle Peterson and Bill Rigby; Editing by Derek Caney)

http://www.reuters.com/article/marketsNews/idINN0728923020080807?rpc=44

 

[Skippy]

And another 91 million well spent, thanks U

 

[FCNelson]

Couldn't they flip them to some Pacific Rim operators who are looking for earlier deliveries of Airbuses? Airtran has had good success in selling some of their excess new 737NGs, making profits on all.

 

[jetjock6]

Upper management will probably get millions in bonus because they found a way to save 2.2 billion.

 

[contrail67]

United may cancel order for 42 Airbus aircraft

Thu Aug 7, 2008 11:30am EDT
CHICAGO, Aug 7 (Reuters) - UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz), parent of United Airlines, may cancel an order for 42 Airbus aircraft, forfeiting a $91 million dollar deposit and possibly heralding a wave of deferrals and cancellations for the major plane makers as their customers scale back growth plans.
The airline, one of Airbus' best U.S. customers, is currently committed to pay $2.2 billion for the purchase of 42 A319 and A320 single-aisle aircraft. If it does cancel the order, UAL would forfeit the advance deposit paid to Airbus.
It is "highly unlikely that (UAL) will take future delivery of these aircraft," UAL said in a July 24 filing with the U.S. Securities and Exchange Commission.
The U.S. airline industry, suffering under the weight of soaring fuel costs, is rapidly shrinking. United has said it would cut its fourth-quarter capacity of its main operations by up to 16.5 percent, meaning it will need fewer planes to serve its routes.
Some analysts have said Airbus, a unit of Europe's EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), and rival Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) could lose a quarter or more of the plane orders on their books as carriers cut back growth plans in the face of high fuel costs.
Airbus has had 43 order cancellations so far this year, according to its website, but some of those are accounted for by shifts to a new version of its A350 model. It said earlier this year that U.S. low-cost carrier JetBlue Airways Corp (JBLU.O: Quote, Profile, Research, Stock Buzz) will defer some deliveries.
Boeing has had no cancellations this year, but has said Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) and AirTran Holdings Inc (AAI.N: Quote, Profile, Research, Stock Buzz) have deferred some orders. (Reporting by Kyle Peterson and Bill Rigby; Editing by Derek Caney)

http://www.reuters.com/article/marketsNews/idINN0728923020080807?rpc=44

MAY CANCEL.....wonder what kind of negotiating is going on with Airbus. WILL CANCEL would be more of a confident statement...just wonder why they said may cancel.

 

[N1atEcon]

Didn't UAL learn their lesson 7 years ago when they tried to start a Fractional. I loved how they tried to get their deposits back from Gulfstream. Gulfstream said "your airplanes are on the production line, take delivery or F off." We all know how that ended. $$$$$$$$$$ free money for gulfstream.

 

[Occam's Razor]

What's Howard up to these days?

("Madam Cleo" moment. Archive for later reference)

 

[Voice Of Reason]

Holy Octogeneriatrics

What's Howard up to these days?

("Madam Cleo" moment. Archive for later reference)

You don't mean.......???

August 14, 1987
UNITED'S PILOTS PICK ACQUISTION CHIEF

By STEPHEN PHILLIPS, SPECIAL TO THE NEW YORK TIMES
LEAD: The pilots union at United Airlines has recruited William R. Howard, until today the chairman and chief executive of Piedmont Aviation, to lead its effort to buy United.
The pilots union at United Airlines has recruited William R. Howard, until today the chairman and chief executive of Piedmont Aviation, to lead its effort to buy United.
Mr. Howard, 65 years old, was named chairman and chief executive of the Airline Acquisition Corporation, the pilots' company established in April for the takeover bid.
The addition of a highly respected airline executive - and the news that the Chemical New York Corporation would help finance the takeover offer - is expected to make the pilots' plan more attractive to Wall Street.
The Allegis Corporation, the parent of United, would not comment beyond restating that the airline is not for sale. And the reaction of other unions at United remained uncertain.
The pilots have proposed wage concessions as part of their financing plan. And the International Association of Machinists, which represents a third of the airline's workers, has previously opposed an employee buyout.
Reached by telephone at Piedmont's headquarters in Winston-Salem, N.C., Mr. Howard said, ''There is an opportunity to do at United what we have done with Piedmont.'' Added Airport Hubs Seen
He declined to discuss specifics but indicated that increasing the number of United's airport hubs would be part of his plan.
Industry analysts said that that strategy - picking particular regions, establishing beachheads at underused airports, then building a dominant position - was behind Piedmont's success. Piedmont has created hubs in Charlotte, N.C., Baltimore and Dayton, Ohio.
The pilots union - the United chapter of the Airline Pilots Association -offered to buy United from Allegis in April. Industry analysts have estimated the bid as high as $5 billion.
The union also said today that Chemical Bank had agreed to provide $500 million in financing for the takeover and to arrange additional financing through a syndicate of banks.
Mr. Howard is given credit for turning Piedmont Airlines from a modest regional carrier into the nation's sixth largest and most profitable airline. He has been rumored to be looking for a job since Piedmont agreed to be acquired by the USAir Group, the parent of USAir, in March. The deal is awaiting final approval from the Department of Transporation.
''The pilots have revitalized their effort to take control,'' said Candace Browning, an airline analyst. ''It seems that they have adequate financing and Mr. Howard is well respected in the industry. By joining the pilots he adds a lot of credibilty to their bid.''
The addition of Mr. Howard and the new financing puts added pressure on Allegis's board, which announced plans in June for a restructuring and recapitalization. But little action has been taken.
The pilots had previously received a commitment from Salomon Brothers Inc. to raise $1.5 billion in subordinated debt. The union also said it would use $200 million in excess pension funding for the takeover.
In agreeing to join the pilots, Mr. Howard is apparently dealing a setback to Allegis's efforts to restructure. According to officials close to Allegis, Mr. Howard was one of three finalists that Allegis had in mind to head United Airlines after Allegis is broken into parts and sold.
Allegis would not comment on whether it had been trying to recruit Mr. Howard and reiterated that United Airlines was not for sale.
The Hilton and Westin hotels and the Hertz car rental company are the other principal components of Allegis.
In June, Allegis in effect repudiated the plans of Richard J. Ferris, the chairman and chief executive, to create a full-service travel company, following Wall Street's cool response to that strategy. Mr. Ferris then resigned.
Since then, Allegis has been searching for a replacement for Frank Olson, who was appointed to replace Mr. Ferris temporarily as chairman and chief executive.
Terms of the contract with Mr. Howard, a native of Scottsbluff, Neb., were not disclosed.
Under the agreement with Chemical Bank, Chemical will lend $500 million, said officials close to the pilots union. The division of the Chemical New York Corporation will also help raise an additional unspecified amount through the syndicate. The bank syndicate has not been lined up, the officials said, but Chemical Bank said that it was highly confident of its ability to raise the funds.
In addition to the bank financing, the pilots also have received a committment from Salomon Brothers Inc. to raise $1.5 billion in subordinated debt. The union also said it would use $200 million in excess pension funding.
But even with Mr. Howard and the additional financing, the pilots' success is not guaranteed. The pilots have not received the endorsement of United's machinists' union.
In composite trading, Allegis closed at $95.50 on the New York Stock Exchange, up $1.25 on the day.

 

[Occam's Razor]

Nope...wrong Howard.

 

[Going2Baja]

Couldn't they flip them to some Pacific Rim operators who are looking for earlier deliveries of Airbuses? Airtran has had good success in selling some of their excess new 737NGs, making profits on all.

NG's are in demand - but who wants the "chick stick/electric jet?"

Baja.