US Air?

[350DRIVER]

They turned down Air Tran and SWA a few years back, now they are paying the price as neither will increase service or come to PIT.

Actually Air Tran just announced this last week that they are increasing daily flight from PIT to both Atlanta and Orlando.

3 5 0

 

[lowecur]

doesn't matter how much they make, if they default on the next loan payment due the end of september they will liquidate, no second ch11 to reorganize.
This could get really interesting

This is absolutely not the case. They have more than enough money to make their loan payments. There are three possible scenerios that could force liquidation.

1: They could violate the loan covenants of the ATSB if their cash or percentages dip below a certain level. The ATSB has the option of demanding full payment of all loans immediately, thus effectively shutting down the airline. 2: The Alabama Retirement Fund could force liquidation with the sale of assets. 3: Other creditors or stakeholders could begin a run on the company to secure their money by requesting immediate repayment.

In my view, the most likely scenerio is the ATSB will readjust the covenants prior to the company entering Chapt. 11. The ATSB will force the sale of the Shuttle and other gates and slots as part of the deal prior to the company entering Chapt 11, since UAIR does not have the cash to spare like the last adjustment. The company will enter Chapt 11 for a short term stay - probably less than 90 days. They will ask and receive relief on various contracts, and re emerge by the 1st of the year a smaller and leaner airline.

 

[350DRIVER]

This is absolutely not the case. They have more than enough money to make their loan payments. There are three possible scenerios that could force liquidation.


1: They could violate the loan covenants of the ATSB if their cash or percentages dip below a certain level. The ATSB has the option of demanding full payment of all loans immediately, thus effectively shutting down the airline. 2: The Alabama Retirement Fund could force liquidation with the sale of assets. 3: Other creditors or stakeholders could begin a run on the company to secure their money by requesting immediate repayment.

In my view, the most likely scenerio is the ATSB will readjust the covenants prior to the company entering Chapt. 11. The ATSB will force the sale of the Shuttle and other gates and slots as part of the deal prior to the company entering Chapt 11, since UAIR does not have the cash to spare like the last adjustment. The company will enter Chapt 11 for a short term stay - probably less than 90 days. They will ask and receive relief on various contracts, and re emerge by the 1st of the year a smaller and leaner airline.

I kind of figured the other poster's comments were incorrect and not based on factual knowledge. Most likely what will happen is the ATSB will readjust, then they go back into 11, sale of Shuttle (possibly but don't think this is a given), routes (probably intl.), sale of slots, be there (in 11) for somewhere in the neighborhood of 4 to 5 months and then re-emerge as a much smaller but profitable airline due to a well defined plan that will be Implemented.

I can't see them going away overnight or atleast anytime in the relatively near future, too many people have a stake in the outcome of this. I don't think 1 & 2 are very likely due to many different factors but time shall tell.


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[SRJ]

What about selling the wholly owned groups to free themselves of RJ financing???

 

[Palerider957]

....yeah, that'll work. Sell off the only thing making them money right now.

 

[350DRIVER]

....yeah, that'll work. Sell off the only thing making them money right now.

On that note, isn't Piedmont the only wholly owned making any money or so I have been told?. All planes are paid for as well.

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[Smoking Man]

350driver

The PSA and MidAtlantic are also making money, the financing for the RJ's is not provided by U, it is provided by GE and can only be used for RJ's. In addition very few of the Dash 8's are owned they are on lease.

 

[SkyBoy1981]

I also find it rather unbelievable that US Airways would be completely liquitated so spontaneously simply for not making a loan payment. If, for whatever reason, the Stabilization Board were to consider the liquidation of US Airways it would most likely become a political battle. The collapse of US Airways 2 months before elections would be a killer for Bush and the Republicans, so you can bet that they would be fighting every way possible to keep them alive until after the election is over at least. I am by far no political analyist, but thats just my thoughts. I also agree with 350Driver that the loan will probably be readjusted, at some point part of the US Airways assets will be sold and they will end up reemerging as a smaller carrier. If so, this is a process that will happen over the next several months, not weeks.

 

[tittyjet]

The collapse of US Airways 2 months before elections would be a killer for Bush and the Republicans, so you can bet that they would be fighting every way possible to keep them alive until after the election is over at least.

Outstanding observation.

 

[350DRIVER]

The collapse of US Airways 2 months before elections would be a killer for Bush and the Republicans, so you can bet that they would be fighting every way possible to keep them alive until after the election is over at least.

Very good point... I agree 100% on this. Bush already has an uphill battle as it is now let alone the ramifications that will then come into play should Airways go bye-bye- prior to the election. I just can't see this happening, you would have to assume that some way shape or form something can be done here.


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[NCFlyer]

Let me add this to the discussion:

USAirways has a pension obligation due the middle of next month in the $190 - $200 million range. In my opinion, they have no intention of making that cash payment. So that leaves them with 2 options:

1. Have that obligation negotiated away through standard (can you say hurried) negotiations, or

2. Enter bankruptcy and have it eliminated by the courts.

Also, I don't know what the revenue to debt ratio is at this point, but if memory serves me correct (and it might not be) USAirways used a $250 million prepayment earlier this year to keep the ratio within the range required by the ATSB loan.

 

[B190Captain]

The PSA and MidAtlantic are also making money, the financing for the RJ's is not provided by U, it is provided by GE and can only be used for RJ's. In addition very few of the Dash 8's are owned they are on lease.

Does that mean that if USAir tanks, PSA will keep getting the RJ deliveries?

 

[Jungle_Jet]

All of you guys speculating that the WO's can be sold to raise cash miss an important economic concept (which is not unusual for pilots, we are perhaps the least economically astute work group around).

With their only client (US) tanking, what value would these companies have to any outside buyers? They have no assets (aircraft mortgaged to the hilt or leased). You can't buy them with the expectation of their current cash flow continuing, as it won't after US goes under. Also the current market value of RJ's is pretty much nil, suffice it to say that the props are even lower.

In the end, the alleged business model for US will be their downfall. The fact that they have built up nearly their entire route structure on short haul flying in the NE will be what determines their fate. That flying is way too expensive (not that the unions are helping in that cause) and post 9/11 people aren't intersted in dealing with the BS involved with flying for a 90 minute flight, priced at $.20 a mile. They save more time (and money) taking Amtrak, driving or flying charter (which is much more cost effective than flying DL, US, NW or CO).

If anyone at US had ever had the foresight to maintain a west coast route structure, holding on to BWI or strengthening their int'l routes without caving in to the unions at every turn, then I think US could weather this like CO or NWA will. But forsight seems to go against US's biz plan.

 

[SRJ]

Didn't USAir finish second in profits in the entire industry after the second quarter? I know they are in a huge rut but they have shown some progress towards the positive side and I think that the creditors may feel a little better about their investment in this "sinking ship".

 

[SkyBoy1981]

With their only client (US) tanking, what value would these companies have to any outside buyers?

I think you have a very legitimate point here. Using turboprops to fly short hauls around the Northeast has played an important role in the US Airways system, but the demand for it is diminishing. It would probably be very difficult for US Airways to sell operators like PSA, Piedmont, or Allegheny even if they wanted to. I personally don't think that they would WANT to at this point, considering the lower cost of operation with these carriers versus the mainline is probably helping to keep them alive. I still think US can make it, but its going to require downsizing in some areas and possibly restructuring itself in order to change its targeted market.