US Airways

[JBrocks]

US Airways weighs $300M in offers


By Thomas Olson
TRIBUNE-REVIEW
Friday, January 30, 2004



Financially troubled US Airways is considering $300 million in offers for unidentified assets the struggling carrier is shopping around.
The airline is using investment banker Morgan Stanley to solicit bids for such properties as the lucrative East Coast shuttle, US Airways Express subsidiaries and gate space at New York's LaGuardia and Boston's Logan airports.

"If that $300 million is correct, it's probably $150 million for the shuttle and another $150 million for their express partners," said Robert Mann Jr., head of R.W. Mann & Co. Inc., an airline consultancy based on Long Island, N.Y.

US Airways spokesman David Castelveter declined to comment about any offers or assets that might be sold.

 

[Heavy Set]

$150 million for the Express partners? Is Ornstein lurking in the background to bail out Siegel? Anyone have any more details? Doesn't sound like a good situation at all - time for some pruning...

 

[boeingdriver213]

The only thing U is interested in is cold, hard cash. Stock options or any other type of payment would probably not even be considered, so anyone with cold, hard cash available to spend would probably be worth listening to. IMHO, the employees are slowly coming to the realization that they either play the game or wait in the unemployment line for a new job that will not pay the bills they now have....if they even find a new job.

 

[FDJ2]

IMHO, the employees are slowly coming to the realization that they either play the game or wait in the unemployment line for a new job that will not pay the bills they now have....if they even find a new job.

Since UAIR enjoys an employee cost advantage over most competitors, the employees should rightfully conclude that they are not a player in this game. If UAIR goes down it will not be because of the employees, but rather UAIR managements inept stewardship of the company and its inability to produce a successful business plan.

 

[blzr]

FDJ2...

That was Very well put. If Management took the kind of pay cuts that the Unions did, maybe the Airline would survive.

 

[climbhappy]

to FDJ2:

how does USAIR enjoy a cost advantage? USA TODAY ran a story last week that said US air's cost per seat mile was still 13.3 cents. twice of Jetblue and airtran. more than american. southwest had gone up to 7.69 from their benchmark 7.5 cents.

what did you base your comment on? is usa today WRONG?

to be selling off assets is some say the beginning of the end.

one glaring sympton to all of this was that the layoffs went all the way up to 16 years senority. This problem has plagued 'em ever since the merger with Piedmont.

it would be the corporate turnaround of the decade if they pull it off.

 

[FDJ2]

to FDJ2:

how does USAIR enjoy a cost advantage? USA TODAY ran a story last week that said US air's cost per seat mile was still 13.3 cents. twice of Jetblue and airtran. more than american. southwest had gone up to 7.69 from their benchmark 7.5 cents.

First of all, CASM is only half the equation for running a profitable or unprofitable airline. RASM is the other half. Each seat mile cannot necessarily be compared to the other. Some ASMs cost more, but they produce more revenue. IOW, a business class seat costs more to produce than a coach seat and a 200 mile flight on the shuttle costs more per mile to produce than a 1,500 mile flight from JFK-FLL.

Second I didn't say cost advantage, I said employee cost advantage . UAIR's CASM is not higher than SWA because of employee costs, but rather because of its higher costs as a persentage of revenue for aircraft rental, fuel, commissions and other structural issues listed notiriuosly as "other". For example, UAIR enjoys a cost advantage over SWA of 1.5% for maintenance, 1.7% for labor and 3.3% for depreciation. OTOH, UAIR has a cost disadvantage of 2.9% for aircraft rental, 4.8% for commissions/selling, 6.1% for fuel and a whopping 10.8% in other miscellaneous expenses as a percentage of revenue.

The point being, that UAIR's troubles are not the product of high employee costs, but rather poor management.

 

[Draginass]

I believe that U employees could work for FREE and the company still tank. It's obvious by now that Siegle is too busy trying to keep breathing for the next hour to worry about details like a business plan or strategic thinking. U is in very very deep trouble, and it's not because of the employees.

 

[lowecur]

FDJ2

For example, UAIR enjoys a cost advantage over SWA of 1.5% for maintenance, 1.7% for labor and 3.3% for depreciation. OTOH, UAIR has a cost disadvantage of 2.9% for aircraft rental, 4.8% for commissions/selling, 6.1% for fuel and a whopping 10.8% in other miscellaneous expenses as a percentage of revenue.

The cost disadvantages are telling. But the most glaring ones are the 6.1% for fuel, and 10.8% for misc. I don't think there would be much Siegel could have done in both cases. He was looking at fuel in the $24-25 range, and without the capital to hedge, he was at the markets mercy. The misc stuff is rather difficult to correct considering it would be impossible to match SWA business model on short notice. Those misc items include the cost of both the PIT & PHL hubs. Charlotte is their only hub that is reasonable. But close PIT, and reduce PHL and there goes RASM. He's between a rock and a sledge hammer.

 

[Paladin]

The only thing U is interested in is cold, hard cash. Stock options or any other type of payment would probably not even be considered, so anyone with cold, hard cash available to spend would probably be worth listening to. IMHO, the employees are slowly coming to the realization that they either play the game or wait in the unemployment line for a new job that will not pay the bills they now have....if they even find a new job.

This begs the question...just who HAS the cold hard cash to purchase the Express division?? And would it be all 3 WOs or just ALG and PDT, since PSA is getting the new CRJs?? Personally, I could see Jetblue wanting the Shuttle operation, especially when their new EMBs starting arriving on property...but who knows.
Cheers

 

[ASApuppy]

Question:

This begs the question...just who HAS the cold hard cash to purchase the Express division??


Answer:

SEATTLE, Feb 2 (Reuters) - Delta Air Lines (NYSEAL - News) on Monday said it was selling $325 million worth of convertible senior notes to a single instituional investor in deal slated to close on Friday.

The Atlanta-based No. 3 U.S. airline said it would use the proceeds for general corporate purposes.


Just reading between the lines............

 

[lowecur]

ASA

Good point. If the rumor in Nawlins is true, buying the Express routes/gates/ would certainly put many furloughs back to work. UAIR is asking GECAS to see if they can lease some of the 170's and CRJ's to other carriers, and DL may be in line if they can get concessions from DALPA. Sounds like a great trade-off that could be in the works right now.

 

[lowecur]

Mesa

Question:

This begs the question...just who HAS the cold hard cash to purchase the Express division??

Answer:

SEATTLE, Feb 2 (Reuters) - Delta Air Lines (NYSEAL - News) on Monday said it was selling $325 million worth of convertible senior notes to a single instituional investor in deal slated to close on Friday.

The Atlanta-based No. 3 U.S. airline said it would use the proceeds for general corporate purposes.

Just reading between the lines............

The line just got longer. Mesa is going ahead with $100 million worth of convertible notes.

Monkey see, Monkey do! Let the bidding begin.

 

[exphojump]

I fail to see what DAL wants with USair express assets.

Mesa on the other hand could buy all the US express carriers for about 100 million cash and maybe a better margin on express flying. With a guaranteed margin of 8- 10% they can finance the aircraft with less than 20% down. I wonder if the Dashes can be traded in for CRJs.

One of the main reasons mesa wanted ACAI, aside from the equity and CRJs, was for the 34 CRJ delivery slots.

I believe PSA and USair have quite a few delivery slots.

USair gets badly needed cash gets rid of its RJs and bothersome express carriers. The USair pilots are employed by Mesa through J4J. Management is happy.

Just a guess.

I hope Piedmont and Alleghany pilots merge DOH at Mesa if they want it.

 

[side stick-n]

Based on todays report of Mesa selling $100 mil of convertible notes and the merger of ALG and PDT, I'd say that the sale of the combined ALG - PDT may be a done deal. If I were in the airline buying business, I'd much rather purchase one company as opposed to two. It is also interesting that US management was/is in such a rush to put this merger in place. PSA on the other hand is taking delivery of RJ's and will probably remain the sole "wholly owned" US carrier. Just my 2 cents.....

I wish the best of luck to my ALG brothers. Once again, PDT and ALG are the expendable assets of US. The ones that were always at the top of the operational performance stats for the entire group. Remember, RJ's are just a fad...........(only those from ALG will understand this statement, sorry)

 

[lowecur]

Based on todays report of Mesa selling $100 mil of convertible notes and the merger of ALG and PDT, I'd say that the sale of the combined ALG - PDT may be a done deal.

It looks like the $100M will be used to take all or part of the 170 E-series and CRJ 700's. This is from tomorrows Pittsburg Gazette:

US Airways has already contacted Phoenix-based Mesa Air about buying some of the 170 RJs on order from Embraer and Bombardier, and has raised the idea in a meeting with GE, its regional jet financier. If another carrier is willing to buy the planes, operate them more cheaply and provide regional jet service for US Airways on a contract basis, "Why not let them do it?" Lauer said.

 

[Propblast]

I hope for the sake of the guys/gals at ALG and PDT they don't get consumed my Mesa. Ornstein is the "mini-me" of Lorenzo in his ruthless tactics.