Will we really see a Chapter 7 with a major?

[ThisistheDream]

I was curious to get other opinions about the real possibility of any major going chapter 7? We have all heard for sometime that USair, and now UAL will go chapter 7, but I am starting to think they they wont. Just for the fact that they have been able to keep operating and that they keep taking more consessions etc. I think before they have the last chance before going chapter 7, the judges will allow the airline to do what ever they want to avoid it, meaning braking more contracts and more concessions, dismantling the work rules, etc. I am sure the gov't does not want to have another 100,000 employees collecting unemployment for a chapter 7. Didnt TWA operate in Bankruptcy for years along with AWA at one time??

 

[FarginDooshbahg]

Along with CO on more than one occasion. My answer to your question is no, we will not see a Chapter 7.

 

[michael707767]

I was curious to get other opinions about the real possibility of any major going chapter 7? We have all heard for sometime that USair, and now UAL will go chapter 7, but I am starting to think they they wont.

You are right. They won't. And that is part of the problem with this industry. An airline is allowed to wallow in BK for years, breaking contracts, not paying bills (and in UAL's case, actually seeking the return of money they paid prior to BK), etc, while airlines that are not in BK have to honor thier contracts and pay their bills. It brings down the whole industry, since those who are not in BK have to find a way to compete with those who are in BK.

Its a sad but true fact that the industry as a whole would be better off if the courts did not allow an airline to stay in BK so long. You should get one shot in BK, no more than six months to restructure, and if that don't cut it...CH 7.

 

[tz800ca]

Yes, we will see at least one. JMHO

 

[ultrarunner]

If any BK judge abrogtes any contracts, I think that act may actually force a chapter 7 filing. I would expect every U FA to walk if their contract is cancelled. And I would hope they would.

An example needs to be set, and I hope AFA follows up on their previous statements.

I would expect the same from the UAL FA's if their contract is also cancelled.

I would fully support a "national strike" against any BK airline. But with the CBA's cancelled, there is no 'strike'. The FA's just simply walk off the job. And I hope they do.

 

[Dizel8]

"I would expect every U FA to walk if their contract is cancelled".

I doubt they will, the CWA has reached a TA and more than likely will vote yes. I have little doubt, that the F/A's will reach one soon and will likley vote yes. The big question is the IAM mechanics, but either way, they face being thrown under the (air)bus.

UAL management is taking notes on the U debacle and will more than likely follow in the same path.

 

[Boeingman]

It isn't going to matter. U will tank very soon. They are already burning through the ATSB money, they are entering a period of depressed revenue next month and they have a huge aircraft payment due in the first quarter.

Reading the following article the math doesn't add up. They admit they cannot find financing so who is going to underwrite them until 2007?


http://biz.yahoo.com/ap/041209/us_airways_bankruptcy_2.html

 

[lowecur]

It isn't going to matter. U will tank very soon. They are already burning through the ATSB money, they are entering a period of depressed revenue next month and they have a huge aircraft payment due in the first quarter.

As usual, the uninformed put their 2 cents in.

They must meet certain caveats first (which they will do), and they will survive. As soon as the CWA vote passes, the pressure will be on the FA's. I don't think UAIR would have any problem abrogating their contract, and taking their chances with the court, mediation board, or Congress.

http://biz.yahoo.com/prnews/041126/nyf010_1.html

http://pittsburghlive.com/x/tribune-review/business/s_277375.html

 

[FoxHunter]

I was curious to get other opinions about the real possibility of any major going chapter 7? We have all heard for sometime that USair, and now UAL will go chapter 7, but I am starting to think they they wont. Just for the fact that they have been able to keep operating and that they keep taking more consessions etc. I think before they have the last chance before going chapter 7, the judges will allow the airline to do what ever they want to avoid it, meaning braking more contracts and more concessions, dismantling the work rules, etc. I am sure the gov't does not want to have another 100,000 employees collecting unemployment for a chapter 7. Didnt TWA operate in Bankruptcy for years along with AWA at one time??

Do you recall Braniff, EAL, PanAM? Sorry to say, but the best thing to happen in the airline industry today would be for both UAL and USAIR to go Chapter 7. I just bought a ticket on American for January, PHL-ABQ round trip, $227.50. If I had bought a discounted ticket for duty travel the price was $354 ONE WAY. If they both stay around you will see a slow bleed for the rest of the industry and those employees that do not work for either UAL or USAIR.

 

[WyoHerkdriver]

I could not agree more! I just love how both UAL and USAir manage to squeeze more and more from labor (3 rounds of concessions so far at USAir) and then they turn around and drop ticket prices even further. All this while they "hide" under bankruptcy protection! What the management of both of these airlines is doing is a complete travesty. I agree that something has got to give and if that means one or both of these airlines finally going under - well so be it. Do not get me wrong - I feel very much for the employees of both of these airlines (I am myself furloughed from another major airline), but enough is enough!

 

[lowecur]

US Air asks judge to outsource heavy mx

The hardline mechanics union may find itself without 2/3 of it's workforce at UAIR.



[font=Helvetica,Helv,Geneva,San Serif,Geneva]US Airways asks to outsource maintenance[/font]



[size=-1]By Steve Halvonik
TRIBUNE-REVIEW
Friday, December 10, 2004 [/size]

ALEXANDRIA, Va. -- US Airways on Thursday asked a bankruptcy judge for permission to outsource heavy maintenance on all of its aircraft, which could lead to the closing of its maintenance facility at Pittsburgh International Airport and wipe out 1,800 mechanics' jobs.

Outsourcing heavy maintenance would permit US Airways to eliminate 2,000 of 3,600 mechanics' jobs and save $40 million by closing one of its two maintenance centers, at either Pittsburgh or Charlotte, N.C., the bankrupt airline said.

No decision has been made on which facility to close, airline officials said, but industry experts and union officials suspect it will be Pittsburgh. Two-thirds of Pittsburgh's mechanics work in heavy maintenance, which refers to rigorous inspections that take three or more days to complete.

Also cutting in Charlotte's favor is that US Airways is expanding hub operations there while it has eliminated hub service in Pittsburgh, where it slashed daily nonstop flights this fall by more than a third.

US Airways CEO Bruce Lakefield said in May that he was not opposed to maintaining the Pittsburgh maintenance center, so long as its costs were competitive.

Lakefield, however, sidestepped a question yesterday about whether that was still his official position.

"We don't know where we are at right now," Lakefield said. "We're in the middle of a case."

US Airways is seeking about $1 billion a year in labor savings as part of its plan to become a profitable, low-cost airline. Last month, it asked U.S. Bankruptcy Judge Stephen S. Mitchell to impose its cost-saving terms on three unions that have refused to accept $700 million in wage and benefits cuts.

Former Chief Financial Officer David M. Davis said yesterday in bankrupcty court hearings that the airline could run out of cash and be forced into liquidation by mid-January without labor savings.

US Airways will lose about $700 million this year and is expected to lose $200 million next year, even if it achieves all of its labor savings and lines up $250 million in new equity investment, Davis said.

"Something needs to be done very quickly," said Davis, who resigned last month to join a Houston energy company.

Davis said most domestic airlines either outsource heavy maintenance or have the right to do so.

Mitchell gave the airline permission in October to temporarily outsource heavy maintenance on its Airbus jets, forestalling the recall of hundreds of furloughed mechanics in Pittsburgh.

A leader of the Pittsburgh mechanics' union played down US Airways' threat as a negotiating ploy aimed at pressuring mechanics into accepting $174 million in wage and benefits cuts.

"Our position is that US Airways is going to need both facilities because we plan on keeping the work in-house," said Frank Schifano, president of International Association of Machinists and Aerospace Workers Local 1976 in Pittsburgh.

Schifano, a member of IAM's negotiating team, declined to discuss how close the union was to reaching a tentative agreement with US Airways.

Maintenance worker Chuck Campbell, leaving his shift at 3 p.m. yesterday, said he, like most of his colleagues, are bracing for the worst -- that the airline will move its maintenance work to one of its two primary hubs in Charlotte or Philadelphia, or outsource the work elsewhere.

Campbell, a 17-year US Airways veteran from South Fayette, said he likely would retire if the airline pulls its maintenance work from Pittsburgh International.

Pilots and three small labor groups represented by the Transportation Workers Union have ratified new contracts delivering about $325 million a year in savings.

Last week, US Airways reached a tentative agreement with the union representing reservations and gate agents that will produce about $137 million a year in savings. That agreement, if approved by the rank and file, could lead to the closing of a reservations center at Parkway Center and the elimination of 800 local jobs.

Talks with the Association of Flight Attendants over a new contract, which have been going on this week, failed to produce an agreement again yesterday, according to a union spokeswoman.

The possible closings of both the maintenance and reservations centers could push US Airways' Western Pennsylvania job cuts to more than 3,000. That would drop its local employment to fewer than 2,000, according to union estimates -- down from more than 12,000 before the Sept. 11, 2001, terrorist attacks.

Company officials have said facility closings would not occur until next year.

US Airways officials have held talks with Allegheny County Chief Executive Dan Onorato and Gov. Rendell and said they would listen to any incentive offers to keep the reservations and maintenance centers in Pittsburgh.

Union workers gave back more than $1.2 billion in wages and benefits during US Airways' bankruptcy reorganization two years ago. Airline officials said that increased competition from low-cost carriers and stubbornly high fuel prices require it to reduce labor costs by another $1 billion a year.

Davis said labor savings would give US Airways a fighting chance but would not ensure its survival.

The airline is projected to lose $25 million in 2006 before turning profits of $25 million in 2007, $233 million in 2008 and $270 million in 2009.

Davis said the airline won't move into the black until its fleet of regional jets comes on line in 2007.

With profit margins of less than 4 percent for the foreseeable future, US Airways will find it "very challenging" to attract new equity investors, Davis said. US Airways has had "some conversations" with potential investors, according to Chiames, who declined to provide details. Whether a potential investor could gain controlling interest for $250 million, as the Retirement Systems of Alabama did two years ago, is subject to negotiation, Chiames added. He declined to comment on whether RSA would be willing to invest more capital if favorable labor settlements are reached.

 

[Boeingman]

As usual, the uninformed put their 2 cents in.

From you? Mr. Insurance know-it-all? Sorry, but I’ll accept that as a badge of honor from the likes of you.

Let’s talk about what you feel is wrong with my statement (please take your hands out of your pants dreaming about USAIR utilizing your beloved ERJ):

I said:

**They are already burning through the ATSB money**

Fact: They had to borrow against the ATSB loan in October to continue operations.

http://biz.yahoo.com/e/041018/uairq.ob8-k.html Not a good sign LowIQer when you’re burning the furniture to heat the house. Another words CompletlyLowIQer their operations can not sustain nor generate enough cash. And remember they are operating under court protection losing money. The numbers don’t add up even with labor concessions.

**they are entering a period of depressed revenue next month**

Pardon me, I should have realized who I was talking with,Anyone with a lick of sense knows the first quarter is brutal on all carriers.

**and they have a huge aircraft payment due in the first quarter.**

In fact still a correct statement. The judge has yet to rule on the GECAS motion and judging by this testimony (http://biz.yahoo.com/ap/041209/us_airways_bankruptcy_2.html)

I doubt they will meet he covenant to emerge from Bk in June of 2005, especially without DIP financing since there is nothing left to leverage anymore.

They must meet certain caveats first (which they will do), and they will survive.

Right….sure….. just a couple of minor ones correct? Like Emerging from bankruptcy by June of 2005? So who is going to loan them the money to do that BEFORE (key word here stickweed) the deal with GECAS goes through. Here let me help you with this since English obviously isn’t your first language.

http://biz.yahoo.com/prnews/041126/nyf010_1.html

**In exchange for these significant commitments by GECAS and GEES, upon successful emergence from Chapter 11, US Airways would issue to GECAS a 15-year convertible note for between $125 and $216 million, depending on future lease options selected by US Airways.

The agreement was filed with the U.S. Bankruptcy Court of the Eastern District of Virginia today and requires court approval by Dec. 17, 2004. In addition to court approval, the agreement requires that by Jan. 14, 2005, the company achieve a series of cost reductions and restructuring milestones, and it must complete its judicial restructuring and exit Chapter 11 by June 30, 2005.**

As soon as the CWA vote passes, the pressure will be on the FA's.

Perhaps, but they are the only group to show any guts so far. I have not heard or seen anything to the contrary they will still walk if their contract is abrogated. I have also seen USAIR is continuing to threaten liquidation if they do. Just wondering Mr. AirlineinsurancesalesERJperformancekleenex expert…how well (or how long) do you think that airline will operate IF it survives with so many angry employees?

I don't think UAIR would have any problem abrogating their contract, and taking their chances with the court, mediation board, or Congress.

Maybe, but like I said above, the airline already is rotting from within and it will only get worse.

Now, in the future, can you at least try and back up your pathetic smokescreen for ERJ sales with better facts? Sorry, I know that is difficult for you.

 

[dlredline]

It isn't going to matter. U will tank very soon. They are already burning through the ATSB money, they are entering a period of depressed revenue next month and they have a huge aircraft payment due in the first quarter.

Reading the following article the math doesn't add up. They admit they cannot find financing so who is going to underwrite them until 2007?


http://biz.yahoo.com/ap/041209/us_airways_bankruptcy_2.html

Excellent points. USAirways is hanging their thinning hopes on acquisition of a $250 million cash infusion. Problem is, at current revenue loss rates, this equates to a little over 3 months operational revenue, not even a sturdy enough bridge to make it to the GECAS-imposed June '05 deadline. Every potential VC and credit market knows this, thus the silence from the market place and daily media driven hysteria from U management to get even more labor concessions. And they still have the multi-million dollar pension obligation and aircraft lease payment coming due mid-January. This is why you keep hearing "...labor concessions by mid-January or liquidation will follow..."

One thing also to consider is the FAA's role in this debacle. Remember that carriers under BK are automatically subject to increased federal scrutiny. Abrogating the mechanics labor contract would open a whole new bag of worms. IAM attorneys agree that without a contract, the RLA doesn't apply and the mechanics may walk enmasse (like the AFA). The FAA may step into the fray if it perceives safety is being compromised due to maintenance considerations (poor or lack thereof). People keep talking about the AFA postition during these "negotiations", but I really think the IAM holds many of the cards in this drama.

Irregardless, the numbers don't add up to a viable operation past January '05. Mainline aircraft will be returned (as per the GECAS, GEE agreement) and Embrear have aircraft (6-7 reportedly) still sitting on the ramp in Brazil undelivered due to lack of MidAtlantic financing. You can only go after labor concessions so long before the well dries up (if they aren't already there by now) and someone, anyone, decides they need to run this airline. USAirways employees certainly deserve better than the hand dealt them.

Red

 

[Clyde]

I was curious to get other opinions about the real possibility of any major going chapter 7? We have all heard for sometime that USair, and now UAL will go chapter 7, but I am starting to think they they wont. Just for the fact that they have been able to keep operating and that they keep taking more consessions etc. I think before they have the last chance before going chapter 7, the judges will allow the airline to do what ever they want to avoid it, meaning braking more contracts and more concessions, dismantling the work rules, etc. I am sure the gov't does not want to have another 100,000 employees collecting unemployment for a chapter 7. Didnt TWA operate in Bankruptcy for years along with AWA at one time??

Let's ask Kit Darby!

 

[dlredline]

Let's ask Kit Darby!

Now that's funny!

 

[Boeingman]

Excellent points. USAirways is hanging their thinning hopes on acquisition of a $250 million cash infusion. Problem is, at current revenue loss rates, this equates to a little over 3 months operational revenue, not even a sturdy enough bridge to make it to the GECAS-imposed June '05 deadline. Every potential VC and credit market knows this, thus the silence from the market place and daily media driven hysteria from U management to get even more labor concessions. And they still have the multi-million dollar pension obligation and aircraft lease payment coming due mid-January. This is why you keep hearing "...labor concessions by mid-January or liquidation will follow..."

One thing also to consider is the FAA's role in this debacle. Remember that carriers under BK are automatically subject to increased federal scrutiny. Abrogating the mechanics labor contract would open a whole new bag of worms. IAM attorneys agree that without a contract, the RLA doesn't apply and the mechanics may walk enmasse (like the AFA). The FAA may step into the fray if it perceives safety is being compromised due to maintenance considerations (poor or lack thereof). People keep talking about the AFA postition during these "negotiations", but I really think the IAM holds many of the cards in this drama.

Irregardless, the numbers don't add up to a viable operation past January '05. Mainline aircraft will be returned (as per the GECAS, GEE agreement) and Embrear have aircraft (6-7 reportedly) still sitting on the ramp in Brazil undelivered due to lack of MidAtlantic financing. You can only go after labor concessions so long before the well dries up (if they aren't already there by now) and someone, anyone, decides they need to run this airline. USAirways employees certainly deserve better than the hand dealt them.

Red

Red also brings up very valid points. It is funny seeing how LowIQer pastes the article about the IAM issue above, yet fails to realize the very ramifications that Red correctly points out above. The IAM will walk. This has been a very thorny and festering issue with them for a long time with the Alabama outsourced heavy MX.



The cash infusion and timeline speaks for itself. No one has offered to put money on the table and anyone with a 2nd grade arithmetic level (sorry LowIQer) can figure out that they will run out of cash, best case scenario very soon. No way can the airline survive until the 6/05 deadline for exiting chapter 11. And no one has even begun to talk about the question of restructuring the covenants on the ATSB loan that they are already burning through. It makes one wonder why GECAS would enter into an agreement with covenants that seem completely unreachable. The GECAS thing does not pass the smell test with me.



Further as Red correctly stated, the absolute hysteria on U management to push for more labor concessions has to be driving business off. In their blind zeal to concentrate on the only thing they know how to do (attack labor). They fail to realize this liquidation publicity and talk may help their agenda with the judge, but no one can put a price on the amount of lost revenue from people booking away from the carrier.



I would think the employee goodwill well has long since dried up. I know some folks over there any from what I have heard the place sounds like it is imploding.

 

[AA717driver]

I realize I'm just a little cynical and jaded(from being in the airline biz?! Nahhhh! ) but it wouldn't surprise me if we see the U contracts $h!tcanned and AMAZINGLY the money starts to flow. I have no faith or trust in the integrity of American business or the courts.

On another subject, is it true that some of the lessors are trying to take their 763's from UAL but are being blocked by the judge? That would spell trouble if they got them and it started a "run on the bank".TC

 

[Propsync]

I liken this to the roulette wheel. You put your money on a number(s). If you don't win, you need to put more down to cover previous bets. How many creditors are going to line up and help bring them out? Taking what they can now is easier than putting more in and getting screwed. The people that wanted to repo the 76's have the right idea. They see this won't work, like a previous post said, the numbers don't add up. Get your airplanes out and back on the market before you have U and/or UA's fleet all sitting around looking for another carrier.

 

[dlredline]

I realize I'm just a little cynical and jaded(from being in the airline biz?! Nahhhh! ) but it wouldn't surprise me if we see the U contracts $h!tcanned and AMAZINGLY the money starts to flow. I have no faith or trust in the integrity of American business or the courts.

On another subject, is it true that some of the lessors are trying to take their 763's from UAL but are being blocked by the judge? That would spell trouble if they got them and it started a "run on the bank".TC

Second question first: Yes it's true that the judge "temporarily" blocked repossession of these aircraft. A further ruling is in the future.

As to a surprise money flow with USAirways post contract-abrogation, I seriously doubt it. Below are the industry numbers as reported for November '04:

NOVEMBER TRAFFIC REPORT:

LOAD FACTORS:
1- JetBlue Airways ... 83.8%
2- Northwest Airlines ... 77.7
3- Continental Airlines ... 77.6
4- America West ... 77.4
5- United Airlines ... 76.1
6- American Airlines ... 73.4
7- Delta Air Lines ... 73.4
8- Alaska Airlines ... 73.3
9- US Airways ... 73.1
10- ATA ... 70.5
11- AirTran Airways ... 69.1
12- Southwest Airlines ... 65.5

The following categories, Revenue Passenger Miles (RPMs), Available Seat Miles (ASMs) and Passengers Carried are compared to November 2003.

TRAFFIC -- Revenue Passenger Miles (RPMs)
1- JetBlue ... 40.5% increase
2- AirTran ... 23.7% increase
3- Southwest ... 14.1% increase
4- America West ... 14.0% increase
5- Alaska ... 11.2% increase
6- Northwest ... 10.7% increase
7- Continental ... 10.1% increase
8- Delta ... 9.7% increase
9- American ... 8.2% increase
10- United ... 3.6% increase
11- US Airways ... 2.0% increase (mainly from the MidAtlantic startup)
12- ATA ... 6.0% decrease

CAPACITY -- Available Seat Miles (ASMs)
1- JetBlue ... 36.7% increase
2- AirTran ... 23.8% increase
3- Southwest ... 11.1% increase
4- America West ... 8.9% increase
5- Northwest ... 8.7% increase
6- Continental ... 6.9% increase
7- Alaska ... 6.2% increase
8- Delta ... 6.1% increase
9- American ... 4.1% increase
10- United ... 2.9% increase
11- US Airways ... 1.3% increase (again from the MidAtlantic startup)
12- ATA ... 15.3% decrease

PASSENGERS CARRIED IN NOVEMBER 2004
(number of passengers carried in parenthesis)
1- JetBlue ... 37.3% increase (1,049,453)
2- AirTran ... 15.1% increase (1,119,249)
3- America West ... 11.1% increase (1,738,486)
4- Northwest ... 11.1% increase (4,488,446)
5- Southwest ... 10.4% increase (6,632,513)
6- Alaska ... 9.0% increase (1,320,200)
7- Delta ... 8.1% increase (9,205,873)
8- American ... 7.0% increase (7,260,278)
9- Continental ... 6.6% increase (3,474,238)
10- United ... 3.8% increase (5,428,000)
11- US Airways ... 1.3% decrease (3,355,008)
12- ATA ... 4.6% decrease (691,524)


The point being that USAirways is one of the industry cellar-dwellers, and future bookings based upon recent SEC filings indicate that the trend will continue, if not worsen. Revenue shortfalls are predicted to worsen above revenue gains from potential AFA and IAM labor concessions (if it comes to that). Passengers are booking away from U, and recent statements from the CEO and former CFO regarding a future liquidation ain't helping. The media has picked up on this (reference the recent Nightline piece where analysts and agents are suggesting that passengers NOT book USAirways further than 3 months out) and continue to fuel the traveling public's concerns.

Again, the employees at USAirways could work for virtually free, and their remaining cost structure, debt load, financial obligations, route structure, fleet cost, etc. would still render it unprofitable. I posted the financials from the 1113(e) court rulings about a month ago, and still today the numbers don't add up. I just don't see where the money is going to come from.

Red

 

[ilinipilot]

The might not get to the point of Chap 7. But their best assests will be sold off/ or bought i.e. Gates and slots at LGA, DCA, route authorities over the pond, aircraft and parts.

I dont know if a sale counts as chap 7