DASHDRIVER
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UAL Where are they at?
- Thread starter DASHDRIVER
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Herby Versmells
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* Net income for month of 68 million dollars, excluding reorganization expenses.
* August unit revenue improves 15 percent year over year.
* Positive cash flow and EBITDAR for August
* UAL meets DIP Covenant for seventh consecutive month.
----------------------------------------------------
UAL Corp. today filed its August Monthly Operating Report (MOR) with the United States Bankruptcy Court, reporting that the company had a net income for August of 68 million dollars, excluding reorganization expenses of 114 million dollars. The majority of reorganization expenses were non-cash items resulting from the rejection of aircraft. Operating profit for the month was 105 million dollars. UAL continued to generate positive cash flow during the month, and the company met the requirements of its debtor-in-possession (DIP) financing for the seventh straight month.
"United delivered another very encouraging month, operationally and financially, particularly in achieving net income of 68 million dollars," says Executive Vice President and Chief Financial Officer Jake Brace. "United's systemwide passenger unit revenue for August improved 15 percent year-over-year, with yield up 10 percent year-over-year, both well ahead of industry averages for the month. We met the requirements of our DIP financing covenants for August and expect to meet them for September, as well. Bookings are better than expected as we move into the fall-winter season. United has been working very hard to achieve these positive results, and we are all looking ahead to the company's emergence from bankruptcy."
UAL again improved its cash position for the month, ending August with a cash balance of approximately 2.4 billion dollars, which included 698 million dollars in restricted cash (filing entities only). UAL began August with a cash balance of approximately 2.3 billion dollars, which included 714 million dollars in restricted cash (filing entities only). The company's cash balance increased approximately 109 million dollars for the month, or approximately 4 million dollars per day.
UAL met the requirements of its covenants for DIP financing in August. As part of its DIP financing agreements, UAL's lenders required the company to achieve a cumulative EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) loss of no more than 219 million dollars between Dec. 1, 2002, and Aug. 31, 2003.
"In addition to the challenging weather conditions, especially heavy thunderstorms, we always must face this time of year, August also was impacted by the blackout of the electrical grid in much of the Northeastern U.S. and Canada," says Pete McDonald, executive vice president-Operations. "United employees once again excelled at their jobs, helping our passengers manage through the delays and rebooking caused by the blackout. Our overall operational performance remained remarkably high despite the challenges."
United completed 98.8 percent of scheduled flights for August and arrivals within 14 minutes of schedule remained high, at 81.7 percent.
"United is continuing to re-engage our customers through an inventive, attention-grabbing marketing and sales campaign," says Executive Vice President-Customer, John Tague. "The company's August 'Go Go Stay' promotion was enthusiastically received by customers and, looking forward, booked load factor is currently ahead of last year. Although much work remains to be done, we are certainly encouraged by the improvement in United's revenue performance. This would not be possible but for the tremendous efforts United's employees are making day-in and day-out simply to run a great airline."
* August unit revenue improves 15 percent year over year.
* Positive cash flow and EBITDAR for August
* UAL meets DIP Covenant for seventh consecutive month.
----------------------------------------------------
UAL Corp. today filed its August Monthly Operating Report (MOR) with the United States Bankruptcy Court, reporting that the company had a net income for August of 68 million dollars, excluding reorganization expenses of 114 million dollars. The majority of reorganization expenses were non-cash items resulting from the rejection of aircraft. Operating profit for the month was 105 million dollars. UAL continued to generate positive cash flow during the month, and the company met the requirements of its debtor-in-possession (DIP) financing for the seventh straight month.
"United delivered another very encouraging month, operationally and financially, particularly in achieving net income of 68 million dollars," says Executive Vice President and Chief Financial Officer Jake Brace. "United's systemwide passenger unit revenue for August improved 15 percent year-over-year, with yield up 10 percent year-over-year, both well ahead of industry averages for the month. We met the requirements of our DIP financing covenants for August and expect to meet them for September, as well. Bookings are better than expected as we move into the fall-winter season. United has been working very hard to achieve these positive results, and we are all looking ahead to the company's emergence from bankruptcy."
UAL again improved its cash position for the month, ending August with a cash balance of approximately 2.4 billion dollars, which included 698 million dollars in restricted cash (filing entities only). UAL began August with a cash balance of approximately 2.3 billion dollars, which included 714 million dollars in restricted cash (filing entities only). The company's cash balance increased approximately 109 million dollars for the month, or approximately 4 million dollars per day.
UAL met the requirements of its covenants for DIP financing in August. As part of its DIP financing agreements, UAL's lenders required the company to achieve a cumulative EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) loss of no more than 219 million dollars between Dec. 1, 2002, and Aug. 31, 2003.
"In addition to the challenging weather conditions, especially heavy thunderstorms, we always must face this time of year, August also was impacted by the blackout of the electrical grid in much of the Northeastern U.S. and Canada," says Pete McDonald, executive vice president-Operations. "United employees once again excelled at their jobs, helping our passengers manage through the delays and rebooking caused by the blackout. Our overall operational performance remained remarkably high despite the challenges."
United completed 98.8 percent of scheduled flights for August and arrivals within 14 minutes of schedule remained high, at 81.7 percent.
"United is continuing to re-engage our customers through an inventive, attention-grabbing marketing and sales campaign," says Executive Vice President-Customer, John Tague. "The company's August 'Go Go Stay' promotion was enthusiastically received by customers and, looking forward, booked load factor is currently ahead of last year. Although much work remains to be done, we are certainly encouraged by the improvement in United's revenue performance. This would not be possible but for the tremendous efforts United's employees are making day-in and day-out simply to run a great airline."
It is true that the general opinion on the line is that United is over the hump and will survive. Economically speaking, the DIP hurdles for Dec-March will be fairly tough to meet, but again the opinion is that the DIP lenders see light (or money) at the end of the tunnel leading into the next summer's flying, and will waive the DIP hurdles, a common occurance in bankruptcy.
The bankruptcy judge gave the UAL management another extension of 5 months, one month less than they asked, to March 6th for submitting the business plan. Apparently, the plan still uses the ATSB loans as an anchor, as well as congressional support for pension plan rule changes. The pension liability alone is 4.2 billion over the next few years, that is why rule changes are under request. If pension termination happens, it will be not be a fun place to be this spring.
My PERSONAL (line pilot) opinion is that there will be some pension modifications and some congressional rules changes, not termination, to solve this problem. I also think that the UAL-UsAir dating game will get hot and heavy again, that more and more routes will be flown by 70 seat RJ's at Skywest and Mesa, that the newly annouced LCO will be a moderate "success" in Denver, but not to the level of "success" of Delta's Song (success is a relative term), that more and more international routes will see codesharing with Star Alliance foreign airlines, that Lufthansa will own a piece of the company, and that many of our airplanes will have a "Star Alliance" paint job. Interesting times right now. Who knows how it will all play out. However, for the Naysayers out there, I do think that United will survive.
Skirt
The bankruptcy judge gave the UAL management another extension of 5 months, one month less than they asked, to March 6th for submitting the business plan. Apparently, the plan still uses the ATSB loans as an anchor, as well as congressional support for pension plan rule changes. The pension liability alone is 4.2 billion over the next few years, that is why rule changes are under request. If pension termination happens, it will be not be a fun place to be this spring.
My PERSONAL (line pilot) opinion is that there will be some pension modifications and some congressional rules changes, not termination, to solve this problem. I also think that the UAL-UsAir dating game will get hot and heavy again, that more and more routes will be flown by 70 seat RJ's at Skywest and Mesa, that the newly annouced LCO will be a moderate "success" in Denver, but not to the level of "success" of Delta's Song (success is a relative term), that more and more international routes will see codesharing with Star Alliance foreign airlines, that Lufthansa will own a piece of the company, and that many of our airplanes will have a "Star Alliance" paint job. Interesting times right now. Who knows how it will all play out. However, for the Naysayers out there, I do think that United will survive.
Skirt
Last edited:
furlough-boy
Well-known member
- Joined
- Mar 19, 2002
- Posts
- 158
Thanks for this week's doom check Ty. However, while the feeling on the line is far more optimistic than back in March, everyone is well aware of the fact that nothing is guaranteed.
Questions and Answers on August 2003 MOR
----------------------------------------------------
Q: How much did United make in aircraft payments in
August and to whom were they made?
A: United made approximately 21 million dollars in
August aircraft payments to various secured
creditors and lessors listed in Schedule D to the
MOR.
Q: What other restructuring charges did the company
take this month?
A: United reported a total of 114 million dollars
in reorganization expenses this month. The majority
of reorganization expenses were non-cash items
resulting from the rejection of aircraft and also
included severance payments and professional fees.
Q: How much has United reduced annual costs since
filing for Chapter 11?
A: When cost savings and work-rule changes made are
fully realized in 2005, labor and non-labor costs
will have been reduced by nearly 5 billion dollars
annually, leaving United with what the company
believes will be a best-in-class position in terms
of cost per available seat mile (CASM).
Q: What does the company's business strategy
entail?
A: United has met monthly with its board of
directors and creditors committee to outline the
business strategy the company needs to put in place
in order to emerge from Chapter 11 as a strong,
profitable and sustainable, competitive enterprise.
The strategy centers on four key elements:
* Focusing on United's core customer -- the premier
business segment -- and reinvigorating the brand;
* Optimizing the network to profitably serve a full
range of customers;
* Achieving and maintaining a competitive cost
structure; and
* Continuing to deliver operational excellence and
building on that performance going forward.
Q: How is United's new business strategy being
received?
A: The business strategy has been well received by
various constituents, primarily because of the clear
progress United employees are making on each of its
components and because it logically taps into the
core strengths of United's unique and powerful
franchise.
Questions and Answers on August 2003 MOR
----------------------------------------------------
Q: How much did United make in aircraft payments in
August and to whom were they made?
A: United made approximately 21 million dollars in
August aircraft payments to various secured
creditors and lessors listed in Schedule D to the
MOR.
Q: What other restructuring charges did the company
take this month?
A: United reported a total of 114 million dollars
in reorganization expenses this month. The majority
of reorganization expenses were non-cash items
resulting from the rejection of aircraft and also
included severance payments and professional fees.
Q: How much has United reduced annual costs since
filing for Chapter 11?
A: When cost savings and work-rule changes made are
fully realized in 2005, labor and non-labor costs
will have been reduced by nearly 5 billion dollars
annually, leaving United with what the company
believes will be a best-in-class position in terms
of cost per available seat mile (CASM).
Q: What does the company's business strategy
entail?
A: United has met monthly with its board of
directors and creditors committee to outline the
business strategy the company needs to put in place
in order to emerge from Chapter 11 as a strong,
profitable and sustainable, competitive enterprise.
The strategy centers on four key elements:
* Focusing on United's core customer -- the premier
business segment -- and reinvigorating the brand;
* Optimizing the network to profitably serve a full
range of customers;
* Achieving and maintaining a competitive cost
structure; and
* Continuing to deliver operational excellence and
building on that performance going forward.
Q: How is United's new business strategy being
received?
A: The business strategy has been well received by
various constituents, primarily because of the clear
progress United employees are making on each of its
components and because it logically taps into the
core strengths of United's unique and powerful
franchise.
This weeks Economist had an interesting tid bit about UAL.
The article was about the possible Air France/KLM/Alitalia merger. They said that Lufthansa was not in the run for an alliance partner because they felt that UAL was no longer in jeporady of Ch7. If Lufthansa mgt felt that UAL was going under then they would not want to be the ugly girl at the dance (no major US airline to dance with). Currently Luft. mgt. is not doing a thing. IMHO, you have just found your answer for UAL's exit financing. It's the ace in the hole that they don't want to use yet. UAL mgt is just taking a page from NWA's previous financial difficulties(KLM bought 25%)
The thing is that UAL's numbers are very difficult to read. They don't indicate how many 747's or other assets that UAL is selling off to make the numbers look good.
Making the DIP financing targets is not all that difficult. Stop and think what EBITDAR stands for:
Earnings Before Interest, Taxes, Depreciation, Amortization and Aircraft Rent
Bottom line UAL can not lose more than $219 million between December 1, 2002 and August 31, 2003. That loss number is EBITDAR.
Where the problem for UAL is. Aircraft Rents do need to be paid. Taxes, slots, gates & ldg fee's need to be paid. Interest needs to be paid. Depreciation and amortization needs to be paid. Hedging fuel for BK airlines don't get the luxery of credit, they pay need to pay upfront. Their biggest cost is fuel and they CAN NOT negotiate the same price as the non BK carriers. That's going to make this winter especially tuff on UAL. Going BK only eliminates the past financial dificulties. The problem is that the same folks that you screw for 10c on the dollar in BK are the ones you now have to deal with outside BK.
UAL's credit is so bad the banks don't even want to take their cash (ok I stole that line from Chris Rock)
The article was about the possible Air France/KLM/Alitalia merger. They said that Lufthansa was not in the run for an alliance partner because they felt that UAL was no longer in jeporady of Ch7. If Lufthansa mgt felt that UAL was going under then they would not want to be the ugly girl at the dance (no major US airline to dance with). Currently Luft. mgt. is not doing a thing. IMHO, you have just found your answer for UAL's exit financing. It's the ace in the hole that they don't want to use yet. UAL mgt is just taking a page from NWA's previous financial difficulties(KLM bought 25%)
The thing is that UAL's numbers are very difficult to read. They don't indicate how many 747's or other assets that UAL is selling off to make the numbers look good.
Making the DIP financing targets is not all that difficult. Stop and think what EBITDAR stands for:
Earnings Before Interest, Taxes, Depreciation, Amortization and Aircraft Rent
Bottom line UAL can not lose more than $219 million between December 1, 2002 and August 31, 2003. That loss number is EBITDAR.
Where the problem for UAL is. Aircraft Rents do need to be paid. Taxes, slots, gates & ldg fee's need to be paid. Interest needs to be paid. Depreciation and amortization needs to be paid. Hedging fuel for BK airlines don't get the luxery of credit, they pay need to pay upfront. Their biggest cost is fuel and they CAN NOT negotiate the same price as the non BK carriers. That's going to make this winter especially tuff on UAL. Going BK only eliminates the past financial dificulties. The problem is that the same folks that you screw for 10c on the dollar in BK are the ones you now have to deal with outside BK.
UAL's credit is so bad the banks don't even want to take their cash (ok I stole that line from Chris Rock)
The biggest issue facing United, and the one that is not getting addressed, is the "people" policies. Airlines, by their very nature, are labor intensive. If labor is unmotivated, stressed, tired, unsure of their future, distrustful, etc., then the bottom line also takes a big hit. Unfortunately, number crunchers, bankruptcy judges, DIP lenders etc, don't realize what the real difference is between an inspired, motivated workforce, and what we see right now. Don't get me wrong, the United workforce has been motivated, but that was out of fear. Now the adrenaline from fear is wearing off, and the "clock-punching" is starting to set in. Sad. For the sake of the many good people at United, I sure hope management gets a clue soon that they MUST start inspiring the troops, and they have to get out of their offices to do that.
Skirt
Skirt
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