United Airlines, Chapter 11 status

[Ignition Override]

Galley Wench and FDX Mechanic: You all have enlightened us with interesting perspectives, not to mention the oft-quoted analyst Mr. Boyd.

Very interesting website, FDX Mechanic. I suspect that a very thoughtful silence will come from some of the cheap-shot Pprune types for a while, who feel that anyone wearing a three-piece suit (or expensive dress) who works for an airline is above reproach, as with many of the "perfumed princes" of the Middle Ages and their frequently arrogant scorn for the peasant masses.

[maxrpm]

A company like UAL does not have to seek Chapter 11 protection without severe failures from top management. Even if the industry leading pay for some of the employee groups was one of the many problems, it was still top managment who signed these contracts.

Top managment itself is choosen by the stock holders. Which rises questions for the UAL case.

The employees hold the maiority of the stock.
Is there a different voting process agreed among UAL shareholders which denies the stock maijority to select top managment?
If not, what made the employees of UAL choose a weak management in turbulent times?

[I. M. Esperto]

I recieved this today:

Friends . . . I thought you would like to know a couple things about timing over the next two months. When United obtained a Debtor in Possession (DIP) loan source of $1.5 billion and went bankrupt a few rules came into play that are time intensive. The most important item to get the money from the lender and please the Judge is have a contract with concessions before the middle of December. (before Christmas) The pilots and flight attendants have already told Tilton they want to work with him. The talk is the pilots will have to increase the concessions given last month by about 50 percent, total concessions something under 30%



If a labor group does not agree to these major concessions . . . that fact . . . will trigger a paragraph in the bankruptcy that gives them another 45 days. I believe it is called paragraph 1013. That would be in February 2003. If any group has not come to some agreement by then the judge can do what ever he wants to the labor group. That rule was used on the IAM at US Air. If the total concessions does not satisfy the DIP they can deny the company money and possibly force the company into liquidation.



From what I am hearing these items should be accomplished in time, regretfully so, but will be done.



There are some Web sites you may want keep track of for more information.



All the legal stuff for the bankruptcy can be seen at: http://www.pd-ual.com



The ALPA web site is: http://www.alpa.org



The flight attendants web site is: http://www.afanet.org



The mechanics web site is: http://www.iam141m.org



The group putting together a company to fight for pension rights is: http://www.ualpilotpenson.com



The Retired United Pilots Association (RUPA) http://www.rupa.org



Doug Wilsman has an excellent article about the federal pension guarantee board on the RUPA web site.





This should keep you busy for awhile. If there is anything I can do for you or anyone else in our United family please let me know.



Fraternally Yours,





Cliff

[411A]

Recently, Southern Air entered Chapter 11 to force lower aircraft lease rates that otherwise could not be obtained from the aeroplane leassor directly.
Federal bankruptcy judges have very wide latitude with regard to terms for lease rates, labor rates, etc for companies in bankruptcy, so expect that the bankruptcy judge will eventually force all UAL unions to accept lower wages, whether they like it or not, and they certainly will not.

The parallels between UAL and Eastern Air Lines (IAM especially) are interesting, except that UAL does not have Frank Lorenzo running the show...and who knows, perhaps if they did...might be in a better financial position now. To bite the (financial, wage) bullet earlier on definately has its benefits.

[I. M. Esperto]

At one time, Lorenzo was a TWA middle management type, in accounting.

[GlueBall]

...On Borrowed Cash And On Borrowed Time.

With recent revelations that UAL is now losing $22+ Million per day, it doesn't take an abacus to conclude that this financial juggernaut is in a deep stall. Banks and institutional investors already are balking at pouring more money into the bottomless pit of Debtor in Possession Funds.

The company is outtatime and will be outta cash in February.

[AA717driver]

Feb. is BIG for UAL

On another website, a numbers type pilot at my airline posted a couple of the marks UAL has to hit to keep getting DIP money.

In Feb. the company has to make about a $1B turnaround in earnings before depreciation, taxes...etc. By the fall, they must make approx. a $2B turnaround.

The bar is set very high.

I wonder if those who are providing DIP money are just secured creditors who wanted to make sure they were first in line when the payouts started. That would be contemptable.TC

[Airbubba]

>>I wonder if those who are providing DIP money are just secured creditors who wanted to make sure they were first in line when the payouts started.<<

Maybe you just broke the code... It is starting to look like liquidation is definitely in the playbook as the latest round of games begin.

_____________________________________


United Lobbies Its Unions
For Further Concessions

Airline Says Savings Must Reach $2.4 Billion
To Tap Financing and Preserve Operations

By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL


CHICAGO -- UAL Corp.'s United Airlines, which filed for bankruptcy-court protection a week ago and must meet stringent financial conditions imposed by its interim lenders, told its unions Friday it needs to secure agreements on $2.4 billion in annual labor concessions by mid-February, according to one union. That figure significantly eclipses the $1 billion in annual savings the unions earlier agreed to provide in the hope of winning a government bailout and avoiding Chapter 11.

The nation's No. 2 airline told its unions that without arranging those savings quickly, it won't be able to tap the second tranche of a $1.5 billion debtor-in-possession financing package that is allowing it to continue to operate. Without a sharp reversal in its daily cash-burn rate and the achievement of positive cumulative cash flow by next spring, its lenders could find UAL in default and sell the collateral backing the loan, which would push UAL into liquidation...

[GlueBall]

Outtatime

Altogether the airline as a going concern is already out of cash and beyond the point of no return. Every emergency measure that's now hastily being enacted is too little too late. Tilton is not an airline guru; he's a gentleman, a nice guy. The job's over his head. In order to turn off the spigot that's pis$ing $22+ Million a day into the wind, he should be having a garage sale right now: All Pacific routes, all South American routes. Immediate 40% downsizing would give UAL some hope of survival.

[I. M. Esperto]

It's tough, and I wish the Gubbmint would help them out.

They give away countless billions to foreign nations with little hope of any return, just for the political gains it will make among some group or another, and turn their backs on an eccential industry eploying some 81,000 tax paying Americans.

[bean_counter]

UAL were well on their way to losing USD 2 BILLION before 9/11
as the economic slowdown in the US blew big holes in their revenue plan.

The Gov is wisely thinking of the other millions of tax-payers and keeping their cash for a more worthy cause.

Chap 11 seems to be a more than fair way of allowing a company time to save itself. Let the market decide.

[Hand Solo]

Its very hard on the United employees, but billions of dollars of federal aid to United is hardly going to help Continental, Delta et al or their employees. United has been a badly managed airline for a long time and pouring in government cash won't change that, it'll just skew the market long enough to drag the well run airlines down with it.

[DUCKMAN052001]

United was a poorly run airline by management. The other thing that hurt UAL was the unions raping the hand that feed it. we can go on and on about what caused the filling, but look at one of the biggest things that hurt them. "SCOPE CLAUSE" A thing that has hurt them has pulled Continental out of the brink and put them into a position of a well ran airline. The pilot union at AU killed the idea several years ago, only to be handed the fact that this is what would save them in the long run. CO found the RJ, so did DL. If you look at the rout structure of DL and CO, you would see that they let the commuter partners do most of the flying under 90 minutes to 2 hours and they took care of the long haul markets. UA went with over saturation and the ego that we fly all our routes. Expect to see more flying from the express units.

[Airbubba]

>>If a labor group does not agree to these major concessions . . . that fact . . . will trigger a paragraph in the bankruptcy that gives them another 45 days. I believe it is called paragraph 1013. That would be in February 2003.<<

Looks like Section 1113 may be coming much sooner than we thought:


_____________________________________________


UAL warns unions on concessions

Dec. 26 deadline, or airline will ask to void contracts

By James P. Miller and Thomas A. Corfman
[ORD] Tribune staff reporters
Published December 18, 2002

United Airlines warned unionized workers Tuesday that if they don't agree to wage concessions by the day after Christmas, the carrier will ask the U.S. Bankruptcy Court to nullify existing labor contracts and impose lower pay scales.

Late last week, only days after United's parent UAL Corp. filed for bankruptcy protection, the carrier outlined to its major unions a revised business plan calling for labor costs to be slashed by $2.4 billion a year, or more than double what the company previously had requested.

Union executives have expressed dismay over the scale of the givebacks United is seeking. As union execs were reviewing the company's revised business plan, UAL established an aggressive deadline to resolve the matter.

While taking pains to say that it remains committed to achieving "consensual agreements" with its unionized employees, UAL said that if the workers haven't signed off on pay cuts by Dec. 26, the company will make what's known as a Section 1113 filing with Bankruptcy Judge Eugene R. Wedoff.

That section of the Bankruptcy Code permits employers to reject labor agreements. Although rarely used, the rule "is always in the back pocket of the debtor company," said bankruptcy lawyer John R. Weiss, a partner in the Chicago firm of Katten Muchin Zavis Rosenman...


http://www.chicagotribune.com/busine...business%2Dhed

[boofhead]

So much for the "land of the free and home of the brave." It should be called the "land of the lost rights without so much as a whimper and the home of the scared out of their wits." Not that the US is alone in stupidity, or in doing bin Laden's work for him.

Sure UA is badly managed, and needs to be sorted out, but now it is in Chapter 11, it can reduce fares and compete with a significant advantage, such that AA and other airlines in the US will be pushed to the brink as well.
I am amazed that no-one has talked about the real reason for the failure of UA - the idiotic Homeland Security and government takeover of people's rights and freedoms. Sure there are some who are afraid to fly because they fear terrorists and blame Sep 11. But most are put off by the insane security procedures in force at the airports, together with the added hours required to make a trip that was simple and easy before. I heard Hannity of Fox TV, making like an extreme xenophobe on his show yesterday, when pressed to justify the treatmenrt given to those Iranian men who showed up at Immigration as directed, only to find themselves in jail, subject to deportation, crying that the US had the right to do "whatever necessary" to protect the American Public. Never mind that the US constitution was written to preserve the rights of "all men" (Which meant all persons when it was written), including those who are in the country as visitors or immigrants. Hannity appeared to be terrified, and would do anything for the appearance of safety, no matter how ineffectual. His mate, O'Reilly, also of Fox TV, said when asked if he was going to fly to visit family during the holidays, that he would not, because of the hassles at the airport. A great example.

Now the burden of inspection of checked baggage has been added, despite no history of risk, leading to real problems with theft, loss and damage, not to say the hassles this gives the travelling public. And this is not the end of it; there will be more stupidity in the name of "security" added before long.

Air traffic in the US, and the number of passengers travelling, has slipped by around 20% since Sep 11. It is my opinion that this is mainly due to the insanity of the authorities, who have no concept of balancing risks against the damage to the airlines. And when the airlines fail, so too do the rental car companies, catering,services, hotels and the many other businesses that rely on people travelling by air. And of course those directly employed by the airlines, who have a passion for aviation, and had planned to complete rewarding careers with them. All at risk now, while those responsible have added to their size and influence, building empires based on fear. Those organisations are, of course, funded by the taxpayer. Put it another way, they obtain their sustenance from the government mammary gland (there is a better way to put it but the PC clowns would not like to see it in print).

Why do so many accept what they must know is idiocy elevated to a level rarely seen before and allow seemingly anything to be done to remove their rights and freedoms? Are they truly so afraid? When the British were under constant attack during the Blitz, and the German public also, they became more determined, not less. Do the Americans (and the present day English, Australians and so on) have less backbone, and if so, why? Are we accustomed now to such an easy life that we will take no risks at all, but are willing to give total control to a bunch of politicians? Politicians who have never shown honesty or backbone themselves I might add.

If we allow our futures to be destroyed in this way, with the example of UA in the news every day to show us what is in store, perhaps we deserve everything that happens to us.

[seacue]

Re: United and Scope clause .... I'm sure my numbers aren't exact, but last I heard, of the roughly 350 "United" departures from IAD each day, about 250 are United Express operated by Atlantic Coast Airlines.

[Wino]

Duckman,

There is nothing stopping United from flying anyjet they want anywhere they want. The only restriction is that they use the united pilots. As no payscale had been aggreed to yet they would have to set a rate for the aircraft.

Most Major airline contracts are based around a weightxspeed formula. If you simply used that formula you woud find that a 50 seater would pay less at the mainline than it does at commair (which is why the pilots were willing to allow that flying to farmed out in certain circumstances)

However, with pilots on the street now, they should be allowed to do that flying.

You are simply buying into management propoganda. United can fly any aircraft anywhere they want at anytime if they used their own pilots. The same thing goes for other majors as well.

Cheers
Wino

[Tan]

boofhead

IMHO you're right on. That was a very informative and well thought out post...

[InitRef]

Of course the added security has led to a decline in air travel, but its not just because of the TSA window dressing.

A good portion of the decline has to be attributed to Americans afraid to fly immediately after Sep 11, and also the airlines who immediately cut large amounts of capacity. In any case, this was largely the discretionary travel/vacationer/low fare pax - not that important for a high-cost airline like UA (before the union-haters jump in - I am just pointing out the reality of an airline like UA that has an extensive route network, necessarily needs different aircraft types, and has lower efficiency due to hub structure)

Still - most business travel is not now being conducted via train/car etc - except for routes which are around an hour or less in duration (where the TSA hassle factor has greater effect) - but also because these routes are usually RJ's anyway (and unlike UA mainline does not have Econ Plus and Biz/First seating that appeals to the freq flyer)

The real reason United is hurting is because business travellers are not travelling enough, and not buying high-fare tickets as in the past - period.

UA always got more business travel revenue than most other US majors, and the general economic slump has hit them harder. They need to decide if they want to struggle being an everything for everybody airline, or decide to abdicate the low-fare market to SW, etc or shrink and focus on the business traveller.

[arcniz]

Bofhead writes:
Now the burden of inspection of checked baggage has been added, despite no history of risk, leading to real problems with theft, loss and damage, not to say the hassles this gives the travelling public. And this is not the end of it; there will be more stupidity in the name of "security" added before long.

I understand the frustration, but your logic is somewhat perverse.

Firstly, the 'history of risk' regarding checked baggage is well established - with an unhappy trail that goes back many decades.

Secondly, your 'history of risk' argument supports the premise that obvious vulnerabilities should not be acted upon until some fresh disaster has demonstrated their relevance. If aviation were operated that way up to now, we'd all still be walking - and glad of it.

Aviation does not have an open-ended franchise for growth and prosperity. Some marvel that it has held up as well as the recent record shows, given that a large majority of trips - even those for business - are highly discretionary.

Public interest and trust in aviation are demonstrated by the still historically high levels of air travel as we experience the unfortunate coincidence of a global economc downturn, increase of high-profile terrorism and dramatic recent improvements in electronic communications that can be used by nearly everyone, everywhere, to reduce or supplant travel.

Whether you regard it as theatre or substance, I personally believe many travelers (and also many airline people) appreciate the perceived incremental gain in their own safety and security which results from heightened inspection protocols.

Yes, it's a nuisance, but so is all the noise and up and down and kerosene that go with the process. We're going through some rough weather - for which special procedures make sense to most of the fare-payers.