US Airways Dividend Miles (Pre-FlightFund Merger) - Will USAir Stop Operating This Summer?

Hello Fellow Flyers-

I am planning on buying two roundtrip tickets to Madrid for travel in August of this year. But I am concerned that US Air will go bankrupt (again), stop operating, and then my tickets will be worthless.

What do people think?

You can always buy travel insurance. From what I have read they have enough cash to last the summer, barring something catastrophic (a major accident, or a long-lasting strike).

I have also heard and read in analyst reports that Uair should have enough cash to operate through the summer.

If they start cutting some service, they most likely won't touch the European routes, as European travel (and fares) are way up from last year and may be one of their few profitable operations at this point.

Madrid in August should be fine, IMO . . .

Even an airline that loses a lot of money on the year usually has a pos cah flow in the summer. Fall is another question.

Rather than just going under (Ch 7), haven't they mentioned the possibility of going Ch 11 again? CO has done it before, IIRC.

If nothing else, it might give me another year or so to use my accumulated stash of miles. :)

It more likely has to do with what else happens going forward. If Southwest smells blood, and ratchets up the pressure, or if another low cost guy increases his presence in one of the hubs, or worse yet, if a key lender or supplier pulls the plug, that kind of thing accelerates the damage. It's all about cash. Selling $29 fares from your fortress hub doesn't do much for your yields. The bigger story on that is the piece the New York Times did a few days ago, showing fares then, and now. I have consistently said this is about collapsing the USAir fare structure. A subsequent business failure opens masses of opportunities up and down the East Coast. That has to be attractive to Southwest, whose reluctance to expand in that area provided the vacuum within which AirTran and JetBlue were created. They need to create room for themselves. If it folds, it will happen between late Summer and the first of the year.

Even an airline that loses a lot of money on the year usually has a pos cah flow in the summer.

I wonder whether higher jet fuel prices, the squeeze in PHL, and Travel Security Aversion (TSA*) won't cut heavily into summer profits.

(*If nebulous traveler fears of terrorism don't deter travelers, there's always the painfully concrete aggravation of airport security & its attendant delays. Not that I mind being put into secondary search at IAD after clearing the magnetometer solely [pun intended] because I'm wearing tennis shoes.)

Rather than just going under (Ch 7), haven't they mentioned the possibility of going Ch 11 again? CO has done it before, IIRC.

They did, in fact, say last Friday that they may go Chapter 11 again:

http://www.washingtonpost.com/wp-dyn/articles/A9400-2004May7.html

I made the decision in 2-04 to not wait for the full LH/*A benefits, and just dump my DM account miles on UA tix (4 F tix - 2 to Asia and 2 to Europe) that would be used no later than 9/04, figuring summer cash could get US to Sept. barring a major 9/11 type event.

While it is unknown what UA (or any *A carrier's) policy will be on honoring US issed ticket stock after (notice I am not writing 'if') US shuts down, I preferred to play it safe and get out while the going was good. Of course, all my flights on US this summer will be credited to UA MP.

With a little luck US might make it till the end of the year, depending on how much cash they are able to bring in this summer, but I have little hope for them after we get through the X-mas holidays. This goose is too well cooked...and expecting a very senior workforce to offer the productivity and accept the pay-cuts needed to keep the bird aloft is probably too much to hope for.

It will probably be an AN/BN type ending for them, unless someone does a TW-style DIP move on US assets to avoid a liquidation/shutdown. In this environment that is a big "if' though.

... It will probably be an AN/BN type ending for them, unless someone does a TW-style DIP move on US assets to avoid a liquidation/shutdown. In this environment that is a big "if' though.

OK, just what is an "AN/BN type ending"?

OK, just what is an "AN/BN type ending"?

Ansett/Braniff

OK, just what is an "AN/BN type ending"?

Braniff just shut down without much warning to passengers; all planes in flight were immediately recalled to Dallas (I think) once the decision was made to shut down and they landed ASAP; the runways looked like a bag of M&Ms due to being covered swarms of colorful Braniff planes.

Braniff just shut down without much warning to passengers; all planes in flight were immediately recalled to Dallas (I think) once the decision was made to shut down and they landed ASAP; the runways looked like a bag of M&Ms due to being covered swarms of colorful Braniff planes.

Trying not to be morbid, but there are certain times of the day that would be most likely for ops to cease, if that becomes necessary. As demonstrated by Braniff, you don't want equipment on foreign soil when you go belly-up. Since US has overnight European and mid-day Caribbean banks, the timing is predicated upon those aircraft being on the way home. Therefore, any announcement would occur between 8 and 10 AM or 5 and 7 PM, give or take a few minutes.

for anyone interested in seeing what colored planes looked like when they closed down..and what it feels like to shut down an airline midflight:

http://www.braniffinternational.org/history/finalhours.htm

Some of the folks I've talked to indicated that US is in better shape than they lead on and that they actually made a profit last quarter. Also a buyout from Virgin keeps coming back on the radar screen. Some sort of Virgin US operation similar to what they developed in Austrialia.

I've got an AMS trip 9/3 and most I've talked to have indicated I should be O.K.

I think a lot of what we read and hear is to rattle the unions. Delta is doing the same thing. Why do you think they're dropping PIT like a hot potato? all the union hard liners are there.

If worse comes to worse I think we'll see certain segments of the airline sold off ~ ie. shuttle

Some of the folks I've talked to indicated that US is in better shape than they lead on and that they actually made a profit last quarter. Also a buyout from Virgin keeps coming back on the radar screen. Some sort of Virgin US operation similar to what they developed in Austrialia.

I've got an AMS trip 9/3 and most I've talked to have indicated I should be O.K.

I think a lot of what we read and hear is to rattle the unions.

You haven't been talking to people who know what they are talking about. :)

Last quarter, US had an operating loss of $143 million, and a net loss of $177 million.

http://biz.yahoo.com/prnews/040427/dctu029_1.html

US is in BIG trouble, but it probably won't cease operating until next year (if at all).

So what's the best way to preserve the value of accumulated miles if one can't use them before US Air shuts down?

I am taking a youth group to FR in October...do you guys think I need to worry?

Not sure what I can do in the event they shut down anyways...

I, at first, also thought US was in BIG trouble, and what i was told could also be BS, but I'm just conveying information I've heard through the rumor mill.

The guy I was talking to indicated he was much more concerned with US a year ago at this time than he was now.

You haven't been talking to people who know what they are talking about. :)

Last quarter, US had an operating loss of $143 million, and a net loss of $177 million.

http://biz.yahoo.com/prnews/040427/dctu029_1.html

US is in BIG trouble, but it probably won't cease operating until next year (if at all).

No doubt, US is in trouble. But if you take the RJ purchases out of the equation and a couple of other creative booking keeping issues, US made money last quarter.

Do they need to cut cost? Yes. Are they trying to scare the unions? Yes. Do they need better work rules? A Big Yes. Are they going to go away anytime soon? NO

US has lived in a fantasy world for along time now, and some hard changes are going to have to be made. Unfortunately this is going to come at the expense of the employees, But they are going to be made. There is no doubt in my mind that PIT is being targeted because of its hard line union membership there. They are going to break the strangle hold the unions have had on this company for a long time, one way or another.

The biggest threat to US as it exist today is being sold to another airline. Congress is likely to take a very hard look at raising foriegn ownership from 25% to 49% this summer. If that happens you are looking at US becoming a part of Sir Richards empire. Just wait and see!

No doubt, US is in trouble. But if you take the RJ purchases out of the equation and a couple of other creative booking keeping issues, US made money last quarter.



Longing, I think you have your accounting principals wrong. RJ purchases, as a capital good, are not immediately expensed on the balance sheet. Rather, they are depreciated over their useful lives. So they would only have a minimal impact on last quarter's loss. US is losing less money than last year, but still quite a bit.

Will they fold? Hard to tell, but two factors will likely be most important. If they get large concessions from the unions, they might be able to get costs closer in line with revenues. More importantly, what WN does will be crucial. If WN can expand more in PHL, or choses to enter CLT or PIT, US will lose most of its premium revenue and then it's only a question on when to turn the lights out.

An acquisition? Why would anybody (particularly Virgin) want to take on a disgrunted, top of the pay scale workforce? Aside from some slots/gates, US has very little that any airline or start up cannot get on the open market without the headache of taking on US's employees.

Longing, I think you have your accounting principals wrong. RJ purchases, as a capital good, are not immediately expensed on the balance sheet. Rather, they are depreciated over their useful lives. So they would only have a minimal impact on last quarter's loss. US is losing less money than last year, but still quite a bit. .

True, as a capitol good, most of the cost must be depreciated over the life of the planes, A substantial amount of the acquisition costs can however be deducted in the quarter incurred.

An acquisition? Why would anybody (particularly Virgin) want to take on a disgruntled, top of the pay scale workforce? Aside from some slots/gates, US has very little that any airline or start up cannot get on the open market without the headache of taking on US's employees.

If this happens, depending on how the purchase agreement is drafted, the previous employees of US, may become employees of Virgin with no seniority, and no union to represent them. There is nothing that says Sir Richard has to honor any current contract between any labor union and US. Just ask the employees of CC Air when they were purchased by Mesa a couple of years ago, at a time when both were carriers for US.

If this happens, depending on how the purchase agreement is drafted, the previous employees of US, may become employees of Virgin with no seniority, and no union to represent them. There is nothing that says Sir Richard has to honor any current contract between any labor union and US. Just ask the employees of CC Air when they were purchased by Mesa a couple of years ago, at a time when both were carriers for US.

I believe that most, if not all, of the US unions have "change in control" clauses in their contracts. I don't know if these are worth the paper they are printed on, but I'd image they probably do hold some sway, especially in light of the similar clauses in the management contracts.

I think you are far more likely to see a TWA-ish Chapter 7 liquidation in this event, so that the planes/slots/stuff can go at auction sans the employees.

As an aside, if my memory serves me, CC Air was shut down by Mesa until the CC Air pilots agreed to a new contract. The problem in that case was that it (the proposed CC Air contract with Mesa) contained payrates on RJ equipment that the CC Air pilots had agreed to accept, but that ALPA National was not willing to accept. The ALPA president refused to sign it (thus putting the CC Air pilots out of jobs, despite their willingness to accept the terms of the contract on the table at the time). The irony here is that those rates are nothing worse than what we see today with the relatively low rates on the E-170 that the US ALPA local is setting, but ALPA national has always been willing to throw regional and junior pilots under the bus to protect senior mainline pilots. ALPA National regularly allows mainline MECs to eat their young.

...The ALPA president refused to sign it (thus putting the CC Air pilots out of jobs, despite their willingness to accept the terms of the contract on the table at the time). The irony here is that those rates are nothing worse than what we see today with the relatively low rates on the E-170 that the US ALPA local is setting, but ALPA national has always been willing to throw regional and junior pilots under the bus to protect senior mainline pilots. ALPA National regularly allows mainline MECs to eat their young...

A RJ capt. I was sitting next to once told me that ALPA should stand for the Aging Lazy Pilots Association. I have heard more than a few pilots tell me (either after drinks or at least nervously looking over their shoulder) that ALPA National's concern for the regional's pilots always stops at the point at which mainline's pilots jobs' begin.

To question this state of affairs too much means the penalty of blacklisting with the pilots' committees when looking for other employment. A junior UA FO once told me that it is easier just to find another job outside aviation than try to fight this 'democratic' workers-rights' organization.

The bunch in Herndon just feels some of its members' have more rights than others.