US Airways Dividend Miles (Pre-2005 America West merger) - US Airways July net income $2.34 million

I didn't see this posted yet. Good, bad, indifferent? Discuss...


LOS ANGELES (Reuters) - US Airways Group (UAIRQ.OB) said on Friday it posted net income of $2.34 million for the month ended July 31.

US Airways also said in a regulatory filing that its operating revenue for the month was $678.3 million.

Typical summer short-term profitability. Same thing happened last summer. I fully expect the red ink to come back this fall and winter as loads make their seasonal pull back.

Sure the red ink will follow, but just to have an operating profit with the high cost of jet fuel while other legacy carriers are showing losses is a step in the right direction. ^

The net income number here isn't particularly relevant unless you're one of the fools that think that the equity is still worth $0.30 something a share... did anyone pull down a cash flow number, particularly cash flow from operations? That would be more interesting... it had better be healthy considering the load factors in the summer.

Sure the red ink will follow, but just to have an operating profit with the high cost of jet fuel while other legacy carriers are showing losses is a step in the right direction. ^

If you subtract their noncash onetime items (largely writing off abrogated aircraft leases), even UA made 76 million in operating profit. If US only eeked 2 million, it's not a good sign.

The net income number here isn't particularly relevant unless you're one of the fools that think that the equity is still worth $0.30 something a share... did anyone pull down a cash flow number, particularly cash flow from operations? That would be more interesting... it had better be healthy considering the load factors in the summer.

Cash Flow from Operations, for July: Minus $146 million

now that's a truly astounding rate of bleeding. means the posted "profits" must've been from fulfilling tickets previously sold.

unrestricted cash was down to $489 million at July 31st.

US is officially in a final desperate death spiral. To drain $5m a day in JULY on operations is beyond abysmal.

I'm sure they can't wait to wind up separate reporting once the merger closes.

Who are they merging with? I'm based in Europe and was not aware they were merging.... :o

Who are they merging with? I'm based in Europe and was not aware they were merging.... :o

with HP, America West. As of approximately October 2005, US creditors will give up their claims in exchange for 12 percent ownership of the merged carrier.

you've much merger-reading to catch up on-- start at americawest.com

Cash Flow from Operations, for July: Minus $146 million

now that's a truly astounding rate of bleeding. means the posted "profits" must've been from fulfilling tickets previously sold.

unrestricted cash was down to $489 million at July 31st.

US is officially in a final desperate death spiral. To drain $5m a day in JULY on operations is beyond abysmal.

I'm sure they can't wait to wind up separate reporting once the merger closes.

$5 mil a day. Pennies... DL lost $5 billion in 2004 followed by $1.1 billion in 1Q 2005. Of course, 2nd quarter was really looking up as they only lost $380 million.

Delta is definitely in worse shape than US, especially with US's cash infusion from various parties in connection with the merger. But a company that is losing money eventually will run out of money and liquidate, unless investors are constantly found to keep it alive, and eventually there won't be enough investors willing to throw money down a black hole like the Alabama pension fund did.

Hopefully US throws some promos out there that make me want to fly more this fall. Maybe that will help things out

Cash Flow from Operations, for July: Minus $146 million

now that's a truly astounding rate of bleeding. means the posted "profits" must've been from fulfilling tickets previously sold.

unrestricted cash was down to $489 million at July 31st.

US is officially in a final desperate death spiral. To drain $5m a day in JULY on operations is beyond abysmal.

I'm sure they can't wait to wind up separate reporting once the merger closes.

That is scary--really scary. Would like to blame it on the price of the jet juice, but frankly, if they can't make do in the summer while operating under court protection, I've finally become a bit scared--I've NEVER felt this way before.

Anyone with cheery news?? :eek:

$5 mil a day. Pennies... DL lost $5 billion in 2004 followed by $1.1 billion in 1Q 2005. Of course, 2nd quarter was really looking up as they only lost $380 million.

US is considerably smaller than DL. "pennies" to DL are not pennies at US.
DL will be forced to enter Ch11 if its cash drops below roughly $1bn. US has less than half that, and is in danger of breaching its most significant loan covenants.

The liquidation hammer would be falling now at US, if there were not a merger in place.

and if they don't stop the current levels of bloodletting, it won't take long to sink the merged carrier, either. Get busy, Mr Parker...

In the airline business, the real number is operating profit, or cash flow. Since they generate large paper losses from the depreciation of aircraft, to get the cash flow, you back those out, and under normal conditions, the company has actually done much better than it looks. In effect, these non cash writeoffs have created a big tax shelter. Now we have USAirways, reporting an unexpectedly good "net profit", which we then find is over a hundred million
dollars greater than actual operating performance. It means two things. Firstly, they have used some non cash credits to boost income, and secondly, they are bleeding to death, which is all the more curious, in light of their continuing hard line on fares that in many cases are higher than competitors. As I have said in other threads, when AWA finally gets a peek at the internal disaster they are inheriting, they will mess their pants.

Delta thoughts. They are a bigger disaster than USAirways. There is just more room to hide it. I spent the weekend in Asheville, NC. Both coming and going, I observed dreadfully delayed flights, and at least one cancellation, all involving flights to and from ATL. And that's just one small station.Their most creative response to competition seems to be a continuing transfer of services to Song, their low cost subsidiary.They must be shredding their yields something awful.

As I have said in other threads, when AWA finally gets a peek at the internal disaster they are inheriting, they will mess their pants.


yes, already the reported US numbers must be considerably worse than HP had counted on when planning a deal. is there a trigger amount which could ruin the deal being completed?

scale this month up to wintertime operations hardships, and the first financial report for the "new" US (HP) will be a billion dollar (or two) loss in the 4th quarter.

What is onerous, assuming the operating loss we have read about here is accurate, is that those are real dollars. If it had been a case of cleaning the balance sheet, those would have been non cash, and would have shown up as a huge net loss. Instead, the net loss appears to be better than the operating number, suggesting they used all their non cash credits, probably lease related. Three things. Firstly, they may be able to get away with dumping more obligations, in the final bankruptcy release, which could put that last 12% of equity at risk. Secondly, along those lines, AWA may have the right to walk if the numbers fall below certain targets, prior to closing (you can bet the equity commitments were based on target amounts of free cash available, which are likely now much lower than expected), and lastly, I still believe Lakefield & Co. have been screwed by a disaffected management core, which has been told they are out. The lack of comment on those alarming operating numbers suggests they may have been a surprise. I have commented recently about mispricing. In a situation like they are in, conserving cash would have been paramount. That would have meant fare sales, and the like. Nada. Deelmakur knows this much. If you are planning to dump the operating folks, you don't tell them until after you take over a business. The higher severances are just added to the deal cost, and you provide for that on the front end, by not paying as much. Over the weekend, I observed many of the employee group singing the praises of AWA, as they blissfully assumed they will fix things. I hope so, for their sake. I'm beginning to think the "fatcats" (that does not include Lakefield) have applied the wood one more time.

I number of commentators have indicated that somehow in bankruptcy US should do better financially. They indicate a high summer cash burn.

Being in bankruptcy frequently destroys a business and that is why DL and NW are strying to avoid it. For over twenty years I have practiced in this area of the law. While in theory you get to defer certain debts and should be able to improve your cash flow, I have never seen that to be true. Once in bankruptcy, even excluding the actual costs of attorneys, cpa's, financial advisors and the US Trustee's Office fees which are considerable, it is not business as usual.

Generally just meeting the reporting requirements triples the costs on the financial side. Because everything is now reported monthly a small downturn is magnified and can look to have more consequences to the bottom line than if the item was spread out over three months.

I have advised my clients to expect a 10-15% increase in their cost of operations as everything will go up from insurance costs (bad risk), to utility deposits to just not being offered discounts for supplies and materials or being able to order in bulk for better pricing. Purchases are strictly reviewed so frequently only the minimum is ordered at a higher per unit cost. Remember creditors will require strict performance to their terms and condictions and may modify them. Payment in 10 days or upon delivery, rather than 30 days.

Don't underestimate the effect of bankruptcy on the bottom line or think it can be transferred to a real world situation outside of bankruptcy.

That being said I am sure AWA is watching certain numbers carefully to see where cuts can be made and due to poor morale where management is not keeping a look at the target. I think it is better to wait and see where they are six months after AWA takes over.

I am certainly not a bankruptcy lawyer, although I have been a trustee 3 times. While I agree, it can have a high administrative cost, this does not explain why the net is so high, relative to operating loss. Such extraordinary expenses as those you describe, would have been removed from, or at least highlighted in the cash flow number, to reflect true operational cost. I haven't seen such a reference, which is what leads me to believe the number caught them off guard. The real problem is yield. Look at advance seat maps. I think they may be masking the F compartment, in case competitors are tracking it (JetBlue, for example, even though it is single class, won't show a seat map until after you have bought the ticket, for this very reason), but the first few rows of coach (so called "elite rows") often have window and aisle seats open. This means, what's back there, has no program status, which comports with my view that they are dumping seats to consolidators, while mispricing the website.

The place could also go Chapter 7, if the current plan fails to win approval, in which case AWA could buy the carcass for pennies, and do it's own thing.

I am certainly not a bankruptcy lawyer, although I have been a trustee 3 times. While I agree, it can have a high administrative cost, this does not explain why the net is so high, relative to operating loss. Such extraordinary expenses as those you describe, would have been removed from, or at least highlighted in the cash flow number, to reflect true operational cost. I haven't seen such a reference, which is what leads me to believe the number caught them off guard. The real problem is yield. Look at advance seat maps. I think they may be masking the F compartment, in case competitors are tracking it (JetBlue, for example, even though it is single class, won't show a seat map until after you have bought the ticket, for this very reason), but the first few rows of coach (so called "elite rows") often have window and aisle seats open. This means, what's back there, has no program status, which comports with my view that they are dumping seats to consolidators, while mispricing the website.

I'm glad to know I'm not the only trustee on this board, although I was appointed to a bit more this year alone (1000--it's been a booming year) :)

Normal higher costs as I set forth above won't show up or be reflected in financials. since they are really not administrative one time costs that have to be noted. For example, assuming payroll is charged at the end of each week, July had an extra payroll (5 instead of usual 4 in a month) which would reflect a 20% increase in that category alone for the month. Monthly bankruptcy figures are good, but it is better to look over a three month period as these type of things average out and you can get a better handle on what actually is occurring.

That isn't to say there is not trouble at CCY, but I think it is too early to tell. We should wait and see what the August financials brings with only 4 payrolls.

I know if I was AWA I would probably "suggest" certain purchases and expenses be made pre-exit from bankruptcy, so things look better post-merger. I know they haven't merged, but with only the plan to merge to be approved by US creditors (who I understand are on board) and the AWA shareholders (majority shareholder already okayed deal), I think it is a go. Heck, I was in ORD recently and the agents for both airlines were talking amongst themselves guessing how things will work out in the future, so you have to believe informal talks are occurring between the parties in other areas as well.

Flyer, my hat is off to you. That's quite a number.As a trustee, I had to run those businesses. One at a time was about my max. As a deal guy, I know the hard way that if the Equity pulls the plug, the deal dies on the table. If those numbers are correct (you are looking at a $140 million spread), that will have an impact. As I have said, the numbers are inverse. Net should be lower, not higher. If two thirds of that loss was payroll, it would equal around $100 million of the July loss. Annualize that, and you get $1.2 Billion. Payroll can't come close to that. The overweight lady has not sung yet on this one.

Flyer, my hat is off to you. That's quite a number.As a trustee, I had to run those businesses. One at a time was about my max. As a deal guy, I know the hard way that if the Equity pulls the plug, the deal dies on the table. If those numbers are correct (you are looking at a $140 million spread), that will have an impact. As I have said, the numbers are inverse. Net should be lower, not higher. If two thirds of that loss was payroll, it would equal around $100 million of the July loss. Annualize that, and you get $1.2 Billion. Payroll can't come close to that. The overweight lady has not sung yet on this one.

I'm not an operating trustee. I am a liquidating trustee who picks over the carcasses of dead companies and insolvent individuals. The one thing I have learned is never to rely on the monthly reports. They never show the complete picture. I'm not saying that what you are saying will not truly be the case--it's just that one month is not a big enough picture to get a trend and one doesn't know what is buried in the numbers. As you may know the government has a particular format for companies' monthly reports in bankruptcy that frequently does not follow GAO principles.

Let's let the stew simmer another month or so and see what develops. I still would not be shocked to later learn that items that could be purchased now or later this year are being purchased today. If the deal is done and creditors will get the same percentage of equity regardless, why not bulk up so the numbers look better post bankruptcy.

I agree that some clean up expenses could be in there, but the numbers they are reporting indicate credits of nearly $150 million. If somebody has seen news about a company release, detailing the extraordianry credits and expenses we are apparently seeing, I'd like to hear about it. Normally, when a business has those sorts of unusual numbers, it is customary for the company to comment. Instead, no comment. Coming on the heels of the recent departure of the USAirways Chief Financial Officer, it certainly cries out for some explanation.

deelmakur and abeflyer-- you really seem to know your stuff. What's your guesstimate on US's prospects over the next year and past that? Probably around in a year still around due to the new investors lined up with the merger, but down the road, what-- a copy of Braniff/Pan Am/Eastern?

Thanks.

Coming out of a bankruptcy with over a $1bil in available cash the merged airline probably has given itself at least a year or two to turn things around. I expect it to burn considerable cash through next spring. The question is how much? If Parker & Co can bring about a "quick" change through integration and code shares between HP & US, and truly over the winter make US a LCC with rationale fares> Then getting the word out as widespread as possible, the new US can make it over the long term.

This is especially true if it can take advantage of the DL and NW money troubles. That is not the CCY way we're used to where the raping the pax with higher fares was the norm, rather than build market share in the medium size cities where it costs less to operate and where most don't have a LCC with a large market share--I hate to say like ABE or CHS or MDT--generally with quick turnarounds and where weather will not effect the schedule like PHL. They generally could support slightly higher revenue due to convenience than a SWA route, but it has to be rational. Five hour drive to PIT or $500 walkup fare to fly than 250 miles in a Saab from ABE doesn't hack it as low cost.

If they fritter away the opportunity in the small window that they have, then I don't know about deelmakur, but I'd give them two years on the outside to merge or liquidate.

I'm not sure they have a billon dollar cushion. Based on these numbers, the cash burn has been $3 to $5 million a day, and as far as I can see,they have made no attempt to persuade people that is due to extraordinary items. That being the case, I think they might lose some of the pledged Equity investments. As well, AWA could get cold feet. Assuming they do merge, I think they wiil have a tough time. You can't just copy a low cost carrier. You also need the culture. Independnece, Song, and TED have discovered that. In addition, the employee love feast will be short lived, especially once the discussion about seniority starts. Remember, with all the layoffs, there are mostly very senior people left at US, which is a much older company than AWA, to begin with.

I'm not sure they have a billon dollar cushion. Based on these numbers, the cash burn has been $3 to $5 million a day, and as far as I can see,they have made no attempt to persuade people that is due to extraordinary items.

I do believe you are onto something here. They proposed (or it made the docket) today to do the sale and leaseback routine with 5 of the A330s, plus 9 319s (with a put option for 5 more) and 5 320s (with a put option for 5 more). And requested Mitchell expedite both hearings. Sure seems to me like burning a bit of furniture for cash (or to pay down the ATSB balance so as to avoid a covenant breakage scenario).

I do believe you are onto something here. They proposed (or it made the docket) today to do the sale and leaseback routine with 5 of the A330s, plus 9 319s (with a put option for 5 more) and 5 320s (with a put option for 5 more). And requested Mitchell expedite both hearings. Sure seems to me like burning a bit of furniture for cash (or to pay down the ATSB balance so as to avoid a covenant breakage scenario).

even if Mr Parker and company approve, a move like that has to be making the outside equity investors nervous.