Here are points I found bothersome:
1. At $80 per barrel, Ms. Mikells pointed out their estimate of cash outlays to cover open hedge contracts at $600 million.
2. The $1 billion financing from Chase is being secured by a second lien position against the Mileage Plus database.
They would not answer questions posed as to the profitability of the Mileage Plus unit. They did footnote in the report that excluding Mileage Plus and other accounting, mainline PRASM increased 4.5% year over year, in line with the 4% capacity reduction. There is no doubt the Mileage Plus unit is profitable, yet by leveraging it as they have for the sake of liquidity, how much of the value will not be realized when it is spun-off.
Projected traffic is expected to be off 10% to 12% (consolidated, the expected decrease in domestic traffic exceeding that of international) in the fourth quarter of 2008 over the fourth quarter of 2007, yet Mr. Tague would not answer the question posed as to what October traffic is to date. I would suspect that if October traffic were exceeding projections he would have answered that question. (Why do I get the feeling Mr. Tague is a big mistake?)
Mr. Tague did point out that the revenue unbundling has been met with "moderate" resistance and they have experienced a decrease in traffic because of it. He went on to say that it has been key in improving United's revenue performance and will remain in place. Their feeling is that the loss in market share will be made up in PRASM. Yet the 3rd quarter showed mainline PRASM only increasing slightly over capacity reductions. This number should have been higher.
To their credit they have taken steps to improve shareholder value in the short-term, but I remain very concerned about the erosion of the brand and its effects in the long term.