HP on the Brink
 

Don't get on my case about copyrights and what not... it's already in front of the world at www.nytimes.com

America West Seeks Loan Guarantee to Avoid Bankruptcy

December 27, 2001

By LAURENCE ZUCKERMAN

Three months after Congress created a board to distribute $10 billion in federal loan guarantees to help the airline industry, the first application is coming down to the wire.

America West Airlines, which is the country's
eighth-largest carrier and one that was struggling even before the terrorist attacks, has asked for help and could be forced to file for bankruptcy protection early next week if the board does not grant it a guarantee.

Other airlines, which together have lost billions of dollars since Sept. 11, are watching the process closely. While their condition is not as pressing as America West's, they say they, too, will be forced to apply to the board if passenger traffic does not pick up significantly next year...

Does this make HP ripe for a buyout, or do other carriers do not want to buy into this liability? CO has been a close partner of HP for some time now, but CO is so knee-deep in debt obligations that I am sure creditors would be screaming bloody murder if Gordon even shot a glance at HP's hemline.

[This message has been edited by ETOPS01 (edited 12-26-2001).]

See:

Well Kids, it's Christmas Eve, and still no word from Santa and the Elves at the NTSB http://www.flyertalk.com/forum/frown.gif

Aren't they merging with Compaq?

Oops, wrong HP.

This is serious stuff, and how much can we attribute this to the crazy rules in place from long lines, blocked off parking areas, missed flights, money spent on extra rules, etc.? It will take more than one of these to get America's attention. There is a limit to how much time and money we can spend on security (or lack thereof).

You know that many of the airports and cities that support them are running into serious budget issues already?

In the HP Club in Phoenix today the rep practically begged me to allow them to comp me status on Flightfund - didn't even have to show them any statements. They must be in trouble!!

If 9/11 had never happened HP was probably going to file bankruptcy before year end. In a weird sort of way, it actually bought them time because they were able to hide behind the fallout.

Absolutely true. HP is a financial disaster. They cannot make money and unfortunately for their fine employees need to be toast.

Capitalism ain't always pretty, but it beats the alternatives.

the big problem for HP is this: just what is their advantage? what makes them attractive to a potential suitor? is it their hub/focus cities of PHX, LAS, and CMH? all have major competition from WN, which depresses their yields. Is it their product, which is so good that the high yield business traveller will pay more for the superior HP service?

~pauses here while laughter subsides~

they do have one advantage of the rest of the majors (including WN) in the fact that their labor costs are among the lowest. however, those low salaries contribute directly to the employee morale at HP.

IMHO, they are a dead duck. hopefully this loan app board holds true to the intention when created by greenspan, and forces them to come up with a realistic reorg plan before any money gets loaned. my hunch, however, is that McCain won't let that happen.

i don't see where HP in part or whole has much value to any airline in this day and age. would gordon want to take on WN in PHX, or fly planes in low yield leisure markets from LAS? is their fleet compatible with anyone elses? i don't know if their A319/320 and 757 fleets have the same engines as NW, but they would be the most likely candidate for some of the equipment. the old 737's would find a new home in the desert.

i can't see any airline trying to go thru the pain of a merger right now. they're going to be looking to labor for pay/benefit concessions shortly, and you don't try to merge a seniority list while you are trying to convince employees to take pay cuts. just ask anyone at United. they sure learned the hard way....

12 months from now, i think PHX will have a gaping void left by the demise of HP...

What the #$% does this mean ?

The sum of the parts are worth more than the whole. Prop it up and sell off the routes and gates where they make the most sense.

Keeps the albatross from taking down another strugling airline.




------------------
"A Southwest line never gets longer, It only gets wider"

dcwcce writes: "The sum of the parts are worth more than the whole.

Parts? what parts are worth anything? Gates? who needs gates with the current schedule reductions? "sell off the routes"??? Did you forget deregulation? http://www.flyertalk.com/forum/rolleyes.gif



[This message has been edited by snake (edited 12-27-2001).]

IMHO = In My Honest Opinion

Also:
IMHO = In My Humble Opinion

Maybe HP's demise is a blessing in disguise for National Airlines out of LAS. From what I hear, National is an excellent airline that recently underwent restructuring.

Good point. Historically, as weaker "dinosaur" airlines have fallen, newer, stronger ones take their place.

I'm a stock market novice, but I am surprised that HP stock hasn't taken a real beating in the last couple of days.

Anyone more knowledgable than me out there care to address that thought?

The market appears to "believe" that HP will get the loan guarantees.

I say ... let's start a contest or pool or something.

Guess the date HP files for Chapter 11! Winner gets two CO drink coupons from me, or maybe the FT masters could come up with something. In case of a tie, first to post with date gets it.

To protect my drinks, I submit: 1/16/2002.

And ... no editing your post like I just did. http://www.flyertalk.com/forum/smile.gif

[This message has been edited by ontheroad (edited 12-27-2001).]

?????????? The stock has gone from $30 in 1998 to around $10 before you know when. Down 4% to $2.60 today. The value of a share today is less then a "Happy Meal" at McDonalds.

http://www.flyertalk.com/forum/frown.gif Sad, but true. http://www.flyertalk.com/forum/frown.gif

[This message has been edited by snake (edited 12-27-2001).]

ontheroad -

I reserve Friday 4-Jan-2002. http://www.flyertalk.com/forum/smile.gif

dAAvid -

I'm in Reno and America West is one of the few remaining airlines with reasonable schedules to PHX - I have had plenty of problems with them with cancelled & delayed flights, but I have nothing but praise for the way they treated me when I was stuck in ABQ on Sept 11th - they got me from ABQ to PHX, arranged a 'disaster rate' room for the night and then got me back to RNO the following day; personally I hope that they can get the bailout they need to stay in business - I'd rather fly HP than "South-Worst"

Wednesday, January 2, 2002 would be a good bet if HP doesn't hear from the NTSB. http://www.flyertalk.com/forum/rolleyes.gif

p.s. Chapter 11, I would expect, and keep flying, hoping for a change of heart from the loan board. If they don't go Chapter 11 soon I wouldn't rule out Chapter 7 at a later date.

p.p.s. snake doesn't drink, so he's not entering the contest for the CO coupons.

[This message has been edited by snake (edited 12-28-2001).]

It'll take longer than you think. first they need to get an answer from the loan board. They'll be turned down. Then McCain has to posture and bluster for awhile, while at the same time HP execs will be both threatening bankruptcy, and working every source of money they can. Plus, based on the cash position they seem to have right now according to this article:

http://biz.yahoo.com/rf/011227/n2738179_1.html

they are not bleeding as bad as we thought.

my guess? april 12, 2002

I don't think they will keep flying during ch 11. I think they will be grounded, and their pax stranded (perhaps competitors will let pax use HP tix, though.)

Right to the last second they will be selling tix and trying to get people to fly.

A look at a past airline shutdown: Braniff's final hours

http://www.flyertalk.com/forum/frown.gif Sad, but true. http://www.flyertalk.com/forum/frown.gif

jyuu I don't quarrel with Snake's point about the decline in the value of HP stock from around $30 to around $2.40. I was only suggesting that the current price has some possibility factored in that the loan guarantees will be approved and that is why the stock hasn't tanked even more.

No news is bad news, HP stock dropped another 5% today.

http://www.flyertalk.com/forum/frown.gif. Sad, but true. http://www.flyertalk.com/forum/frown.gif

hobson: Why don't you put what I said in quotes, insted of my quote of your words that I included in my post. it might make things clearer to the readers.

There's always a possibility that the loan guarantees will be approved, thats why the stock is worth so much more then zero.


[This message has been edited by snake (edited 12-28-2001).]

This just in:

Press Release Issued December 28, 2001 8:32:00 PM ET
America West Receives Conditional Approval for Loan Guarantees

Full text of this press release available at:
http://www.prnewswire.com/cgi-bin/mi...01639955&EDATE

[QUOTE]Originally posted by snake:


hobson: Why don't you put what I said in quotes, insted of my quote of your words that I included in my post. it might make things clearer to the readers.

Point well taken. My only excuse is that my cat was walking over my keyboard at that point in time and I got a little distracted!

Congratulations, boys and girls. You now own a chunk of America Worst.

http://signonsandiego.com/news/busin...lineloans.html

So does this mean it is now my patriotic duty to fly America Worst?

Ugggh.

33%!!Why didn't they shoot for 66%, heck, even 99% That would really protect (Enhance) us taxpayers. ¿Como no?

http://www.flyertalk.com/forum/smile.gif Man, it's gonna be pure entertainment, I love it. http://www.flyertalk.com/forum/smile.gif

hobson: ever think of using the "edit" button to correct after your cat walks?

The 33% could of course be worthless if the airline goes bust.

This bailout scheme is a horror.

If HP can get financing guarantees, then every airline bleeding all over can get financing now.

Rather than going out of business, there will be more "going concern" carcasses around to make life harder for the airlines that have a fighting chance.

This is very disappointing. It will diminish the health of the whole industry at a time when the financial health of the players has never been in more jeopardy.