United Records Special Impairment Charges on HK Routes
Jan 7, 2020, 3:00 pm
#1
FlyerTalk Evangelist
Original Poster
Join Date: Apr 2003
Programs: UA*Lifetime GS, Hyatt* Lifetime Globalist
Posts: 12,334
United Records Special Impairment Charges on HK Routes
Low demand and decreased revenue cited for another $90 million write-off (in addition to the amount wrote off last year)
https://seekingalpha.com/news/353026...pha#email_link
https://seekingalpha.com/news/353026...pha#email_link
Jan 7, 2020, 3:22 pm
#2
Join Date: Feb 2008
Programs: 6 year GS, now 2MM Jeff-ugee, *wood LTPlt, SkyPeso PLT
Posts: 6,526
Low demand and decreased revenue cited for another $90 million write-off (in addition to the amount wrote off last year)
https://seekingalpha.com/news/353026...pha#email_link
https://seekingalpha.com/news/353026...pha#email_link
Is this just an effort to have an explanation for underperformance?
Jan 7, 2020, 3:55 pm
#3
Join Date: Jun 2004
Location: What I write is my opinion alone..don't read into it anything not written.
Posts: 9,686
I don't understand the need for this. My understanding is that no limiting authorization was needed to fly to Hong Kong and there was no route authority that was at issue (as with e.g. flights to LHR or HND (which are slot restricted) or say PEK which are limited by bilateral agreement) so there is no legal right/benefit that is being impaired.
Is this just an effort to have an explanation for underperformance?
Is this just an effort to have an explanation for underperformance?
I'm no SEC guru, but I believe they have an obligation to shareholder/potential investors to disclose when an asset is worth less, beyond normal depreciation. 737-max, a route impacted by low demand due to extended political unrest...
Jan 7, 2020, 4:13 pm
#4
Join Date: Sep 2006
Location: HNL
Programs: UA GS4MM, MR LT Plat, Hilton Gold
Posts: 6,447
Form 8-K's are standard for any corporation to file to notify investors of a current event.
United usually files at least 1 8-K every month. Change of CEO, fleet changes, etc all get 8-K's filed.
Better to file - than not to file.
United usually files at least 1 8-K every month. Change of CEO, fleet changes, etc all get 8-K's filed.
Better to file - than not to file.
Jan 7, 2020, 4:16 pm
#5
A FlyerTalk Posting Legend
Join Date: Apr 2013
Location: PHX
Programs: AS 75K; UA 1MM; Hyatt Globalist; Marriott LTP; Hilton Diamond (Aspire)
Posts: 56,460
For fourth quarter 2019, the company expects to record a special non-cash impairment charge of $90 million associated with its Hong Kong routes. The company conducted its annual impairment review of intangible assets in the fourth quarter of 2019, which consisted of a comparison of the book value of specific assets to the fair value of those assets calculated using the discounted cash flow method. Due to a decrease in demand for the Hong Kong market and the resulting decrease in unit revenue, the company determined that the value of its Hong Kong routes had been fully impaired. Notwithstanding such impairments, the collateral pledged under the company's term loan continues to be sufficient to satisfy the loan covenants.
Jan 7, 2020, 4:37 pm
#7
Join Date: Jan 2014
Location: SFO
Programs: OZ Diamond/*G, IHG Diamond Amb, Hilton Gold
Posts: 2,239
They probably attach a value to their market share/position in the HKG market which they consider to be an asset, but currently deprecated in value due to the ongoing protests (which don't seem like they're going to stop anytime soon).
Jan 7, 2020, 7:00 pm
#8
FlyerTalk Evangelist
Original Poster
Join Date: Apr 2003
Programs: UA*Lifetime GS, Hyatt* Lifetime Globalist
Posts: 12,334
A number of Asian airlines have cut flights to HK and/or downsized their planes serving the HK routes.
A number of trade and industry conferences, that have been staged in HK in the last years, have been moved to Mainland China and/or Macau.
IMHO, it will be a long recovery for HK.
The question that has been raised by my clients and my competitors: Have we seen the peak of HK in its history (150 years) of political/economic cycle, or will HK ever get back to its glory day of pre-China opened up period in the early 90s.
Most have come to the conclusion that there is no growth potential in HK for the long run. Almost 70% of its vibrant capital market are companies with mainland China connections, and it is no longer an international capital market as been perceived in eyes of public.
According to one economist friend of mine: “Sadly we are witnessing the rise and decay of an economy in front of our eyes as it evolves in the geo-political history cycle.”
I hope that is not the case and still cautiously optimistic.
Hope UA routes will flourish eventually.
A number of trade and industry conferences, that have been staged in HK in the last years, have been moved to Mainland China and/or Macau.
IMHO, it will be a long recovery for HK.
The question that has been raised by my clients and my competitors: Have we seen the peak of HK in its history (150 years) of political/economic cycle, or will HK ever get back to its glory day of pre-China opened up period in the early 90s.
Most have come to the conclusion that there is no growth potential in HK for the long run. Almost 70% of its vibrant capital market are companies with mainland China connections, and it is no longer an international capital market as been perceived in eyes of public.
According to one economist friend of mine: “Sadly we are witnessing the rise and decay of an economy in front of our eyes as it evolves in the geo-political history cycle.”
I hope that is not the case and still cautiously optimistic.
Hope UA routes will flourish eventually.