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UA's Viability / Financial Future due to the COVID-19 Era [Consolidated]

UA's Viability / Financial Future due to the COVID-19 Era [Consolidated]

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Old Jul 7, 20, 7:36 am   -   Wikipost
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In recent days a number of threads have started touching on the impacts on UA as a business going forward due to the travel disruption of COVID-19 --- including multiple Viability / Bankruptcy / Bailout discussions. While inconceivable a few months ago, UA (and all commercial airlines) is facing challenges that are uncharted.

This consolidated thread has been created by merging a number of existing threads that trend to address essentially the same subjects.

Some thread guidelines
-- This thread / forum is for discussing UA and the UA traveler, so please focus on UA in these discussions. Other forums exist to discuss other carriers or the industry in general -- we do just UA here.
-- This thread is for discussion of how UA gets from here to its future state.
-- All the standard FT rules apply. We will have a civil, constructive, collegial discussion -- even in these turbulent times.
-- While much of this will play out in the political arena, this forum is not the place for political / OMNI discussions. Please use threads in appropriate forums for that, such as Covid-19 US tax cuts or fiscal stimulus
-- Similarly, discussions of the evils / greed of corporations or other broad societal issues are out of scope, those are for OMNI -- let's stick to discussing UA, its past and its future here
-- Please do not start new threads on these topics in the UA forum. One reason for this consolidated thread was to minimize the redundant posts in separate threads. There is plenty of room in the scope of this thread to cover all aspects of these topics. (Note things like M&A, restructuring, ... would all be in scope).
-- Please once you have laid out your position, do not repetitively re-state that opinion. It is usually a better discussion if many participate vs a few dominating the thread

On behalf of the UA Moderator Team
WineCountryUA


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Old Mar 8, 20, 10:21 am
  #1  
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UA's Viability / Financial Future due to the COVID-19 Era [Consolidated]

The big three, or four if you include WN, will not fail. UA is obviously concerned about cash flow but Fed will bail them out with taxpayer fund if they are in trouble.
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Old Mar 8, 20, 10:55 am
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Originally Posted by TerryK View Post
The big three, or four if you include WN, will not fail. UA is obviously concerned about cash flow but Fed will bail them out with taxpayer fund if they are in trouble.
Please now... You can't put Southwest and American in the same sentence. SW has a debt to earnings ratio of 0.6. They nearly have no debt. American operates at a debt to earnings ratio of 4.4 -- that's frightning. If airlines fail, American will be first by a country mile...
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Old Mar 9, 20, 9:45 am
  #3  
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UA Viability/ Chance of Bankruptcy/ Bailout discussion in COVID-19 Era [Consolidated]

In recent days a number of threads have started touching on the impacts on UA as a business going forward due to the travel disruption of COVID-19 --- including multiple Viability / Bankruptcy / Bailout discussions. While inconceivable a few months ago, UA (and all commercial airlines) is facing challenges that are uncharted.

This consolidated thread has been created by merging a number of existing threads that trend to address essentially the same subjects.

Some thread guidelines
-- This thread / forum is for discussing UA and the UA traveler, so please focus on UA in these discussions. Other forums exist to discuss other carriers or the industry in general -- we do just UA here.
-- All the standard FT rules apply. We will have a civil, constructive, collegial discussion -- even in these turbulent times.
-- This thread is for discussion of how UA gets from here to its future state.
-- While much of this will play out in the political arena, this forum is not the place for political / OMNI discussions. Please use threads in appropriate forums for that, such as Covid-19 US tax cuts or fiscal stimulus
-- Similarly, discussions of the evils / greed of corporations or other broad societal issues are out of scope, those are for OMNI -- let's stick to discussing UA, its past and its future here
-- Please do not start new threads on these topics in the UA forum. One reason for this consolidated thread was to minimize the redundant posts in separate threads. There is plenty of room in the scope of this thread to cover all aspects of these topics. (Note things like M&A, restructuring, ... would all be in scope).
-- Please once you have laid out your position, do not repetitively re-state that opinion. It is usually a better discussion if many participate vs a few dominating the thread

On behalf of the UA Moderator Team
WineCountryUA

Last edited by WineCountryUA; Mar 22, 20 at 8:52 pm
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Old Mar 9, 20, 9:45 am
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COVID19 / How Viable is UAL in a Prolonged Grounding?

It looks like the White House / CDC wants the airlines to collect more passenger data around the COVID-19 outbreak...or don't fly at all. A report aired on CNN says if the issue isn't resolved soon, domestic airlines/flights could be grounded later this month.

(See https://thehill.com/policy/healthcare/486586-airlines-threatened-with-fines-if-they-dont-provide-foreign-passenger-data)

Meanwhile, LH said their loads continue to collapse, adding that when they grounded their A380 fleet, their overall network is only operating at 35% load factors and that cancelling 50% of their flights may not be enough.

With threats of grounding and/or people just not flying, how long can UA survive not flying without government intervention? Few days? Few weeks? Longer?
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Old Mar 9, 20, 9:53 am
  #5  
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Two comments

-- This report seems to reference just international travel, remember a significant portion of UA operations is domestic

-- AA is while reported to be in a more difficult financial situation
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Old Mar 9, 20, 9:54 am
  #6  
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Same threads dotted across FT for many carriers.

Bottom line is that the US government won't let any of its major carriers collapsed, even if it means bailouts of the sort given to financial institutions in 2008. There are, of course, other efforts such as suspending consumer taxes on tickets, suspending slot control utilization requirements, and guaranteeing other payments.
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Old Mar 9, 20, 11:09 am
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Would the carriers really start slashing rates to encourage more bookings? Or is that bad PR to promote air travel during the coronavirus outbreak?
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Old Mar 9, 20, 11:11 am
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Originally Posted by WineCountryUA View Post
Two comments

-- This report seems to reference just international travel, remember a significant portion of UA operations is domestic

-- AA is while reported to be in a more difficult financial situation
I agree with our moderator. AA is in the most difficult situation of the big three.

Also, bear in mind the situation is very fluid. An airline bailout package (similar to the way the auto industry was bailed out after the financial crisis) is a distinct possibility down the road.
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Old Mar 9, 20, 11:14 am
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Originally Posted by Winkdaddy View Post
Would the carriers really start slashing rates to encourage more bookings?
Yes.

Originally Posted by Winkdaddy View Post
Or is that bad PR to promote air travel during the coronavirus outbreak?
It hardly matters. Voluntarily going out of business out of a desire to “protect your customers” isn’t an option.
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Old Mar 9, 20, 11:35 am
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Originally Posted by jsloan View Post
Yes.


It hardly matters. Voluntarily going out of business out of a desire to “protect your customers” isn’t an option.
And remember for most people the effects of the Corona virus will be more about being stuck in quarantine for a few weeks versus long-term health effects.
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Old Mar 9, 20, 11:41 am
  #11  
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The CNN report was quite vague about the information he government wanted. I suspect it would also take the airlines some time to properly add it as part of the process (ie, at check in) to OLCI, kiosks, agent screens, etc.

im also not sure the value of asking if people have been to China in the last 48 hours unless you are sure you are going to get accurate responses. Even of the people who have, who is going to admit that if they realize it could cause them trouble? It’s like when they used to ask the question in the early 2000s about whether you packed your bags yourself and whether it has been out of your site - is anyone going to admit this, particularly anyone who has nefarious intent?
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Old Mar 9, 20, 12:57 pm
  #12  
 
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Originally Posted by Winkdaddy View Post
Would the carriers really start slashing rates to encourage more bookings? Or is that bad PR to promote air travel during the coronavirus outbreak?
Originally Posted by jsloan View Post
Yes.


It hardly matters. Voluntarily going out of business out of a desire to “protect your customers” isn’t an option.
I was poking around looking for a decent fare for a close-in (time-wise) weekend get away. Over the next 3 weekends - Couldn't locate anything worthwhile.
Wonder if United has tweaked their revenue management tools sufficiently for these unique circumstances?
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Old Mar 9, 20, 12:59 pm
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I just took a quick look at their earnings, and as of 12/31/2019, UA had roughly $5B in liquid assets. Its operating expenses were roughly $10B in the last quarter. Of that $10B/quarter, I'd estimate about $3-4B/quarter would persist through a shutdown (e.g. exempt salaries, rent, debt payments). So if UA completely shut down operations they could last somewhere between 4-6 months before running out of cash.

Of course, unless things get significantly worse, they will still be able to operate on a reduced scale so it's not clear how long they would be able to stay afloat on a reduced schedule.
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Old Mar 9, 20, 1:24 pm
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I refuse to believe that most domestic airlines are in that dire of a situation after several weeks of reduced demand. Especially since some (UA, DL) just came off blowout quarters. Globally some airlines / regions are in much better shape than others (reference the FlyBe collapse last week), but UA certainly isn't toast after the relatively short period of reduced bookings thus far. This hype continues for two or three quarters? Yeah, then there's huge a problem. Airplanes are expensive and don't pay for themselves sitting on the ground.

Here's my take on this: the American public has an attention span about as long as a housefly's life. In other words people will realize that panic buying toilet paper and painter's masks is doing nothing more than filling up their storage closets, more people die in auto accidents every day, and some new drama will unfold on the Bachelorette to takeover the headlines soon enough. Pretty soon people will tire of this hype and decide they can't stand to stay home and actually interact with their family members anymore and decide its time to move on with their lives. Until people come to their senses we'll see market turmoil, whining about FF status extensions, and chicken little running around all at the same time.
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Old Mar 9, 20, 1:49 pm
  #15  
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Originally Posted by gmt4 View Post
I refuse to believe that most domestic airlines are in that dire of a situation after several weeks of reduced demand. Especially since some (UA, DL) just came off blowout quarters.
''

AA's debt load makes it the most threatened of the US3. DL's deep pockets and better margins make it the most secure. UA is somewhere in the middle.

I expect things will pick up in Q3. After 9/11 it took about three months to get people back to the airports.
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