Last edit by: WineCountryUA
Please do not modify or remove
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
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
UA's Viability / Financial Future due to the COVID-19 Era [Consolidated]
#751
A FlyerTalk Posting Legend
Join Date: Sep 2002
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Posts: 42,200
.
That's fine, then don't fly. Simply pay your debt, ride out the storm, and live to fight post-Vaccine. It's that simple.
Boeing is in good shape right now. Plenty of cash and lots of govt planes to build. They will not do anything that hurts customers because Chap 11 allows companies to cancel all Boeing contracts...
Two of the largest investment banks on Wall Street disagree with you. The offering will likely be over-subscribed.
That's fine, then don't fly. Simply pay your debt, ride out the storm, and live to fight post-Vaccine. It's that simple.
Boeing is in good shape right now. Plenty of cash and lots of govt planes to build. They will not do anything that hurts customers because Chap 11 allows companies to cancel all Boeing contracts...
Two of the largest investment banks on Wall Street disagree with you. The offering will likely be over-subscribed.
The MAX issue is only getting worse, and Coronavirus probably just put a stake in the MAX's heart - Boeing will never be able to climb out from under the financial catastrophe they will need to absorb from endless canceled orders and delivery refusals while those planes sit and rust.
Don't put your eggs in the vaccine - there is a flu vaccine, yet millions get the flu every year, even with the shot, and many pass away. As the Coronavirus waxes and wanes, comes and goes, vaccine or not, it will set off waves of panic for years to come that will quickly contract and expand consumer and business spending in its wake. Instability is the new normal, and a vaccine won't change anything.
#752
Suspended
Join Date: Aug 2005
Location: BOS
Posts: 15,027
"Buy High, Sell Low "
"...or how United is the epitome of bad management."
https://seekingalpha.com/pr/17844186...f-common-stock
First they BUY back shares for about $88 each and now they plan to SELL shares for about $26.
What IDIOT is running this company???
United Airlines Holdings, Inc. (UAL) today announced an underwritten public offering of 39,250,000 shares of its common stock, subject to market conditions and other factors.
https://seekingalpha.com/pr/17844186...f-common-stock
First they BUY back shares for about $88 each and now they plan to SELL shares for about $26.
What IDIOT is running this company???
#753
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Join Date: Apr 2004
Location: GVA (Greater Vancouver Area)
Programs: DREAD Gold; UA 1.035MM; Bonvoy Au-197; PCC Elite+; CCC Elite+; MSC C-12; CWC Au-197; WoH Dis
Posts: 52,139
#754
Moderator: United Airlines
Join Date: Jun 2007
Location: SFO
Programs: UA Plat 1.995MM, Hyatt Discoverist, Marriott Plat/LT Gold, Hilton Silver, IHG Plat
Posts: 66,850
UAL Announces Pricing of Public Offering of Common Stock
CHICAGO, April 21, 2020
-- United Airlines Holdings, Inc. (NASDAQ:UAL) today announced the pricing of an underwritten public offering of 39,250,000 shares of its common stock, at a public offering price of $26.50 per share. Morgan Stanley and Barclays are acting as the underwriters of the offering. The Company has also granted to the underwriters a 30-day option to purchase up to 3,925,000 additional shares. The proceeds from the offering will be used for general corporate purposes. Subject to the satisfaction of customary conditions, the offering is expected to close on April 24, 2020.
CHICAGO, April 21, 2020
-- United Airlines Holdings, Inc. (NASDAQ:UAL) today announced the pricing of an underwritten public offering of 39,250,000 shares of its common stock, at a public offering price of $26.50 per share. Morgan Stanley and Barclays are acting as the underwriters of the offering. The Company has also granted to the underwriters a 30-day option to purchase up to 3,925,000 additional shares. The proceeds from the offering will be used for general corporate purposes. Subject to the satisfaction of customary conditions, the offering is expected to close on April 24, 2020.
Roughly $1B is fully subscribed
Last edited by WineCountryUA; Apr 21, 2020 at 9:33 pm Reason: Roughly $1B is fully subscribed
#755
FlyerTalk Evangelist
Join Date: Oct 2001
Location: Austin, TX
Posts: 21,400
UA has a history of labor troubles going back at least 40 years. I doubt that they've ever been "completely aligned" on anything.
That... isn't what happens in Chapter 11, although, yes, it does give UA an opening to renegotiate the contracts. They're not immediately cancelled, seniority isn't immediately gone. In Chapter 7, sure, because the company shuts down.
If this is true, then the current stock offering is the worst financial decision UA has made since at least 2001. That's really saying something.
At the risk of repeating myself, you'd have to be an idiot to issue new stock now unless you needed the money badly. If you project a $3BB free cash reserve in 6 months, you do not sell your stock when it's 70% off of the 52-week high in order to pick up $1BB more. Instead, you wait until October and sell when the stock is 3x what it is now -- because if they can navigate the waters as cleanly as you're projecting, their stock is a massive buy right now, not a sell. In fact, if your numbers were right, the board would be risking a shareholder lawsuit for breach of fiduciary duty by issuing new stock at this time.
You don't work in a unionized profession, do you?
It isn't that simple, because you're just assuming that they have no fixed costs beyond the ones that are being subsidized by the government, and then you're also assuming that if you go out of business for a year, when you come back, people will be like, "Oh, hi, United; I missed you! Please, take my money."
Here you are correct about Chapter 11, but I suspect you're being as unreasonably rosy about Boeing as you are about United. The military side of the operation has not been without its problems over the last few years, and Boeing Commercial Aircraft is a major part of the business that, in the space of two years, has gone from an order book that was the envy of everyone (except the A321 aficionados on this board) to a place where they have a massive inventory glut, the likelihood that their customers are going out of business, a giant used aircraft market about to come online, and zero demand for their products. I promise you that there is a management team somewhere at Boeing whose sole responsibility right now is figuring out how to work with their customers to get the MAX delivered and paid for.
Sure, on the very good theory that they can probably make some intraday profit buying below market and selling at market. It's not a bad idea for the bank; it's just a bad idea for the business. I promise you -- UA is dealing from a position of extreme weakness. "Buy high, sell low" is a strategy that gets the board removed and the CEO replaced. They're doing this because they have no choice.
If this is true, then the current stock offering is the worst financial decision UA has made since at least 2001. That's really saying something.
At the risk of repeating myself, you'd have to be an idiot to issue new stock now unless you needed the money badly. If you project a $3BB free cash reserve in 6 months, you do not sell your stock when it's 70% off of the 52-week high in order to pick up $1BB more. Instead, you wait until October and sell when the stock is 3x what it is now -- because if they can navigate the waters as cleanly as you're projecting, their stock is a massive buy right now, not a sell. In fact, if your numbers were right, the board would be risking a shareholder lawsuit for breach of fiduciary duty by issuing new stock at this time.
Sure, on the very good theory that they can probably make some intraday profit buying below market and selling at market. It's not a bad idea for the bank; it's just a bad idea for the business. I promise you -- UA is dealing from a position of extreme weakness. "Buy high, sell low" is a strategy that gets the board removed and the CEO replaced. They're doing this because they have no choice.
#756
FlyerTalk Evangelist
Join Date: May 2000
Location: TPA for now. Hopefully LIS for retirement
Posts: 13,691
This isn't how any of this works . . . (And I lived through it as a union UA employee.)
#757
Join Date: May 2013
Posts: 3,361
Two of the largest investment banks on Wall Street only want the fees from the offering - they could care less on whose face the egg lands, provided it's not theirs and they collect their fees.
The MAX issue is only getting worse, and Coronavirus probably just put a stake in the MAX's heart - Boeing will never be able to climb out from under the financial catastrophe they will need to absorb from endless canceled orders and delivery refusals while those planes sit and rust.
Don't put your eggs in the vaccine - there is a flu vaccine, yet millions get the flu every year, even with the shot, and many pass away. As the Coronavirus waxes and wanes, comes and goes, vaccine or not, it will set off waves of panic for years to come that will quickly contract and expand consumer and business spending in its wake. Instability is the new normal, and a vaccine won't change anything.
The MAX issue is only getting worse, and Coronavirus probably just put a stake in the MAX's heart - Boeing will never be able to climb out from under the financial catastrophe they will need to absorb from endless canceled orders and delivery refusals while those planes sit and rust.
Don't put your eggs in the vaccine - there is a flu vaccine, yet millions get the flu every year, even with the shot, and many pass away. As the Coronavirus waxes and wanes, comes and goes, vaccine or not, it will set off waves of panic for years to come that will quickly contract and expand consumer and business spending in its wake. Instability is the new normal, and a vaccine won't change anything.
While the lower demand will almost certainly slow Boeing’s MAX deliveries, it doesn’t inhibit the return to service. The FAA is still working on it and I think if anything, there’s more political pressure. Boeing has zero MAX production right now, which puts them in a better place than Airbus.
And on the final pessimistic note, we can all sit at home scared and let our lives and economy crumble or we can act prudently to manage the impact of COVID and work towards more normal lives. As the current outbreak moderates and stay at home orders are lifted, there will be some recovery of demand. Many people will want to travel. There could be waves of outbreaks and pullbacks in demand, but a vaccine will moderate both. We don’t see lower travel in the winter when seasonal flu spikes, nor have regional outbreaks of other communicable diseases hurt travel. The most pessimistic outlooks have demand in 2023 returning to 2019 levels. I’m hoping for better, but I think United will survive until then. The management team has moved aggressively to position the company for the future. It will look different and many employees will loose their jobs.
If a people see no future for business or discretionary travel, what is the purpose of FlyerTalk?
#758
Join Date: Dec 2006
Location: Silicon wasteland
Programs: UA 1KMM
Posts: 1,381
It's obvious that UA is making desperation moves. There is absolutely no way that anyone in UA leadership has the same rosy outlook that you do, and I can prove it. Nobody in their right mind would try to sell $1BB of UAL stock now -- 70% off of their 52-week high -- unless they really, really, really needed the money.
#760
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Location: Austin, TX
Posts: 21,400
Although UA is a smaller airline than DL, its cost structures are similar, so it wouldn't surprise me if UA's cash burn were in similar territory. I suspect we'll know when UA makes its official earnings release.
#761
Moderator: United Airlines
Join Date: Jun 2007
Location: SFO
Programs: UA Plat 1.995MM, Hyatt Discoverist, Marriott Plat/LT Gold, Hilton Silver, IHG Plat
Posts: 66,850
($1.65B/month)
Unknown the conditions to achieve that burn rate
Found the BofA report but not public (available to Merrill Lynch customers)
Thinks UA's current burn rate is $65M/day ($2B/month) but UA should be able to reduce that to $55M/day
Taking in account all announced steps -- operational reductions, starting liquidity, new loans / credit lines, CARES loans/grant, stock offering, .... UA might have access to $16-17B
Not mentioned by BoA some of the loans require UA to maintain $2B liquidity and there are some (anther $2B) short debt due later this year -- probably will try to refinance that.
Last edited by WineCountryUA; Apr 22, 2020 at 10:47 am Reason: Update
#762
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Join Date: Mar 2014
Location: 4éme
Posts: 12,038
I am seeing some of UA's longer term debt trading at a 15% - 25% discount. Their debt maturing 12/2020 is trading about 2% discount. A quick look at DL's debt showed about the same.
#763
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Join Date: Sep 2002
Location: LAX/TPE
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The equity offering was underwritten, meaning the banks committed to United that the shares would be sold at certain levels. Thus commitment was based on known demand, but still requires the banks to purchase the shares as a last resort. This is a meaningful positive indication of how the banks see United’s viability.
While the lower demand will almost certainly slow Boeing’s MAX deliveries, it doesn’t inhibit the return to service. The FAA is still working on it and I think if anything, there’s more political pressure. Boeing has zero MAX production right now, which puts them in a better place than Airbus.
And on the final pessimistic note, we can all sit at home scared and let our lives and economy crumble or we can act prudently to manage the impact of COVID and work towards more normal lives. As the current outbreak moderates and stay at home orders are lifted, there will be some recovery of demand. Many people will want to travel. There could be waves of outbreaks and pullbacks in demand, but a vaccine will moderate both. We don’t see lower travel in the winter when seasonal flu spikes, nor have regional outbreaks of other communicable diseases hurt travel. The most pessimistic outlooks have demand in 2023 returning to 2019 levels. I’m hoping for better, but I think United will survive until then. The management team has moved aggressively to position the company for the future. It will look different and many employees will loose their jobs.
If a people see no future for business or discretionary travel, what is the purpose of FlyerTalk?
If a people see no future for business or discretionary travel, what is the purpose of FlyerTalk?
#764
Join Date: Jan 2018
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Posts: 1,250
The burn number that matters is the burn as of Oct 1 after the entire labor force is furloughed. The Oct. burn number will go down by ~50%-75% from the numbers above.
#765
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Join Date: Oct 2001
Location: Austin, TX
Posts: 21,400
You can't just close up shop and hope for better days ahead. Not only would you have to refund ticket purchases during the interim period, you'd ensure that whenever you started back up, you'd start with empty planes. Who'd give UA money if they got the idea that UA wasn't planning to fly them anywhere?