SPEAKING OUT - COMMENTS - OPINIONS also go to: retup. for more discussions and postings. and www.bigjetcity.com |
Plane Business Banter Newsletter on Delta & United Holly Hegeman, Editor ... On top of that list would have to be the merger frenzy that broke out this week over reports that Delta Air Lines and United Airlines might be the next two airlines to attempt the merger mambo. The furor began when a letter, that had been sent to managements at both Delta Air Lines and United Airlines by a hedge fund called Pardus Capital, was leaked to reporters on Tuesday night. The next thing we knew the Associated Press was then reporting the potential deal's supposed "details"-- which included Delta's CEO Richard Anderson taking over as CEO, the company's headquarters moving to Chicago, and Atlanta becoming an "operations" center. So what exactly was in this letter that was leaked to the press? Pardus said that the letter it had sent to Delta and United management on Sept. 7 recommended a merger but had not named particular potential partners. Since then, the hedge fund has said that it has consulted with Gordon Bethune, former CEO of Continental, (you know Gordon charged them a hefty fee) and with consultants at Simat, Helliesen & Eichner. SH&E, according to Pardus, concluded that United and Delta together would offer the broadest network of routes to business travelers, and substantial savings. While a combination with Northwest would offer more savings — $1.5 billion a year, mostly from combining smaller hubs — that deal would not create as expansive a network, Pardus concluded. A combination with Continental would deliver no savings, actually raising the costs for the combined airlines by $171 million a year, and also present difficult management succession issues, the hedge fund said. Pardus then recommended that Delta acquire United in a stock merger with no premium, which based on recent trading prices would mean that Delta would swap 2.395 of its shares for each United share. Pardus said it would back Richard Anderson to run the combined airline, while Glenn Tilton, United’s CEO, would be asked to remain as Chairman for a couple of years to help "facilitate integration. " What is it that makes hedge funds think that after they accumulate a few million shares that they can simply sit back and play God? I don't know, but they do. And yes, Pardus was covered in both directions -- as at the time the letter was sent, the firm owned shares in both Delta and United. When I first heard about this letter, the first thing I did was go look at how much stock these guys controlled, as I had never heard of them. According to their letter, they now own about seven million shares of Delta Air Lines. This would be up from the most recent SEC filings, in which the company said it owned 3 million shares. Looks like the company has been on a little buying spree of late. This is about 3% of Delta's outstanding shares. As for United shares, the company said it has 5.6 million shares, or about 5%. And who is Karim Samii, the person who owns the hedge fund? Well, I couldn't help but be attracted to his own description of himself posted on the Stockpickr.comwebsite. And I quote, "The decision to start his own hedge fund came on a bright, snowy morning in December 2003, when he and his wife were visiting his in-laws in Hamburg, Germany. "I was jogging around the lake and I said to myself, 'Where do I want to be five years from now?' " he said. "It's a big bet," said Mr. Samii, 42. "But if you think you're good, you take the risk." Uh-huh. Unfortunately, given that airline stocks continue to be beaten down by higher fuel prices, and that airline executives continue to talk about the fine advantages of consolidation -- this type of thing is going to continue to occur. Although I am willing to bet that Mr. Samii knows not one wit of just how such a mega-deal like this would work, practically speaking. So did the leaked letter serve its, perhaps secondary, purpose? Did shares rise up in the double-digits for Delta and United, thus allowing Mr. Samii to cash out? No. Not hardly. My poker chips are still on a Delta/Northwest deal. As for Mr. Samii, I think maybe he needs to go play in another sandbox somewhere.
Got this from a retired UAL Captain. I cleaned up the grammar and punctuation. Not sure who Jerry and Larry are, but the article is interesting. It’s aimed at current employees, but has some interesting ramifications for all. Ran into Dr. McGuffin (ORD Flight Surgeon for many years) this AM at church and he told me UAL outsourced their Medical Department in May. They replaced the Doctor at O’Hare with a Nurse Practitioner. They may have a Medical Doctor at EXO; retired Navy Doctor. He said the whole changeover was a real “Goat Rope”. Gee, imagine that, UAL screwing something up. Here is an interesting one, I don't know how much truth there is to it but I do know Capt. Cordle has a financial business and have seen where he has advised any number of people and airlines about the future. Jerry Sent: Tuesday, August 28, 2007 8:52 AM Hi, I was down in the crew lounge in Kuwait today, chatting it up with this pilot. He owns http://www.airlineforecasts.com/. While chatting about airline stuff and opening a private business on the side was interesting to talk about, another pilot walked into the lounge and we went into details on United Airlines. He told us that United is planning to spin off mileage plus program to make 7million off the deal. Divest into selling off parts of United such as international routes to another carrier and domestic flying. Merge with another carrier. The only carrier that this is going to happen with is CO, once NW and Delta merge. Captain Cordle says Delta is not a good merge for UAL. UAL will have to make some quick decisions on their fate by this fall. UAL can't afford to give any huge raises at this time or it will put the carrier back into bankruptcy. Any pilot who thinks they will get 40% raise in 2010 is dead wrong because it will only put UAL into bankruptcy again. The most UAL can do to stay out of bankruptcy is 15%, but no more than 18%. This is what Captain Vaughn Cordle, who is a chief analyst for airlines, forecasts 5years down the road. He has already approached Tilton and said that he (Tilton) needs to offer an early out to get rid of the top (higher paid) pilots, flight attendants, and ramp workers to save money in order to survive. This way the junior pilot can do the same job at 50k less, than the senior pilot. Same with the flight attendants. Getting rid of the older flight attendants and bringing in new, junior ones to fly the international routes at cheaper rates will save a lot of money. This might forego a sell off of UAL routes. Southwest is doing this now, to cut their costs. UAL has about 3 million dollars in capital, sitting and paying interest, because they borrowed too much money when United came out of bankruptcy. Captain Cordle told Tilton that 1million dollars of it should be spent on early buy outs for employees, to save money for the company. Tilton has to keep the stock above $37 a share or he will loose his job. The only way he can do this, is make some quick decisions. If he does, we should know the results by mid fall. Also, UAL can't buy any new aircraft or the stock will drop. UAL is looking at many different ways to accomplish their goals. If UAL does merge it won't be UAL buying CO, but the other way around; CO buying UAL. The name might be replaced and all of United’s upper management might be out of a job. Anyway, this is what Captain Cordle told us. He owns the aviation forecast business, and both American and Northwest have hired his company to look into their books. He can't do United’s books because of a conflict of interest, since he is a pilot for UAL. The man sure appears to know his stuff. So we better plan our future carefully, because in 3 or 4 years we might not have jobs. If a spin off happens before a merger, it might mean many of us won't have jobs, especially if an early out arrangement doesn’t materialize. Even with a merger, 12% work force could be let go. Northwest and Delta will have to merge first to get Northwest off the CO board. This will make it possible for CO to merge with another carrier without Northwest having any say in the matter. Many believe that with Anderson as the new Delta CEO as of Sept 2007, Delta and Northwest stock will keep climbing because Wall Street thinks a merger between Delta and NW will happen. If UAL does merge with CO this will be a quick fix and bring profits of 3 million a year to the table, and stave off any divesting of the UAL. As you know, United is already thinking of spinning off the SFO Maintenance Division to save money and increase profits. This is the first link in the “Divesting” chain. I hope I haven’t burst anyone’s bubble today, but it’s important, so we can plan for our futures. Captain Cordle is an interesting guy and he knows his stuff. I think he’s a straight shooter, and is giving us the best information available at this time. He works outside of UAL for Goldman Sachs and, is a consultant besides being a B-777 Captain for UAL. You are welcome to share my article with your flying partners. Larry August 25, 2006 Airline Stocks Fall As Oil Rises Above $70 Per Barrel NEW YORK (AP) -- Airline stocks fell further on Friday morning, as oil prices again topped $70 a barrel and despite an analyst note urging investors to buy Delta Air Lines Inc. shares. Delta shares fell 19 cents to $17.81. Higgins rates Delta a "Buy" with a $25 price target.
|
United may shed repair unit August 23, 2007 8:12 AM Before you read this article keep in mind that it really means how bad of a hosing the maintenance people will take. Pursuing an effort to hand over maintenance to a third party means hosing the incumbent employees. By Julie Johnsson | Tribune staff reporter
Chicago-based United earlier this year hired McKinsey and Co. to draw up strategic options for its maintenance, repair and overhaul operations, which employ about 5,500 mechanics and handle much of the airline's routine repair work as well as maintenance for about 150 other carriers. "We are contemplating bringing in third parties who can invest in the maintenance, repair and overhaul business," said United spokeswoman Jean Medina. "This will enable us to continue to provide the highest quality maintenance to United and our customers. We are working cooperatively with our labor groups to ensure that any arrangement would be for the long term with a partner that creates value for our customers, investors and employees."
Any such change in ownership structure would require union approval, sources said. Entering into such a joint venture could help United raise hundreds of millions of dollars from outside investors and avoid costly infrastructure investments needed to keep its San Francisco operations current, sources say. The San Francisco maintenance facility dates to the 1950s. Since emerging from bankruptcy in early 2006, United has continued to trim costs and explore new ways to wring more money out of its franchise. The moves are intended to strengthen United's finances as a slowing economy threatens the recovery of the airline industry, and to improve its standing with investors. Off-loading the airline's largest maintenance base, where more than 3,000 mechanics work, could also potentially lessen the clout held by a labor group that has not shied from confrontation in the past. United officials, including Chief Operating Officer Peter McDonald, notified the mechanics union of the strategic shift at a meeting Aug. 10. The two sides are discussing the details of the strategy and its implications in San Francisco this week. While the mechanics contract is not due to be revisited until early 2010, the two sides are embroiled in a dispute over the degree to which United has shipped maintenance work to third-party vendors. The Aircraft Mechanics Fraternal Association said this year that the carrier had greatly exceeded its contractual limits on outsourcing, a charge the airline denied. An arbitrator is set to review the matter next month. A spinoff would affect about 2,800 United employees, most of them based in the Bay Area, sources say. It would not affect workers in San Francisco, O'Hare or elsewhere who perform line maintenance, the term for overnight tweaks and repairs needed to keep jetliners airworthy. However, some of United's approximately 700 mechanics at O'Hare International Airport could lose their jobs as a consequence. Union rules allow senior workers whose base is shuttered to assume jobs held by junior workers in other cities. About 200 of the 1,200 United mechanics working in Indianapolis took jobs in other cities when the carrier closed that maintenance center in 2003. United's maneuver apparently ends its recent strategy of trying to turn its maintenance unit, branded United Services, into a profit center. And it signals that United CEO Glenn Tilton will continue to pursue smaller deals while advocating for broader industry consolidation. United Services generated $280 million in revenue last year, about 75 percent of which came through maintenance and repairs. Investment bank Bear Stearns & Co., in a July 17 research report, estimated that the division could have an equity value of anywhere from $60 million to $600 million and noted that recent deals in its sector pointed to a valuation of about $330 million. The report estimated that United could generate billions of dollars, and nearly double its stock price, by unloading such assets as its frequent-flier program, real estate and some international routes. Before its descent into bankruptcy in 2002, United boasted one of the largest and best-equipped maintenance forces in the business. The carrier built an $800 million, state-of-the-art maintenance center in Indianapolis in the 1990s and employed more than 15,000 mechanics at its turn-of-the-century peak. United jettisoned the Indianapolis facility in 2003. jjohnsson@tribune.com
I have confirmed this on Snopes.com. URL: http://www.snopes.com/crime/fraud/juryduty.asp Bruce McCleod |
Bob, From: CharlesTolleson [mailto:bibag@ comcast.net] Bob,
|
Greetings! |
|---|
Holly Hegeman, Editor
Thursday, April 5, 2007
... This week we have an updated look at the Altman-Z Scores for our usual select group of airline suspects.
For those of you who are new to PBB, the Altman-Z Score is a metric that is used to rate a company's potential for bankruptcy.
The Z-score was developed by Edward I. Altman, Professor and Vice-Director of New York University's Salomon Center at the Leonard N. Stern School of Business.
The Altman's Z-score calculates five ratios:
1. return on total assets;
2. sales to total assets;
3. equity to debt;
4. working capital to total assets; and
5. retained earnings to total assets.
These ratios are then multiplied by a predetermined weight factor, and the results are added together. The final number--the Z-score--yields a number between -4 and +8. Financially-sound companies show Z-scores above 2.99, while those scoring below 1.81 are in fiscal danger, maybe even heading toward bankruptcy. Scores that fall between these two points indicate potential trouble. In Altman's initial study of 33 bankrupt companies, Z-scores for 95 % of these companies pointed to trouble or imminent bankruptcy.
While airlines rarely reach the higher levels that companies do in other industries, it is still interesting to see where the airlines stack up, because historically, the order in which they stack up here has pretty much matched the order in which they march into bankruptcy.
Having said that, let's take a look at our chart that covers the fourth quarter of 2006 -- the most recent period we can review -- the data needed having come in during the first quarter.
The chart is really pretty self-explanatory. Southwest Airlines and US Airways now are in the best financial shape of the group.
But from that point -- things get interesting.
First -- look at United's very poor showing. And this is after bankruptcy. (And those astronomical management payouts.)
Also note that AMR is still sitting in the third spot -- which puts it in the most vulnerable position financially, while Continental has improved considerably upon its previous position, all the way up to third place overall.
If you recall, at one time, Continental and AMR were neck and neck as the next two potential bankruptcy candidates, at least in terms of this measurement. No more.
Feb 6th, 2007 For more discussions on the 1099's , W2, and other tax considerations check the Employee Equity button. To All: My name is Steve Moddle a retired UAL Capt. also. I am secretary of the United Airlines retired Pilots Foundation and I was asked by the board to contact someone in the LAX area. The BOD of the Foundation is in need of a few new members and we have board members form all parts of the UAL system, except the LAX area. We would like to know if you could possibly announce our need at your next RUPA luncheon . The BOD meets 4 times a year in ORD for about 2 hours and we all are able to get home the same day. We can also substitute a meeting by a conference call meeting and if there is no business to conduct cancel the meeting. In 2006 we had only one meeting so it does not take up a lot of someone's time, and it gives great pleasure to know we are helping some people in financial need. At the present time we are giving aid to 8 widows of UAL pilots. I plan on contacting Capt. McDermott also to see if he can find us some help. Thanks. Steve Moddle for the BOD |
Jan.4, 2007 FYI - This is a response to Gordon Kibbe's question about, "Bad (Dept - sp?) Debt" Medical Insurnce Claim. See Gordon's letter below. So, you can expect a w-2 from UAL for wages earned in 2006. I'm not a tax advisor, but I've done my own taxes forever. Common sense tells me that how can you claim a "bad debt" when all the difference went to them?? Another concern for me is that I'm not at full retirement age, getting SS benefits and earning money part time. This distribution puts me way over my earnings limit without incurring a penalty. The link below gives me encouragement to argue a case to Social Security for "Special Payments". http://www.socialsecurity.gov/pubs/10063.html As far as claiming this as "bad debt" I will be looking into it and I feel it was a gross miscarriage of what we should have been awarded. Steve Clark (SFOMM) ret. Feb 1999 |
To all,
If if comes down to suing ALPA, I will add my voice to the general
hue and cry. If what I have read in the posts of Jim Moorehead are
correct, then we may have a case. We obviously owe nothing to
this "union" in that they have shown that they "owe" nothing to us.
And as a 'union' it seems to me that their days are numbered anyway.
An organization that cannot "deliver"... cannot last.
I read with some bemusement that the current MEC is going to "demand"
that they get their fair share of the monies now coming in. I wonder
just how they propose to convince the boys over at Tilton & Co.?
Use "harsh language?" Pout? Make little faces and go into a state
of "grand dudgeon?" How about laying on the floor and throwing a
temper tantrum...always worked for my kids.
Someone made the comment that the demise of ALPA would be Tilton's
fondest dream. I beg to differ. ALPA, as it now is, represents the
perfect sham or "shell" of a union, and the membership is paying
dearly for that. There are still a lot of smart, savvy guys and gals
over there, and someday, not too long from now, they will de-certify
ALPA and put their OWN union in place.
I do think that there might just be a chance to regain some of our
benefits through the legislative route once the new Congress is
seated. Once Congress wakes up to the fact that the "beggaring" of
millions of boomers is going to put our economy in the dust bin of
history, then they will do something. We will see.
Merry Christmas and be careful out there!
Denny
Excess FICA
"John Mcdannel" <johnmcdannel@earthlink.net>
To: arvidvn@yahoo.com
To all UAL retired pilots that have been furloughed!
Date: Sun, 10 Sep 2006 11:24:50 -0700
Former furloughed retired UAL pilots (Approx. 650 pilots):
Your initial PBGC Benefit Statement Letter and Work Sheet dated 5/16/06 was not properly calculated by the PBGC. In their original calculation the PBGC did not properly credit you with the 1/3 furlough credit that was originally agreed to in the 1991 UAL-ALPA labor agreement. Some how, this bit of information was over looked by the PBGC actuaries. This important detail was first discovered a the LAX PBGC Road Show held in April of 2006.
Your monthly retirement check will now increase by the stated amount in your September 5, 2006 revised PBGC Benefit Statement. This monthly increase in benefits is due to the addition of 1/3 of your furlough time which is added to your years of participation. As stated in this revision letter, your bump in benefits will occur on October 1, 2006.
The PBGC now owes you seven months of underpayment of benefits for the months between March - September of 2006. The PBGC has made a policy decision to not issue you a retro check for this difference. They have chosen to suspend this amount and later offset it against the PBGC's ultimate recoupement which will be determined in your final determination letter at some time in the future. Normally the PBGC final determination letters are issued to plan participants approximately three years after the PBGC assumes control of a defined benefit plan.
Cheers, John
