United Airlines' parent company said it has secured new commitments from banks for up to US$3 billion in debt financing that should enable it to emerge from Chapter 11 bankruptcy protection late this year or early 2006.
While the financing is not yet final, UAL Corp hailed the revised proposals as a strong endorsement of the new business plan it formulated this summer even as the steep increase in fuel prices continues to squeeze carriers' bottom lines.
The commitments from the four financiers -- Citibank, JP Morgan Chase & Co, Deutsche Bank and GE Commercial Finance -- were disclosed as the Elk Grove Village, Illinois-based airline updated its status in a filing on Thursday with federal bankruptcy court.
United said it registered a US$274 million net loss for last month. That pushed its losses to US$2.8 billion this year and more than US$7 billion since it entered bankruptcy in December 2002.
CFO Jake Brace said that the lenders are willing to provide more than the US$2.5 billion United sought testifies to the resilience of its new business plan even amid daunting conditions for airlines. He said United is continuing to negotiate the cost and terms of the financing, but has fully underwritten offers it could put into place now if it so chose.
United has not yet publicly disclosed its new business plan or laid out its strategy for returning to profitability for the first time since 2000. Brace said only that it would be filed in the "not too distant future" with its reorganization plan.
"This validates our business plan and demonstrates that despite the fact that the industry environment has gotten tougher, the United business plan can attract even more all-debt exit financing than it could last winter," Brace said in an interview.
Despite its long streak of money-losing, airline analyst Mike Mooney said United remains a worthy investment risk for the banks because of several strengths: its international route network, strong US hub structure, long-term labor deals in place and the shedding of its multibillion-dollar pension obligations.
"It's a tough business right now, and certainly one can critique the overall success of United's management team -- the amount of time they've spent in bankruptcy," said Mooney of the Boyd Group in Evergreen, Colorado. "But United has a beautiful franchise. The banks see the opportunity to step in on that, which puts them in a very preferred position assuming there is a successful emergence."
The banks had tentatively agreed in January to provide up to US$2.5 billion in debt financing, but that was before soaring fuel prices forced United to devise a new business plan. Oil prices, now topping US$67 a barrel, have risen more than 50 percent this year.
The company attributed the latest monthly loss to US$350 million in reorganization expenses -- mostly from renegotiating leases on some of its aircraft. It said its monthly operating profit more than doubled to US$113 million from US$51 million a year earlier, despite fuel costs that increased by US$127 million. Passenger unit revenue rose 9 percent over July last year.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has
China is mischaracterizing UN Resolution 2758 for its own interests by conflating it with its “one China” principle, US Deputy Assistant Secretary for China and Taiwan Mark Lambert said on Monday. Speaking at a seminar held by the German Marshall Fund, Lambert called for support for Taiwan’s meaningful participation in the international community at a time when China is increasingly misusing Resolution 2758. The resolution had a clear impact when it changed who occupied the China seat at the UN, Lambert said. “Today, however, the PRC [People’s Republic of China] increasingly mischaracterizes and misuses Resolution 2758 to serve its own interests,” Lambert said. “Beijing