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Old 01-27-2006, 03:01 PM   #1  
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Default UAL posts $17 billion loss

Looks like UAL is shedding all the old debt and preparing to exit chapter 11 next Wed.

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United Airlines parent records $17 billion loss
Fri Jan 27, 2006 3:35 PM ET

By Kyle Peterson

CHICAGO (Reuters) - UAL Corp. <UALAQ.OB>, parent of United Airlines, on Friday said it lost a jaw-dropping $17 billion in the fourth quarter on reorganization expenses and skyrocketing fuel prices.

The No. 2 U.S. airline, which is set to emerge from bankruptcy next month, said the $145 per share net loss compared with a loss of $741 million, or $6 per share a year earlier.

The $17 billion in reorganization items recorded in the quarter represent mostly claims allowed during the bankruptcy process. They are expected to be settled when the company exits bankruptcy for a small fraction of the amount, the company said.

"The $17 billion (loss) is meaningless because it involves all sorts of accounting issues," said airline consultant Michael Boyd.

The airline, which has been in bankruptcy since December 2002, has been hurt along with other major airlines by high fuel costs and overcapacity. Some carriers have seen renewed stability lately as excess capacity comes out of the market.

Excluding the charge, UAL said its operating loss was $182 million compared with $570 million in the same quarter last year. Total revenue for UAL increased by 10 percent, to $4.4 billion.

"These results set us on track for the year ahead," UAL's Chief Executive Glenn Tilton said in a recorded message to employees. "We will push forward and build on this momentum, knowing there is much to be gained simply in improving our execution."

The carrier ended the quarter with an unrestricted cash balance of $1.8 billion and a restricted cash balance of $957 million for a total cash balance of $2.7 billion.

The airline forecast its fuel price would average $1.92 per gallon in the first quarter. For all of 2006, UAL said it anticipates fuel expenses would increase by about $885 million over its previous assumption, which was based on a fuel price of $1.48 per gallon.

UAL has taken criticism in the last few months because of a fuel forecast that many experts say is overly optimistic. The carrier said in its reorganization plan, approved by a bankruptcy court, that it expects the price of oil to average $50 a barrel over the next five years. NYMEX oil futures were trading above $67 a barrel on Friday.

"They're facing reality," said Ray Neidl, airline analyst at Calyon Securities. "They can offset some of that in a better revenue environment."

UAL's Chief Financial Officer Jake Brace agreed the airline can offset high fuel prices by controlling non-fuel costs.

"It's consistent with what we've been saying all along," Brace said, adding the airline still believes fuel prices will fall in line with its forecast.

Currently, UAL has no hedges in place for 2006 to protect itself from unexpected spikes in fuel prices, due in part to restrictions placed on the airline in bankruptcy. Brace said the airline will consider fuel hedging once it emerges from bankruptcy.

UAL said it expects its mainline capacity, the number of seats it puts up for sale, to increase by about 1 percent in the first quarter of 2006.
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Old 01-27-2006, 03:24 PM   #2  
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The $17 billion (loss) is meaningless

Interesting choice of words there.

If I lost $17 billion on the sidewalk running for the bus I probably wouldn't think anything of it either.
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Old 01-27-2006, 03:34 PM   #3  
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HAA, I have to laugh. Didn't those execs big bonus? I cannot understand how they can be rewarded with a 17 billion dollar lost
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Old 01-27-2006, 03:51 PM   #4  
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Default Yes it really is meaningless

I have some comments.

1. Obviously, the two people above have not had any experience either investing in airlines. They obviously have no idea where that figure comes from. Where does that $17 billion come from? It really is meaningless. When United exits from bankruptcy, there will be a several billion dollar profit. Where did that all come from??? Again, that is meaningless.

2. There is only one thing that matters. Operating profit/loss. That was $183 million for the 4th quarter. Hummm... That is exactly how much Southwest would have lost if they didn't have fuel hedges. INTERESTING!!!

3. Exec bonuses. The exec bonuses are fair. The number 400 manager at United makes about $85,000 a year. That is less than almost EVERY pilot at the airline. Executives are underpaid for their field of work, and a bonus is certainly within reason, especially sticking with the airline during bankruptcy. Executives are in high demand. Their compensation is not on par for their line of work. They deserve the bonuses.

4. Why do many people on this forum attack executives. If you are so envious of their job, why don't you try to become an executive??? Oh wait, you might have to work more than 20 hours a week. They are more important, they are in demand, they did their job. They deserve a stock bonus.

5. I predict a slight loss in 06, and a profit in 07 for UAL.
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Old 01-27-2006, 04:13 PM   #5  
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No, I haven't invested in airlines. I just don't hear things like "The $17 billion (loss) is meaningless" everyday. If it offends you, maybe I'll delete it, maybe I won't post again on this forum until I find a way to make a 747-400 fly from IAH to NRT on 1 gallon of Jet-A.

I'm not attacking executives. I was an executive at one point (no, not an airline exec). I had my paychecks stolen from executives at one point. I'm not the only one.

I can't predict anything, but just to hope the best for UAL. There's some seriousness for ya.

Last edited by Chris; 01-27-2006 at 05:24 PM.
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Old 01-27-2006, 07:13 PM   #6  
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Quote:
There is only one thing that matters. Operating profit/loss. That was $183 million for the 4th quarter. Hummm... That is exactly how much Southwest would have lost if they didn't have fuel hedges. INTERESTING!!!

$183 million dollar loss...while still in bankruptcy??? I'd say that's an operating loss for sure! And by the way....17 Billion does matter...especially if you pay taxes here in the U.S. I wouldn't begrudge an executive a bonus...especially if he did his job and kept the company OUT of bankruptcy. Not to mention shareholders. Another chapter altogether. Look, you may be speaking from a wealth of experience, but salting fries has little to do with the airline business.
Interesting link below for those interested.




http://enplaned.blogspot.com/
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Old 01-27-2006, 10:40 PM   #7  
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"These expenses reflect claims allowed against the company from our creditors as part of the restructuring process. In order to conform with the rules of (a set of accounting guidelines called 'Generally Accepted Accounting Principles,)' we have to record the full claims amounts as reorganization expenses now, even though these claims are expected to be settled to just a minor fraction of the claims recorded ... and in most cases, that will be for stock in the new company and not in cash."

The Company expects to report a substantial gain at bankruptcy exit. According to a release issued by United today, these unsecured claims "are not expected to have a significant impact on the Company's cash position."

Ryan is right, that loss, for all practical purposes, is meaningless.
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Old 01-28-2006, 06:58 AM   #8  
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Quote:
Ryan is right, that loss, for all practical purposes, is meaningless.
Tell that to your retirees, the PBGC, bond and tranch holders, et al. 20 Billion reflects just how bad the businees plan was. If it was meaningless, the hard working employees of United took a double haircut for naught. Their cuts went right into the pockets of the bankruptcy lawyers...maybe a little to the oil companies. Did you get a Christmas Card from either??
But, with that said, I understand your position. It is believed that once the stock is launch, it's increase will make everybody whole again. We will see. I'm actually rooting for it because I understand the PBGC got a big chunk of it. I'd like to see retirees get something back. Maybe we will have another Google,eh? Of course, it's all based on $50 bbl oil. Let's hope.
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Old 01-28-2006, 12:07 PM   #9  
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Quote:
Originally Posted by Daytripper
It is believed that once the stock is launch, it's increase will make everybody whole again.
I don't think the retirees at UAL will ever agree with that. No matter how you slice it, UA's chapter 11 was financially devastating for many pilot's (and their families) and most will never fully recover.
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Old 01-28-2006, 12:16 PM   #10  
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You are right HSLD. I should not have said everybody. I think the retirees lost health care too.
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