UAL Borrows $2 Billion
 

Kirby talked about this in the call the other day.

... and with this new facility, they now have 8 billion in liquidity and 20 billion in unencumbered assets. Someone correct me if I’m wrong, but I believe this is stronger than any other airline at this point.

I don't know anything about financials, but based on the size of Delta's profit sharing checks vs United's, I find it hard to believe that United is better off financially than Delta. It seems we're about to find out.

Maybe our guys were better at hiding the money than yours.

Doubt it.....SK is definitely “B Team”

profit sharing checks have nothing to do with liquidity. UAL has about 8 Billion on tap, the most of the Big three. DAL about 5 Billion albeit less debt

”better off financially” can be defined many ways. In terms of ability to weather this storm with the least amount of financial stress, I would think liquidity and unencumbered assets would be very important. I found a mainstream news source last night (can’t remember which one) that reported Delta has ~5.1b liquidity and 20b unencumbered assets, American with similar liquidity but about half the unencumbered assets, and United 8b liquidity and 20b unencumbered assets. It would be interesting to review a complete analysis of all the airlines including the ULCCs.

companies go bankrupt because they cannot pay their bills or make payroll. It’s about cash flow and liquidity.

debt doesn’t matter unless it is due.

What's an example of an unencumbered asset?

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That does not paint the entire picture. Liquidity gets you through the short term, but if you have to encumber a large amount of your assets to do it, then that becomes a MAJOR long term problem because the cash required to pay down those loans simply will not be there. Of course any company will do what it takes to get through the short term, but if they rack up too much debt to do it, it will become a long term issue. This is the fundamental problem that AA has, while it’s short term liquidity might be adequate, if this goes on for an extended period of time, they have over $30B in debt vs $42B (annually) or so in revenue, and this revenue number will come down big time. When you have more debt than revenue, situation gets serious.

SOMEONE is going to take a huge haircut with this, debt holders, employees, someone. Let’s all pray this thing blows off in the shortest amount of time to at least hit bottom, not there yet.

Thanks. So for us, that'd likely be airplanes we own, tools, parts, etc? Would any of those things actually sell for close to the value they're expecting? In other words, is that $20 billion likely to only actually fetch $10 billion, while crippling the operation?

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Its collateral to borrow against, like a giant pawn shop.

yes - it becomes an issue if you cannot serve the debt aka cannot pay your bills or the debt comes due and you cannot refinance it which is what people do - just roll it over.

every leveraged business will run into issues if the revenue stream goes a way - it is just a matter of time.

In the case of UAL, and I’m also assuming DAL, besides aircraft one of the most valuable assets is the frequent flyer program.

And, FWIW, an airline can be fully leveraged with no unencumbered assets without crippling the operation. Debt can be a useful survival tool as long as one can make the payments. One recent example is CAL prior to the merger.

this. It’s collateral to borrow against. It’s viewed similar to cash because it can be used to raise cash.

This was reported in the Wall Street Journal. UAL with $8B Delta with $5B but UAL has higher debt.