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SkyWest Inc. Message Board

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  • dabmu dabmu Aug 15, 2002 11:24 AM Flag

    UAL Exposure Facts - Minimal

    Market seems to assume UAL will cease operations, and all the UAL passengers will be denied to SKYW feeder lines. Why?

    Most airlines in BK continue to operate - and if UAL isn't there, the passengers won't cancel trips, they just book another airline.

    If their trips require feeder service, SKYW can be there to meet it.

    This freaked out bear market shoots stocks first and asks questions later. The SKYW story looks very solid to me, no matter what happens to UAL.

    Remember, SKYW was the airline with the smarts to maintain an affordable cost structure while the biggies overbuilt.

    I am holding my SKYW investment past this storm in a teacup.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • The risks to SKYW of a UAL BK:

      1. Any pre-petition amounts owing are unsecured creditor claims. With UAL debt trading at 40 cents or so, the market is telling us that these junior unsecured claims (and the UAL stock) are going to get creamed.

      2. UAL renegotiates its contract with SKYW. I presume the SKYW contract is what is called an executory contract, which means that UAL can reject it. While they probably do not want to do that, the threat will be some powerful leverage over SKYW to knock down their fees charged to UAL.

      To me the real issue for SKYW is "What alternatives does UAL have if it actually rejected its SKYW contract?"

      If there are alternatives (e.g., other RJ carriers, fly the routes itself (since it will be cramming down new scope clauses on its pilots as part of the BK renegotiation)), then SKYW is likely to get hit harder than if there are no other realistic alternatives.

      If there are no other realistic alternatives for UAL, then after a bunch of posturing and threatening, they will cave and SKYW will come out of this fine.

      So, Board, if you were UAL, what are your alternatives to SKYW? Understand the answer to that question and you will understand what the impact will be on SKYW, good, bad or indifferent.

      • 1 Reply to symonte
      • ***To me the real issue for SKYW is "What alternatives does UAL have if it actually rejected its SKYW contract?"

        If there are alternatives (e.g., other RJ carriers, fly the routes itself (since it will be cramming down new scope clauses on its pilots as part of the BK renegotiation)), then SKYW is likely to get hit harder than if there are no other realistic alternatives.

        If there are no other realistic alternatives for UAL, then after a bunch of posturing and threatening, they will cave and SKYW will come out of this fine.
        **

        I don't see any alternatives. UAL does not have the equipment to fly these routes. ASA and Comair are owned by Delta. American Eagle is owned by American, Continental express is owned by Continental. ACA is based in the east. No one else has the capacity to provide the feed to UAL.

        Now....if UAL were to go under, then that would leave SKYW out in the cold, since American or Delta would use Comair, ASA and Eagle and probably cut Skywest out of the picture....But Delta currently uses Skywest, so who knows.

    • Remember, SKYW was the airline with the smarts to maintain an affordable cost structure while the biggies overbuilt.


      How is 15.2 cents per ASM a better cost structure then the biggies?

 
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