UAL Union Asks Court For New LeadershipThe International Association of Machinists last week filed a request in bankruptcy court to replace CEO Glenn Tilton with a trustee as UAL Corp.'s lead decision maker during the Chapter 11 process. The union already has filed two lawsuits against three top UAL executives following a decision to cease funding employee pension plans. IAM also filed opposition to UAL's recent request for a sixth extension to the exclusivity period for filing a reorganization plan. The company has until Aug. 30 to file a plan but asked the court to extend that deadline by four months. "Terminating exclusivity would grant the official committee of unsecured creditors and other constituencies the realistic opportunity to explore alternatives without being held hostage to what appears to be an ineffective management team seeking to perpetuate an ineffective business model," IAM said in its filing. U.S. Bankruptcy Court Judge Eugene Wedoff, presiding over United's bankruptcy case, is expected to address these issues in the next scheduled court date on Aug. 20.
Delta's Cash Dwindles, Bankruptcy LoomsDelta Air Lines last week reported to the Securities & Exchange Commission that it had burned through $744 million in the first half of the year and that it plans to use cash reserves to pay "certain obligations that we previously anticipated would be paid from cash flows from operations." J.P. Morgan Securities analyst Jamie Baker said Delta's unrestricted cash balance at year-end could fall to $1.3 billion, a level he said is "about $300 million to $400 million below its 'magic number,' the point at which bankruptcy appears increasingly unavoidable." Delta last week saw its stock price reach a new low and Moody's Investor Service downgrade its unsecured debt rating. The carrier and its pilots union remain hundreds of millions of dollars apart in their negotiations on concessions. J.P. Morgan credit analyst Mark Streeter said, "Our best guess is that the Delta situation reaches a head in September, maybe October but not beyond." His estimated probability of Delta's Chapter 11 filing is 49 percent. The Benchmark Co. analyst Helane Becker last week was less optimistic, pegging at 80 percent the probability of a Chapter 11 filing by year-end.
Deluxe Hotel Turnaround Revs UpBattered the most severely of any lodging segment during the downturn, high-end hotels have staged the biggest comeback in the rebound. Four Seasons Hotels, for example, saw second-quarter revenue per available room jump 22.7 percent year over year compared with overall lodging industry RevPAR gains of 8.6 percent. Similarly, Marriott International's deluxe brand, Ritz-Carlton, outperformed other Marriott brands in the quarter, while Starwood Hotels & Resorts Worldwide's St. Regis chain outdid both Westin and W Hotels. J.P. Morgan analyst Harry Curtis attributed Four Seasons' RevPAR jump to increased demand from both business transient and high-end leisure travelers. Higher rated group business is starting to kick in as well.
Malaysia Airlines Eyes Alliance PartnersA top carrier in southeast Asia, Malaysia Airlines in the coming weeks is expected to announce which of the three primary airline alliances it intends to join. "You are at a disadvantage when you are not in an alliance with regard to special pro-rate pricing," said William Noonan, Malaysia Airlines southwest sales manager. SkyTeam appears a likely candidate as Korean Airlines is that group's only Asian carrier; Star Alliance already has All Nippon, Asiana, Thai and Singapore airlines. Oneworld also only has a single Asian member—Hong Kong's Cathay Pacific—but Malaysia already has an antitrust-immunized partnership with incoming SkyTeam member Northwest
(BTN, Nov. 6, 2000) and frequent flyer program links with SkyTeam founder Delta.