United Pilots to Picket PAR Capital, Altimeter Headquarters

[Seggy]

From the MEC Update.

United Pilots To Picket PAR Capital, Altimeter Headquarters

In recent weeks, rhetoric from investor groups PAR Capital Management and Altimeter Capital has posed new challenges for the pilots of United Airlines. These investors have made disturbing statements in an attempt to force many changes within United’s Board of Directors.


Our pilots have endured the corporate malfeasance of a structured bankruptcy by our employer and continuous challenges to our industry that have threatened our profession for more than two decades. Management has used opportunities of national crisis to attack our contracts and achieve, through the courts, what they could not secure at the bargaining table.


Thankfully, and due wholly to our past sacrifices, our situation has dramatically improved. Now is not the time for hedge fund minority shareholders to reward themselves at our expense. Now is the time for all stakeholders to benefit from continued reinvestment in our airline’s corporate infrastructure, customer experience, new aircraft, maintenance, training, IT, and improved contracts.


On April 6, 2016, United Airlines will celebrate its 90th anniversary. To mark this historic occasion, the United pilots will convene at the headquarters of PAR and Altimeter in the historic North End of Boston, Mass., - mere footsteps from the location of the Boston tea party of 1775 - and exercise our lawful right to picket. Please join us on April 6, 2016, at 1100 One International Place in Boston. Details from the MEC Strategic Planning and Strike Committee will follow.

Interesting times we are in...

 

[surreal1221]

Sadly I'll be flying but hopefully you guys will get a turn-out form non-UAL pilots. Good luck.

 

[hcaeborev]

Hmm, I live in Boston and am off. I may swing by and take a look/drop my resume off.

 

[mastermags]

Hmm, I live in Boston and am off. I may swing by and take a look/drop my resume off.

At United or PAR Capital?

 

[///AMG]

In other news, "Hi-TACAN Financial Group" is doing just fine…..

 

[ScorpionStinger]

I see this as a great networking opportunity... Hmmm

 

[jskibo]

I see this as a great networking opportunity... Hmmm

Bring a cake too!

 

[Maximilian_Jenius]

Bring a cake too!

Wrong airline!

 

[jskibo]

Wrong airline!

Good for any airline!

Unless you make really good gyros then bring those.

 

[Flying Saluki]

Investors have the right to push for changes in the board of directors. What are they protesting?

 

[Seggy]

Investors have the right to push for changes in the board of directors. What are they protesting?

The ultimate motive of these 'activist' investors.

 

[Ecl!pse]

The ultimate motive of these 'activist' investors.

Curious question, @Seggy - any specific motives or actions in particular that the pilot group is protesting, outside of the board nominations? From the public interviews/articles, it doesn't sound like these guys are typical "pump and dump" shops - sounds more like they are interested in backing Oscar to make sure he has the resources needed to turn things around. Could just be a facade - but I think there's been a lot of knee-jerk reactions solely off the "activist" name/connotation.

 

[Seggy]

Curious question, @Seggy - any specific motives or actions in particular that the pilot group is protesting, outside of the board nominations? From the public interviews/articles, it doesn't sound like these guys are typical "pump and dump" shops - sounds more like they are interested in backing Oscar to make sure he has the resources needed to turn things around. Could just be a facade - but I think there's been a lot of knee-jerk reactions solely off the "activist" name/connotation.

Of all people, Jim Cramer had a fantastic break down of the B.S. PAR and Altimeter are trying to pull here...

http://www.cnbc.com/2016/03/16/cramer-ual-activist-claims-are-ridiculous.html

Oscar has the resources he needs already. He has a great board now and is well positioned for success. Let me know what you think of what Cramer says, but in my mind he hits the nail on the head here.

 

[ScorpionStinger]

I've been following this since early march. I found the article which was very informative about old Continental chief Gorden Bethune's role in all this.

http://www.bloomberg.com/news/artic...ckholders-nominate-bethune-led-director-slate

"“You can’t be effective as one guy unless you come in as chairman,” said Bethune, 74. “I would not go, nor think about going in, just as a board member. I don’t need a job."

 

[typhoonpilot]

Cramer is looking at it from a "stock performance" angle. I think Bethune and gang are looking at different numbers.

2015 Net Income:

United = $4.5 billion
American = $6.3 billion before special items, $7.6 billion after
Delta = $4.53 billion

2014 Net Income

United = $1.97 billion before special items, $1.13 billion after
American = $2.9 billion
Delta = $2.8 billion before special items, $659 million after

2013 Net income

United = $1.084 billion before special charges, $571 million after
American = $1.95 billion before special charges, loss of 1.23 billion (not really fully merged until December, 2013)
Delta = $2.7 billion, $10.54 billion after special non-cash gain


Looking at the combined numbers after special items over the three years we have:

Delta = $15.729 billion net profit
American = $9.27 billion net profit
United = $6.201 billion net profit

So yea, I'd say United is lagging a little based on those numbers too.



Typhoonpilot

 

[Ecl!pse]

Of all people, Jim Cramer had a fantastic break down of the B.S. PAR and Altimeter are trying to pull here...

http://www.cnbc.com/2016/03/16/cramer-ual-activist-claims-are-ridiculous.html

Oscar has the resources he needs already. He has a great board now and is well positioned for success. Let me know what you think of what Cramer says, but in my mind he hits the nail on the head here.

Cramer brings up good points, especially on the timing of all of this. I think his opinion is a good balance to PAR/Altimeter - it goes to show how two financial "titans" can have vastly different opinions when looking at the same company. Clearly there's a disconnect in how they interpret the data.

I think PAR/Altimeter are looking to turn around the things that Typhoon started mentioning above. Looking at UAL's fundamentals -- compared to their peer set (AAL, DAL) for 2016, they are meaningfully trailing both AAL and DAL in estimates. For earnings -- they are projected to trail in total revenue, revenue growth (+ RASM growth), and should be in the middle for cost/CASM growth. This combo will mean they will trail the other two in margins (cash margin, operating margin, and net margin). On the balance sheet, they have the 2nd highest debt load after AAL, so that will continue to eat into future earnings and cash flows.

Combined, all of this means that for every dollar invested in UAL - debt and equity - they are generating less in returns than AAL or DAL. I think PAR/Altimeter will work with/want Oscar to continue making changes that address these fundamental issues, rather than some financial engineering scheme to load up on debt and flush it back out to shareholders. AAL has already proven that massive buybacks alone won't get you any premium in share prices or trading multiples.

 

[NovemberEcho]

Well, seeing as how monkeys are better at picking stocks than Wall St. stock brokers, they're all probably wrong.


http://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/#36e6e35c6e8b

 

[Seggy]

Cramer brings up good points, especially on the timing of all of this. I think his opinion is a good balance to PAR/Altimeter - it goes to show how two financial "titans" can have vastly different opinions when looking at the same company. Clearly there's a disconnect in how they interpret the data.

I think PAR/Altimeter are looking to turn around the things that Typhoon started mentioning above. Looking at UAL's fundamentals -- compared to their peer set (AAL, DAL) for 2016, they are meaningfully trailing both AAL and DAL in estimates. For earnings -- they are projected to trail in total revenue, revenue growth (+ RASM growth), and should be in the middle for cost/CASM growth. This combo will mean they will trail the other two in margins (cash margin, operating margin, and net margin). On the balance sheet, they have the 2nd highest debt load after AAL, so that will continue to eat into future earnings and cash flows.

Combined, all of this means that for every dollar invested in UAL - debt and equity - they are generating less in returns than AAL or DAL. I think PAR/Altimeter will work with/want Oscar to continue making changes that address these fundamental issues, rather than some financial engineering scheme to load up on debt and flush it back out to shareholders. AAL has already proven that massive buybacks alone won't get you any premium in share prices or trading multiples.

First, they are projected numbers. I doubt those projections have taken into consideration what we are doing out of SFO with our hub there and the renewed plans.

Secondly, it may not be bad to carry a higher debt load. There are a lot of factors such as interest rates, what the debt is used for such as new aircraft acquisitions, more efficient ground equipment orders, etc. that really can turn the debt into an asset.

Thirdly, why did PAR/Altimeter wait until NOW to bring all this up? Why weren't they crying foul a year ago when Jeff was in control?

 

[Ecl!pse]

First, they are projected numbers. I doubt those projections have taken into consideration what we are doing out of SFO with our hub there and the renewed plans.

Secondly, it may not be bad to carry a higher debt load. There are a lot of factors such as interest rates, what the debt is used for such as new aircraft acquisitions, more efficient ground equipment orders, etc. that really can turn the debt into an asset.

Thirdly, why did PAR/Altimeter wait until NOW to bring all this up? Why weren't they crying foul a year ago when Jeff was in control?

Projections may or may not be based on the SFO changes, but they should be relatively close to management's guidance. And unfortunately, it goes beyond 2016 estimates - 2016 was the simple example I used, but the numbers hold for 2013, 2014, and 2015 -- all metrics were below peers.

Agree completely that higher debt load in and of itself isn't bad. Like it or not, though, the market today seems to reward airlines with lower debt burdens than higher debt burdens -- see ALK/DAL multiples vs. AAL/UAL multiples. Debt itself isn't the sole culprit for lower multiples, but it's a consistent factor.

I also agree on the conspicuous timing - it's odd that now is the time for this. The only rationale I can come up with is they want to keep everyone (i.e. the Board) laser focused on continuing to improve things, and not give the management a free-pass during Oscar's recovery.