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Aviation History
2002
2002 - 3552.PDF
PEOPLE • Former IBM chief executive Lou Gerstner is to succeed Frank Carlucci as chairman of the Cariyle Group, the US pri vate equity firm. Carlucci will become chairman emeritus. • Asa Hutchinson is to serve as under-secretary for border and transportation security in the newly created US Department of Homeland Security. Hutchinson, currently head of the Drug Enforcement Agency, will report to the new homeland security secretary, Thomas Ridge. Also appointed was Ridge's deputy, Gordon England, a former vice-president of General Dynamics currently working as secretary of the navy. • Vice-Admiral (retired) Thomas Wilson, formerly direc tor of the US Defense Intelli gence Agency, has joined ATK as president of the newly formed ATK Missile Systems division. • Choong Hoon Cho, founder and chairman of Korean Air's parent company Hanjin Group, has died aged 82. His eldest son, Korean Air chairman Yang Ho Cho, is expected to inherit his father's role. • Unison Industries, a GE Engine Services subsidiary, has named Michael Sanders as VP engineering. • Northrop Grumman has added Charles Noski, formerly vice chairman of AT&T and Admiral (retired) Charles Larson, USN, to its board of directors. PRODUCTION Sokol starts Airbus trials Sokol has begun "trial production" of Airbus components at its plant in Nizhniy Novgorod, Russia. Airbus chose Kaskol, a private investor with 38% in Sokol, as its main Russian partner, signing a deal on 21 May, 2001, to develop Airbus A318. A340 and A380 parts production. Kaskol holds 41 % of landing gear specialist Hydromash, which is also part of the deal. Sokol makes and upgrades RSK MiG-29 Fulcrums, MiG-31 Foxhounds and Mikoyan MiG- 21 bis fighters, Myasistchev M-101T business turboprops and Yakovlev Yak-130 jet trainers. BUSINESS FINANCES Fairchild Dornier seeks political wi Creditors for bankrupt Fairchild Dornier, meeting this week, are being told that German politicians hold the key to the airframer's sur vival. "The ball is now on the German side," says Irkutsk Aircraft Production Association, part of a Russian consortium which aims to buy the company. Says a Fairchild Dornier source: "For the Russian bid to be taken seri ously it is critical to have support from the political and economic cir cles in Germany and we are now working on it." Administrator Eberhard Braun has previously said that he wants the company to be operational again by 1 January. FINANCES DAVID FIELD / RIO DE JANEIRO United holds breath as it crawls back from brink The airline will soon learn whether it has escaped Chapter 11 bankruptcy protection United Airlines should know this week if it has successfully dodged Chapter 11 bankruptcy protection. A $375 million loan payment is due this week, and a decision from the Air Transportation Stabilization Board on the federal guarantees for a $1.9 billion loan package is expected within two weeks. Speak ing at a Star Alliance board meeting in Rio de Janeiro last month, United chief executive Glenn Tilton said "the first week in December is very important for us". United is likely to post a full-year loss of between $2.5 billion and $2.7 billion, but its current cash burn rate is $5-7 million a day due to an "uptick" in revenue in late October. United's fourth quarter daily cash burn rate had been esti mated at more than $7 million. But some positive signs are emerging. Tilton says the "disincli nation phenomenon" that has crimped business travel is weaken ing and some regions are perform ing slightly better then predicted. United's home territory of the US Midwest has performed "quite well" recently, and its routes to and from Chicago O'Hare have been "better than previously forecast". Tilton says United's cash balance "has recently grown to exceed fore casts" and is now "well in excess" of $1 billion. As of 30 September, United's cash balance stood at $2 billion, including $344 million in restricted cash. He says a balance that reached an unspecified "inflec tion point" would likely lead to fil ing for Chapter 11 bankruptcy. Glenn Tilton: positive signs Tilton estimates the carrier will be cash-positive in 2003 and post a net profit in the first half of 2005. United now has all of its major labour groups signed up for cost sav ings, although final ratification by the various memberships is needed. The $1.5 billion in concessions granted by the machinists adds to $2.2 billion agreed by pilots, $1.3 billion from salaried and manage ment workers, $412 million from flight attendants and an unknown but smaller amount from flight con trollers and meteorologists, for a $5.4 billion package. JP Morgan's Jamie Baker questioned the estima tion, saying it was "short by several hundred million dollars". In August, United said it needed labour concessions of $9 billion over six years, but the two biggest unions balked and a coalition later produced a proposal of $5.8 billion over a slightly longer time. United is in talks with aircraft lenders to restructure lease pay ments out of the bankruptcy court. A group of global banks is working on a refinancing plan for about $7 billion in leases. This could yield up to $150 million for the airline. Talks are being held with up to five debtor-in-possession (DIP) fin anciers for $2 billion in financing if United decides to file for Chapter 11 protection. According to Tilton, United had more than $3 billion in unencumbered aircraft assets that could secure DIP backing at the end of the third quarter. It also has routes rights to London Heathrow and across the Pacific, most acquired from the defunct Pan Am. Tilton says discussions are being held with Star Alliance members over ways they could provide aid. Tilton says he has "some commit ment" from unnamed Star airlines to supply, back or arrange as much as $200 million in loans. Lufthansa, which recently increased its transat lantic co-operation with United in a revision that could bring as much as $90 million more to United, is con sidering other ways to aid the air line, Lufthansa chairman and chief executive Jurgen Weber says. Air Canada chief executive Robert Milton says other Star members are contemplating ways to help United. DAVID FIELD IS AMERICAS EDITOR OF FLIGHT INTERNATIONAL'S SIS TER MAGAZINE AIRLINE BUSINESS 28 3-9 DECEMBER 2002 FLIGHT INTERNATIONAL www.flightinternational.com
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