May 20, 2004
Increased Oil Prices Jeopardize Recovery in
Airline Industry
Higher fuel prices threaten to wipe out
the progress U.S. airlines have made toward financial recovery just as
they are emerging from three of the industry's most troubled years, the
Wall Street Journal reported. While
passenger traffic has been improving and many carriers have cut
expenses, those moves will provide only partial help. If crude-oil
prices hold above $40 a barrel U.S. airline-industry losses could exceed
$5 billion this year, says UBS Warburg analyst Sam Buttrick. That's
double his current estimate and just slightly less than last year's loss
of $5.6 billion, he said, the online newspaper
reported.
Air Canada, Union To Meet One Last Time On
Cuts
Air Canada and the Canadian
Auto Workers union will meet in Toronto one last time today to try to
reach a deal on cost-savings, Reuters reported. Ontario Supreme Court
judge Warren Winkler ordered the meeting, to be held at a Toronto after
talks collapsed on Wednesday to reach an agreement on cutbacks needed to
salvage a financing deal crucial to pull Canada's biggest airline from
bankruptcy. The union, which represents 5,900 customer service
employees, failed to reach an agreement over its share of a C$200
million cost-cutting effort that the insolvent carrier is demanding from
its employees. Air Canada needs its unions to agree to cuts to secure
the backing of Deutsche Bank AG to underwrite a C$850 million rights
offering to creditors, the newswire reported.
Ex-Enron Official Pleads
Guilty
A former top official in Enron Corp.'s investor relations unit yesterday
pleaded guilty to a criminal charge of insider trading and settled a
related civil complaint, giving investigators another witness in their
probe of the company's former leaders, the Washington Post
reported. Prosecutors said Paula H. Rieker made $629,000 by selling
18,380 shares of the Houston energy company's stock in July 2001 shortly
after she learned that Enron's Internet broadband unit was about to
announce enormous losses. Rieker also 'aided' unnamed Enron executives
in dispensing phony information to analysts about the company's
financial condition for the first half of 2001, according to court
papers filed by the Securities and Exchange Commission, the newspaper
reported.
Kaiser's Mead Smelter Sale
Gets Nod But No Restart
Bankrupt Kaiser Aluminum Corp. said Wednesday it won
court approval to sell its smelter in Washington state to Commercial
Development Co. Inc., an asset management firm that does not intend to
restart primary aluminum production at the plant, Reuters reported. The
Bankruptcy Court for the District of Delaware approved the plant's sale
in a hearing on Tuesday, Jack A. Hockema, Kaiser's president and CEO,
said in a note to customers, suppliers and employees. Terms were for
cash proceeds of around $7.4 million, a spokesman for Kaiser Aluminum
told Reuters.
Sealed Air Rating Not
Affected By Court News
Standard & Poor's Ratings Services said today that
Sealed Air Corp.'s ratings and outlook are not immediately affected by
news that the federal judge who was overseeing the W.R. Grace bankruptcy
case has been removed, in a decision ruled by the 3rd U.S. Circuit Court
of Appeals, following a petition filed by certain creditors, the agency
announced in a statement. Standard & Poor's will monitor
developments to evaluate the impact of the judge's recusal on timing or
terms of the settlement agreement.
Delta Names New Team To Turn Airline Around
Delta Air Lines Inc., which lost its top three
executives earlier this year, on Wednesday announced a new leadership
team to help the struggling airline regain profitability, Reuters
reported. Members of the team will report directly to CEO Gerald
Grinstein, who took over the top job on Jan. 1 from former CEO Leo
Mullin. Grinstein has said Atlanta-based Delta can avoid a bankruptcy
filing but it needs a minimum 30 percent pay cut from pilots. The
carrier said it appointed Vicki Escarra as chief customer service
officer, Joe Kolshak as chief of operations, Lee Macenczak as chief
human resources officer and Paul Matsen as chief marketing
officer.
US Airways Wants More Concessions
Financially struggling US Airways Group Inc. is seeking
$800 million in additional concessions from workers and wants to have
the agreements in place by the end of September, executives from the
airline said yesterday, the Washington
Post reported. The cuts in pay and benefits would come on top of the
$1.2 billion in concessions workers gave during the airline's bankruptcy
reorganization. Most of the airline's labor leaders have said they would
not agree to any more hardship for the rank and file, according to
the Post.
American Air CEO Named Chairman, Warns On
Fuel
The chief executive of American Airlines parent AMR
Corp., Gerard Arpey, was named to the additional post of chairman on
Wednesday and he warned that record high oil prices were creating
problems for the carrier, Reuters reported. 'If not for fuel, we would
have been building a lot more momentum,' Arpey said at a press
conference. Despite the drag on its finances from fuel prices, he does
not see the airline turning away from a restructuring plan announced a
year ago that was aimed at cutting costs. Airlines have been warning for
months that soaring jet fuel prices are eroding their bottom lines.
Analysts say that this threatens the industry's chances of turning a
profit this year, the newswire reported.
Global Crossing Gets Bridge Financing
Global
Crossing Ltd. secured as much as $100 million
in bridge financing from Singapore Technologies Telemedia Pte., its
majority shareholder, the online Wall
Street Journal reported. The fiber-optic network operator, which
faces a delisting from the Nasdaq Stock Market because of an accounting
review, will use the financing for business operations. Under the loan
facility, which matures Dec. 31, the company may borrow over several
months. Global Crossing emerged from bankruptcy protection in December
2003, but announced last month that poor internal controls had led it to
underestimate costs of accessing other telecom networks, according to
the online newspaper.
HealthSouth Creditor Groups Reject
Bid
A majority of two groups of
HealthSouth Corp. creditors today rejected as inadequate the company's
offer to pay noteholders in exchange for waiving a default from last
year, Reuters reported. The Birmingham, Ala.-based company needs consent
from a majority of each group of its noteholders to avoid default. A
default could eventually force HealthSouth into bankruptcy.
face='Times New Roman' size='3'>The company received consents from two
such groups last week. HealthSouth is offering $13.75 per $1,000 in
principal amount to bondholders. The rejection, by a majority of the
holders of HealthSouth's 6-7/8 percent senior notes due in 2005 and 7
percent senior notes due in 2008, could ensure that the default that was
incurred last year under the company's credit facility is enforced, the
newswire reported.
U-Haul Parent Amerco Complying With SEC Subpoenas
Amerco Inc., the parent of
truck renter U-Haul International Inc., on Wednesday said a bankruptcy
court ruled it has jurisdiction over potential U.S. Securities and
Exchange Commission (SEC) claims, and that Amerco had as of April 21
complied with SEC subpoenas, Reuters reported. In early March, the SEC
filed a subpoena to force Amerco to produce documents related to a
year-old investigation into possible securities law violations. Later
that month, Amerco emerged from chapter 11 bankruptcy protection. U-Haul
did not file for chapter 11, the newswire reported.