View Full Version : Let's All Jump on Uncle Sam's Gravy Train!

The Guvnor
5th Oct 2001, 23:25
From Speednews... only in America!!


The Airline Suppliers Association recently solicited the US government for economic relief to the critical, but often overlooked, aspects of the nation's air carrier infrastructure, specifically the suppliers of aircraft parts, and repair stations that maintain aircraft.

With the recent problems in the air carrier world, cash-flow for ASA members has evaporated. The ASA expressed the urgent need to keep this vital infrastructure alive and in business, and cited these possible
legislative changes:

-Make SBA economic disaster assistance loans available to aviation industry companies

-Make loan guarantees available to the aviation industry through the Economic Development Agency

-Provide temporary accelerated depreciation for aviation industry capital equipment

-Enact a seller's exclusion that precludes product liability actions against aviation industry companies that are not involved in the design or manufacture of aircraft or aircraft parts

For statistics on the damage done to the industry, information on ways to support the industry, or more information on the needs of the industry, e-mail: inf[email protected] or visit http://www.airlinesuppliers.com

In related news.....

CAP (Coalition of Airline Providers) was formed by Florida aviation companies to lobby for state and federal assistance for US airline maintenance, repair and service industry; it expects 30,908 Florida jobs
could be lost due to September 11 events in US, and estimates 23% (340 companies) of Florida's aviation businesses could go bankrupt or close.

Next, it will be the Airline Passenger Lobby Group who will be claiming billions for not being able to travel when the US skies were closed; and who will doubtless claim that they are being inconvenienced now due to all the extra security, plastic cutlery, etc etc!

:eek: :mad: :eek:

6th Oct 2001, 02:26
Hey Guv;

Your point is what? Should the U.S just let the aviation industry go out of business? With over 110,000 layoffs in the past 3 weeks, and the ripple effect downwards to the poeple who clean the planes, bring food on the planes, fuel the planes, put luggage on the planes, I'd have thought this was a positive development as opposed to a negative one.

Apparently, with the U.S government doing the right thing, this isn't exactly the way you see it. All I want to know is what exactly should the U.S government have done or do in your opinion?


[ 05 October 2001: Message edited by: whatshouldiuse ]

The Guvnor
6th Oct 2001, 02:43
In short, it should do nothing. Zip. Nada. Nix.

Why? It's called Darwinism - survival of the fittest. Those companies knew that there was a recession around the corner and should have planned accordingly. Of course, no one could have forecast the events of the 11th September, but all that that has done has hastened the process somewhat.

Instead of saving for a rainy day - which incidenatally has come around with great regularity every ten years or so - they went on spending sprees; acquiring competitors and packages of spares that were being dumped by airlines.

Now they have come, cap in hand, to Uncle Sam. If they are given handouts, then it's like not punishing a child for wrongdoing - they won't learn from their mistakes and will assume henceforth that there will be a government safety net.

Let me give you two examples of companies in the spares business. One is Kellstrom, which has been shaky for nearly two years now yet still tries to buy its way out of trouble. They have no real cash reserves and have been steadily laying off staff over the last year. Instead of paying millions of dollars for luxurious new offices in Fort Lauderdale, they could have been consolidating their position and acquiring packages of spares for aircraft that would continue to fly in a recession - instead of going out and getting still more early generation packages.

At the other end of the spectrum, you have The Memphis Group. This major player is family owned and controlled - and boy, is John Williams fiscally cautious! They have built up more than sufficient reserves to tide them over and indeed are starting to look around to see what bargains are out there.

Add to that that the provision of subsidies is illegal under international law (the WTO gets rather interested in it) and whilst politically it might be a votewinner at home, internationally - end long term domestically - it does the US no favours at all.


After writing this, I found this most interesting and relevant article on Fortune.com:

Although Jerry Greenwald isn't CEO of anything right now, he is better placed than anyone to judge the government's $15 billion bailout of the airline industry. In the late '90s Greenwald ran United Airlines; before that he was vice chairman of Chrysler, where he negotiated the 1979 government rescue of his crucial but stricken company. He says it was the government's tough love that reshaped Chrysler into a world-class, highly profitable automaker. In exchange for $1.2 billion in loan guarantees, the government got concessions from Chrysler, as well as warrants that it ultimately sold for a $300 million profit.
Greenwald shudders when he compares Chrysler's rescue with the no-strings-attached airline bailout.

"The federal government put us under tremendous pressure to create a strong operating plan before we got the money," he says. "Every constituency kicked in--the unions and management with pay cuts, suppliers with lower prices, banks by rescheduling loans. The government should have required the airlines to create a tough-minded operating plan showing how they would pay back the taxpayers' money."
Washington could yet decide to get tough. Although the airlines are getting $5 billion in cash with virtually no restrictions, a blue-ribbon panel that includes Fed Chairman Alan Greenspan has the authority to impose conditions on up to $10 billion in loan guarantees. Without such discipline, worries Greenwald, the airlines could absorb the funds, fiddle instead of reform, then file for bankruptcy. "The government risks throwing good money after bad," he says.

Everyone agrees that the airlines needed a quick infusion of cash. But while the industry can rightfully blame terrorists for its descent into crisis on Sept. 11, it can only blame itself for being so financially vulnerable on that date. This is a business whose binge-purge cycles date back approximately to the Wright brothers. When times are good, its captains of industry accumulate planes and load on debt. When times are bad, they plead for antitrust relief so they can dominate their hubs even more completely than they already do.

Since Sept. 11, times have been desperate. Many planes are flying at less than 50% of capacity. Passengers and pilots are edgy; one pilot on a flight from New York to San Francisco introduced himself to his passengers, told them to look at his face and listen to his voice--and to "take out" anyone else who issued orders. David Neeleman, the CEO of JetBlue, a discount carrier, predicts that by next summer, traffic will be just 80% of normal. Asked if 80% would be enough to keep the airlines in business, he said, "Oh, no. A lot of these carriers operate at 3% margins or minus 5% margins, so they won't make it." Even with a bailout, the weakest majors, US Airways and America West, may go bankrupt. Some industry experts say the government might now permit United to take over US Airways, but Michael J. Boyd, a Colorado aviation consultant, is skeptical. "Who wants to merge the Andrea Doria with the Titanic?" he asks. "I see every airline in trouble."

In return for taxpayer money, the government could have required the airlines to restructure their hubs to encourage more competition and resolve the bitter labor relations that have plagued them--and their passengers--for years. Instead, one of the package's few conditions says top executives must forgo raises for the next two years, a meaningless gesture that would enable US Airways Chairman Stephen Wolf to collect as much as $11 million a year, the amount he made last year.

The post-bailout industry will likely be dominated by a few surviving majors saddled with more debt and even higher costs. Ticket prices, particularly for business travelers, seem likely to rise substantially to cover the airlines' ever-increasing labor and interest expenses. "I fear an industry with far fewer airlines and far higher prices," says Kevin Mitchell, head of the Business Travel Coalition, an industry group that represents corporate travel managers. The biggest danger is that the government will regulate prices or grant antitrust exemptions to ensure the airlines' survival. And don't rule out more subsidies. Robert Crandall, the former CEO of American, worries that the rescue package isn't large enough. "At a subsequent time," he says, the airlines may need "another infusion or more loan guarantees."

The terrorist attacks came at the worst possible time for the airline industry, which was flying into a full-blown economic downturn even before Sept. 11. During the mid-1990s, the airlines had embarked on one of their most prosperous periods in history, earning a total of $23 billion between 1995 and 2000. But--and this demonstrates why the airlines are such a lousy business--even in that roaring market, the industry managed a return on capital of only 8%, vs. 10% for autos and 12% for computers.

The airlines' returns suffered from large interest payments on a mountainous debt load--$30 billion, about equal to the industry's total equity. The carriers are also hostage to some of the worst labor-management relations in business. Because a strike is so devastating--a one-month walkout by pilots can wipe out a year's profits--airline executives can effectively be held up by their powerful unions. "The consequences of a strike in a major hub are so huge that there's no way an airline can take one," says Delta Chairman and CEO Leo Mullin. As a result, pilots for major carriers are some of the best-compensated employees in America.

Up, Up, and Away
High pilot salaries are forcing up ticket prices, particularly at the major carriers.

Airline - No. pilots - Max. pilot salary - Flight hrs/month(avg.) - All labor as a % of expenses - Cost/seat mile*
United - 10,682 - $290,000 - 80 - 40% - 11 cents
US Airways - 5,941 - $279,000 - 82 - 39% - 14 cents
Delta - 10,037 - $262,000 - 78 - 40% - 10 cents
American - 11,625 - $206,000 - 74 - 36% - 11 cents
Continental - 5,277 - $199,000 - 82 - 34% - 10 cents
Southwest - 3,754 - $148,000 - 85 - 40% - 8 cents
Frontier - 330 - $115,000 - 77 - 24% - n.a.
JetBlue - 177 - $96,000 - 80 - 31% - n.a.
American Eagle - 2,700 - $81,000 - 80 - 21% - n.a.

*Cost of flying one seat (empty or full) one mile.
n.a. Not available.

[ 05 October 2001: Message edited by: The Guvnor ]

6th Oct 2001, 10:23
Hate to say it, but have to agree with guv in part anyway, these gubmint handouts should come with some sort of requirement to establish fiscally responsible practices at the airline...Southwest shining example of proper management....don't hear them crying too loudly...and the employees are well paid for their work as well...crew salaries are a part of these problems yes, but poor management at the airlines for years and years are mostly to blame...

6th Oct 2001, 11:40
In fairness to Guv he's been whittering on about the forth coming down turn within the airline industry for some time now, something I have been in total agreement with.

The events on the 11th sept have exasperbated an already fairly dire situation, just look at the problems some of the european airlines are facing now, most were struggling prior to the 11th.

Unfortunatly Uncle Sams bail outs have been seen by some euro outfits as a green light to go cap in hand to their respective governments (Swissair & Sabena) with no doubt more to follow. The end result could well be that the astutely managed airlines with no access to government funds will struggle to compete, hey presto back to the 60's & 70's in one fell swoop. The most irritating thing is it's my (taxpayers) money that will be used to bail out the extremely badly managed "state" golioths at the expense of some leaner operations. I do appretiate that the situation in the USA is exceptional but bottom line is the fittest will survive.
I think the US government should instead be encouraging people to carry on with their normal lives, at the moment the terrorists must think they've managed to bring the US economy to it's knees. From the european perspective it is only just becoming apparent to some how dependent we all are on a strong US economy.

Guv, this does not mean however that I agree with some of your more ludicrus statments on this board. :D Nearly there now(3000) :eek:

[ 06 October 2001: Message edited by: wooof ]

6th Oct 2001, 12:47
You could make a killing out of this Guv, apply to Uncle Sam for compensation along the lines of "a down-turn in pax numbers, due to lack of security at US airports, has finally killed-off long-term plans to start a Trans Atlantic airline, which would bring employment to an economically disadvantaged part of the UK!" Same approach might work with Brussels, substitute Eu for UK in the wording. :D :D :D

6th Oct 2001, 13:16
Nearly fell off my seat. Guv has issued some sense.
Yep, where will it end. And as mentioned it is'nt restricted to the US.
I find the Belgium governments fiscal support, be it loans or otherwise, given under the auspisice of emergency funding totally against fair economic principals. This going against the outlines set out by the EU for govenment funding of Airlines. Sabena has been terminal for some time now, and with its benefactor SwissAir now also in trouble, does this give the government carte blanche to support a dead cause to the detriment of other more financially sound european operations. I think not.
This principle, I believe, should be allowed to progress through the second and third tier US airline support industry. Not discounting AWA and other sick ducklings as primary candidates for serious restructuring or replacement. A bitter pill to swallow indeed, and only exacerbated by the current climate. The trough will be followed by a rise, as always, and the much needed corrections will inevitably be made to the industry.
Before anyone rips my head off for these remarks, I might just add that I am one amongst your number who as of the 23rd knows exaclty what this feels like....But it IS necessary.
Well said Guv and Woof.

6th Oct 2001, 13:20
"Why? It's called Darwinism - survival of the fittest "

Then Guv you should get your affairs in order. Winter is coming and scores of old farts like you buy the farm at this time of the year.
You know, there was a black mustached very jumpy little fellow who spoke wizz a stttrrrange accent all those years ago. Can't remember his name but it'll come back to me. Not sure but I think his first name was Adolf, but I'll have to check. Anyway, he went along the same ludicrous lines.
Guv, my blessed puppie, my experience in life is that it is old and grumpy men like you who end up on their knees crying their heart out when donk hits the fan. So please, do use " survival of the fittest" with the upmost humility and wisdom !!

Absolutly, pilots are responsible for this catastrophe, they even plotted it with the help of Bin Ladden just so they can get laid off.
Pilots represent 10 % of the costs ?? Slash their salaries by ...........let me see, Ok !!! 80 % !!! Let's not be shy !! How much are you saving on your total costs ???Keeping my ears on the ground
CEO's are taking advantage of this crisis to get money from Uncle sam, spank the pilots and point their fingers at them. It's pay back time for all the years of shinning greed and arrogance on their part, is it not Guv ?
You know, you might think of pilots as being arrogant bus drivers, but lower the salaries, turn the already demanding working condition to even tougher ones, who do you think you will get at the helm in the end. There is a very delicate balance where the insurance man comes in because, sorry to brutalize you my love, no CEO has ever had to act in order to save an aircraft.
The backbone of an airline is, like it or not, its safety record and its reputation and pilots, who by the way are responsible of 80 % of accidents, are precisely here to ensure that. Get my drift ? That is worth some Euros Guv.
You may be a twitt, but a very entertaining one. Don't forget your hot water bottle.
See Ya

[ 06 October 2001: Message edited by: wallabie ]

[ 06 October 2001: Message edited by: wallabie ]

6th Oct 2001, 13:55
Wallabie, I think its high time you opened your eyes. Guv has hit the nail on the head. I work for a european based outfit, and can tell you one thing for sure: myself & a lot of my colleagues are highly annoyed with the whole SR/SN affair. Why on earth should they get a special deal? SN has been a disaster for 80-odd years (they made a profit ONCE if I remember correctly). SR with its SFR17bn debt got exactly what it (its management) deserved.
We're cost-cutting/saving like never before; everything is under scrutiny - no sacred cows. Makes me wonder if we've got it wrong...shouldn't we just go cap in hand for a hand-out?
AZ next is my guess.

Darwinism? of course.

6th Oct 2001, 15:19
Instead of being

6th Oct 2001, 18:57
Some government help in the order of airline loan guarantees maybe, "war risk" supplementary insurance guarantees...OK. But just handing out $5 Billion in "free" cash is unprecedented taxpayer fraud. Especially troublesome is the overt airline management abuse at semi bankrupt USAir, where the likes of top dog Steven Wolff and his gangster management team have pocketed $ Millions in salary and bonuses. Master thief Wolff alone had pocketed over $11 Million Dollars last year! Lots of tickets have to be sold to cover Eleven Million Dollars. It's a total disgrace. :(

6th Oct 2001, 20:03
Hey Guys;

Let me clarify something here first. Out of the $15 billion, $11 billion is in loans which are repayable.

Having said that, the US is still $4 billion in arrears. What would Europe and the rest of the world want us to do? Get rid of these airlines eliminating much needed jobs which I see is a prevalent factor on this board, or try and jump-start the airlines back to profitablity?

Let's face it folks, we've seen Swiss Air, Air Italia, British Airways, BMI etc just to name a few who have dismissed pilots, flight attendants, ground crew and many others because their respective governments wouldn't step up to the plate.

While I don't support the U.S govt. involvement on this, I totally understand why they are doing it...and that is to preserve the livelyhoods of all the people in the U.S aviation industry. What is so wrong with that?


[ 06 October 2001: Message edited by: whatshouldiuse ]

The Guvnor
6th Oct 2001, 20:12
Simple! They are obviously overmanned, otherwise they couldn't lay off so many staff - they would need them. The fact that they can lay off thousands and cut routes so quickly after the 11th is indicative of their bloated operations.

Furthermore, American Airlines - the recipient of one of the largest amounts of government handouts - is apparently looking at buying Sabena! Strange, that, don't you think? :eek: :rolleyes: :eek:

So no, I still don't think that the US government should do anything to assist them. Let them sink or swim. It's a lesson to all of us.

6th Oct 2001, 20:30
Hey, Guv, don't forget that the Yanks abandoned Darwinism in favour of Creationism. Now the seem to be dropping that for Protectionism - we've been seeing it on a legislative level for years (flagging-out, service rights etc), now we're seeing it on a more blatent financial level. Some help is warranted, but this much?

7th Oct 2001, 10:07
Ok, sure. We, as americans, should simply let our own airlines crumble due to a momentary lapses in traveler confidence so the foreigners can come in and take over. Sounds like a great plan for us!

7th Oct 2001, 10:51
cack to the lab alchemy....the airlines are not suffering ONLY because of sept 11th, it also has a lot to do with fiscal irresponsiblity on behalf of the managers who "run" these airlines....no, let's not let it collapse, but let's make sure this is the LAST bailout.

7th Oct 2001, 13:47
The company in the UK that is responsible for the repair and maintainance of the UK rail network, Railtrack, has run out of cash.

Without Railtrack, there will be no one to man the signals, no one to check the track and no one to carry out repairs. Even if the train operators in the UK, Virgin for example, could continue rail operations, it would only be a matter of time before rail safety would be greatly affected and the network would descend into chaos.

It is expected today (Sunday) that the UK Government will 'rescue' Railtrack and return it to state control.

Why are the large air carriers so different? I appreciate that mis-management and over expansion in our industry has led to to the requirement for a reduction of capacity, but if the large airlines are allowed to run out of cash and go out of business, who is going to replace them when things do start to return to normal? Some bloke from Scotland with a fleet of sand filled L1011's? I think not.

The Guvnor
7th Oct 2001, 13:54
There are a few fiscally responsible airlines around - and they will be the ones to survive. It's ironic, but you may well see KLM now acquiring BA! :D :D :D

Railtrack is a monopoly - if it goes, the entire rail system grinds to a halt. At the last count, there are over 200 airlines in teh UK of various sizes.

7th Oct 2001, 18:52
Just one question folks as I sense a HINT of contradiction on this thread.
Do I understand that those of you in favour of " suriving of the fittest " are themselves just about to be laid off, or have been already laid off but are soooooooooooooooo much into their capitalistic orthodoxy or dare I say fundamentalism that they are themselves ready and willing to be axed just so as to go like martyrs. we've seen that before , haven't we Oussama ?
If that's the case my advice is: Get out of the house and go get laid. You'll feel much better afterwards.
If not, why don't you close your mouth and get on with whatever you should be doing while people are trying to pick up the remains of their lives.
Guv, you and your lot seem to forget that those responsible for this blatant mismanagement still keep making piles of money holding other corporate positions while the vast majority will have do get on with life and look for a job when there are none.
I don't give a donk about " surviving of the fittest " when so many people are going to be hit. Good God Guv !! or should I call you Scrooge ? Get hold of yourself !
So the Swiss, actually Mr Brugissier ( who left with enough money to take to his grave ) stuffed up big time, so what !!??. Why on earth do you have to dance woola hoop over Swissair or Sabena pilots you don't even know losing their position ?

[ 07 October 2001: Message edited by: wallabie ]