UAL on Deathwatch [Archive]

Ignition Override

16th Feb 2003, 20:51

Folks, just two simple, objective questions here. Aside from United's problems, is it not true that during that infamous summer, United's pilots decided to fly only their planned monthly schedules, and not volunteer to fly extra? I know nothing about their MEC's other decisions, whether considered reasonable or not. But there is evidence that they warned mgmt numerous times about a worsening staff shortage problem, to no avail.

Are your days off yours, or are they are not? Excluding pilots on reserve/standby, whose contracts sometimes allow them to be drafted for extra flying on a day off.

This is just a simple question, and if my airline asked me to fly an extra one-day trip on a certain weekend (or two?) which I had bid around, in order to spend it with a young family member who will be gone to college in a few years, then my decision is not difficult to imagine. Anyone who claims that any days off should be 'fair game' for an employer is either insincere, or should not be involved in business decisions, at least outside of Iraq.

Under-staffing has been the nature of operations for many years at FEDEX and Southwest, in order to reduce the need for extra pilots, which cost more than paying somebody an extra "trip" or one and a half times the normal pay rate as incentive. This extra flying is supposedly the only way that the newer SWA pilots can find any money for their retirement funds.

Shore Guy

17th Feb 2003, 09:09

Bumper stickers in DEN:

FULL PAY TILL THE LAST DAY

No wonder theyr'e in so much trouble. Yes, there have been some incredible blunders by management. But they are up against the wall and it is time for action, not bickering and infighting. I just can't believe how fast the wheels are coming off UAL.

It is time for STRONG Leadership. If I were Tilton, I would gather the union heads in a room, say this ($) is what we need, and let them work it out or the lights go out. Simple.

Max Angle

17th Feb 2003, 12:59

IMHO there is little doubt that UAL is history in it's current form. There is no way back from the situation they are in. A good proportion of the operation may end up being split into different companies but UAL as we know it today has had it.

A-V-8R

17th Feb 2003, 15:14

Ignition Overide....

You are correct in your comments about the staffing problems during the summer of love......

We have (had) kind of a funny pay situation here up till the furloughs.....

You were paid a guarantee of 75 hours, Reserve or lineholder.

You could fly, in any one month, up to 83 Hard Hours domestic, and 85 Hard Hours domestic. This was waived for carry in's, that portion of a trip that starts near then end of the month and carries into the new month.

(For those who don't know, Hard Hours are what you actually fly, Soft hours are pay that you are given for extensive layovers, where you are forced to stay at a hotel or field layovers. When I was on the 737, some days scedules us only one leg, but we were guaranteed 5 hours credit time. )

Now, credit time was virtually unlimited. If you were like me, fairly senior on the 767, you could either pick up overtime to 85 hours or bid months with carryings that would brink you up to 90 hours hard time. The Soft time in thes months would be well over a 100 hours credit. I had many months like that.

Now the strange part, we are only paid 85 hours a month maxium. Any credit time over that is put into a bank, and later either trip dropped or, in the month of November, cashed completely out.

What happend in the Summer of love, there was peer group pressure not to fly over your line. Most people did not. If you did, your monthly schedule was posted on the walls, along with some disparaging remarks about your lineage...

As an example, in the early 1990's, UAL pilots got to option to trip trade. A union study concluded that trip trading would cost 150 wide body captain jobs, and 300 narrow body captain jobs.

When people ceased flying over what the line builders scheduled, UAL was short 450 pilots.

********

Down in 3 Green, UAL had former Eastern Pilots in the interview process.....If your name was not in the yellow sheet, you can bet you recieved preferential hiring....we picked up a lot of good Eastern Men, good pilots and good people. On the 727, it was not unusual for me to have both a former Eastern pilot in both the right seat and on the panel. United ALPA went out of its way to help the Eastern guys........if they didn't perform work as a permanent replacement.

AA717driver

17th Feb 2003, 18:32

I have been trying to defend the reasoning behind the 'summer of love' to the people on A.net--generally to no avail.

We all know airlines chronically understaff and expect us to pick up the slack. Penny wise and pound foolish. Then managment uses the lackeys in the press to bash us when we don't cover their butts.

Good luck. TC

newarksmells

17th Feb 2003, 20:07

It's very sad that the possible demise of United is causing so much antagonism. Does it really matter at this point who did or said what? It's way beyond that.

All I know is with both Europe and the U.S in a severe economic turndown, that for every United person who is let go if they can't come out of bankruptcy, it will mean an additional 10 jobs lost for every United person who is let go whether this be a caterer / supply / parts / cleaning / fueling professions etc.

Does arguing who was really to blame for the current mess make sense to anybody? I hope not as you are professionals of the highest regard and this squablling needs to stop before UAL and their employees are thrown out of work not to mention the other million plus people who will also be out of work.

Sorry if I'm out of line

I. M. Esperto

17th Feb 2003, 20:56

I recall the days in EWR where we had to use the UAL parking lot to get to the terminal, and we shared the crew bus with UAL crews.

One fellow glared at me, and said "We'll bury you."

Ignition Override

18th Feb 2003, 04:39

Let's not forget those pilots and other employees at United Express (Atlantic Coast etc.... and Mesa?), who need mainline United to feed them passengers and vice versa.

Many of these folks also have children to feed and shelter-heaven help those who lose group medical insurance.

The govt needs to back off from the very high ticket taxes which are helping to suffocate the airlines. It is reported by our company that 25% of the average AIRLINE ticket price consists of government TAXES, and this does not include all of the taxes for security.

Could it possibly open up some of the (secret) Strategic Fuel Reserves, possibly leading to cheaper fuel in the US?

GlueBall

18th Feb 2003, 22:09

It is said that guru Tilton and his family's "temporary" accommodation at the Four Season's Hotel at downtown Chicago (not near the airport nor near UAL's World Headquarters) are costing the company $18,000 per month...Not to mention Tilton's $950,000 annual salary, plus $3 Million "signing" bonus, plus $4.8 Million compensation for lost pension benefits at his former employer, plus entitlements to "future" bonuses, including 200% of his "base" salary.

...Meanwhile the company still is burning something like $9 Million cash daily. :yuk:

OneWorld22

19th Feb 2003, 11:33

I think you can sum up United's problems very quickly. They are a misfit of the industry, they have developed huge infrastructures and have high wage employees with very low productivity because of narrow job descriptions and unreasonable work rules.

They also never had peaceful labour relations because of the multiple workforces brought together through mergers. It's got to the point now where there is no way to solve these issues in a normal negotiation between two sides.

Buster Hyman

19th Feb 2003, 12:29

To all the UAL staff out there.

If you enjoyed your job, loved your company & were proud to wear your uniform, do whatever you can to save your company! If you can survive on a lower wage, take it. If it's the only life you know, accept it. If you don't give a stuff...walk away & let someone else in.

My company died through a number of reasons, but if you are like the Ansett staff, then you'd want to do anything to keep it alive. We flew for 65 years until bean counters took over & we then died a slow & agonising death.

Sure the management will try one over on you, but tell your unions to watch them and keep the dialogue going. Don't let the unions talk your way out of a job.

Good luck to all at UAL.:)

Airbubba

19th Feb 2003, 16:14

>>They also never had peaceful labour relations because of the multiple workforces brought together through mergers.<<

Perhaps you have UAL confused with another carrier... Delta, US Airways, Northwest and American have had much more merger activity over the past three decades than UAL.

OneWorld22

19th Feb 2003, 17:04

Aibubba, I'm just pointing out one if the reasons for their malaise, it's not the crucial reason and obviously the carriers you mentioned have fare better, but you can't tell me AA's swallowing of TWA has been all sweetness and light!

GlueBall

19th Feb 2003, 17:13

Labor peace and tranquility had fallen apart many moons ago. It has never been forgotten that in the mid 80's a strike had employed many scabs. Even today, the lingering presence of these low lifers continues to poison the pilot group. It was also the era of the A & B pay scales.

Airbubba

19th Feb 2003, 17:32

>>Aibubba, I'm just pointing out one if the reasons for their malaise, it's not the crucial reason and obviously the carriers you mentioned have fare better, but you can't tell me AA's swallowing of TWA has been all sweetness and light!<<

Yep, looks like you were thinking of AA instead of UAL...

Airbubba

22nd Feb 2003, 05:04

>>It is said that guru Tilton and his family's "temporary" accommodation at the Four Season's Hotel at downtown Chicago (not near the airport nor near UAL's World Headquarters) are costing the company $18,000 per month...Not to mention Tilton's $950,000 annual salary, plus $3 Million "signing" bonus, plus $4.8 Million compensation for lost pension benefits at his former employer, plus entitlements to "future" bonuses, including 200% of his "base" salary. <<

Looks like the judge has OK'ed Tilton's pay package, let's see what he approves for the pilots on March 15...

___________________________________

Bankruptcy Judge Clears
United CEO's Pay Package

Associated Press

CHICAGO -- A bankruptcy judge allowed United Airlines to go ahead Friday with its multimillion-dollar pay package for Chief Executive Glenn Tilton, despite acknowledging that the timing may send a questionable message to employees.

Judge Eugene Wedoff said rejecting the company's bid for prompt adoption of the compensation package in bankruptcy would have raised questions about the court's confidence in the carrier's restructuring. He said the financial impact on UAL Corp.'s United should be comparatively negligible.

The Association of Flight Attendants contested Mr. Tilton's five-year contract as premature and unfair, given that United employees have taken interim pay cuts and are being asked for longer-term concessions. The flight attendants argued that, instead of stating full confidence in its CEO, United should send a message of shared sacrifice by revising or delaying the plan. To that argument, Judge Wedoff responded: "You may be right." The flight attendants said Mr. Tilton's compensation should be tied to the success of the company's restructuring.

United said the original $11.4 million pay and benefits package for Mr. Tilton -- the terms of which were lowered somewhat this week -- was "eminently reasonable" and even below market average for a company its size. Mr. Tilton got a $3 million signing bonus last September as part of a package that also included an annual salary of $950,000, $4.5 million in pension benefits, 1.15 million stock options in parent UAL, and relocation expenses.

The chairman and CEO volunteered early in United's 10-week-old bankruptcy reorganization to take an 11% pay cut, which would lower this salary to $845,500 if adopted. United didn't immediately disclose the terms of the revised package.

A spokeswoman for the flight attendants' union, Sara Nelson Dela Cruz, said the group remains fully committed to United's success "regardless of whether we agree with the judge's decision." She said the judge will have an opportunity to "balance" his decision on CEO compensation with that of employee wages when renegotiated contracts come before the court.

Judge Wedoff also sided with the company Friday in extending the ban on further sales of employee-owned stock in the airline. After hearing arguments from both United and the independent trustee for its employee stock ownership plan, State Street Bank & Trust Co., he said he would issue a new injunction blocking the sale.

United will lose what could amount to a billion-dollar tax writeoff if employee ownership falls below the 20% level it's at now.

State Street argued that employees' 12 million remaining shares could be worthless if not allowed to be sold soon. Its attorneys called United's plan for a low-cost carrier at the heart of its restructuring strategy "more an exercise in hope than in reality."

But Judge Wedoff said the tax benefit could have "very substantial significance" as an element of United's restructuring. He said employees can benefit more from a revived United than from cashing in their remaining shares, which at current value are worth about $13 million -- an average of about $170 for each of 75,000 participants, based on the company's figures.

Updated February 21, 2003 9:19 p.m. EST

canuck slf

22nd Feb 2003, 08:48

A recent family experience illustrated to me some of UAL's secondary problems. Adult daughter got prices for 6 month trip, YVR to BKK. Equally price for UAL and EVA. She decided to go with EVA, whom she had never heard of.
Reasons,
1 "Why would I go thru the aggravation of paranoid US security and INS at the connecting airport?
2 US airline is more likely to attract terrorism and
3 Will they be in business for my return trip?"

Sad really!

seacue

22nd Feb 2003, 13:38

Mr. Tilton is costing UAL something like $15k to $25k a day, it you count all the perks against this one year. That is a small fraction of the $9 million they lose each day. Most of us would be happy with that kind of pay, BUT ....

UAL was unable to attract a person with good airline experience for that kind of money - given that the company is likely to fail leaving a black mark on their resume. How many people will take a job that is very likely to hurt their future employment possibilites?

B767300ER

22nd Feb 2003, 18:46

You are correct in your statement about TWA/AA being less than sweet; far from it actually. In UA's case, the last real merger they had was with Capital Airways in 1960. Over the years, they've acquired various assets and routes, such as PA routes to the far east in '85 and LHR-USA routes in '91, but no real mergers.

As far as AA/TWA, AA has furloughed 42% of TWA's pilots (up to 8 years seniority), and 50% of TWA's F/As (up to 25 years seniority). AA has only furloughed 3% of their own F/As and 4% of their own pilots, an obvious disparity. AA Pilots & F/As with only 1 or 2 years of service stay, while many TWA workers with 9,15,25 years get laid-off. Not exactly 'sweet and kindly' treatment by any means, is it?

411A

22nd Feb 2003, 20:43

OTOH, considering the state TWA was in, the folks that were there are lucky to have jobs at all...the ones that remain that is...:rolleyes:
The folks on the outside, will REMAIN on the outside for a very long time.

B767300ER

23rd Feb 2003, 01:30

"The state TWA was in"?

You mean the 'state' AA, UA and US are in RIGHT NOW? AA will be the next victim to join other bankrupt US carriers, so what then?

Nobody has a sense of entitlement here, 411A, and nobody knows how their career will turn out until they hit age 60.

AA's current stock rice, $2.90 per share, amounts to a market cap that is LESS than the $750 million AA paid for TWA. Nothing gives AA the right to furlough only TWA people and not junior, new-hire AA people.

Ignition Override

23rd Feb 2003, 05:07

767 300 ER hit the nail on the head. I've wondered how the AA Pilot Merger Committee justified (other than doing an excellent job protecting the original AA pilots' jobs) such a staple of seniority lists (despite protecting some senior TWA pilots), except by using these two rationalizations;

1) TWA might not have survived more than a short while.

2) Almost blaming TWA's problems on the TWA pilots, who had for years, reduced their own salaries by 40%, in order to repair crippling cash-flow damage which was inflicted on the operation by former owner Icahn and his attorneys-all of whom had no scruples or business integrity, whatsoever. But when did Ubermenschen ever take pity on the Untermenschen: "Arbeit Macht Frei".

Using the AA Merger Committee's (who somehow also deserved to have the views of Owner-Ubermenschen, as they gazed down to their fellow pilots....) logic before 9/11, they are (or were) entitled to a self-righteous, unashamed attitude because they previously WERE a relatively healthy airline. Ironically, TWA's Merger Committee, partly due to strong impatience and pressure on the part of Icahn for quick merger results, did a somewhat similar thing to Ozark Airlines in the 90s, which consisted of DC-9s.

dudly

23rd Feb 2003, 20:19

B767300ER,

The AA crews I talked with at LHR were absolutely stunned when AA management announced the buyout of the 3X BK'ed TWA. All they wanted to know was why. It made absolutely no sense at all. Now in hindsight, it may be the final straw that breaks AA's back.

BenThere

24th Feb 2003, 03:13

I think I can trace the inception UAL's problem back to 1994 when they failed to grant me an interview when I had 2,000 hours heavyjet PIC, and another 500 instructor hours. They hired a female colleague I had tried to train with 600 hours who never would learn to fly. I went elsewhere. They lost my contribution (thank God), and I suspect this type of logic led to other missteps company-wide.

B767300ER

24th Feb 2003, 04:25

Ignition Override: Thanks for your comments. One error, though, and it is a very popular misconception: Ozark pilots, numbering 500+ or so flying only DC-9/MD80s, were NOT stapled. They were ALL given their DATE-OF-HIRE, for pay and bidding purposes. They were also restricted from bidding B-747/767/L1011 as Captain for a short while, for obvious reasons, and then allowed to bid 16% of the Captain bids until the last OZ pilot could hold Wide-Body Captain. This TWA/OZ merger did NOT result in the overwhelming furlough of more than half of the OZ pilots, nor the loss of any seats/bids/routes or domiciles they brought to the marraige. AA has taken EVERYTHING TWA brought for themselves, and furloughed 65% of TWA's employees. Not in any way, shape or form comparable to TWA/OZ.

About AA pilots being amazed at purchasing TWA, if it was'nt for that buyout, over 2000 of AA's pilots would have been laid-off; right now, only 386 out of 11,200 have been. They should count their lucky stars AA bought TWA, or thousands of their employees would be on the street.

AAL_Silverbird

24th Feb 2003, 06:25

Oh trust me B767300ER we to a man would have rather seen TWA die a natural death and take our chances with lady luck vs. having this TWA albatross around our neck.

It doesn’t take a Harvard MBA to know it is better to have money in the bank then have another anchor on a sinking ship. Under the current conditions I’ll take more cash, less planes, one less hub, and one less airline to share the sky with.

Airbubba

24th Feb 2003, 13:09

>>They hired a female colleague I had tried to train with 600 hours who never would learn to fly. I went elsewhere. They lost my contribution (thank God), and I suspect this type of logic led to other missteps company-wide.<<

Well, in fairness to UAL, they were under a court ordered EEOC settlement for many years that required "affimative action" since the pilot force lacked "diversity". As practiced in the U.S., diversity implies people other than straight European males of non-hispanic origin. Every major airline has a diversity comittee of some form and has an obligatory statement of a commitment to diversity and preference for diverse suppliers, for example:

http://www.ual.com/page/article/0,,1365,00.html

http://www.ual.com/page/middlepage/0,1454,50126,00.html

http://www.aacareers.com/diversity.htm

http://www.nwa.com/corpinfo/profi/supplier.shtml/

UAL had a double quota system, if five percent of their applicants were female, they had to hire ten percent until the overall pilot force was five percent. After a decade or so the requirements were met and the court order was lifted.

Diversity is still a somewhat novel concept in Europe but like a lot of things that start in the U.S. (e.g. alcohol testing, locked cockpit doors) it is starting to come ashore.

Scottie Dog

24th Feb 2003, 13:52

Whilst not able to respond directly to this forum, I feel that I may also be able to add some alternative input.

Having been employed as a Corporate travel agent for over 30 years - that must be approaching a record! - I am amazed at the lack of expertise shown by UAL's reservations staff in Europe. Calls from the UK are put through to a call centre in Ireland, and taken by staff who appear only able to answer a question that the computer is programmed to serve. As happens with so many companies, they go for a 'call centre enviroment' where staff with no deep knowledge of the product are employed in order to take as many calls as quickly as a windows driven system will process.

Ask any questions with regards to fares and other intricate matters and you will be asked to hold, for more than a few minutes, and then fed an answer to your question. The answer has obviously come from a 3rd party, because if you then query the response you are again placed on hold yet again and the whole process is repeated. At no time are you able to speak to anybody with experience.

The end result of this is that traffic is being directed away from UAL to those airlines who are able to give a proper and accurate answer within a short timescale. To take 45 minutes to arrange a ticket on departure for a 5-sector itinerary is an embarressment to UAL and a definate turn-off for any agent.

I hope for the sake of everybody that UAL do survive, but I also hope that they will be fully supported by experienced staff in all departments. This will go a long way to rebuild confidence in the product.

Thank you for allowing me to have my rant and I now, as a 'professional on the ground', hand back over to the 'professionals in the air'.

Scottie Dog

RRAAMJET

25th Feb 2003, 02:55

767-300errrrr:

what utter hogwash, and you know it....
the reports I've seen by financial institutions unrelated to this fiasco indicate that all the purchase of TWA did for AA was to saddle it with an extra 2 billion in debt, and require an immediate 1 billion goodwill write-off. Not remotely like the Ozark situation, as you say....

PS. Why did AA have over 500 TWA applicants on file prior to the purchase, if TWA was doing so splendidly; why were those applicants happy to start at the bottom of the seniority list if they'd been called for interview? Hmmmmm....

You must think the European readers of this were born yesterday.:mad:

Ignition Override

25th Feb 2003, 03:54

B767300ER: Pardon my faulty memory about the Ozark merger. I had forgotten the basic situation about the use of date-of-hire etc. My "good friend" who was with TWA (who acknowledged the rough deal for so many Ozark pilots) retired there about eight years ago.

Without the 9/11 catastrophe, could AA have digested TWA?

Although I should have admitted this, I can somewhat understand the AA Merger Committee's view, i.e., that any fairly secure future jobs for TWA pilots with a major airline could be considered very fortunate. But in my opinion, it would have still made me a bit uncomfortable to have used that as the main rationale for certain arbitration scenarios, were I to have had any input.
:O

acb4u: out of respect for the United employees, it would be nice if the title of this topic could be more tactful than the crude phrase "deathwatch", as if it were the very old Frankish king Charlemagne in the Dark Ages.

tsgas

25th Feb 2003, 18:11

Affirmative action not only hurt the pilot's group but all departments of UAL. To ignore the best qualifed and productive applicant and be forced to hire second rate and lower just because of political correctness is going to cost big time.

411A

27th Feb 2003, 05:32

Notice that the American Airlines pilots' union (APA) has rejected a report indicating that AA will file for bankruptcy in May...and Northwest has told their ALPA pilots that wages and benefits/pensions could well be rolled back to 1996 levels.

Would expect many are still in a severe state of denial, but will have to face the music at some point...there is a sea change taking place in the airline industry in the USA, make no mistake.

Tough times ahead for many...management certainly included.

WhatsaLizad?

27th Feb 2003, 16:40

Notice that the American Airlines pilots' union (APA) has rejected a report indicating that AA will file for bankruptcy in May...

411A

More drivel from a alleged US expert.

There was no "report" 411A. The paper somehow came across a private email from the local DFW rep sent to the members of his base. These were the thoughts of this rep only. He doesn't know any more than what is publicly known already, which I'll agree isn't good to say the least.

Most of my fellow AA pilots are not in any state of denial 411A. Any group this large will still have a vocal few though, which is not suprising since some always are, like in your case where you think FO's like flying with you.

OldAg84

27th Feb 2003, 20:20

As an outsider, I put forward the following

First Rule of Business- Value is set in the transaction, i.e. I might think my product is worth $10, but if I can only sell it for $4, that's the value.

UAL's and other major's business models need to change. Are there too many employees, too many aircraft, overpaid employees, underutilized employees, excess taxes, fear of terrorism, a bad (abysmal!) economy, and a pending war.....yes it's a combination of all these factors.

I fear for the livelihoods of all the employees for all the majors. In UAL's case the fixes will be so drastic that I'm afraid they won't be implemeneted in time, even if accepted. The lack of trust between labor and management (well deserved it seems) can't be in place at a much worse time for the industry.

Clearly something has to change- or give.

Over millions of miles, I've had great service from UAL, Continental, and in the past- Delta, and I wish them well.

411A

27th Feb 2003, 22:58

Those still in that state of denial, would do well to take heed of the statements of OldAg84....and wake up.:eek:

dudly

27th Feb 2003, 23:44

OldAge84

That about sums it up in a nutshell OldAge, and very well said. The current legacy carrier managements do not have an entrepreneur (sp?) in the group. Just a group of corporate dogs that only know how to bash employees, not how to be bigger than life and build something. A really sad state of affairs.

Tandemrotor

28th Feb 2003, 00:57

I have asked this question before, on another thread, but didn't receive an answer. I wonder if I'll be lucky this time.

Do you think that Chapter 11, and the Air Transport 'slush fund' are anti competitive?

In other words, they are an apparatus, to prop up airlines that would otherwise fail!!

ie. There are some great offers from US carriers to fly over 'the pond.'

European carriers would (at first sight) not have been so generously bankrolled!!

arcniz

28th Feb 2003, 05:23

Tandemrotor - nothing.....absolutely nothing is in place to prop up airlines that want to fail. This is a period of economic involution, when even governments must spend lightly to survive.

Dudley - entrepreneur is the right word. The formula for UAL to survive is for everybod on salary to become one post-haste. If they can all work for about six months with no pay, then they might have a job after that. Otherwise, think toast.

Groaner

28th Feb 2003, 05:54

arcniz

Not quite right, I suspect.

Practically anywhere outside the USA, there is no equivalent to the Chapter-11 system. An airline in US Air's state, or UAL's, would have been shut down prior to now and liquidated.

Add together all airline and steel manufacturer Chapter-11-covered assets in the last 15 years, and the total exceeds 90% of all Chapter-11-related assets. Airlines (and steel manufacturers) seem to be abusing the process. TWA is a very good example of an airline that in recent decades has spent more time in Ch-11 than out.

Ch-11 means that an airline is bankrupt. It cannot pay it's creditors. Ch-11 means that the airline does not have to pay what it owes. The intention of Ch-11 was to avoid the (sometimes very large) costs of liquidation (usually costs such as the drop in value caused by a fire-sale, the personnel costs of finding a new job etc) when the underlying business was essentially healthy but needed a reorganisation of finances. The Ch-11 code is set up to allow some very unpalatable choices to be forced on creditors.

The ATSB system is very similar

What's wrong with that? Well, nothing in principle, but in practice no US major (except SWA...) has an underlying essentially healthy business. And in recent Ch-11 cases, various airlines have fairly openly used the Ch-11 procedures arguably unfairly.

US carriers surely are using Ch-11 and the ATSB fund as anti-competitive measures. They are certainly used to prop up airlines that would otherwise fail. Imagine if an airline with a fatally-flawed business (UAL?) were allowed to fail promptly. Its competitors on various routes would immediately benefit. And most likely it will fail eventually anyway - all that is happening is that others are bearing the pain that should rightly be felt by UAL.

So what? Well, the average US investor in airlines (shareholders via their 401Ks, insurance companies etc) now has an average share-holding period of less than 6 months. No-one invests long-term in US airlines. No-one sane would invest in a large US airline except SWA now.

Ignition Override

1st Mar 2003, 03:03

Most pilot groups at the US majors will likely end up giving up at least 15-20% of their salaries, never mind the very risky retirement pension mess, but Continental CEO Gordune Bethune reportedly used words to the effect that labor really is not the main problem (or 'the' problem), but I never read the quote.

One question is just how many "unplanned" furloughs (+ or -300 pilots etc) will take place if they don't get everything they expect at negotiations. These employees can be considered hostages at the bargaining table, but if my company never asked us to go up to 90 monthly credit hours in the 'good old days', then why are they suddenly claiming that this is one of the necessary changes-in order to lay off even more employees?:(

Just two more questions-has JETBLUE made many/any aircraft lease or purchase payments before this winter? If not, was Wall Street aware of this last summer and fall?:} Many pilots have the impression that a lack of payments is how this start-up airline was able to begin service with brand-new 140 (+) seat jets. Of course somebody will say, "oh, they actually have (i.e.) 130 seats-get your facts straight".

Notso Fantastic

1st Mar 2003, 10:27

Groaner- I don't understand how Ch11 works in practice. In a state of bankruptcy, it appears airlines under Ch11 can cut ticket costs to get income, but how can they pay for fuel/wages costs/landing fees/spares etc? Suppliers are not going to let that business go deeper into hock, so presumably the airlines have to start paying upfront immediately for all new items as well as servicing current debts to a certain extent? So how can they then start discounting?

411A

1st Mar 2003, 14:34

Chapter 11 of the Federal bankruptcy code is used by some companies, who for a short/medium period, find that their cash flow is not presently sufficient to cover all expenses. The law allows a bankruptcy judge to re-schedule payments to creditors so that the company can re-organize and regain profitable operations. To file Ch. 11 does NOT necessarally mean that the company is bankrupt...in fact it has been used in the past with companies whose assets substantially exceed liabilities.

At least that was the intension of the law.

It HAS on occasion been used by those in the know to squeeze concessions out of labor, in order to line their own pockets...something for which the law was not intended.

In the present economic climate, some air carriers, whose management have made very fundimental mistakes will find that the going is tough indeed. In many of these companies, the outright greed of pilot/mechanics/cabin crew unions has certainly NOT helped the financial picture.

Time to pay the piper....and it ain't gonna be pretty.

Airbubba

1st Mar 2003, 14:37

Here's an overview of Chapter 11 :

http://www.hq.com/reorganization/hq_overview.htm

And here's the actual text from the U.S. Code:

http://www4.law.cornell.edu/uscode/11/ch11.html

Section 1113c is of particular interest in the coming days at UAL as management seeks to get labor costs under control with or without approval of the unions.

ironbutt57

1st Mar 2003, 14:37

no groaner you're wrong...the airline would get a huge infusion from the govt illegally and it would be called something besides state aid:yuk:

Airbubba

5th Mar 2003, 04:42

Looks like with the earlier "temporary" pay cuts they've cut the losses to only about $12 million a day:

UAL loses $382 million in January

United aims to cement labor changes ahead of March 17

CHICAGO, March 4 — UAL Corp., parent of bankrupt United Airlines, said Tuesday it lost $382 million for the month of January as it pushes ahead with labor talks to cement long-term contract changes before a March 17 deadline.
THE NO. 2 U.S. airline reported in a filing with the Securities and Exchange Commission that it had $1.18 billion in operating revenue and $1.51 billion in operating expenses before additional expenses were included.
Just last week, bankrupt US Airways Group said it lost $98.6 million in January on operating revenue of $476 million, which fell short of projections for the month. US Airways plans to emerge from bankruptcy by the end of March.
Faced with such daunting losses, United is trying to cement long-term contract changes before a March 17 deadline when it may formally ask that all labor agreements be scrapped.
Trading in United shares was halted briefly on the New York Stock Exchange Tuesday. The shares have traded around $1 for some time, after peaking at more than $100 in the late 1990s.
March 17 is the date when the airline may formally ask that all labor agreements be scrapped.
United filed for bankruptcy in December after amassing gigantic losses and failing to get the federal government to back a big loan guarantee.
Since then, fighting for survival under new Chief Executive Glenn Tilton, United has embarked on yet another round of talks about concessions with its labor groups, which are currently working under temporary pay cuts. Those reductions are saving the airline around $70 million a month. UAL in January posted its largest annual net loss ever, $3.2 billion for 2002.
Sticky long-term issues revolve mostly around productivity and, especially important for the pilots’ union, what a proposed low-cost carrier will look like...

http://www.msnbc.com/news/880620.asp?sym=UAL

ATPMBA

5th Mar 2003, 12:05

Airlines in the US are in a crisis situation, we are looking at two possible liquidations by the end of the year. If this happens it will make the Internet meltdown look like a Sunday picnic. Thousands of people with families, homes, mortgages will be out of jobs which then can turn into personal financial crisis sending a ripple effect through the economy.

Structural changes going on in the business world that adversely affects airline traffic. The hub-and-spoke system is probably obsolete and point-to-point maybe the future of air travel. Market segments may include the low-cost budget operations like Southwest and high end like the old Pan Am that served dinner on real China or nowadays fractional jets.

I have noticed at the local airport a lot of the 22-23 year old flight instructors who were on the airline track have disappeared. They probably realized that they we not going to be hired by a major airline anytime soon and did not want to be CFI’s forever and moved on. Becoming a CFI takes years of hard work and $30-40K of earned after tax money. Moving into a major airline slot for the $100k plus income is a strong motivator/sustainer, without those slots I can’t blame the kids for looking for other careers. A major US GA flying magazine recently stated that major airlines will not recall pilots for 5-7 years and may not have new hires for 7-10 years, and that may not include any liquidations factored in.

All of this cost costing is basically window dressing. I have worked a major company that went through Chapter 11 (non-airline) and the new ceo stated in a meeting that “we cannot cost cut our way to profitability.” With losses of 382 million a month 70 million in savings helps but it will not solve the problem.

A looming Gulf war will suppress airline traffic like it did in 1991 and will cause further losses. Many corporations have cut back on travel and rely on conference calls and Internet email rather than flying out for face-to-face meeting at full business fares.

Changing into a low cost carrier like Southwest is a possible solution, however, there is little time to do this and the major obstacle is changing the employees. The aircraft and facilities can be changed overnight. Changing people and corporate culture is one of the hardest things to do as people resist change. At major corporations there is an “institution think”, “we never done it that way before”, etc. is an example of what change agents are up against.

UAL needs a strategy, the ceo must articulate the strategy to the employees, and the employees must believe in the strategy and feel they are part of it.

OldAg84

5th Mar 2003, 13:01

With regard to income, 70% of something is better than 100% of nothing. Obviously, a major cost challenge is that the majors are being forced to meet the cost structure of Southwest, AirTran, JetBlue and others. In light of the fact that there is no significant service difference in product delivered, why should the passenger pay more? I for one am flying Southwest more and more. Why? The people are friendly, the planes are clean, I'm not going to get a meal on anyone I fly, and they have plenty of flights.

I used to fly Delta almost exclusively, to the point where I purchased Christmas gifts for the gate agents. No more. Why?
The have shelled the frequent flyer program for people like me and I can never cash in my miles for flights- "no seats on that flight, not on that one either." I won't fly Northwest unless they are the last airline running, as the last reservations agent I dealt with was so rude to me it just about ruined my day. United and Continental are much better.

In short, by gutting their inflight and airport service, as well as the frequent flyer plans, the airlines in general have beaten the customer loyalty out of the business traveler. I fly whatever is the quickest and easiest and least expensive and don't care anymore what color the plane is or if I get miles. This truly can't help the airlines bring up their revenues and margins.

Curious Pax

5th Mar 2003, 13:25

This is moving off topic a little, but ATPMBA makes an interesting point about increasing the use of conference calls. The company I work for has increasingly rationalised its national operations into a more global set up, and the initial result was managers on planes most of the time. However a combination of a tougher business climate, an increasingly stressful air travel environment (ie extra security/time taken to get through airports now) and the rapidly improving video/audio conferencing facilities available mean that travel is avoided much more nowadays. For the company this saves a lot of money on airfares/travel time; for the airlines it could be a culture change for many of their erstwhile customers that is irreversible. Not good news for United I suspect.

Wino

5th Mar 2003, 13:35

ATPMBA,

The only difference between 2003 and 1991 is that this time around the government slowed the progress of airlines towards liquidation with the ATSB, thereby harming the rest of the industry.

There is NO ability to shrink an airline to profitability during a recession. The structural costs are too high and remain regardless of whether you keep all the people and fly the aircraft or park the aircraft and layoff all the people. When an airline shrinks during a recession its breakeven loadfactor GOES UP!

The only thing that cures the airline industry during a recession is that 1 or 2 airlines is allowed to liquidate, always to the cries of teutonic shifts and 10s of thousands displaced from work. PAN AM, Eastern, Braniff, Midway, Name the recession since the end of deregulation and I will name the dead airline.

Once USair and or United liquidate the industry can go back to its disfunctional ways untill the next recessions, when another airline will be thrown upon the alter of free enterprise and sacrificed.

The claims of conference calls has also been made in every recession, and while some customers will do that, the economy America grows every year, so as some leave others come, and at the end of the day no one signs a billion dollar contract over the phone. Before you write the check you will still want to look the person in the eye and shake his hands. If business travel shrinks somewhat an airline will be liquidated untill the balance is struck.

When the extreme life or death pressure is let up on the rest of the airline's Oldage 84 I suspect that service will improve at those that are left. But while they are fighting every day for survival that takes a toll in too many ways to count.

Cheers
Wino

OldAg84

5th Mar 2003, 14:32

Wino,

I agree with your post, but I feel it's somewhat incomplete. The industry is over capacity, no doubt. The near certain war, this week, next week, next month....will possibly (but hopefully not)make all this discussion moot.

Now is the time to focus on customer loyalty and service (within the obvious constraints of today). It doesn't cost any more for someone to smile or be pleasant. On a recent CO flight (and bear in mind I truly like CO) I was upgraded to First Class- on the entire flight 1.25 hours, I was offered one (ONE!) drink, and pretty much ignored. On another, a Northwest Flight Attendant actually sat down and read a magazine in a empty row for about 10-15 minutes. Don't worry, I'll skip a refill on the coffee! Conversely, on a recent roundtrip on Southwest, on both legs, one fairly crowded, the other fairly empty- the cabin crew couldn't have been nicer or more responsive. Air travel is stressful enough without pleasant faces and adequate service.

Why are Southwest and others making money (or losing very little) in today's market? Possibly because they are setting the new standard in a lot of markets.

Wino

5th Mar 2003, 18:15

Southwest also didn't lay off or slash wages or benefits, so its easier to smile. (Infact they have just given out more raises even though they are likely to lose money this quarter)

At many of the majors the cuts have been draconian already (over 20 percent) leaving less people to do more, for less money, leaving them frustrated and harried. When the majors can recall everyone and everyone feels like the light at the end of a tunnel isn't an oncoming train, look for attitudes to improve.

Right now many employees are severely demoralized for good reason, and the airlines are simply trying to preserve cash untill times turn, even though it may hurt them in the short term.

Cheers
Wino

OldAg84

5th Mar 2003, 19:09

Wino,

My point exactly- I won't be looking for attitudes to improve- I'll be flying elsewhere. I understand why people are demoralized, but it's still a competetive marketplace out there.

Personally, I do more with less than many of my counterparts do. I have my own "issues" at work, but because I'm in sales, I smile and do my best. Reservations, ticket counter, gate agents, and inflight crew better recognize they are, in large fashion, sales people as well. They craft my travel experience, and in light of the fact that frequent flyer plans are becoming less attractive, this is becoming more important-not less.

Because my loyalty (or any potential loyalty) has been squandered by select carriers management and customer contact employees, I'll bring my business elsewhere. Likely, I'll stay there as well, even if things get better.

I'll agree that it is a very tough time for alot of people in the industry but as I said; a smile costs nothing for the airline.

Lest one think I'm trite or insincere- I've flown over 2 million aggregate miles (based on frequent flyer standards). I've flown all the majors domestically in the U.S.. As an aviation buff (that's why I PPrune)- I have the utmost respect for the professionals who make my trip a safe and timely one. I for one wish the market conditions that drive this thread never existed. In the end one can roll over and die- or you can play to win all the way to the end.

OldAg

411A

5th Mar 2003, 21:26

Unless and until major US air carriers improve their cabin/reservation service, passengers will flow to the best service/lowest fares....and for a VERY long time (overseas routes),
non US carriers will be used by the knowledgeable traveller.
Simple as that.
In short, the malcontents on US carriers should be put OUT to pasture, pronto.
Will it happen...probably not.:rolleyes:

Ignition Override

6th Mar 2003, 02:26

411A-it's refreshing to see people acknowledge the abuse of Chap 11, such as with old CO in '83, in order to void all labor contracts, despite negotiations having begun.

You hit the nail on the head regarding attitudes, and one of our 744 Captains who might already have retired, was on our jumpseat (commuting home)about a year ago, and described this situation which happened on his first flight over to Narita. Edited for brevity!

Anyway, that is only a drop in the bucket, regarding cabin "attitude" at my company (but seems to be apparent mostly on widebody crews), based on many chats with our widebody pilots-it would be interesting to find out what attitudes would be present if we were in Chapter 11. But I'm not saying that the only problems are 'back there'. :)

411A

6th Mar 2003, 03:02

Ign Override,

Had a similar situation with a chief hostie some years ago, complained to management...and she was ah.....terminated.
A small victory.
Let there be no mistake, service sells....and the overseas airlines have been aware for a LONG time.

ATPMBA

6th Mar 2003, 11:59

Quotes from OldAge84:

In short, by gutting their inflight and airport service, as well as the frequent flyer plans, the airlines in general have beaten the customer loyalty out of the business traveler. I fly whatever is the quickest and easiest and least expensive and don't care anymore what color the plane is or if I get miles. This truly can't help the airlines bring up their revenues and margins.

I won't fly Northwest unless they are the last airline running, as the last reservations agent I dealt with was so rude to me it just about ruined my day.

On a recent roundtrip on Southwest, on both legs, one fairly crowded, the other fairly empty- the cabin crew couldn't have been nicer or more…
- - - - - -

I think OldAge84 and 411A have zeroed in on a major problem in the industry. The four P’s of marketing are product, place, price, promotion. Price is only one of the four “levers” a company can pull. It seems at this point customer service has slipped so much that price is the only lever left to pull. People generally do not buy only on price, if they did we all would be driving Yugo’s. It seems like airlines are a commodity, almost all are the same, all are un-differentiated, just like buying a gallon of gasoline. If airlines can boost their customer service and get rid of attitudes perhaps the travelers would be more inclined to fly or flock to the airline that offered better service (product).

Quote from Wino:

Southwest also didn't lay off or slash wages or benefits, so its easier to smile. (Infact they have just given out more raises even though they are likely to lose money this quarter)
- - - - - -

I could be wrong but it’s my understanding the pay scale at SW is well below other major airlines. A 20% pay hike from $100k is still well below $180k but that 20% still looks good. I once worked for an air taxi firm and we had a term for it, it was called “subsidizing the company”, so there is a tradeoff, take low wages and have a job or go for the gold and risk a furlough. I also heard that pilots have been called in to move baggage, I don’t now if this is SOP or just part of Herb Kelleher’s corporate tales. SW is different from most airlines and that’s why they are successful, it’s called product differentiation.

I recommend that you get a copy of Herb’s book, “NUTS!”, as it contains lot of business wisdom and may serve as a guide for anyone thinking about improving their airline or selecting a model for a startup airline.

Wino

6th Mar 2003, 14:01

Actually you are quite wrong.

Southwest pays quite well, and now excedes most of the other majors in class and craft. There 737 pilots do a lot better than AA's 737 pilots and its only going to get worse for the AA pilots as the drums beat for concessions around the industry.

No it is not true that pilots are called into move baggage, they do sometimes help cross the seatbelts if they have time inorder to board the aircraft quicker. Pilots moving baggage would bring on very expensive disabilty and sick claims for back injuries. That's one of those myths that doesn't make economic sense.

What southwest pilots do is FLY. ALOT, which is all any airline pilot ever wants to do. It is very common for a UAL NWA AA DAL pilot to fly 1 hour to the hub, sit for 3 hours fly an hour out sit for an hour fly another hour sit for 4 hours fly an hour and go to the hotel. That is the major's idea of "efficient" A southwest pilot day is fly an hour, 20 minute turn fly an hour 20 min turn fly an hour 20 min turn fly an hour 20 min turn, till they have flow 6 or 7 hours in a 10 hour period, as opposed the the AA pilot flying 5 hours or less in a 14 hour period. The DAL/AA/NWA pilot goes to work for 14 hours and gets 5 hours of pay (this is on duty time, not including hotels and whatnot) and the Southwest pilot goes to work for 10 hours and gets 7 hours of pay (at an hourly rate that is now equal to the AA/NWA etc pilot.)

That is not the fault of the pilot. That is the fault of the managment of the airline. When you use your resources so inefficently you could fly the airplanes for free and lose money.
That is how you use your resouces efficiently. Using a 100 dollar per hour pilot to load bags is not an efficient use of resources no matter how nice it sounds. He should be FLYING, which is what southwest has them do.
Cheers
Wino

ATPMBA

6th Mar 2003, 15:03

Wino,

Thanks for the correction notice. Sometimes I am wrong or receive incorrect info.

You indicated that pilots spend a lot of downtime at hubs, does the aircraft have downtime too or does another crew fly it? If this is the case why doesn’t the original crew fly it ?

Thanks,

ATPMBA

B767300ER

6th Mar 2003, 15:59

ATPMBA---Usually the crew sits and the plane continues. Everybody HATES these 3/4-hour 'practice layovers' and would rather be flying. But, because of the direction of flights leaving the hub EB/WB, usually crews wait for a flight departing to the direction from which they came. Most major US carriers have'nt figured out this inefficient, unproductive waste of crewmembers.

They'd better.

Buster Hyman

7th Mar 2003, 01:46

Jet careens off tarmac at Melbourne

March 7 2003

A United Airlines passenger jet taxiing to the terminal after landing at Melbourne Airport careened off the tarmac shortly after 11am today. No passengers were hurt in the incident.

The aircraft, flight 815, experienced mechanical problems with its steering which caused it to veer off the taxi route, an airport spokeswoman said.

"All passengers on board were fine and in no danger," she said.

Passengers were asked to disembark from the flight which arrived from Sydney and were taken to the terminal.

Usual press sensationalism here, posted FYI only. :(

XL5

7th Mar 2003, 02:02

Wino.

w.r.t the November 2002 edition of MONEY magazine, pages 78/79. A picture of a married couple, Mr. and Mrs. airline pilot, both captains with SWA. The associated financial profile gives a combined salary of US $280K which the math wizards will work out at $140K each. A good company, but the remuneration isn't par for the course.

Airbubba

7th Mar 2003, 02:27

>>The associated financial profile gives a combined salary of US $280K which the math wizards will work out at $140K each. A good company, but the remuneration isn't par for the course.<<

We have to remember that the pay is low by U.S. standards. 744 captains make less in many countries.

Ignition Override

7th Mar 2003, 05:21

Wino: yep, and as you, Airbubba and many others know, now and then even our narrowbody crews spend two or so hours at one of our two large hubs, but just as often, many times we are doing a very quick turnaround at a smaller spoke airport, then back at a hub, very busy pulling our bags through a large terminal, no time to eat, in order to check the six feet of flight papers at the next gate (for the laymen here, we scan the flight release/flight plan info and then catch, buried in a very big, mostly disorganized JUMBLE of information: NOTAMs about shortened runways, inop ILS glideslopes, runway braking action 'problems' , see if the planned fuel.... and on certain days, if we bust our butt on four or five legs, we might get paid for five-six intense hours of work.

And this is MUCH more intense, fast-paced work (with very limited minimum fuel on the dispatch release) than what widebody crews experience, except during the descent in a two-man cockpit into Europe with visibility quickly decreasing. But, I would rather be a hard-working narrowbody pilot: I feel more like a pilot...

There seems to always be some irony in an airline's stated goal nowadays to have flightcrews become much more p r o d u c t i v e, when it is ALSO committed to the hub-and-spoke networks, as it stated years ago; is this not an inherent contradiction, especially when most of this fleet's crews (and passengers) must often change airplanes at hubs with very little time built in for this, and so many planes on the same taxiways at times? Southwest certainly did not quickly develop its network-it has been creating it, very carefully, for about twenty five years or so.:D

Wino

7th Mar 2003, 13:50

XL5

As you may or may not know I am married to a fedex pilot. The intracies of two airline pilots living together are that they will never make as much as their peers if they want to see each other and their children. They will drop trips for a loss of pay to make time for each other or they will not have a marriage for long.

Especially when you are both captain's and can't buddy bid each other.

Just saying how much they made doesn't tell the story because you don't know how much they worked. Furthermore the SWA pilots have had extensives raises since that article was published and they would have been looking back a year as well at earnings.

Cheers
Wino

Ignition Override

8th Mar 2003, 04:29

A friend was married to an MD-11 FO there.:)

Airbubba

12th Mar 2003, 03:28

From the "trust me" department of UAL ALPA...

The UAL MEC is now claiming to have some supersecret plan to save the company. It is so secret that if it leaks out the competition will find out about it and use it to their advantage.

From a special message by the MEC Chairman:

" ...It also is crucial for our competitors to not have access to our plan. With other airlines in bankruptcy, or on the verge of filing, it would be a tremendous disadvantage to us to show our cards at such a critical juncture...

...Going public with details of our proposal would place us at an extreme disadvantage and could produce far-reaching consequences for our pilots. It's a risk I'm not willing to take..."

We'll see, hope they can pull something off.

AA717driver

14th Mar 2003, 05:58

I know! Their plan is to bring in Steve Bonderman and he promises to save the airline and give ALPA their BOD seats back.

I hear Duane Woerth"less" is endorsing the plan.

And if they're reeeel nice, Steve won't cut their pay more than another 20%.TC

P.S.--In the words of Carl Icahn--"Hey! You f***ed up. You trusted me!".

bean_counter

14th Mar 2003, 21:07

http://news.bbc.co.uk/1/hi/business/2852095.stm

United Airlines has failed to reach a deal with its employees' unions, making it increasingly likely that the group will miss a key deadline in its bankruptcy filing.

Credit rating group Standard & Poor's said war fears and higher fuel prices could hurt the airline to the point where it would not be able to meet its second set of bankruptcy covenants.

If that happened, its lenders could ask for an immediate re-payment of the $700m they are owed - forcing the airline to shut down altogether.

B767300ER

16th Mar 2003, 04:54

Very funny, GOOSE (AA717Capt)Iowa Airways! I'll bet you go around cheering up laughing hyenas all day!

See you on SJ's MB!
http://www.starmanauctions.com/twa.gif

PS Did you lose your password?

Copenhagen

16th Mar 2003, 16:46

Interesting comments at http://www.airportplanning.com/apcommentary.htm about Uniteds recent Cash Positive statements..... ummm.... talk about spinning the story - united are getting good at it!

The Growing Shortage At United: Credibility

"While we have seen only the press reports, those figures do not come even close to adding up."
-CSFB Analyst James Higgins, CBS News, March 13,2003, regarding United CFO's claim of being cash-positive in January.

It's becoming sort of the reverse of crying wolf.

Last week, United's CFO got the airline some great press, announcing that United was cash-positive to the tune of $1 million a day in January. Great news. The media headlines trumpeted this achievement, taking the CFO's statement at face value. But there was a lot of skepticism in the industry, given the track record of weird data coming from United's executive offices.

Two days later, Credit Suisse First Boston came out seriously questioning United's claim: "Our only surmise is that United is not making payments on many items...we can think of no way that monthly cash flow could have been even close to positive ... such decisions not to pay are unsustainable."

What's also unsustainable how long this stuff will be taken seriously. Getting called on for playing word games by financial institutions like CSFB does not reflect well on United's senior management. Nor can it build confidence in the carrier's overall direction.

This comes fast on the heels of another sunshine story that left the industry underwhelmed. Two weeks ago United's senior management grandly announced that its new, substantially-lower business fares were "revenue positive" - i.e., the decline in unit revenues was being more than off-set by increases in the number of passengers. Other airlines - which have seen just the opposite - scratched their heads. Bluntly, nobody believed it. Then, just days later, United announced the lay-off of 900 more flight attendants because of lower passenger traffic. First, they tell the world their grand fare scheme is generating more passengers. Then they pink-slip hundreds of employees for low passenger loads.

As they say down on the farm, that cow don't moo. CSFB is right. Something here doesn't seem to add up.

United is not running out of money. It's much worse. It's senior management is running out of credibility. The track record is getting pretty clear. In November there was the laughable, embarrassing ATSB filing, with numbers that were zip codes away from reality. Then there was the flood of obviously advisor-scripted babble about "reconstituting margins" and "transformational models" and describing some passenger segments as "price-driven occasionalists," all of which seemed to indicate more smoke than substance in the front offices.

To get out of bankruptcy, United will need the full confidence of creditors, financial institutions and the flying public.

It seems to be going in the opposite direction.

Airbubba

18th Mar 2003, 04:05

As predicted, with a history lesson in the article:

United Asks to Void Union Contracts

By MICHELINE MAYNARD

United Airlines asked a federal bankruptcy court judge yesterday to set aside its labor agreements as it seeks deep wage and benefit cuts for its employees.

The motion, filed in Chicago by United's parent, the UAL Corporation, proposed a series of agreements that would permanently reduce wages and benefits by $2.56 billion a year and make changes in schedules for flight crews; pension plans; job security; and various clauses that govern staffing levels and job duties. UAL also wants to create a low-fare airline.

If Judge Eugene Wedoff of United States Bankruptcy Court permits United to revoke its contracts, it will be the first time a major airline has used the bankruptcy code to cancel its labor agreements and impose new work rules since Frank Lorenzo did so in 1983 at Continental Airlines.

The court filing came on the final day that United, which filed in December for bankruptcy protection, was permitted under bankruptcy law to make the request. Otherwise, it would have lost the ability to apply what could be a critical tool as it seeks to reorganize.

Although the action was expected, it had extraordinary significance in the case of United, whose employees owned 55 percent of the airline before it filed for bankruptcy. In addition, United's labor unions held three seats on its board and had the right to veto the selection of a chief executive. Those rights were terminated two weeks ago when employee ownership fell below 20 percent.

The changes United is seeking would permit it to create a low-fare airline, which would take over about 30 percent of its operations. The unions strongly oppose such an airline.

United also said it would place greater emphasis on the use of regional jets, contract out functions now performed by airline employees and expand code-sharing agreements with other airlines.

"We have a plan to fundamentally transform United's business in a way that is durable and sustainable, and we have made solid progress in reducing costs," Glenn F. Tilton, the chief executive of UAL, said. "It strikes a balance in achieving our near-term goal of successfully emerging from bankruptcy with our longer-term commitment to create a resilient, profitable enterprise that can be the industry leader once again."

Industry analysts said they expected negotiations between United and its unions, under way in earnest over the last few weeks, to continue. But United's unions face two deadlines. Yesterday, Mr. Tilton said that the threat of war in Iraq had caused United's bookings to drop significantly. If it cannot reach agreement with its unions within 30 days, he said, the airline will be forced to impose across-the-board cutbacks of at least 9 percent on all 72,500 employees. If war occurs, Mr. Tilton said, the airline is prepared to cut capacity by whatever level is necessary. Last week, in a recording to employees, Mr. Tilton placed that figure at 10 percent to 12 percent.

Another deadline looms on May 1, when United must meet terms of $1.5 billion in debtor-in-possession financing that it obtained when it filed for bankruptcy. Mr. Tilton vowed that the airline would negotiate "around the clock" to reach agreements with its unions by then.

"However, all of us will have to accept changes that are broad and deep, and those changes require that we take an entirely new approach to competing and succeeding in this changed industry," Mr. Tilton said.

United's pilots were said to be "extremely dismayed" by the court filing. "Our contract is the product of 52 years of good-faith collective bargaining conducted under federal labor law," said Paul Whiteford, chairman of the Air Line Pilots Association's master executive council at United and one of the union members on the airline's board. "To seek to wipe out this contract by the stroke of a judge's pen is disheartening,"

Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that the abrogation of a contract is "like the voiding of a sacred oath."

"It's asking for cooperation under threat," he said. "It's going to greatly embitter relations between labor and management."

In addition to the pilots' union contract, United sought to cancel contracts with the Association of Flight Attendants; the International Association of Machinists and Aerospace Workers, which represents mechanics and other airport workers; and the Professional Airline Flight Control Association, representing traffic controllers.

United said the union that represents meteorologists would be exempt from its motion. It reached agreement this weekend with that union, the Transport Workers Union, on a new contract with the concessions it sought. United said meteorologists would vote on the plan by Friday.

Mr. Whiteford, who vehemently opposes the low-fare airline proposal, described the airline's plan as "an overreach," but he said it would be in the labor unions' best interests to reach a negotiated settlement rather than see new contract provisions imposed in court.

The airline industry has one glaring example of the chaos that can occur if that happens. In 1983, amid a nasty dispute with Continental Airlines' unions over his bid for wage and benefit cuts, Mr. Lorenzo filed for Chapter 11 bankruptcy protection and shut down the company for three days, then reopened it with just one-third the number of employees, who were paid 50 percent less.

Continental's unions subsequently went on strike, but Mr. Lorenzo persuaded a bankruptcy court to throw out Continental's contracts and replace them with new ones paying the sharply lower rates. Ultimately, the federal bankruptcy code was changed to make it much harder for airlines to cancel their contracts.

US Airways, which filed for bankruptcy last summer, filed a motion like United's but did not impose new contracts. Instead, it kept negotiating with its unions, and the airline obtained multiple sets of concessions before its restructuring plan was complete. Yesterday, US Airways' creditors' committee endorsed the plan. The airline hopes to emerge from bankruptcy on March 31.

http://www.nytimes.com/2003/03/18/business/18AIR.html

Copenhagen

18th Mar 2003, 17:05

CHICAGO (Reuters) - Bankrupt United Airlines forecast a first-quarter operating loss of $877 million and said for the first time publicly that liquidation is a "distinct possibility."

In the last week alone, UAL Corp's UAL.N United's domestic bookings are down and international bookings have dropped 40 percent due to the impending Iraq conflict.

In papers filed with the bankruptcy court on Monday, United outlined a dire set of circumstances in months ahead as the Iraq war appears imminent.

The projections contrasted with recent announcements from the world's second-largest airline that daily cash flow was positive in January and it was beating the first set of financial requirements set by bankruptcy lenders.

United said in the court document it might cease operations altogether without labor cost reductions from major unions.

Elk Grove Village, Illinois-based United said initiatives so far to cut costs will not return it to profitability. UAL lost a record $3.2 billion in 2002, about a quarter of the $11 billion in net losses by all top eight U.S. carriers combined.

"With war-related jitters increasing and fewer people purchasing tickets, United's near-term revenue forecast through June 2003 has deteriorated by $298 million from projections made just weeks ago," the company said. "At the same time, the cost of fuel, United's second-largest operating expense, has gone in the opposite direction."

"In the wake of the deadlines that have recently been set for Iraq to disarm, United's bookings have begun to drop substantially," it said. "Domestic bookings have recently declined ... the drop in international bookings has been more dramatic."

SOARING FUEL COSTS

Unhedged on its jet fuel purchases for the entire year, United now says it expects the price for fuel in 2003 will be 19 percent higher than it projected in December, when it filed for bankruptcy.

As a result of the higher costs and lower revenues, United will violate its debtor-in-possession financing covenants starting in May 2003, even with temporary wage cuts that are saving $70 million monthly.

"Liquidation is a distinct possibility if United does not receive its proposed labor cost reductions," the airline said. "The consequences of liquidation for all United stakeholders would be catastrophic. In particular, liquidation would mean that all of United's employees would lose their jobs."

In the wake of the Sept. 11, 2001, attacks, United cut about 20 percent of its workforce and 20 percent of its flight schedule, reduced other expenses and tried to restructure its financial obligations.

But those efforts could not offset weak revenue, and after the U.S. government denied an application for $1.8 billion in backing of private-sector loans, the airline filed the largest aviation bankruptcy in history on Dec. 9.

REJECTING CONTRACTS

After winning temporary wage cuts from its unions, United is now seeking to throw out its collective bargaining agreements altogether. Weeks of talks yielded no deal on $2.56 billion annually of longer-term concessions the airline wants.

United said it is not alone in its troubles, noting Continental Airlines CAL.N also recently forecast rough times ahead in transAtlantic travel.

"Other carriers, such as Delta DAL.N , Japan Airlines 9205.T and others, have also felt the conflict's effect on bookings," it said. "The difference between United and its competitors is that, because the company is in Chapter 11, United must disclose its Iraq contingency plans."

United said it has already met with a representative of its DIP lenders to ask for a relaxation of the loan covenants. Four institutions put up $1.5 billion in financing for United -- J.P. Morgan Chase & Co Inc. JPM.N , Citigroup Inc. C.N , CIT Group Inc. CIT.N and Bank One Corp. ONE.N .

But the DIP lenders said they needed hard data from United on the effects of the war, which they assumed would not be available until after it started. More meetings are scheduled for this week.

UAL shares, which traded at more than $100 each in the late 1990s, fell 1 percent on the New York Stock Exchange to 85 cents. Shares of its biggest competitors, AMR Corp. AMR.N and Delta, were higher.

ATPMBA

21st Mar 2003, 13:35

If UAL does liquidate there will be unintended consequences that will affect the industry.

Has anyone thought of the regional jets that feed into UAL. If UAL is gone there nothing to feed into, a few passengers may fly, those who do not need a connection. I believe the current revenue stream for regional feeders is they are paid by the flight, not by the number of passengers onboard. Regionals may try to become point-to-point airlines, but they will miss the pay by flight and now have to get out and sell tickets to individuals, a real hard change to implement, with a lot of marketing and sales costs involved

Perhaps regionals can change their structure and develop useful point-to-point routes, even have agreements with other regionals to have a more complete route structure.

If UAL liquidates and the regionals cannot change fast enough then they to would end up following UAL’s footsteps.

It appears the airline that is going to survive needs a business model similar to Southwest and JetBlue. They use smaller aircraft of one model. I can see this will spell trouble for Boeing and possibly Airbus. Sales of B737 may hold up but the new airlines will not be needed B767, B747, B777 aircraft. Boeing could end up shutting down production lines for the larger aircraft. I’m sure there is more profit in a B747 sale than B737 sale. New aircraft sales could be depressed for years as there are many aircraft parked in the desert.

And off course this ripples down to the engine manufactures…

Airbubba

28th Mar 2003, 07:52

Liquidation looms, ALPA hopes to keep things afloat and beg for another government bailout. Worth a try perhaps...

________________________________________

United, pilots reach deal

Pilots say union leadership supports package of pay cuts to try to help bankrupt No. 2 airline.

March 27, 2003: 5:16 PM EST

NEW YORK (CNN/Money) - United Airlines reached a tentative agreement Thursday on a cost-cutting contract with leaders of the Air Line Pilots Association, and said the deal would save the bankrupt airline approximately $1.1 billion a year.

United had said it needed total labor savings of about $2.6 billion to meet lenders' requirements to continue funding it through its bankruptcy reorganization.

"This is a huge step in enabling this airline to emerge from Chapter 11 as a stronger, more competitive company," said Glenn Tilton, CEO of United. "We are committed to continuing to work collaboratively with our remaining unions on similar agreements," he added.

Meanwhile, United's flight attendants, represented by the Association of Flight Attendants, said they are still continuing negotiations with the airline. The AFA said that reaching consensual agreements between labor and management is the best solution for United's successful restructuring.

The world's No. 2 airline filed for bankruptcy protection December. In Chapter 11, a company is protected from creditors while it tries to reorganize. It also can ask courts to void labor contracts and impose new deals. The bankruptcy court has scheduled hearings for the week of April 14 on whether to void the labor agreements, putting pressure on the unions to reach new deals.

United has proposed starting a separate low-cost, lower-pay airline with about 30 percent of its assets and a separate work force made up of furloughed United employees. The proposal drew initial opposition from United unions. Management argues such a carrier is needed to compete with low-fare carriers such as Southwest Airlines (LUV: Research, Estimates) and JetBlue Airways (JBLU: Research, Estimates), which have continued to make money while all the larger "network" carriers such as United have lost money.

The pilots' statement Thursday suggested the union had agreed to management's proposal, although it did not explicitly spell out how the contract would work with the plan.

"The tentative agreement...will help transform United into a more effective competitor against both low-cost carriers and other network carriers," the union statement said. "ALPA and United will continue to work together to ensure that United's operations remain competitive in every market United serves, including markets served by the company's no-frills, low-fare competition."

ALPA is the first of three major unions at the carrier to agree to a deal in current talks. The union representing 16 meteorologists also has agreed to a labor pact that still needs approval of its rank and file membership.

ALPA is the second-largest union at United in terms of membership, behind the International Association of Machinists, which represents mechanics and other ground employees. But due to higher salaries for flight crews, ALPA's membership accounts for the greatest share of labor costs at United, making its cost savings crucial to the airline's plan.

But the pilots also have been more willing to agree to concessions due to their dependance on the seniority system for pay and work conditions, which makes the pilots most vulnerable in case of a liquidation. It was the first union to agree to cost savings in past discussions with the airlines.

The IAM has been the most reluctant to agree to cuts, and on the eve of the airline's bankruptcy filing its mechanics voted against a concession contract endorsed by their leadership. So even with the pilots' deal in place, United has a long way to go to reach the necessary labor deals.