Feds say no to United bailout for third and 'final' time
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I think Ace Rimmer has made the best point on this thread. Pilot's Pay is almost never the reason that the company is sinking... It's bad management. Airline pilot unions do not pick random numbers on how much they should make. They take a piece of the pie and through negotiations tell management how they would like it divided. United's problems are NOT pilot pay. UAL is showing an operating profit even with these high pay rates. The problem is that management has mismanaged finances so bad that even if the pilots worked for free, it would not get them out of debt at this point.
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I don't think anyon'e suggesting that pilot (or any workgroup's) pay got United into this mess, but their problem is now that the overall bills (including debt servicing) exceed income. The payroll is one of the few expenses that is - more or less - within the airline's control; most of the other expenses are determined by third parties. For however long it takes to get the debt under control, the payroll will suffer. The alternative is closing the airline down!
Arguing over who's to blame is a pretty useless occupation when your job's at stake, with all that that implies. The priority is surely to sort out the mess now, and hang the guilty later.
Arguing over who's to blame is a pretty useless occupation when your job's at stake, with all that that implies. The priority is surely to sort out the mess now, and hang the guilty later.
Good points, Ace and BigBeerB.
Maybe we should all, no matter how much debt our companies are under, simply give up at least a third of our salaries. How many tens of millions did a few US major airlines EACH spend/waste during the good times-and only to buy back their own stock? AMR reportedly spent about a BILLION (in the US, this is $1,000,000,000) to buy back stock. Wisely spent? That profit alone, came from many thousands of flights.
Back to the present. Who is so naiive that they believe that such a pay concession from all of us, will be "their" last major request from the unions? No matter what "we" give, it is never enough, unless we are then paid what a dump truck driver is paid to haul a load of dirt.
Maybe we should all, no matter how much debt our companies are under, simply give up at least a third of our salaries. How many tens of millions did a few US major airlines EACH spend/waste during the good times-and only to buy back their own stock? AMR reportedly spent about a BILLION (in the US, this is $1,000,000,000) to buy back stock. Wisely spent? That profit alone, came from many thousands of flights.
Back to the present. Who is so naiive that they believe that such a pay concession from all of us, will be "their" last major request from the unions? No matter what "we" give, it is never enough, unless we are then paid what a dump truck driver is paid to haul a load of dirt.
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UAL going bye bye?
Well it's hard for many in the aviation industry to feel sorry for United. They have been the big bully for years. Their crews have been very arrogant, and cocky for many years. I can remember them with stickers wishing for a bankrupt airline to go under. While it's sad to see anyone lose their job we all have to remember that what goes around comes around.
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Override:
The points about poor choices and flat out mistakes by management are well taken. The issue about how United employees will have difficulty regaining leverage if they give it up now are also valid.
But one of those is looking back-when and the other is in-the-future.
Meanwhile, the guys with the sharp pencils and even sharper knives are impatiently standing by the door. Read the bios of Michael Milliken and disciples in this kind of process if you harbor optimism about the affection of the money guys for UAL or any other pile of assets up for grabs at the breaking yard.
It appears the problem is Now.
The only (semi) sure fix for a financial upset is to reduce the daily burn of cash while maintaining or increasing activity that leads to revenue production - i.e, adding power to climb out of the dive - and the only BIG way to do this when there's little or nothing left to mortgage is to cut payrolls every how possible.
Otherwise we stand to see the still-shiny airline converted into a lot of aluminum scrap and a long line at the PGBC.
The points about poor choices and flat out mistakes by management are well taken. The issue about how United employees will have difficulty regaining leverage if they give it up now are also valid.
But one of those is looking back-when and the other is in-the-future.
Meanwhile, the guys with the sharp pencils and even sharper knives are impatiently standing by the door. Read the bios of Michael Milliken and disciples in this kind of process if you harbor optimism about the affection of the money guys for UAL or any other pile of assets up for grabs at the breaking yard.
It appears the problem is Now.
The only (semi) sure fix for a financial upset is to reduce the daily burn of cash while maintaining or increasing activity that leads to revenue production - i.e, adding power to climb out of the dive - and the only BIG way to do this when there's little or nothing left to mortgage is to cut payrolls every how possible.
Otherwise we stand to see the still-shiny airline converted into a lot of aluminum scrap and a long line at the PGBC.
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United snags $1B in loans, buys time to reorganize
By Marilyn Adams, USA TODAY
United Airlines and three big lenders Wednesday finalized $1 billion in new bankruptcy financing that gives the giant airline another year to reorganize in Chapter 11 protection.
The new loan is designed to give United, in reorganization for 19 months, until June 2005 to cut more costs and revise its business plan, said Bill Repko, restructuring chief at J.P. Morgan Chase.
The loan package will be split among J.P. Morgan and Citigroup, United's existing lead lenders, and GE Commercial Finance. United is a significant customer of General Electric, which makes aircraft engines and finances aircraft.
Neither the banks nor United would disclose specific terms or conditions of the loan package.
The new loan agreement "is a positive statement: We wanted to show that United is adequately financed," Repko said. "This will give United adequate liquidity and ample time" to redraw its business plan.
The development comes just weeks after a federal panel denied United's application for a $1.6 billion loan guarantee to help United exit bankruptcy.
The Air Transportation Stabilization Board said United didn't need a federal guarantee to get financing because the credit markets have improved since the Sept. 11 terrorist attacks, which prompted Congress to establish the guarantee program.
United filed for Chapter 11 bankruptcy protection in December 2002 with plans to emerge as a reorganized company by last month. That didn't happen. Now, United must line up private loans or obtain exit capital from an investor who would get a stake in the airline.
Following the government's denial last month, analysts said United's cash could run dangerously low by year's end. At the end of the first quarter, United had less available cash relative to its size than any other major airline. Despite major cuts in labor and aircraft costs, United is posting big losses amid weak airfares and high fuel prices.
GE Commercial Finance confirmed the deal was being finalized Wednesday night.
United spokeswoman Jean Medina said the airline is pleased with the extension.
United's existing bankruptcy loans had been extended to Dec. 31. But industry experts said the new loan deal isn't premature.
"United has to get itself reorganized, so it's not too early," said analyst Ray Neidl of Blaylock & Partners.
Last week, United took another step to bolster cash, deferring a $72 million scheduled payment for its employees' pension plans. Experts say it's a sign United, whose pension plans are underfunded by billions of dollars, may be forced to revise those plans in bankruptcy. Another pension payment is due in September.
http://www.usatoday.com/money/biztra...1-united_x.htm
By Marilyn Adams, USA TODAY
United Airlines and three big lenders Wednesday finalized $1 billion in new bankruptcy financing that gives the giant airline another year to reorganize in Chapter 11 protection.
The new loan is designed to give United, in reorganization for 19 months, until June 2005 to cut more costs and revise its business plan, said Bill Repko, restructuring chief at J.P. Morgan Chase.
The loan package will be split among J.P. Morgan and Citigroup, United's existing lead lenders, and GE Commercial Finance. United is a significant customer of General Electric, which makes aircraft engines and finances aircraft.
Neither the banks nor United would disclose specific terms or conditions of the loan package.
The new loan agreement "is a positive statement: We wanted to show that United is adequately financed," Repko said. "This will give United adequate liquidity and ample time" to redraw its business plan.
The development comes just weeks after a federal panel denied United's application for a $1.6 billion loan guarantee to help United exit bankruptcy.
The Air Transportation Stabilization Board said United didn't need a federal guarantee to get financing because the credit markets have improved since the Sept. 11 terrorist attacks, which prompted Congress to establish the guarantee program.
United filed for Chapter 11 bankruptcy protection in December 2002 with plans to emerge as a reorganized company by last month. That didn't happen. Now, United must line up private loans or obtain exit capital from an investor who would get a stake in the airline.
Following the government's denial last month, analysts said United's cash could run dangerously low by year's end. At the end of the first quarter, United had less available cash relative to its size than any other major airline. Despite major cuts in labor and aircraft costs, United is posting big losses amid weak airfares and high fuel prices.
GE Commercial Finance confirmed the deal was being finalized Wednesday night.
United spokeswoman Jean Medina said the airline is pleased with the extension.
United's existing bankruptcy loans had been extended to Dec. 31. But industry experts said the new loan deal isn't premature.
"United has to get itself reorganized, so it's not too early," said analyst Ray Neidl of Blaylock & Partners.
Last week, United took another step to bolster cash, deferring a $72 million scheduled payment for its employees' pension plans. Experts say it's a sign United, whose pension plans are underfunded by billions of dollars, may be forced to revise those plans in bankruptcy. Another pension payment is due in September.
http://www.usatoday.com/money/biztra...1-united_x.htm
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UAL Pay
As a UAL furloughed pilot, I can tell you that there is no way that a UAL pilot is overpayed. Review the facts...UAL pilots worked at a substantially lower pay rate from 1994-2000 in order to "buy" the company. Senior captains gave away hundreds of thousands of dollars of pay to do this. In one fail swoop of bankruptcy, this was wiped out and they lost hundreds of thousands of dollars. They also could not contribute to their own retirement at the time due to the stock being purchased for their retirement.
I will tell you this...the current pay of a junior 737 pilot at UAL is currently zero...they are all on furlough, up to 6 years seniority. Even those still working are making significantly less than their military counterparts. A junior 737 co pilot makes about $80,000 per year, gets an average of 10 days off a month, has an average of 12-14 hour days w/ about 8-9 hours actually in the hotel on a layover. If you think this is a lot of money, great...but it's not.
Someone mentioned a job vs no job...my question is how low will you go. Will you work as a major airline pilot for $30k per year??? How about $20k....Free??? You gotta have a bottom line and for me, if it is less than $100k per year, it isn't worth the stress and problems on the family, much less the health issues all pilots face...Get real.
Anyway, I am happy to be furloughed and hope to stay that way until United sorts out it's problems. United will do well, they will make big money, they will come back stronger than ever and it will be on the backs of it's employees. Trust me....airlines go in cycles and it will again be up, no matter what airline management wants to say.
If you are happy making $25k a year flying airplanes, being away from you family half the month, then continue to lobby for decreased pilot pay...I am sure you will get it.
My 2 cents....
I will tell you this...the current pay of a junior 737 pilot at UAL is currently zero...they are all on furlough, up to 6 years seniority. Even those still working are making significantly less than their military counterparts. A junior 737 co pilot makes about $80,000 per year, gets an average of 10 days off a month, has an average of 12-14 hour days w/ about 8-9 hours actually in the hotel on a layover. If you think this is a lot of money, great...but it's not.
Someone mentioned a job vs no job...my question is how low will you go. Will you work as a major airline pilot for $30k per year??? How about $20k....Free??? You gotta have a bottom line and for me, if it is less than $100k per year, it isn't worth the stress and problems on the family, much less the health issues all pilots face...Get real.
Anyway, I am happy to be furloughed and hope to stay that way until United sorts out it's problems. United will do well, they will make big money, they will come back stronger than ever and it will be on the backs of it's employees. Trust me....airlines go in cycles and it will again be up, no matter what airline management wants to say.
If you are happy making $25k a year flying airplanes, being away from you family half the month, then continue to lobby for decreased pilot pay...I am sure you will get it.
My 2 cents....
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>>United will do well, they will make big money, they will come back stronger than ever and it will be on the backs of it's employees. Trust me....airlines go in cycles and it will again be up, no matter what airline management wants to say.<<
Yep, they will be back just like Pan Am, Eastern, Braniff and all the rest. That bankruptcy is just a technicality, trust me...
Here's the latest roll of the dice:
_______________________________
UNITED AIRLINES
No payments made to workers' pension plans
Compiled by William Sluis from staff and wire reports
Published July 25, 2004
Troubled carrier United Airlines, still struggling to escape from bankruptcy, said it will not make payments to its underfunded pension plans, igniting the ire of its union members.
The carrier is "following a very dangerous path and cannot successfully exit bankruptcy without living up to the commitments they made to their employees," the International Association of Machinists and Aerospace Workers said.
The union, which represents 27,000 ramp and other workers at United, is considering taking legal action to protect its members' retirement income.
The airline missed a $72 million payment earlier this month and expects to miss nearly $500 million in payments in September and October.
"Because United's existing pension funding obligations will remain a huge financial burden after exit, it is incumbent on United to study all possible options and to determine whether United can sustain this burden and still attract exit financing," James Sprayregen, its lead bankruptcy attorney, told U.S. Bankruptcy Judge Eugene Wedoff.
The decision to hold off on payments will not have an immediate impact on United retirees already receiving pension payments.
Even so, "it's water torture treatment" for employees, said John Pincavage, a Westport, Conn.-based financial adviser to airlines.
United's pension plans are underfunded by at least $7.5 billion, according to the Pension Benefit Guaranty Corp.
Watch for: Scant progress in the impasse unless fuel costs fall. The airline is hamstrung by huge debts and sky-high fuel prices.
http://www.chicagotribune.com/busine...i-business-hed
Yep, they will be back just like Pan Am, Eastern, Braniff and all the rest. That bankruptcy is just a technicality, trust me...
Here's the latest roll of the dice:
_______________________________
UNITED AIRLINES
No payments made to workers' pension plans
Compiled by William Sluis from staff and wire reports
Published July 25, 2004
Troubled carrier United Airlines, still struggling to escape from bankruptcy, said it will not make payments to its underfunded pension plans, igniting the ire of its union members.
The carrier is "following a very dangerous path and cannot successfully exit bankruptcy without living up to the commitments they made to their employees," the International Association of Machinists and Aerospace Workers said.
The union, which represents 27,000 ramp and other workers at United, is considering taking legal action to protect its members' retirement income.
The airline missed a $72 million payment earlier this month and expects to miss nearly $500 million in payments in September and October.
"Because United's existing pension funding obligations will remain a huge financial burden after exit, it is incumbent on United to study all possible options and to determine whether United can sustain this burden and still attract exit financing," James Sprayregen, its lead bankruptcy attorney, told U.S. Bankruptcy Judge Eugene Wedoff.
The decision to hold off on payments will not have an immediate impact on United retirees already receiving pension payments.
Even so, "it's water torture treatment" for employees, said John Pincavage, a Westport, Conn.-based financial adviser to airlines.
United's pension plans are underfunded by at least $7.5 billion, according to the Pension Benefit Guaranty Corp.
Watch for: Scant progress in the impasse unless fuel costs fall. The airline is hamstrung by huge debts and sky-high fuel prices.
http://www.chicagotribune.com/busine...i-business-hed
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We all knew that the A Fund retirement would go away, especially the junior guys. That is why the junior pilots tried to fight to get rid of it and keep more pay.
To compare United's situation with that of Eastern or Pan Am is ridiculous. United has the best route structure in the world and the fact that they are going to cancel the pension plans will give them an instant advantage over all the other network carriers. If you are buying into all the hype and media coverage you are hearing, then you are a bit naive. It is all posturing. Having been there and knowing what I know about United and the employees I will tell you this...they will give into more concessions (maybe not the mechanics), the pension funds will be drastically changed, and United will exit bankruptcy and EXPAND!! Read it now, and witness it later...
Again, all of you praying for drastic cuts in United pay, and losses of benefits, good for you...but you are in the wrong line of work and you will reap what you sow. Lower wages, no benefits, tougher working conditions...
United's costs for labor are among the lowest in the industry at this point and mgt will milk this whole thing for every penny. I will laugh my butt off when the big management bonuses get handed out about a year after exiting. That is the worst part about not getting a loan guarantee, the govt cannot limit the executive bonuses. And by the way, I personally think they earned every penny of the bonuses that they are going to get.
To compare United's situation with that of Eastern or Pan Am is ridiculous. United has the best route structure in the world and the fact that they are going to cancel the pension plans will give them an instant advantage over all the other network carriers. If you are buying into all the hype and media coverage you are hearing, then you are a bit naive. It is all posturing. Having been there and knowing what I know about United and the employees I will tell you this...they will give into more concessions (maybe not the mechanics), the pension funds will be drastically changed, and United will exit bankruptcy and EXPAND!! Read it now, and witness it later...
Again, all of you praying for drastic cuts in United pay, and losses of benefits, good for you...but you are in the wrong line of work and you will reap what you sow. Lower wages, no benefits, tougher working conditions...
United's costs for labor are among the lowest in the industry at this point and mgt will milk this whole thing for every penny. I will laugh my butt off when the big management bonuses get handed out about a year after exiting. That is the worst part about not getting a loan guarantee, the govt cannot limit the executive bonuses. And by the way, I personally think they earned every penny of the bonuses that they are going to get.
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>>To compare United's situation with that of Eastern or Pan Am is ridiculous. United has the best route structure in the world and the fact that they are going to cancel the pension plans will give them an instant advantage over all the other network carriers. If you are buying into all the hype and media coverage you are hearing, then you are a bit naive. It is all posturing.<<
All the same, if you are on furlough from UAL, don't quit your day job just yet...
All the same, if you are on furlough from UAL, don't quit your day job just yet...
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<<All the same, if you are on furlough from UAL, don't quit your day job just yet...>>
Doesn't matter if one is on furlough -- my father, having retired after 41 years in air freight at UAL has taken a part-time job out of fear that the pension checks will stop arriving, as has my mother -- both in their late-60's and already feeling the pinch of medical benefits being cut.
With the latest news, it kills me to receive the tearful phone calls from them wondering what is going to happen next. Yes, the pension is Federally guaranteed as long as UAL stays solvent, but what do I tell a man who devoted his entire life to the company? We can blame 9/11, we can blame the employee buyout, we can blame the Unions...
I grew up with UAL, it was part of my 'family' - but I can't help but wonder if when (yes, when) they do emerge from bankruptcy, will I still be getting those tearful phone calls wondering if those pension payments will still be there, will they be financially devestated if, God forbid, there's a medical problem?
A lot of people out there who helped make the airline as strong as it was for all those years are now living each day with a fear of what may be next...
Doesn't matter if one is on furlough -- my father, having retired after 41 years in air freight at UAL has taken a part-time job out of fear that the pension checks will stop arriving, as has my mother -- both in their late-60's and already feeling the pinch of medical benefits being cut.
With the latest news, it kills me to receive the tearful phone calls from them wondering what is going to happen next. Yes, the pension is Federally guaranteed as long as UAL stays solvent, but what do I tell a man who devoted his entire life to the company? We can blame 9/11, we can blame the employee buyout, we can blame the Unions...
I grew up with UAL, it was part of my 'family' - but I can't help but wonder if when (yes, when) they do emerge from bankruptcy, will I still be getting those tearful phone calls wondering if those pension payments will still be there, will they be financially devestated if, God forbid, there's a medical problem?
A lot of people out there who helped make the airline as strong as it was for all those years are now living each day with a fear of what may be next...
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I will tell you this...the current pay of a junior 737 pilot at UAL is currently zero...they are all on furlough, up to 6 years seniority. Even those still working are making significantly less than their military counterparts. A junior 737 co pilot makes about $80,000 per year, gets an average of 10 days off a month, has an average of 12-14 hour days w/ about 8-9 hours actually in the hotel on a layover. If you think this is a lot of money, great...but it's not.
Someone mentioned a job vs no job...my question is how low will you go. Will you work as a major airline pilot for $30k per year??? How about $20k....Free??? You gotta have a bottom line and for me, if it is less than $100k per year, it isn't worth the stress and problems on the family, much less the health issues all pilots face...Get real.
Someone mentioned a job vs no job...my question is how low will you go. Will you work as a major airline pilot for $30k per year??? How about $20k....Free??? You gotta have a bottom line and for me, if it is less than $100k per year, it isn't worth the stress and problems on the family, much less the health issues all pilots face...Get real.
This and many other posts go in the right direction but miss to follow through, in my opinion. The problem here is economics, not whether Pilots feel how much money they deserve.
(1)There are too many pilots for too few jobs right now, be it for mismanagement, demand, or industry structure reasons (or all of the above).
(2)Whenever you have overcapacity, prices go down. This is a fact of economics.
(3) As prices for pilots go down, the job will become unattractive for some, and people will seek other jobs, as this poster rightfully points out. But this does not mean we need to pay more - it means that economics is working! It means that the pilots who are willing to work for less will have a job, just like the guy who cuts my grass is the one who bid the lowest price for the job. Then after a while, growth picks up, and demand for pilots exceeds supply, and pay will raise again. Pricing takes place where marginal pay hits marginal ability to pay (i.e., where marginal price hits marginal cost). Again, this is not a reason to pay more, it is economics at work. Everything else is union or management role - or, for that matter, government subsidy like the huge payments for the corn industry, which pay farmers much more that their market price would be.
The fact that mostly junior pilots are of of job is purely a creation of the union rules, and in a free market, this would probably not be the case. This doesn't mean it is good or bad - it is a self-created situation, the rules that the pilots (and management) chose to accept. But we have to live with it, or change it - and for that one, you have to look in the union direction, not to management. The pilots have to take responsibility for the work rules - they proposed them and fought for them. Again, this is not inherently good or bad (although economists might disagree).
It is a sad situation, where high growth created a lot of overcapacity in both seats flown and pilots. But other industries see this too, and this is an economic fact. They bitch, too, as would I if my employer told me that I lost 30% of my pay. But that doesn't mean they should be paid more.
As long as pilots are willing to fly (and able, capable, legal, etc..), the airline will pay the lowest pay that these pilots are willing to accept. Right now, this is going down, and rightfully so from an economists perspective.
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Bailout Feared if Airlines Shed Their Pensions
By MARY WILLIAMS WALSH
Published: August 1, 2004
In an echo of the savings and loan industry collapse of the 1980's, the federal agency that insures company pensions is facing a possible cascade of bankruptcies and pension defaults in the airline industry that some experts fear could lead to another multibillion-dollar taxpayer bailout.
"The similarities are incredible," said George J. Benston, a finance professor at Emory University in Atlanta who has written extensively on the regulatory failures that led to the costly savings and loan bailout.
Deposits in savings institutions are, like pensions, guaranteed by a federal insurance program. The savings industry first sickened because changes in market conditions made the traditional way savings and loans operated unprofitable, but government delays and policy missteps then made the situation much worse. In the end taxpayers bailed out the industry — at a cost, according to various estimates, of $150 billion to $200 billion.
Now experts say they see similar forces gathering in the pension sector, with United Airlines perhaps the first to go down the path. Operating in bankruptcy, United is striving to attract the lenders and investors it needs to survive. It said last month that it would no longer contribute to its pension plans; United also seems intent on shedding some or all of its $13 billion in pension obligations as the only way to succeed in emerging from bankruptcy proceedings.
If United manages to cut itself loose from the costly burden of its pension plans, it might force others determined to keep their costs similarly under control to emulate its move. "Rivals may feel they are at a competitive disadvantage and follow suit, raising the specter of a domino effect in the industry," said Bradley D. Belt, the executive director of the government's Pension Benefit Guaranty Corporation, which insures pensions. If every airline with a traditional pension plan were ultimately to default, the government would be on the hook for an estimated $31 billion. Its insurance coverage is limited, so some employees would have their benefits reduced.
"The pension insurance program is there to protect workers' benefits," said Mr. Belt, who took over the agency in April. "It shouldn't be used as a piggy bank to help companies restructure."...
http://www.nytimes.com/2004/08/01/bu...=all&position=
By MARY WILLIAMS WALSH
Published: August 1, 2004
In an echo of the savings and loan industry collapse of the 1980's, the federal agency that insures company pensions is facing a possible cascade of bankruptcies and pension defaults in the airline industry that some experts fear could lead to another multibillion-dollar taxpayer bailout.
"The similarities are incredible," said George J. Benston, a finance professor at Emory University in Atlanta who has written extensively on the regulatory failures that led to the costly savings and loan bailout.
Deposits in savings institutions are, like pensions, guaranteed by a federal insurance program. The savings industry first sickened because changes in market conditions made the traditional way savings and loans operated unprofitable, but government delays and policy missteps then made the situation much worse. In the end taxpayers bailed out the industry — at a cost, according to various estimates, of $150 billion to $200 billion.
Now experts say they see similar forces gathering in the pension sector, with United Airlines perhaps the first to go down the path. Operating in bankruptcy, United is striving to attract the lenders and investors it needs to survive. It said last month that it would no longer contribute to its pension plans; United also seems intent on shedding some or all of its $13 billion in pension obligations as the only way to succeed in emerging from bankruptcy proceedings.
If United manages to cut itself loose from the costly burden of its pension plans, it might force others determined to keep their costs similarly under control to emulate its move. "Rivals may feel they are at a competitive disadvantage and follow suit, raising the specter of a domino effect in the industry," said Bradley D. Belt, the executive director of the government's Pension Benefit Guaranty Corporation, which insures pensions. If every airline with a traditional pension plan were ultimately to default, the government would be on the hook for an estimated $31 billion. Its insurance coverage is limited, so some employees would have their benefits reduced.
"The pension insurance program is there to protect workers' benefits," said Mr. Belt, who took over the agency in April. "It shouldn't be used as a piggy bank to help companies restructure."...
http://www.nytimes.com/2004/08/01/bu...=all&position=
