Delta & Northwest file for Chapter 11
Trash du Blanc
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Unfortunately I am personally very close to this pension debacle.
My uncle retired from UAL. And my father retired from NWA.
Both joined the military in the 1960's. One went to Vietnam, the other stayed stateside and trained pilots. They both ended up in the airlines. They both flew ~30+ years, as professional as they come, both great role models for a young buck like me who wanted to make a career in this business.
Now they are in financial turmoil, at the end of their lives. My father is 66, and has lived modestly his whole life. Yes, he can live off SS and his B fund. But here's the thing: I believe he EARNED his pension, it was part of his compensation, it was like a savings account that he built up with his sweat and toil.
Now it is just going to the ether like some sort of ponzi scheme gone bad.
This strikes to the heart of everything - our free market system, our government, the courts, the current administration..... The moral of this train wreck is: "Contracts really don't matter much. Not if you are weak and vulnerable when you want to enforce them."
My uncle retired from UAL. And my father retired from NWA.
Both joined the military in the 1960's. One went to Vietnam, the other stayed stateside and trained pilots. They both ended up in the airlines. They both flew ~30+ years, as professional as they come, both great role models for a young buck like me who wanted to make a career in this business.
Now they are in financial turmoil, at the end of their lives. My father is 66, and has lived modestly his whole life. Yes, he can live off SS and his B fund. But here's the thing: I believe he EARNED his pension, it was part of his compensation, it was like a savings account that he built up with his sweat and toil.
Now it is just going to the ether like some sort of ponzi scheme gone bad.
This strikes to the heart of everything - our free market system, our government, the courts, the current administration..... The moral of this train wreck is: "Contracts really don't matter much. Not if you are weak and vulnerable when you want to enforce them."
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Now it is just going to the ether like some sort of ponzi scheme gone bad.
The smart pension plans are the ones with an independent board who insist on highly diversified investments, and not relying on the employer's earnings for the bulk of their cash flow.
When the employees buy out a company (as they did with UAL) they are increasing their risk in this area.
My guess is that the legacy carriers' pension plans made some sort of sense pre-deregulation, but they failed to adapt to the new travel marketplace. But hindsight always seems to have the upper hand.
Huck.
You sir, have explained our US system very well. Better than anyone else on Pprune. We live in a very unhonouroble land. Integrity can not be quantified and measured.
In the US, unless you retire from a minimum of years with the civil service or military, not to mention upper management, your retirement does not need to be honored. My father retired from TWA ("class of '66"). He might be more fortunate than most of us airline "grunts".
Only upper management people are considered "Special People".
You sir, have explained our US system very well. Better than anyone else on Pprune. We live in a very unhonouroble land. Integrity can not be quantified and measured.
In the US, unless you retire from a minimum of years with the civil service or military, not to mention upper management, your retirement does not need to be honored. My father retired from TWA ("class of '66"). He might be more fortunate than most of us airline "grunts".
Only upper management people are considered "Special People".
Trash du Blanc
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I had a professional (non-seniority) instructor this summer on the MD11. This guy was 75 and had retired from NWA in 1990(!), and was sharp as a tack.
He was with Hughes Airwest when it got bought by Republic. Management at Hughes was evidently from another breed, and stipulated as part of the purchase that the employee's pension fund would NOT be part of the transaction. The fund was handed to Merrill Lynch for management.
This guy was still receiving pension checks from Hughes, ~20 years after the company was gone.
The irony is - his NWA pension will (possibly) evaporate, and the company will still be in business (soon to be as profitable as UAL....)
He was with Hughes Airwest when it got bought by Republic. Management at Hughes was evidently from another breed, and stipulated as part of the purchase that the employee's pension fund would NOT be part of the transaction. The fund was handed to Merrill Lynch for management.
This guy was still receiving pension checks from Hughes, ~20 years after the company was gone.
The irony is - his NWA pension will (possibly) evaporate, and the company will still be in business (soon to be as profitable as UAL....)
Trash du Blanc
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Yes I did.
But the problem, I think, was not deregulation of the airline industry. It was a failure of the federal government in the 80's and 90's to adequately oversee pensions.
But the problem, I think, was not deregulation of the airline industry. It was a failure of the federal government in the 80's and 90's to adequately oversee pensions.
Mach 3
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What I can figure out is why anyone wants to be a creditor to a US major these days?
Just who are the the major creditors these days of big US airlines?
If I lend you some money and you don't repay me, I get nervous about lending you more.
Call me a conspiracy theorist, but I can't help thinking that once in Ch 11 there is more going on behind the scenes than meets the eye. The political influence on the process seems to me, incontrovertible. But to what end? The critics are right his time. History appears condemned to repeat itself.
The underlying economics of the American aviation industry are no different from that the world over. Last time I looked, it was signed up the to the Western Worlds capitalist hegemony.
Re-regulation isn't the solution. How ironic to hear that from such quarters.
It ought to be able to make it work like other airlines do.
The notion that it isn't ultimately the tax-payers, though, that pick up the bill is laughable...that is, until you retire.
Just who are the the major creditors these days of big US airlines?
If I lend you some money and you don't repay me, I get nervous about lending you more.
Call me a conspiracy theorist, but I can't help thinking that once in Ch 11 there is more going on behind the scenes than meets the eye. The political influence on the process seems to me, incontrovertible. But to what end? The critics are right his time. History appears condemned to repeat itself.
The underlying economics of the American aviation industry are no different from that the world over. Last time I looked, it was signed up the to the Western Worlds capitalist hegemony.
Re-regulation isn't the solution. How ironic to hear that from such quarters.
It ought to be able to make it work like other airlines do.
The notion that it isn't ultimately the tax-payers, though, that pick up the bill is laughable...that is, until you retire.
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The US aviation picture is a little more complex than some posters think.
Here is a piece written by a well known aviation analyst, Mike Boyd.
http://www.aviationplanning.com/asrc20.htm
Airline Industry Bankruptcies
Facts V Myths
Cutting Through The Lore
It's understandable how many folks get the wrong idea when they hear the term "airline bankruptcy" - especially in light of the number we've seen over the past five years. But some of the immediate conclusions coming from various media sectors have done nothing to really inform the public about the real nature of this situation, particularly the Delta and Northwest filings.
Somehow, several "unquestioned truths" have been promulgated in the wake of the DL and NW bankruptcy filings, many of which have no basis in fact, only in accepted lore. The accepted "facts" often are nothing more than "everybody knows" opinion. Yet they seem to be stated over and over, with nobody daring to question them, lest the questioner be burned at the stake as a heretic.
Let's note a couple of them:
WN's Profitable. That Means Other Airlines Should Be Just Like Them
Fact: The current Southwest model is really not profitable. It's living on very cheap fuel. It's a tribute to its management that it made a bet - a hedge - that fuel would go up, and it's now enjoying fuel at well below market rates. But its fundamental model, on an all-up cost basis is losing money. (More below on this)
Chapter 11 Is Just keeping Sick Carriers Alive
No, it's buying time for Delta and Northwest. Neither have a sick route system, although Delta needs to address its over-reliance on RJs. As noted below, Northwest has a route system that is geared for the future.
There's only so many people who can be convinced to chuck their plans for a new refrigerator and use the dough to take a low-fare LCC airline to Florida instead. But the current and future revenue streams between the fast-growing US centers of Asian investment on one hand - most of which are too small to support LCCs - and points in China on the other, are huge. Chapter 11 is allowing these carriers to adjust to what are immediate crises in fuel costs. (And, by the way, LCCs are suffering this too.)
If We Let'em Die, LCCs Will Take Their Place
Get real. Ask the folks in places like ROA, LYH, and BPT about the flood of LCCs that rushed in to replace service lost when a mega-carrier pulled down a hub.
The LCC model, not to mention investment capital, chases big markets, not small and medium size ones. Southwest and AirTran have made that quite clear - they're not interested in expanding at small or medium markets any longer. Flint is a great place for AirTran, but economics point to future expansion in Southeast Michigan being at Detroit.
The same windbag politicians who call for letting airlines fail will be the very ones who will rant and rave when East Upchuck loses all scheduled air service, and Southwest declines the opportunity to operate there.
LCC's Are The Future
Fact: It's here where the next shake-out is coming. First, they are not by and large really profitable, and the picture looks worse going forward. Second, there is an ultimately finite number of places where 100-seat to 150-seat airliners can be placed to make money with the LCC model. Third, take a look at the airplanes coming on line just at AirTran, jetBlue, and Southwest. Hundreds and hundreds. From a marketing point of view, they're already beginning to bump into each other. And for the folks ascribing to the "over-capacity" theory, these new aircraft offer no hope for getting a good night's rest.
The Reasons For C-11 Filings Are Essentially All The Same
Again, wrong. The causes for Continental to file in the 1990s, for TWA to file more than once, and United's filing, are very different than the reasons for DL and NW going the C-11 route. Again, look at the specifics of each incident, and there are few common threads beyond them all being airlines.
Letting A Couple Go Down Will Reduce "Over-Capacity"
Fact: we've already lost essentially the equivalent of one airline on the East Coast. US Airways dumped over 100 airplanes in the last three years. And, indeed, we have seen capacity reductions. In places like Roanoke. But where the huge passenger numbers are, airlines are still fighting for share.
It's lunacy to believe that in these "over-served" markets the failure of say, a United, would permanently reduce capacity allowing fares to go up. Just for starters, again, take a gander at the fleet plans for jetBlue, Southwest, Spirit, and AirTran. It's going to be a capacity free-for-all, and a major airline failure will only zap mid-size communities. Ask the ones who got the short end of the US PIT pull-down, or the DL DFW pull-down.
The Regionals Are Profitable, So Let Them Take Over
This is a statement often heard, but one that can only come from somebody who literally is on another planet from airline industry reality.
Fact: "regional airlines" are vendors, not airlines. They get their revenues based on selling services to mega carriers, not from passenger tickets. For example, Delta pays Comair on a cost-plus basis to provide it with feed traffic. Without that cost-plus deal, Comair would instantly be transformed into Independence Air, Phase II.
Consolidation Will Fix Everything
Sounds good. Gee! Look at the great synergies that would come from a combination of say, Northwest and Delta!
Unfortunately, there are some very expensive things that would have to come about to merge the two airlines and get operating synergies. Like, fleet commonalities. Taking a Boeing-operator and putting it together with a predominantly Airbus operator would require enormous amounts of expensive pilot training, maintenance training and the like. Just bridging maintenance programs between two fleets of 757s can be hugely expensive, even assuming they have the same engines, systems, and cockpit configurations. The bid-and-bump routine for pilots and other staff (which would be necessary if there were to be a combination of disparate fleets) would entail possibly hundreds of millions in costs to train and shift crews around.
Sorry, it looks good, but the results would not be as grandly positive as some seem to think.
Other Common Myths
Myth: The Legacies Are Dead, The LCCs Are The Future: Lots of the alleged "experts" are telling the world that legacy carriers simply cannot compete anymore with the likes of Southwest and jetBlue, which, they point out, are consistently profitable.
Fact: This is a sure sign that whoever makes the statement doesn't know any more about the fundamentals of today's airline industry beyond what they just read someplace else.
Note: Last quarter, American and Continental reported profits, and they were essentially paying "retail" for their jet fuel.
Note: Last quarter, if Southwest had been paying retail for their fuel, they'd have reported a big loss. True, they have hedged fuel, but that was a bet they made long ago - a bet that, fortunately, they won big-time. But it does not change the fact that on an apples-to-apples basis, AA's cost restructuring over the past three years gave it an all-up quarterly profit, and on an all-up basis, Southwest's system isn't making money.
It's great that whoever lost the hedge bet is bearing much of the cost of WN's fuel, but without that, the basic model Southwest operates today isn't a money-making one with high fuel prices.
Myth: NW & DL Are In Bankruptcy Because They're "Legacy" Carriers. Wrong. It's not the "system." It's not the "legacy" problems from the 1970s that pundits try to point out through the haze of over 25 years since deregulation.
Their problems were that they got caught in the headlights by fuel prices that went up a lot faster than they could adjust to quickly. True, both were in the process of getting their labor costs down - something that American, Continental, and United have already done. When jet-A went to over $2 a gallon, the immediate need was to conserve cash while labor and other cost reductions were achieved.
Lots of "experts" go into diatribes about how these legacy carriers have unsupportable cost structures and route systems, dating from the days of regulation in the 1970s. Sounds great, but it is more nonsense. It's missed by these grand prognosticators - most of whom have never worked within the airline industry - that if oil had stayed right where it was at the beginning of last year, as most of us expected, these filings would not have taken place.
The fact is that many of these alleged dead-man-walking legacies have addressed most of those structural problems. The fact is that most of these legacies - Northwest being at the top of the list - have revenue systems that will make them in the long run (and even in the short-run) the carriers to bet on.
But when fuel cost doubles in a period of only a few months, and a hurricane flummoxes both the price and the distribution of the stuff, the cash positions of airlines can get zapped quick. It's just that NW and DL had not gotten their labor costs down fast enough. In the case of DL, you could make an argument that the pre-Grinstein regime sat on its hands. In the case of NW, you could argue that the strategy taken didn't address labor soon enough.
But what you cannot argue is that the basics of these two airlines - particularly Northwest - are fundamentally flawed. They are not.
If fuel had stayed where it was projected to in early 2004, we would not be now bombarded by the dogmatic idiocy being spit out by a whole circus of sudden experts on the airline industry.
But these are hindsight calls by the usual suspects of the school of veneer reporting. If oil had stayed in the mid-$30s, as expected, they'd all be singing a very different tune.
There's A Revenue Side, Too. Then let's talk revenue streams. To hear the "let'em die" analysts tell it, Northwest and Delta simply don't have route systems that work.
Wrong.
Northwest in particular has one of the strongest route systems and revenue flows in the industry. The mantra-chanters have no knowledge about things like where current and future revenue growth will be. Hint: the future is not in trying to get more families to take trips from the Northeast to Florida, which is a mainstay of LCC operations. It's not relying on the potential for stimulating new demand with low fares between Boston and Lincoln. It's not just cherry-picking heavy markets like transcons.
Sorry to disappoint them, but as we'll note below, the new, growth revenue flows are between places like Montgomery and Seoul. Tokyo and Grand Rapids. Charleston to Osaka. Shreveport to Lansing. Greenville-Spartanburg to Milwaukee.
These, and dozens of other destination pairs, are where the future is. And where the LCC model mostly can't go.
Myth: The Hub-And-Spoke System Is Inefficient. There are the usual parrots that are spouting the "fact" that it's the "point to point" airlines that are making money, therefore the legacy carriers' hub systems are obsolete.
Depending on the source, the story is sometimes accessorized by babble about fleet utilization, assuming that just flying an airplane makes money. In another twist, they sometimes point to the number of airplane types legacy systems operate, and note that Southwest only has "one" type of aircraft in its system.
Fact: This is another badge of ignorance from people who get their airline knowledge from the cocktail party circuit.
Note: Southwest doesn't operate just one type of aircraft. There are fundamental differences in their fleets of 737-300/500s and their fleet of 737-700s. Until the end of last year, they actually operated a third type, the 737-200. It is a fact, however, that Southwest does focus on fleets of airliners between 124 and 140 seats, which is the general template for the LCCs that some of these "analysts" predict can and will replace Northwest and Delta, both of which have sinned greatly, according to some "experts," and must go out of business.
More of the article in the link...
Here is a piece written by a well known aviation analyst, Mike Boyd.
http://www.aviationplanning.com/asrc20.htm
Airline Industry Bankruptcies
Facts V Myths
Cutting Through The Lore
It's understandable how many folks get the wrong idea when they hear the term "airline bankruptcy" - especially in light of the number we've seen over the past five years. But some of the immediate conclusions coming from various media sectors have done nothing to really inform the public about the real nature of this situation, particularly the Delta and Northwest filings.
Somehow, several "unquestioned truths" have been promulgated in the wake of the DL and NW bankruptcy filings, many of which have no basis in fact, only in accepted lore. The accepted "facts" often are nothing more than "everybody knows" opinion. Yet they seem to be stated over and over, with nobody daring to question them, lest the questioner be burned at the stake as a heretic.
Let's note a couple of them:
WN's Profitable. That Means Other Airlines Should Be Just Like Them
Fact: The current Southwest model is really not profitable. It's living on very cheap fuel. It's a tribute to its management that it made a bet - a hedge - that fuel would go up, and it's now enjoying fuel at well below market rates. But its fundamental model, on an all-up cost basis is losing money. (More below on this)
Chapter 11 Is Just keeping Sick Carriers Alive
No, it's buying time for Delta and Northwest. Neither have a sick route system, although Delta needs to address its over-reliance on RJs. As noted below, Northwest has a route system that is geared for the future.
There's only so many people who can be convinced to chuck their plans for a new refrigerator and use the dough to take a low-fare LCC airline to Florida instead. But the current and future revenue streams between the fast-growing US centers of Asian investment on one hand - most of which are too small to support LCCs - and points in China on the other, are huge. Chapter 11 is allowing these carriers to adjust to what are immediate crises in fuel costs. (And, by the way, LCCs are suffering this too.)
If We Let'em Die, LCCs Will Take Their Place
Get real. Ask the folks in places like ROA, LYH, and BPT about the flood of LCCs that rushed in to replace service lost when a mega-carrier pulled down a hub.
The LCC model, not to mention investment capital, chases big markets, not small and medium size ones. Southwest and AirTran have made that quite clear - they're not interested in expanding at small or medium markets any longer. Flint is a great place for AirTran, but economics point to future expansion in Southeast Michigan being at Detroit.
The same windbag politicians who call for letting airlines fail will be the very ones who will rant and rave when East Upchuck loses all scheduled air service, and Southwest declines the opportunity to operate there.
LCC's Are The Future
Fact: It's here where the next shake-out is coming. First, they are not by and large really profitable, and the picture looks worse going forward. Second, there is an ultimately finite number of places where 100-seat to 150-seat airliners can be placed to make money with the LCC model. Third, take a look at the airplanes coming on line just at AirTran, jetBlue, and Southwest. Hundreds and hundreds. From a marketing point of view, they're already beginning to bump into each other. And for the folks ascribing to the "over-capacity" theory, these new aircraft offer no hope for getting a good night's rest.
The Reasons For C-11 Filings Are Essentially All The Same
Again, wrong. The causes for Continental to file in the 1990s, for TWA to file more than once, and United's filing, are very different than the reasons for DL and NW going the C-11 route. Again, look at the specifics of each incident, and there are few common threads beyond them all being airlines.
Letting A Couple Go Down Will Reduce "Over-Capacity"
Fact: we've already lost essentially the equivalent of one airline on the East Coast. US Airways dumped over 100 airplanes in the last three years. And, indeed, we have seen capacity reductions. In places like Roanoke. But where the huge passenger numbers are, airlines are still fighting for share.
It's lunacy to believe that in these "over-served" markets the failure of say, a United, would permanently reduce capacity allowing fares to go up. Just for starters, again, take a gander at the fleet plans for jetBlue, Southwest, Spirit, and AirTran. It's going to be a capacity free-for-all, and a major airline failure will only zap mid-size communities. Ask the ones who got the short end of the US PIT pull-down, or the DL DFW pull-down.
The Regionals Are Profitable, So Let Them Take Over
This is a statement often heard, but one that can only come from somebody who literally is on another planet from airline industry reality.
Fact: "regional airlines" are vendors, not airlines. They get their revenues based on selling services to mega carriers, not from passenger tickets. For example, Delta pays Comair on a cost-plus basis to provide it with feed traffic. Without that cost-plus deal, Comair would instantly be transformed into Independence Air, Phase II.
Consolidation Will Fix Everything
Sounds good. Gee! Look at the great synergies that would come from a combination of say, Northwest and Delta!
Unfortunately, there are some very expensive things that would have to come about to merge the two airlines and get operating synergies. Like, fleet commonalities. Taking a Boeing-operator and putting it together with a predominantly Airbus operator would require enormous amounts of expensive pilot training, maintenance training and the like. Just bridging maintenance programs between two fleets of 757s can be hugely expensive, even assuming they have the same engines, systems, and cockpit configurations. The bid-and-bump routine for pilots and other staff (which would be necessary if there were to be a combination of disparate fleets) would entail possibly hundreds of millions in costs to train and shift crews around.
Sorry, it looks good, but the results would not be as grandly positive as some seem to think.
Other Common Myths
Myth: The Legacies Are Dead, The LCCs Are The Future: Lots of the alleged "experts" are telling the world that legacy carriers simply cannot compete anymore with the likes of Southwest and jetBlue, which, they point out, are consistently profitable.
Fact: This is a sure sign that whoever makes the statement doesn't know any more about the fundamentals of today's airline industry beyond what they just read someplace else.
Note: Last quarter, American and Continental reported profits, and they were essentially paying "retail" for their jet fuel.
Note: Last quarter, if Southwest had been paying retail for their fuel, they'd have reported a big loss. True, they have hedged fuel, but that was a bet they made long ago - a bet that, fortunately, they won big-time. But it does not change the fact that on an apples-to-apples basis, AA's cost restructuring over the past three years gave it an all-up quarterly profit, and on an all-up basis, Southwest's system isn't making money.
It's great that whoever lost the hedge bet is bearing much of the cost of WN's fuel, but without that, the basic model Southwest operates today isn't a money-making one with high fuel prices.
Myth: NW & DL Are In Bankruptcy Because They're "Legacy" Carriers. Wrong. It's not the "system." It's not the "legacy" problems from the 1970s that pundits try to point out through the haze of over 25 years since deregulation.
Their problems were that they got caught in the headlights by fuel prices that went up a lot faster than they could adjust to quickly. True, both were in the process of getting their labor costs down - something that American, Continental, and United have already done. When jet-A went to over $2 a gallon, the immediate need was to conserve cash while labor and other cost reductions were achieved.
Lots of "experts" go into diatribes about how these legacy carriers have unsupportable cost structures and route systems, dating from the days of regulation in the 1970s. Sounds great, but it is more nonsense. It's missed by these grand prognosticators - most of whom have never worked within the airline industry - that if oil had stayed right where it was at the beginning of last year, as most of us expected, these filings would not have taken place.
The fact is that many of these alleged dead-man-walking legacies have addressed most of those structural problems. The fact is that most of these legacies - Northwest being at the top of the list - have revenue systems that will make them in the long run (and even in the short-run) the carriers to bet on.
But when fuel cost doubles in a period of only a few months, and a hurricane flummoxes both the price and the distribution of the stuff, the cash positions of airlines can get zapped quick. It's just that NW and DL had not gotten their labor costs down fast enough. In the case of DL, you could make an argument that the pre-Grinstein regime sat on its hands. In the case of NW, you could argue that the strategy taken didn't address labor soon enough.
But what you cannot argue is that the basics of these two airlines - particularly Northwest - are fundamentally flawed. They are not.
If fuel had stayed where it was projected to in early 2004, we would not be now bombarded by the dogmatic idiocy being spit out by a whole circus of sudden experts on the airline industry.
But these are hindsight calls by the usual suspects of the school of veneer reporting. If oil had stayed in the mid-$30s, as expected, they'd all be singing a very different tune.
There's A Revenue Side, Too. Then let's talk revenue streams. To hear the "let'em die" analysts tell it, Northwest and Delta simply don't have route systems that work.
Wrong.
Northwest in particular has one of the strongest route systems and revenue flows in the industry. The mantra-chanters have no knowledge about things like where current and future revenue growth will be. Hint: the future is not in trying to get more families to take trips from the Northeast to Florida, which is a mainstay of LCC operations. It's not relying on the potential for stimulating new demand with low fares between Boston and Lincoln. It's not just cherry-picking heavy markets like transcons.
Sorry to disappoint them, but as we'll note below, the new, growth revenue flows are between places like Montgomery and Seoul. Tokyo and Grand Rapids. Charleston to Osaka. Shreveport to Lansing. Greenville-Spartanburg to Milwaukee.
These, and dozens of other destination pairs, are where the future is. And where the LCC model mostly can't go.
Myth: The Hub-And-Spoke System Is Inefficient. There are the usual parrots that are spouting the "fact" that it's the "point to point" airlines that are making money, therefore the legacy carriers' hub systems are obsolete.
Depending on the source, the story is sometimes accessorized by babble about fleet utilization, assuming that just flying an airplane makes money. In another twist, they sometimes point to the number of airplane types legacy systems operate, and note that Southwest only has "one" type of aircraft in its system.
Fact: This is another badge of ignorance from people who get their airline knowledge from the cocktail party circuit.
Note: Southwest doesn't operate just one type of aircraft. There are fundamental differences in their fleets of 737-300/500s and their fleet of 737-700s. Until the end of last year, they actually operated a third type, the 737-200. It is a fact, however, that Southwest does focus on fleets of airliners between 124 and 140 seats, which is the general template for the LCCs that some of these "analysts" predict can and will replace Northwest and Delta, both of which have sinned greatly, according to some "experts," and must go out of business.
More of the article in the link...
Aviator: fascinating, assuming that Mr. Boyd has his facts in context, and he is persuasive, although his frequent off-the-cuff remarks can appear sloppy and vague. He is often quoted by US business and general media.
Maybe my understanding of this industry is based on wrong interpretations.
A friend I just flew with lives in Florida, next door to a Delta pilot. C. was told by his neighbor that due to their next pay cut, the guy might just quit Delta, because his pay could be surpassed in another line of work. I suggested that the guy go on leave, despite his emotions, instead of burning a major "bridge", so to speak.
Our CEO has spoken to a few classes of pilots in recurrent training. Some of his comments were not well received, to put it mildly. I was told that when he stated that thousands of pilots are lined up to work for JetBlue (assuming that nobody connects this with the thousands of laid-off pilots), several pilots were ready to punch their CEO. A pilot in one class responded by telling him, to his face, that the airline could hire a brand-new Harvard (Business School) MBA to replace him for much less money. The guy who was there, said that the CEO....a, ..eh...a natural leader of men...
became quite angry, and used the f*** word four times, despite the fact that a lady pilot was there. This was exactly what he observed in class. Many of our pilots have the backbone to openly contradict blatant "poisoned Kool-aid", and refuse to "drink it" without question.
It is amazing how so-called corporate leaders, typical US airline CEOs, continue to view us as mere mushrooms who only need a dark room and bulls**t to thrive.
Maybe my understanding of this industry is based on wrong interpretations.
A friend I just flew with lives in Florida, next door to a Delta pilot. C. was told by his neighbor that due to their next pay cut, the guy might just quit Delta, because his pay could be surpassed in another line of work. I suggested that the guy go on leave, despite his emotions, instead of burning a major "bridge", so to speak.
Our CEO has spoken to a few classes of pilots in recurrent training. Some of his comments were not well received, to put it mildly. I was told that when he stated that thousands of pilots are lined up to work for JetBlue (assuming that nobody connects this with the thousands of laid-off pilots), several pilots were ready to punch their CEO. A pilot in one class responded by telling him, to his face, that the airline could hire a brand-new Harvard (Business School) MBA to replace him for much less money. The guy who was there, said that the CEO....a, ..eh...a natural leader of men...
became quite angry, and used the f*** word four times, despite the fact that a lady pilot was there. This was exactly what he observed in class. Many of our pilots have the backbone to openly contradict blatant "poisoned Kool-aid", and refuse to "drink it" without question. It is amazing how so-called corporate leaders, typical US airline CEOs, continue to view us as mere mushrooms who only need a dark room and bulls**t to thrive.
Last edited by Ignition Override; 25th Sep 2005 at 23:02.
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I can smell some el toro doo-doo as well.
How many business analysts do NW, AA, UAL and DL have?
What are management for if not to apply a business strategy that fits the times?
If you want me sympathetic as a creditor taking a hit on my investment, don't just talk to me about projected revenue streams, talk to me about projected costs as well.
Reminds me of a Top Gun quote:
How many business analysts do NW, AA, UAL and DL have?
What are management for if not to apply a business strategy that fits the times?
If you want me sympathetic as a creditor taking a hit on my investment, don't just talk to me about projected revenue streams, talk to me about projected costs as well.
Reminds me of a Top Gun quote:
Maverick. That was some of the best goddamn flying I've ever seen. Right up to the time you got killed.
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Southwest is profitable and heavily unionised, therefore unions must be good. A classic example of inductive logic, the permitted influence of the union is surely more relevant. Ignition O, of course CEO's, managers and corporate leaders hate pilots. They see them as overpaid, arrogant know it alls who rarely put thier money where their mouth is.
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I have tried to read all the posts related to this topic, but one thing that I missed so far is the chicken and egg thing behind the Chapter 11 filling of both NW and DL. To me they are indelibly related to the filling of both US airways, and United. UA and US airways were able to downsize their operations, and their Terms and Conditions in a way that would be impossible during the normal running of their operations. This has brought their costs down in such a way that is has harmed all the other carriers operating under the “normal laws” of business.
United has been in Chapter 11 protection for 33 months and is aiming for a flexible exit date of February, 2006. US airways is aiming for its second exit out of Chapter 11 in a period of one year. I sympathize, their troubles are huge and I would hope that my airline would also do all that is possible to keep my airline going. But what has happened here is that their presence in Chapter 11 has harmed all airlines. If United would have been allowed to fail (Chapter 7, as an example) it would have taken out most of the excess capacity that was present in the industry at that time. It would have allowed other carriers to straighten out some of their problems. Now the gangrene has been allowed to develop further and has harmed more than just the limb initially affected.
What we see now it that DL and NW are cutting back on their domestic operations and put in more capacity into their international network. This is being subsidized by their Chapter 11 filling. In this way the harm will be exported across the world. Their cost structure will be downsized, as especially their pension funds will be raped and pillaged and handed over to the government. This is a multi-billion dollar subsidy for both carriers. But United and US airways got the same deal. Continental was able to do all this back in the early nineties. This leaves only American Airlines as a top six carrier who has not resorted to this method of downsizing its cost structure. This means that 5 out of the top 6 domestic/international carriers in the USA are using this method to gain a cost advantage. By the way only a part of this subsidy is paid for by the government, most of it is paid for by the employees current and past in lost pension benefits.
Living in the Netherlands I am always amazed at the way the USA allows the little guy to pay the bills for the rich. Upper management is able to put together the most beautiful golden parachutes (even American Airlines had an issue with this when Mr. Carty put together a beautiful one for himself and his top team) while the normal employees are left holding the stinky little bag when things go south.
In my country our pension funds are a total separate entity from the employee’s company. My company is not allowed access to any funds. My pension is guaranteed up to this moment, meaning what I have built up to this point is something that I can rely on. Even if my company were to shut its doors tomorrow I would still get this pension payment when my retirement age comes around. Why can this be done in my country and not in the richest country in the world? To me it is a great shame that even people who have paid into the pension scheme their whole career are left with a greatly reduced pension or even loose it all. How on earth can you make a reliable financial planning?
In short Chapter 11 is harmful to all; it screws employees, damages competitors, and screws the taxpayer. I can’t think of any airline that has survived long term once it has used chapter 11 besides Continental (nine years and counting). The list of airlines that have eventually folded or been bought out is much larger.
United has been in Chapter 11 protection for 33 months and is aiming for a flexible exit date of February, 2006. US airways is aiming for its second exit out of Chapter 11 in a period of one year. I sympathize, their troubles are huge and I would hope that my airline would also do all that is possible to keep my airline going. But what has happened here is that their presence in Chapter 11 has harmed all airlines. If United would have been allowed to fail (Chapter 7, as an example) it would have taken out most of the excess capacity that was present in the industry at that time. It would have allowed other carriers to straighten out some of their problems. Now the gangrene has been allowed to develop further and has harmed more than just the limb initially affected.
What we see now it that DL and NW are cutting back on their domestic operations and put in more capacity into their international network. This is being subsidized by their Chapter 11 filling. In this way the harm will be exported across the world. Their cost structure will be downsized, as especially their pension funds will be raped and pillaged and handed over to the government. This is a multi-billion dollar subsidy for both carriers. But United and US airways got the same deal. Continental was able to do all this back in the early nineties. This leaves only American Airlines as a top six carrier who has not resorted to this method of downsizing its cost structure. This means that 5 out of the top 6 domestic/international carriers in the USA are using this method to gain a cost advantage. By the way only a part of this subsidy is paid for by the government, most of it is paid for by the employees current and past in lost pension benefits.
Living in the Netherlands I am always amazed at the way the USA allows the little guy to pay the bills for the rich. Upper management is able to put together the most beautiful golden parachutes (even American Airlines had an issue with this when Mr. Carty put together a beautiful one for himself and his top team) while the normal employees are left holding the stinky little bag when things go south.
In my country our pension funds are a total separate entity from the employee’s company. My company is not allowed access to any funds. My pension is guaranteed up to this moment, meaning what I have built up to this point is something that I can rely on. Even if my company were to shut its doors tomorrow I would still get this pension payment when my retirement age comes around. Why can this be done in my country and not in the richest country in the world? To me it is a great shame that even people who have paid into the pension scheme their whole career are left with a greatly reduced pension or even loose it all. How on earth can you make a reliable financial planning?
In short Chapter 11 is harmful to all; it screws employees, damages competitors, and screws the taxpayer. I can’t think of any airline that has survived long term once it has used chapter 11 besides Continental (nine years and counting). The list of airlines that have eventually folded or been bought out is much larger.
d246: Come on now-why such silliness? Despite the handicap of living abroad, are you aware that at most US airlines, pilots have already put chunks of their "money where their mouth is", in order to help their employers survive? One must be quite familiar with the industry over here, not 'hearsay' on Pprune, in order to comprehend the issues.
1) If a pilot (or other labor/staff) group volunteers to give up 15% las December and is about to give up another 10-20% of one's salary (which is a legal contract), with OR without a bankruptcy judge's order, why does this huge amount of cash not count? Read up on it ('Aviation Week& ST' or 'Wall Street J.'), this is no exaggeration. Some pilot groups volunteered to give up exactly 15% back in 1991, for three years (they gave their ALPA union MEC extra money in order to provide normal health and dental ins. for the furloughed families), in order to help their companies reduce cash flow and survive highly-leveraged corporate buy-outs. Why does that money not count in the quantifiable cash equation?
Already US pilot salary cuts often are 30%, or for others, will be so in the immediate future (not including benefits which also will help many upper mgmt airline executives to compensate for their slightly smaller, but still grotesquely over-bloated 'golden parachutes').
2) The US Airline Pilots' Association supported management by helping advocate a Bill in the US Senate which could relieve airlines of most of the immediate, huge pension burden: pension liabilities are amortized. The money (if it ever is available...) would be paid out over at least 15 years. The bill needs to be passed before the Senate leaves on October 6th.
Is this not "putting their money where their mouth is"? If these steps do not provide airlines with significant financial relief, then let's see the proof.
Either: a) the British press does not publish this information or
b) many readers choose to ignore it.
The JetBlue CEO's income is many times smaller than what it is at several US majors. Leadership by example. It should begin with management-well...if they have leaders at the top.
For those Ppruners who stay in the dark about the history of the US industry, pilots are almost always the first group to voluntarily take a significant pay cut and work more hours per month, despite having hundreds laid-off at a given company. And in many, if not most recent cases, the other (ramp, gate, flight att.) unions tend to be very resistant to any voluntary pay cut. We pilots don't need or expect a golden trophy, but these basic facts need to be acknowledged by our "leaders". If people choose to ignore these facts, that is a personal decision.
On a different note, maybe the politicized, radical environmentalists are partly to blame for the price of fuel right now- research and drilling.
But many of us still look forward to going to work
. It sure beats flying a desk or a computer (even 'Ubisoft IL-2' or 'Pac.'), wearing an expensive suit. Lots of mgmt. people resent the fact that we both mostly enjoy our work and get paid pretty well, in some cases-but choose to ignore how critical our performance is, both to the safety of passengers/cargo (literally in the palms of our hands) and the expensive "limos" which we all fly. The combination of good pay for many (about half of our regional jet pilots [FOs] receive about US minimum wage) and enjoyment really drives many mgmt. types up the wall. This is a basic bone of contention (Zankapfel).
1) If a pilot (or other labor/staff) group volunteers to give up 15% las December and is about to give up another 10-20% of one's salary (which is a legal contract), with OR without a bankruptcy judge's order, why does this huge amount of cash not count? Read up on it ('Aviation Week& ST' or 'Wall Street J.'), this is no exaggeration. Some pilot groups volunteered to give up exactly 15% back in 1991, for three years (they gave their ALPA union MEC extra money in order to provide normal health and dental ins. for the furloughed families), in order to help their companies reduce cash flow and survive highly-leveraged corporate buy-outs. Why does that money not count in the quantifiable cash equation?
Already US pilot salary cuts often are 30%, or for others, will be so in the immediate future (not including benefits which also will help many upper mgmt airline executives to compensate for their slightly smaller, but still grotesquely over-bloated 'golden parachutes').
2) The US Airline Pilots' Association supported management by helping advocate a Bill in the US Senate which could relieve airlines of most of the immediate, huge pension burden: pension liabilities are amortized. The money (if it ever is available...) would be paid out over at least 15 years. The bill needs to be passed before the Senate leaves on October 6th.
Is this not "putting their money where their mouth is"? If these steps do not provide airlines with significant financial relief, then let's see the proof.
Either: a) the British press does not publish this information or
b) many readers choose to ignore it.
The JetBlue CEO's income is many times smaller than what it is at several US majors. Leadership by example. It should begin with management-well...if they have leaders at the top.
For those Ppruners who stay in the dark about the history of the US industry, pilots are almost always the first group to voluntarily take a significant pay cut and work more hours per month, despite having hundreds laid-off at a given company. And in many, if not most recent cases, the other (ramp, gate, flight att.) unions tend to be very resistant to any voluntary pay cut. We pilots don't need or expect a golden trophy, but these basic facts need to be acknowledged by our "leaders". If people choose to ignore these facts, that is a personal decision.
On a different note, maybe the politicized, radical environmentalists are partly to blame for the price of fuel right now- research and drilling.
But many of us still look forward to going to work
. It sure beats flying a desk or a computer (even 'Ubisoft IL-2' or 'Pac.'), wearing an expensive suit. Lots of mgmt. people resent the fact that we both mostly enjoy our work and get paid pretty well, in some cases-but choose to ignore how critical our performance is, both to the safety of passengers/cargo (literally in the palms of our hands) and the expensive "limos" which we all fly. The combination of good pay for many (about half of our regional jet pilots [FOs] receive about US minimum wage) and enjoyment really drives many mgmt. types up the wall. This is a basic bone of contention (Zankapfel).
Last edited by Ignition Override; 26th Sep 2005 at 20:21.
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Mr Boyd has been right more often than he has been wrong. He called the demise of the 30 to 50 seat RJ several years ago.
The NWA and Delta CH 11 filings now are a direct result of the new Bankruptcy laws that take effect in October. The new laws make it tougher to file and limit the amount of time a company can spend in CH 11.
NWA used to be the model of fiscal responsibility until the Wall Street turds took over and leveraged every asset they had to go private. Look at Eastern, TWA and United, leveraged out to fatten short term shareholders and the used carcass left to rot on the side of the road. UAL used to known as the 800 pound gorilla of the industry, now it is little more than a neutered poodle.
The NWA and Delta CH 11 filings now are a direct result of the new Bankruptcy laws that take effect in October. The new laws make it tougher to file and limit the amount of time a company can spend in CH 11.
NWA used to be the model of fiscal responsibility until the Wall Street turds took over and leveraged every asset they had to go private. Look at Eastern, TWA and United, leveraged out to fatten short term shareholders and the used carcass left to rot on the side of the road. UAL used to known as the 800 pound gorilla of the industry, now it is little more than a neutered poodle.
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So some pilots have generously agreed to give back, in extremis, some of the exhorbitant sums they have screwed from the industry. Why don't they show these corporate leeches how to run an airline and do it themselves? Surely such expertise amongst them and their union would have the airlines profitably up and running in no time at all? Surely a bit of financial risk and hard work is no problem. Or is it easier to let others take the strian while the pilots sit and winge, demand more and of course expect the airline to be run for their benefit. Wake up boys, de- regulation has meant that the legacy carriers can no longer stitch up the market, your industry will have to compete to survive and you will get paid your market value.
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I have never read such unmitigated tosh as that written by Mike Boyd above.
For example:
How can buying time if you cannot make it without protection be anything other than keeping a company alive that would not normally be under the normal rules of the market?
His diatrabe seems to focus upon him knowing the industry better than the market itself; yet if the market votes against you by making you unprofitable, how can that business model ever have been right for the period in which you are operating.
I note also that JetBlue does not have the same hedging as SouthWest, yet is profitable as well - his examples are selective and twisted to prove his biased point of view.
Just another example of his tosh; there may well be passengers, but if you can't make a profit at the prices that attract all those passengers then you have overcapacity and should exit that market regardless.
For example:
Chapter 11 Is Just keeping Sick Carriers Alive:
No, it's buying time for Delta and Northwest.
No, it's buying time for Delta and Northwest.
His diatrabe seems to focus upon him knowing the industry better than the market itself; yet if the market votes against you by making you unprofitable, how can that business model ever have been right for the period in which you are operating.
I note also that JetBlue does not have the same hedging as SouthWest, yet is profitable as well - his examples are selective and twisted to prove his biased point of view.
Fact: we've already lost essentially the equivalent of one airline on the East Coast. US Airways dumped over 100 airplanes in the last three years. And, indeed, we have seen capacity reductions. In places like Roanoke. But where the huge passenger numbers are, airlines are still fighting for share.
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His diatrabe seems to focus upon him knowing the industry better than the market itself; yet if the market votes against you by making you unprofitable, how can that business model ever have been right for the period in which you are operating.
"Oooo, hang on, we're tweaking the business model guys. Moving capacity to the International routes. Yields are up. Load factors are up. Labour concessions are forthcoming. Things are looking good. Ummm....revenue streams are down??? Oh bollocks. Forgot about fuel prices, pensions and hedging."
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d246 - the airline industry was started and run by pilots for the first 30 years. Look at the lions of industry back then - Rickenbacker (Eastern), Patterson (UAL), Hughes and Fry (TWA), Smith (AA)., pilots with vision who were leaders first and then managers..
Today we have managers with no leadership. The exceptions are the success stories that we read about, Branson, Kelleher, Bethune. Look at BA, an airline with a great reputation, a fortress hub closed to effective competion by way of slot restrictions, and what happens? The airline is allowed to deteriorate by managers who can't manage. It is good to see BA has recovered but that airline has succeeded in spite of management, not because of it. That story has been repeated over the last 20 years by managers who are looking for short term results and not the long term viability of their companies.
Pilots are generally very good at what they do. We are scrutinized far more than any other profession I can think of (save a football referee). 3 sim rides per year, 2 medicals, company line checks, FAA line checks, recurrent tests and all the Flight Data parameters that are monitored by the company via the FOQUA program (Flight Oriented Quality Assurance, aka the Snitch). All these are neccessary because we have to get it right, every time.
Since pilots are good at what they do they have a tendency to think they are good at everything they do, which, of course, is not the case. But since we are on the front lines we have a lot better picture of the operation than someone sitting in a cubicle back at company HQ. Since pilots are married closer to their jobs than their spouses and that manager sitting on his butt in his office can float away on his golden parachute to his next job with little change in status or pay, then pilots tend to get more than a little irritated at incompetence in other areas.
Should pilots run the airline - no, we need to be focused on what we do, which is fly the airplane. But should managers listen to the pilots and take heed of their warnings - yes, because we are the tip of the spear and we see things first.
Today we have managers with no leadership. The exceptions are the success stories that we read about, Branson, Kelleher, Bethune. Look at BA, an airline with a great reputation, a fortress hub closed to effective competion by way of slot restrictions, and what happens? The airline is allowed to deteriorate by managers who can't manage. It is good to see BA has recovered but that airline has succeeded in spite of management, not because of it. That story has been repeated over the last 20 years by managers who are looking for short term results and not the long term viability of their companies.
Pilots are generally very good at what they do. We are scrutinized far more than any other profession I can think of (save a football referee). 3 sim rides per year, 2 medicals, company line checks, FAA line checks, recurrent tests and all the Flight Data parameters that are monitored by the company via the FOQUA program (Flight Oriented Quality Assurance, aka the Snitch). All these are neccessary because we have to get it right, every time.
Since pilots are good at what they do they have a tendency to think they are good at everything they do, which, of course, is not the case. But since we are on the front lines we have a lot better picture of the operation than someone sitting in a cubicle back at company HQ. Since pilots are married closer to their jobs than their spouses and that manager sitting on his butt in his office can float away on his golden parachute to his next job with little change in status or pay, then pilots tend to get more than a little irritated at incompetence in other areas.
Should pilots run the airline - no, we need to be focused on what we do, which is fly the airplane. But should managers listen to the pilots and take heed of their warnings - yes, because we are the tip of the spear and we see things first.
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...[S]ome of the exhorbitant sums they have screwed from the industry.
When pilots make "exhorbitant sums", it's... well, what? Organized crime? The government? Surely not the market - the companies' officers must have had guns to their collective heads when they signed all those fat contracts.
It's all business, buddy-boy. Pilots get good money when they can, and they don't when they can't. It's called the free market. Works both ways, don't it?
Last edited by Huck; 26th Sep 2005 at 19:45.
Well-spoken Cactus and Huck.
Our companies often "vigorously deny" the patter-bargaining strategies which they refer to in other arenas. As one of you stated, few airline CEOs even had an interest in aviation. They originally came from other industries. At least Continental's Bethune has a 757 type-rating and worked at Boeing (he has delivered a few aircraft from Boeing).
Our companies often "vigorously deny" the patter-bargaining strategies which they refer to in other arenas. As one of you stated, few airline CEOs even had an interest in aviation. They originally came from other industries. At least Continental's Bethune has a 757 type-rating and worked at Boeing (he has delivered a few aircraft from Boeing).
Last edited by Ignition Override; 28th Sep 2005 at 04:25.