Letter to United
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Quote from Boofhead - "Fly from Dublin to Edinburgh for One Euro plus taxes and no blockout dates, saturday night stays or advance purchases etc. Of course the taxes are sixty to seventy Euros for the same ticket, which shows a lot about just who is making the money here."
Except, of course, only a very small percentage of the so called "taxes" are going to the government. For me to fly from Stansted to Dublin tommorow would cost £24.99 (cheapest fare.) The total I would have to pay would be £39.67, as there is a "taxes and charges" addition of £14.68. Of this, a mere £5 is a government imposed tax - the rest ends up with the airline (in this case, Ryanair) in one way or another, through "PSC, Ins and Wchr levy."
I recently travelled with a group of 36 people to Frankfurt Hahn, and was interested to see that we had been charged £81 as a wheelchair levy, despite none of us being disabled. Through such disguised "taxes" the airlines manage to make a substantial and quite stealthy additional income.
I think that the five points that Watercheck made to account for greater profitability amongst european airlines are valid. I also believe that the US administration is to blame for part of the current problem with the legacy carriers - it simply does not make long term economic sense to provide them with such a high level of bankruptcy protection, and this situation cannot persist indefinately. Part of the reason that many european airlines continue to be succesful post 9/11 is that we witnessed the demise of two major national airlines (Sabena and Swissair.) The need to rapidly cut capacity and otherwise adapt was quickly realised. In the US, the legacy carriers are too quick to jump under chapter 11 protection, and too slow to take real action to avoid a future crisis.
Except, of course, only a very small percentage of the so called "taxes" are going to the government. For me to fly from Stansted to Dublin tommorow would cost £24.99 (cheapest fare.) The total I would have to pay would be £39.67, as there is a "taxes and charges" addition of £14.68. Of this, a mere £5 is a government imposed tax - the rest ends up with the airline (in this case, Ryanair) in one way or another, through "PSC, Ins and Wchr levy."
I recently travelled with a group of 36 people to Frankfurt Hahn, and was interested to see that we had been charged £81 as a wheelchair levy, despite none of us being disabled. Through such disguised "taxes" the airlines manage to make a substantial and quite stealthy additional income.
I think that the five points that Watercheck made to account for greater profitability amongst european airlines are valid. I also believe that the US administration is to blame for part of the current problem with the legacy carriers - it simply does not make long term economic sense to provide them with such a high level of bankruptcy protection, and this situation cannot persist indefinately. Part of the reason that many european airlines continue to be succesful post 9/11 is that we witnessed the demise of two major national airlines (Sabena and Swissair.) The need to rapidly cut capacity and otherwise adapt was quickly realised. In the US, the legacy carriers are too quick to jump under chapter 11 protection, and too slow to take real action to avoid a future crisis.
Rupert 369-y'all made excellent observations. And airlines with extended time under Chapter 11 (as with United, USAirways twice: often better than poking your head to quickly out of the trenches...)seem to always attract financing, although I have no idea what collateral or equity can still be available to back up financing-is it often shares of stock?. For the foreigners who are still in the dark, US bankruptcy laws undergo dramatic changes October 17, no matter what type of industry is involved, and this has given airlines and many others incentive, to file Chapter 11 now, if in doubt. Executive pay is also worse after the date. Filings after Oct 17 will be, as of now, much more difficult to escape from, to avoid liquidation, though I know nothing about how the financial, banking and credit card lobbyists so successfully persuaded the US Congress to change this.
Do European or the British governments allow these lobbyists so much influence on laws and industry regulations?
AirRabbit (or whoever mentioned such an example): there have been stories, over the years, of pilots who have two homes, and maybe a boat or a small airplane. People tend to over-generalize. And some of those lucky pilots were hired in the huge hiring boom of the mid-60s. One guy made 727 Captain at age 25. Another supposedly had flown with the RAAF and bluffed his way into the interview. And got hired! Luck of the draw. On the other hand, VERY MANY of the same type of guys were flying for Uncle Sam and never made it home, many killed in training or normal operations. Very many shipped home in a plastic bag, or disappeared as military or (technically) civilian over SE Asia, possibly the wicked, very deadly Plain of Jars in Laos...only about 5% of those guys in uniform who were shot down were rescued. Capture in a civilian uniform was very bad luck.
As for opportunities and risks in the civilian world: unless they were very lucky selling houses during the right economic upturns, or had a second income (lots of days flying with the Air Force Reserve limit one's free time quite a bit; nowadays, you might be activated to full-time, lose big chunk of income and dodge stinger missiles), or a wife with a chunk of cash etc, those stories might be too easy to use in a stereotype. There have been more than at least a few periods since the first Arab Oil Embargo of 1973, when hundreds of pilots were laid off at each major airline. At TWA, some pilots were on the street two or even three times. This must have happened at not just TWA and American, but several others as well. Find out what has happened now to retirements. Can this widespread disaster easily erase any lucky gains in real estate etc?
Somebody mentioned Alfred Kahn, the so-called brains of deregulation. I doubt that this former academic type ever knew what he was talking about. I've read some of his convoluted, bizarre arguements, and what was HIS a i r l i ne background ? As he advised the former US Civil Aeronautics Board under the Carter admin., Kahn was already being courted by the original airline Cash Carnivore/airline destroyer (if someone does not believe so, then show us, on Pprune, his record), Frank Lorenzo: they called it "upstreaming" cash out of the airline's vital revenue. Lorenzo was reportedly quoted as saying "...some of my best friends are airline pilots-everybody should OWN one..." Kahn was given many shares of stock in New York Air, one of the first 'darlings' of deregulation, as he was advising the government about the huge advantages of dereg. Based just on what I've read, Senator Ted Kennedy was willing to turn the industry upside down, partly to help his local constituents in the tiny state of Massachusetts. Find out what rulings were made in Frank's favor by more than one Dept. of Transportation Admin. judges, right before they went to work at Frank's holding company TAC: you can find some of this in "Aviation Week & ST" in the late 80s or early 90s, and about the "alleged" cover-up in the FAA's Western region regarding the strike operations at Lorenzo's Continenta.As for the safety implications, I suggest just a glance at one of the excellent books by John Nance, "Blind Trust", about the myths of deregulation's effects upon safety, from the operational (pilot) side. He also wrote an intriguing book called "Splash of Colors", about Braniff Airlines. Find out why Nance's ENTIRE first edition NEVER made it to the bookstores. They made a backroom deal...Something to do with former American CEO Robert Crandall's approval of "allegedly"
booking phantom passengers into Braniff's reservations computer software, "allegedly" done by American's Sabre computer personnel, in order to reduce Braniff's ticket revenue and market share. Woops! Might hear a knock on the door at 0400! Hello, County Sheriff here. I have a legal complaint from the nice folks at AMR.
Airline managements are still learning lessons and pointers from earlier years (decades) under US deregulation. Many of today's airline executives were nurtured under Lorenzo's "leadership". One of the tops guys at Airtran was one. He was "allegedly" forced out of another US major, not long ago, in a quiet deal with their MEC, unknown to the press, possibly as a contract side-letter
.
Please pardon the boring length, I never plan on being a page hog. Next
.
Do European or the British governments allow these lobbyists so much influence on laws and industry regulations?
AirRabbit (or whoever mentioned such an example): there have been stories, over the years, of pilots who have two homes, and maybe a boat or a small airplane. People tend to over-generalize. And some of those lucky pilots were hired in the huge hiring boom of the mid-60s. One guy made 727 Captain at age 25. Another supposedly had flown with the RAAF and bluffed his way into the interview. And got hired! Luck of the draw. On the other hand, VERY MANY of the same type of guys were flying for Uncle Sam and never made it home, many killed in training or normal operations. Very many shipped home in a plastic bag, or disappeared as military or (technically) civilian over SE Asia, possibly the wicked, very deadly Plain of Jars in Laos...only about 5% of those guys in uniform who were shot down were rescued. Capture in a civilian uniform was very bad luck.
As for opportunities and risks in the civilian world: unless they were very lucky selling houses during the right economic upturns, or had a second income (lots of days flying with the Air Force Reserve limit one's free time quite a bit; nowadays, you might be activated to full-time, lose big chunk of income and dodge stinger missiles), or a wife with a chunk of cash etc, those stories might be too easy to use in a stereotype. There have been more than at least a few periods since the first Arab Oil Embargo of 1973, when hundreds of pilots were laid off at each major airline. At TWA, some pilots were on the street two or even three times. This must have happened at not just TWA and American, but several others as well. Find out what has happened now to retirements. Can this widespread disaster easily erase any lucky gains in real estate etc?
Somebody mentioned Alfred Kahn, the so-called brains of deregulation. I doubt that this former academic type ever knew what he was talking about. I've read some of his convoluted, bizarre arguements, and what was HIS a i r l i ne background ? As he advised the former US Civil Aeronautics Board under the Carter admin., Kahn was already being courted by the original airline Cash Carnivore/airline destroyer (if someone does not believe so, then show us, on Pprune, his record), Frank Lorenzo: they called it "upstreaming" cash out of the airline's vital revenue. Lorenzo was reportedly quoted as saying "...some of my best friends are airline pilots-everybody should OWN one..." Kahn was given many shares of stock in New York Air, one of the first 'darlings' of deregulation, as he was advising the government about the huge advantages of dereg. Based just on what I've read, Senator Ted Kennedy was willing to turn the industry upside down, partly to help his local constituents in the tiny state of Massachusetts. Find out what rulings were made in Frank's favor by more than one Dept. of Transportation Admin. judges, right before they went to work at Frank's holding company TAC: you can find some of this in "Aviation Week & ST" in the late 80s or early 90s, and about the "alleged" cover-up in the FAA's Western region regarding the strike operations at Lorenzo's Continenta.As for the safety implications, I suggest just a glance at one of the excellent books by John Nance, "Blind Trust", about the myths of deregulation's effects upon safety, from the operational (pilot) side. He also wrote an intriguing book called "Splash of Colors", about Braniff Airlines. Find out why Nance's ENTIRE first edition NEVER made it to the bookstores. They made a backroom deal...Something to do with former American CEO Robert Crandall's approval of "allegedly"
booking phantom passengers into Braniff's reservations computer software, "allegedly" done by American's Sabre computer personnel, in order to reduce Braniff's ticket revenue and market share. Woops! Might hear a knock on the door at 0400! Hello, County Sheriff here. I have a legal complaint from the nice folks at AMR.
Airline managements are still learning lessons and pointers from earlier years (decades) under US deregulation. Many of today's airline executives were nurtured under Lorenzo's "leadership". One of the tops guys at Airtran was one. He was "allegedly" forced out of another US major, not long ago, in a quiet deal with their MEC, unknown to the press, possibly as a contract side-letter
.Please pardon the boring length, I never plan on being a page hog. Next
.
Last edited by Ignition Override; 15th Oct 2005 at 22:51.
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BOHICA NWA
Following United's lead, the folks at Northwest get ready to grab their ankles and enjoy the ride:
________________________________________________
Northwest Seeks Sway Over Unions
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
October 13, 2005; Page A5
Northwest Airlines asked for judicial approval to void its labor contracts if its employees don't quickly agree to about $900 million in additional concessions the carrier says it needs to avoid liquidating.
Like UAL Corp.'s United Airlines and US Airways Group Inc. before it, Northwest is embarking on a power play afforded by the U.S. Bankruptcy Code: the ability to goad unions into voluntary givebacks by threatening them with potentially more onerous, court-imposed contract terms.
Northwest, the nation's fourth-largest airline by traffic and one of the most unionized, filed for Chapter 11 on Sept. 14, blaming high fuel costs, its inability to win concessions from most of its big unions and rising competition from discount carriers that are setting the pricing agenda in the domestic industry. No. 3 Delta Air Lines, which has only one major union, also sought bankruptcy protection that day. Both Northwest and Delta have said they will shrink, and Northwest in its court filing yesterday estimated its mainline capacity in next year's first quarter will be down 11% to 13% from the year before.
United, which remains in Chapter 11 after almost three years, and US Airways, which visited court protection twice since 2002, both used the threat of contract annulments to win huge savings from their employees. They and other airlines in Chapter 11 have cited a portion of the bankruptcy code known as Section 1113. That allows the carriers to make the case that the proposed contract rejections are necessary to permit their reorganizations. Northwest said it hopes it can reach agreement with its unions on new terms and didn't specify a deadline. The judge has discretion over timing, but the process could take less than two months.
United and US Airways ultimately jettisoned their underfunded pension plans, transferring the assets and liabilities to the Pension Benefit Guaranty Corp., a government pension insurer. Northwest, in its 171-page court submission yesterday, reiterated it wants to retain its pension plans, which also are deeply underfunded. But "if timely and adequate pension legislative relief is not obtained," the carrier said, "Northwest will be forced to seek termination of its...plans."
Northwest, based in Eagan, Minn., has said it needs a total of $1.4 billion in annual labor savings through a combination of pay cuts, new work rules, changes to medical coverage, reductions in holiday and vacation time and increased outsourcing. Retirees can expect to shoulder a larger share of their medical coverage, too, according to the court filing.
Northwest, which says it has the highest labor costs in the U.S. industry, already has shown how far it will go to reach that $1.4 billion target. In the aftermath of an Aug. 20 strike by its mechanics, the company imposed new contract terms on a smaller cadre of replacement workers now caring for its fleet, achieving the $203 million annual savings it had targeted from its mechanic work force.
With the economies wrung from the mechanics and with $300 million in annual givebacks already agreed by the pilots and salaried workers, Northwest needs about $900 million more. It envisions a second round of cuts from the pilots and salaried employees as well as deep givebacks from flight attendants, customer-service agents and ramp workers. In yesterday's court filing, Northwest also said it will ask most workers to take an extra 5% pay cut for the remainder of its time in Chapter 11.
A spokesman for the International Association of Machinists union, which represents 14,600 Northwest ramp workers, customer-service agents and clerical employees, said the union was prepared for the filing. "We're committed to reaching an agreement at the bargaining table," a union spokesman said. Capt. Mark McClain, chairman of the 5,100-member Air Line Pilots Association branch at Northwest, also said his group is ready to negotiate, having already agreed to 15% pay cuts. He said he would expect Northwest to want to reduce its costs, but some items it is asking for are "overreaching." The pilot added, "We don't feel like it's open-season on the contract."
________________________________________________
Northwest Seeks Sway Over Unions
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
October 13, 2005; Page A5
Northwest Airlines asked for judicial approval to void its labor contracts if its employees don't quickly agree to about $900 million in additional concessions the carrier says it needs to avoid liquidating.
Like UAL Corp.'s United Airlines and US Airways Group Inc. before it, Northwest is embarking on a power play afforded by the U.S. Bankruptcy Code: the ability to goad unions into voluntary givebacks by threatening them with potentially more onerous, court-imposed contract terms.
Northwest, the nation's fourth-largest airline by traffic and one of the most unionized, filed for Chapter 11 on Sept. 14, blaming high fuel costs, its inability to win concessions from most of its big unions and rising competition from discount carriers that are setting the pricing agenda in the domestic industry. No. 3 Delta Air Lines, which has only one major union, also sought bankruptcy protection that day. Both Northwest and Delta have said they will shrink, and Northwest in its court filing yesterday estimated its mainline capacity in next year's first quarter will be down 11% to 13% from the year before.
United, which remains in Chapter 11 after almost three years, and US Airways, which visited court protection twice since 2002, both used the threat of contract annulments to win huge savings from their employees. They and other airlines in Chapter 11 have cited a portion of the bankruptcy code known as Section 1113. That allows the carriers to make the case that the proposed contract rejections are necessary to permit their reorganizations. Northwest said it hopes it can reach agreement with its unions on new terms and didn't specify a deadline. The judge has discretion over timing, but the process could take less than two months.
United and US Airways ultimately jettisoned their underfunded pension plans, transferring the assets and liabilities to the Pension Benefit Guaranty Corp., a government pension insurer. Northwest, in its 171-page court submission yesterday, reiterated it wants to retain its pension plans, which also are deeply underfunded. But "if timely and adequate pension legislative relief is not obtained," the carrier said, "Northwest will be forced to seek termination of its...plans."
Northwest, based in Eagan, Minn., has said it needs a total of $1.4 billion in annual labor savings through a combination of pay cuts, new work rules, changes to medical coverage, reductions in holiday and vacation time and increased outsourcing. Retirees can expect to shoulder a larger share of their medical coverage, too, according to the court filing.
Northwest, which says it has the highest labor costs in the U.S. industry, already has shown how far it will go to reach that $1.4 billion target. In the aftermath of an Aug. 20 strike by its mechanics, the company imposed new contract terms on a smaller cadre of replacement workers now caring for its fleet, achieving the $203 million annual savings it had targeted from its mechanic work force.
With the economies wrung from the mechanics and with $300 million in annual givebacks already agreed by the pilots and salaried workers, Northwest needs about $900 million more. It envisions a second round of cuts from the pilots and salaried employees as well as deep givebacks from flight attendants, customer-service agents and ramp workers. In yesterday's court filing, Northwest also said it will ask most workers to take an extra 5% pay cut for the remainder of its time in Chapter 11.
A spokesman for the International Association of Machinists union, which represents 14,600 Northwest ramp workers, customer-service agents and clerical employees, said the union was prepared for the filing. "We're committed to reaching an agreement at the bargaining table," a union spokesman said. Capt. Mark McClain, chairman of the 5,100-member Air Line Pilots Association branch at Northwest, also said his group is ready to negotiate, having already agreed to 15% pay cuts. He said he would expect Northwest to want to reduce its costs, but some items it is asking for are "overreaching." The pilot added, "We don't feel like it's open-season on the contract."
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It is amazing and criminal to me that pensions represent such an uncertain benefit in the USA. The pension fund should be something totally separate from the company’s balance sheet. And it should represent a quantifiable amount to the person involved.
In Holland this is the case. Our pension fund is a separate entity. The company and employee together save for the employee’s pension. In our case you build up 2.25% of your annual pay for that year’s service. So after 30 years of service you have build up 67.5% of your average pay over your career. The pension that you have built up to any given point (say today) is completely separate from the company. If the company goes down the toilet your pension rights remain assured within this separate company. The pension fund does not become part of the bankruptcy. Of course your rights are frozen from that point onward. From that same point your final pension payments depend on the results of the pension fund, indexation can or can not take place. To me this seems so normal. How come Americans accept this ridiculous situation? How on earth can you make any sort of financial planning if a basic element of your planning is built on quicksand?
Of course a company can get into trouble and things might have to change. But the way things are run in the USA is beyond cruel.
I will leave all the jerks who are saying I told you so, or are jealous of not having made it into the majors for what they are. But the people at United, Northwest, Delta, and US airways have my sympathy, they are being robbed (and that is putting it mildly). I guess as long as the top 5% of the population controls 95% of the wealth things are unlikely to change.
Wishing you the best.
Regards, O.
In Holland this is the case. Our pension fund is a separate entity. The company and employee together save for the employee’s pension. In our case you build up 2.25% of your annual pay for that year’s service. So after 30 years of service you have build up 67.5% of your average pay over your career. The pension that you have built up to any given point (say today) is completely separate from the company. If the company goes down the toilet your pension rights remain assured within this separate company. The pension fund does not become part of the bankruptcy. Of course your rights are frozen from that point onward. From that same point your final pension payments depend on the results of the pension fund, indexation can or can not take place. To me this seems so normal. How come Americans accept this ridiculous situation? How on earth can you make any sort of financial planning if a basic element of your planning is built on quicksand?
Of course a company can get into trouble and things might have to change. But the way things are run in the USA is beyond cruel.
I will leave all the jerks who are saying I told you so, or are jealous of not having made it into the majors for what they are. But the people at United, Northwest, Delta, and US airways have my sympathy, they are being robbed (and that is putting it mildly). I guess as long as the top 5% of the population controls 95% of the wealth things are unlikely to change.
Wishing you the best.
Regards, O.
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Well you give the AirRabbit a hard time about Economics 101 but no-one else is putting up the solutions!
So which part of Economics 101 didn't we understand?
Is it the part about how revenues minus costs mustn't be a negative number?
Lets say, we halved the size of the fleets, got rid of even more staff, introduced some efficiencies and raised prices...
No-one likes to say it because we're in the business and its our colleagues we're talking about here but would that not work? Put it this way, would Michael O'Leary see it that way?
But the classic anecdote applies:
If I owe the bank $10K, I've got a problem. If I owe the bank $10billion, the bank has a problem.
The creditors are half the problem here. I can't see them in favour of abandoing Ch 11. In turn they're bank-rolled by who?
The whole thing is an almighty piss-take and that some people have got seriously rich out of it is criminal.
My $0.000000000001 ( = NPV of my pension).
So which part of Economics 101 didn't we understand?
Is it the part about how revenues minus costs mustn't be a negative number?
Lets say, we halved the size of the fleets, got rid of even more staff, introduced some efficiencies and raised prices...
No-one likes to say it because we're in the business and its our colleagues we're talking about here but would that not work? Put it this way, would Michael O'Leary see it that way?
But the classic anecdote applies:
If I owe the bank $10K, I've got a problem. If I owe the bank $10billion, the bank has a problem.
The creditors are half the problem here. I can't see them in favour of abandoing Ch 11. In turn they're bank-rolled by who?
The whole thing is an almighty piss-take and that some people have got seriously rich out of it is criminal.
My $0.000000000001 ( = NPV of my pension).
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"Somebody mentioned Alfred Kahn, the so-called brains of deregulation. I doubt that this former academic type ever knew what he was talking about."
When you see Alfred kahn on TV news programs now he is still defending his position. I would like to see old Alfred lose his job and tenure at his current Ivy Walled University, along with his pension, and then get a job down the street at a local jr. college at minium wage and then tell us what a great deal he has because he is going to save the students massive amounts of money in tuition.
Yeah right!!
When you see Alfred kahn on TV news programs now he is still defending his position. I would like to see old Alfred lose his job and tenure at his current Ivy Walled University, along with his pension, and then get a job down the street at a local jr. college at minium wage and then tell us what a great deal he has because he is going to save the students massive amounts of money in tuition.
Yeah right!!
JustAWS: You might look up some of Kahn's nebulous arguements for deregulation. To me, they sounded quite abstract and deceptive.
Otterman: We can partly thank the US Congress for never requiring corporations to fully fund pensions. Who can translate the background into laymens' terms, as to why, historically, they were never created as separate accounts, like a bank saving's account?
Congress seems to have been hijacked in recent years by lobbyists and the PAC donations. Various industries give money to a politician's campaign, so he/she can afford to advertise, travel and become re-elected.
And which party is mostly to blame?
Could it be the same party which most pilots vote for
? Does anyone have objective information?
Otterman: We can partly thank the US Congress for never requiring corporations to fully fund pensions. Who can translate the background into laymens' terms, as to why, historically, they were never created as separate accounts, like a bank saving's account?
Congress seems to have been hijacked in recent years by lobbyists and the PAC donations. Various industries give money to a politician's campaign, so he/she can afford to advertise, travel and become re-elected.
And which party is mostly to blame?
Could it be the same party which most pilots vote for
? Does anyone have objective information?
Last edited by Ignition Override; 15th Oct 2005 at 04:25.
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I have some objective information.
Where do Americans get off allowing
companies to turn their noses up at
creditors under this chapter11 nonsense
in the first place.
The great land of free enterprise my ass.
But I guess a country that is itself in
effective chapter11 should allow this
sort of corporate behaviour.
If a business can't pay its debts, real
free enterprise says it should fail.
Where does that leave the USA?
Where do Americans get off allowing
companies to turn their noses up at
creditors under this chapter11 nonsense
in the first place.
The great land of free enterprise my ass.
But I guess a country that is itself in
effective chapter11 should allow this
sort of corporate behaviour.
If a business can't pay its debts, real
free enterprise says it should fail.
Where does that leave the USA?
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Chapter 11 isn't nonsense
boofta:
I think you're being unfair in describing Chapter 11 of the US bankruptcy code as nonsense.
IMHO, it's a more sensible version of the UK's "adminstration". It's more sensible in that it allows the management of the company to re-structure it (under legal supervision) to prevent bankruptcy.
With UK administration, the directors don't run the business with the object of recovery, but an administrator (who may know precisely zilch about the business/industry) does. Administration usually ends in liquidation. Chapter 11, more often than not, leads to recovery of the enterprise.
You may feel that Chapter 11 has been abused by companies that frankly should not survive -- and you may well be right.
But Chapter 11 is a sensible "intensive care" mechanism.
I think you're being unfair in describing Chapter 11 of the US bankruptcy code as nonsense.
IMHO, it's a more sensible version of the UK's "adminstration". It's more sensible in that it allows the management of the company to re-structure it (under legal supervision) to prevent bankruptcy.
With UK administration, the directors don't run the business with the object of recovery, but an administrator (who may know precisely zilch about the business/industry) does. Administration usually ends in liquidation. Chapter 11, more often than not, leads to recovery of the enterprise.
You may feel that Chapter 11 has been abused by companies that frankly should not survive -- and you may well be right.
But Chapter 11 is a sensible "intensive care" mechanism.
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JustAWS: You might look up some of Kahn's nebulous arguements for deregulation. To me, they sounded quite abstract and deceptive.
Curious, because I cannot believe it if you are, but are you in favour of re-regulation?
There seems to be this lingering sentiment in the US that the success of de-regulation was going to be judged by how well it maintained the status quo!
I don't believe the country ever fully embraced de-regulation (although I don't claim to fully understand all the issues), whereupon now, almost 30 years later, when the financial crisis is ostensibly worse than it ever was, people still want to lay the blame at the foot of Mr Kahn and co. rather than the chronic financial mis-management that has ensued since then.
derekl,
I think you are being generous to Ch 11 here, but my take is that, when companies take opportunistic advantage of imminent change in legislation to file for Ch 11, an abuse of the system is being perpetrated. I accept it was likely to happen anyway but thats not the point.
The reason this one is difficult for pilots to swallow is that the economic issues and social issues are confused.
Lets assume that airline (ex)+employees were not going to take a big hit in order to solve the problem of how the bath-tub emptied and no-one noticed (impossible but run with it...).
The answer is obvious. The networks must shrink. The customer will loose out but he is going to loose out anyway.
But it is because, (ex)+employees are going to take a huge hit, that (and quite rightly so) the issue becomes complicated because with business activity comes social responsibility.
What I can't figure out is how those MBA's could sit there with the books in front of them everyday and watch those pension deficits mount. How can you not notice a number with 6, 7, 8 zeros after it? Even if you did, why didn't you do something about it? If pensions are capitalised on the BS in the US, the crime is even more heinous.
But you have to say some are still succeeding inspite of the economic climate whereupon you arrive at your own conclusions about whether the de-regulation paradigm is valid. It bothers me that some see the fact that some airlines are hedged (for instance) as having an unfair advantage. Thats bulls**t. All the information was out there for everyone to take advantage of - your/my management didn't, you/I pay the cost.
Ryanair are hedged at $57/barrel for next year I believe and everyone laughed when they bought. Now who is laughing. Plus a boat-load of sale-leaseback transactions to carry them through the lean years ahead...
Opportunistic perhaps?
If you wanted to go into business though, would you want MOL as your wingman?
We will see how WW @ BA stacks up against him soon no doubt.
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....just an observation (and no disprespect to SR71), but it seems nearly no one on this forum can spell the word 'lose' properly (almost always mispelled as 'loose')..... Either way, the employees of Delta, United, NW...and probably in the end CO and AA, have been cheated out of their rightful pension benefits. If I was a pilot at AA or CO, I would take early retirement and get out your lump-sums now. Unfortunately, wishful thinking will prevail and most will wait until it's too late. Funny how predictable human nature is.
Either way, the employees of Delta, United, NW...and probably in the end CO and AA, have been cheated out of their rightful pension benefits. If I was a pilot at AA or CO, I would take early retirement and get out your lump-sums now. Unfortunately, wishful thinking will prevail and most will wait until it's too late. Funny how predictable human nature is.
IF and that's a big IF one can get out early and still take a lump sum. Most pensions in the legacy carriers have some sort of restriction and the unfortunate fact is that if PBGC gets hold of the pension you are done for. They look back 3 years, take a snapshot from there back to establish FAEs (thus rendering ones best years invisible) and then say look you retired 3 years early...that's a decrement to your FAes (2.5% pa I think). As to planning for the unthinkable. Some of us got screwed by multiple bankrupcies and when you have to start at the bottom with a growing family it is next to impossible to save at the rate required to replace a pension.
SR-71: from what I've read about the conflicts of interest which created so-called deregulation, and the ruling favoritism, made on behalf of various parties by many numerous, some former, Dept. of Trans. Admin judges, among others (the Dept. of Justice), it might be worth seriously considering re-regulation, although in what form might be the most beneficial to stockholders and route flexibility (or should this be excluded?), who can guess? There is no doubt that marketing depts have priced the tickets too low to make any profit on most domestic routes, therefore, with decades of this policy being STANDARD, among the major airlines, and the resultant accidents which are directly related to unrestrained growth (Air Florida...Valuejet, to name just two, and with the documented help of the FAA's..eh... "oversight", driven by political factors stemming from the White House : these are just the more notorious accidents, because passengers paid the revenue, instead of cargo customers...), nobody can convince me that US deregulation has been a success. Are stockholder profits to be the only criteria? How about a son or mother killed in a crash, in an operation where flight ops are quietly given carte blanche by the govt. inspectors, especially at higher levels where documented concerns are "allegedly" locked away?
No matter whose fault it is for the state of the industry, it appears to me that from a safety perspective and that of stability for employees and passengers, it is quite a failure. The stupid fare-wars have created the "Wal-Mart" mentality among the flying public, regarding ticket prices. Nobody deserves to buy a ticket below, or even at the operating cost to move the airline seat, and I make no apologies to Wal Mart (their benefits come partly from "allegedly" cheating many of their employees out of numerous benefits, and outsourcing production to the Pacific Rim).
"oversight", driven by political factors stemming from the White House : these are just the more notorious accidents, because passengers paid the revenue, instead of cargo customers...), nobody can convince me that US deregulation has been a success. Are stockholder profits to be the only criteria? How about a son or mother killed in a crash, in an operation where flight ops are quietly given carte blanche by the govt. inspectors, especially at higher levels where documented concerns are "allegedly" locked away?No matter whose fault it is for the state of the industry, it appears to me that from a safety perspective and that of stability for employees and passengers, it is quite a failure. The stupid fare-wars have created the "Wal-Mart" mentality among the flying public, regarding ticket prices. Nobody deserves to buy a ticket below, or even at the operating cost to move the airline seat, and I make no apologies to Wal Mart (their benefits come partly from "allegedly" cheating many of their employees out of numerous benefits, and outsourcing production to the Pacific Rim).
Last edited by Ignition Override; 16th Oct 2005 at 05:00.
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Flown it. Most of the legacy carriers have a portion of their pension fund set up so that the employee can elect to take a 'lump-sum' provision. It reduces the subsequent monthly amount that they also get after retirement. Once the carrier has entered Ch11, the lump-sum payout is history. If I was in AA or CO, I would take the lump-sum NOW, and worry about the rest later. At least that way they have recouped some of their long-term investment in their pension. I think it is criminal how US companies are allowed to continue to keep operating for years without funding their pension plans, and even more criminal that the amount they do fund can be held by the Airlines themselves. You couldn't make this stuff up...!! I think we are about to see the greatest melt-down in the retirement welfare of middle-class America in history. It is becoming quite apparant that for decades corporate management in America has had an unwritten 'compact' with the Government to line each others pockets. The supposed welfare of the employees is now being discarded brutally and cynically. I predict much social unrest in the US in coming years. If you think the Airline situation is dire...wait until the autoworkers and GM/Ford face off over these same issues...! Although I think Europe has a lot wrong with it too, you couldn't concieve of this sort of thing happening here.....could it! 
..another thought: I think some sort of regulation of aviation is necessary. As an airline grows, the cost of it\'s loyal workforce grow, as do it\'s infrastructure costs. It seems unfair that a new airline can come into the market place, with NO legacy costs (pensions, medical etc) and deliberatly undercut the legacy carriers for however long it takes to put them out of business. As an example, Southwests costs are now amongst the highest in the US, and they don\'t have a pension or onerous medical benefits system. They do however have \'high\' crew costs. A new entrant should not be able to sell tickets below an established \'cost\' basis. As it is now, they can get enough capital in place, then \'bleed\' the competition until they fail. I don\'t have all the answers (probably not any for that matter), but surely the present ridiculous system in the US has been proven to be a failure...certainly for the average employee.
..another thought: I think some sort of regulation of aviation is necessary. As an airline grows, the cost of it\'s loyal workforce grow, as do it\'s infrastructure costs. It seems unfair that a new airline can come into the market place, with NO legacy costs (pensions, medical etc) and deliberatly undercut the legacy carriers for however long it takes to put them out of business. As an example, Southwests costs are now amongst the highest in the US, and they don\'t have a pension or onerous medical benefits system. They do however have \'high\' crew costs. A new entrant should not be able to sell tickets below an established \'cost\' basis. As it is now, they can get enough capital in place, then \'bleed\' the competition until they fail. I don\'t have all the answers (probably not any for that matter), but surely the present ridiculous system in the US has been proven to be a failure...certainly for the average employee.
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Question for all the Airline Management bashers:
If the Tooth Fairy magically took back, retroactive to the date the company came into existence, every penny ofl Management compensation ever paid, would that sum be enough to make whole the pension plan shortfall at UA or your airline of choice?
Methinks not. During the bullish years, you negotiated a contract that ended up being unsustainable given the revenue and cost fluctuations in this highly volatile business. There simply isn't money to pay it out.
This just isn't a business that can sustain lifetime employment, ever-escalating wages based upon seniority, and fully paid rich retirement and benefits.
Very unfortunate - and I agree unfair to those who signed on and worked hard under the unkeepable promises - but seemingly true.
Maybe the real reason to be angry at "Management" is because they weren't prescient or fortitudinous in past to say "We can't make these sorts of deals with employees."
If the Tooth Fairy magically took back, retroactive to the date the company came into existence, every penny ofl Management compensation ever paid, would that sum be enough to make whole the pension plan shortfall at UA or your airline of choice?
Methinks not. During the bullish years, you negotiated a contract that ended up being unsustainable given the revenue and cost fluctuations in this highly volatile business. There simply isn't money to pay it out.
This just isn't a business that can sustain lifetime employment, ever-escalating wages based upon seniority, and fully paid rich retirement and benefits.
Very unfortunate - and I agree unfair to those who signed on and worked hard under the unkeepable promises - but seemingly true.
Maybe the real reason to be angry at "Management" is because they weren't prescient or fortitudinous in past to say "We can't make these sorts of deals with employees."
Wake turbulance. As you are no doubt aware, the rapid expansion post deregulation dried up the available pool of pilots of the normal hiring age . To fill their seats the airlines turned to older pilots some of whom had already suffered through a bankruptcy. Those pilots then, if lucky, made Captain after 10 or 11 years ...lots of them did not. They thus did not have many years with their snout in the trough and when their pension went South they were left with the little they had saved through the years. Let me assure you, the best laid plans mean naught when at age 59 with less than 20 years in the company you are told that your pension will be reduced by 60%.
Water check
Not necessarily. I believe some plans had open and closed years depending on the amount going out of the plan with normal retirements and also dependant on the prevailing interest rates. However I believe Delta did not have this restriction and it would be interesting to see the effect on the Delta pension of so many senior Captains jumping ship prior to Chap 11
Water check
Not necessarily. I believe some plans had open and closed years depending on the amount going out of the plan with normal retirements and also dependant on the prevailing interest rates. However I believe Delta did not have this restriction and it would be interesting to see the effect on the Delta pension of so many senior Captains jumping ship prior to Chap 11
Wake T: Your ideas appear to make some sense, and seem in a minority on Pprune whereby at least they use a detached perspective to defend the upper mgmts. of many airlines. Such an outlook is appreciated and refreshing on this forum . I wish my comments could be more detached and appear less resentful. My main gripe is that retirements were never all kept in separate funds, let alone certain funding contributions falling far short, even when the economy was doing well. What was it really all about, hang-ups with the IRS, SEC, or Congress? Maybe all of them.
As for lump sums, based on everything I've read in the US media in the last few years, only the Delta pilots (at least until until now) were able to take out the entire retirement in one single lump sum.
. I wish my comments could be more detached and appear less resentful. My main gripe is that retirements were never all kept in separate funds, let alone certain funding contributions falling far short, even when the economy was doing well. What was it really all about, hang-ups with the IRS, SEC, or Congress? Maybe all of them.As for lump sums, based on everything I've read in the US media in the last few years, only the Delta pilots (at least until until now) were able to take out the entire retirement in one single lump sum.
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- - - Prudence is to have a 2nd parttime non-flying job
The airline "career" has deteriorated into a "blue collar" job.
A career path often encompassing multiple employers.
We pilots are little more than truck/bus/taxi drivers with wings,
....subjected to constant schedule changes and relentless
challenges to our hard earned benefits and quality of life standards.
What are one's expectations? What can one do? What can one hope for?
The airline business has become a mass transit industry.
"Now everyone can fly" is the logo of paperless low cost
carrier AIR ASIA.
New practical reality: Carriers with the cheapest fares rule the sky.
...and most pilots, soon to be working for common wages, will
have a hard time earning expected retirement portfolios at any
retirement age.
A career path often encompassing multiple employers.
We pilots are little more than truck/bus/taxi drivers with wings,
....subjected to constant schedule changes and relentless
challenges to our hard earned benefits and quality of life standards.
What are one's expectations? What can one do? What can one hope for?
The airline business has become a mass transit industry.
"Now everyone can fly" is the logo of paperless low cost
carrier AIR ASIA.
New practical reality: Carriers with the cheapest fares rule the sky.
...and most pilots, soon to be working for common wages, will
have a hard time earning expected retirement portfolios at any
retirement age.
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IgnOverride - thanks for the kind words. Re: underfunding, and subsequent termination, of defined benefit pension schemes in the US - this is not limited to the airline business and is a MAJOR looming social issue. Fixing blame is less important at this stage than learning from the mistakes and coming up with a solution.
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C11 and Pensions
Otterman, Ign Ov., Wake TB,
I think there is a general misunderstanding of Chapter 11 and the pensions of US pilots.
Chapter 11 is a mgmt tool that allows the mgmt, at the discretion of the Creditors Committee established to represent the bests interests fo the enterprise, to reorganize the entity into a forward-looking, on-going company. Both the Federal Bankruptcy Judge and the Creditors Committee have to comply with the intended direction of the company coming out of BK.
One of the immoral by-products of Chapter 11 are the 1113c and 1113e sections, which allow the company to renege on contracts after a suitable period of "negotiation." During this time, most company tells unions they want $X billions of dollars in concessions and then the "negotiations" are to determine where the money will come from. The 1113c is a "consentual" change in the contracts after "negotiations." 1113e is the "emergency" changes to contracts that come when the mgmt convinces the judge that the need to save the dollars in the 1113e filing is dire and immediate for the well-being of the corporation's ability to reorganize successfully.
So, in short, a company tells its unions that they are filing an 1113c motion so start negotiating for 51 days. At the end of that time, if no agreement has been arrived at, they file an 1113e motion to get the cuts foreced on employees by the Judge. However, at that time they can also ask for MORE than they originally asked for....and often do (IAM at UAL).
As for the pensions, it is a difficult problem to overcome due to ERISA, which (perversely) was intended to protect the pensions of employees from corporate raiders and malcontents. It has done exactly the opposite and US Congress has been too myopic to change it. Clearly, the Bush Administration has declared war on its own citizens by having a clearly stated objective to rid US industry of Defined Benefit Plans.
Defined Beneft Plans are the type of pensions that set aside a percentage of your pay for an annuity type retirement payment. They are VERY different from Defined Contribution Plans, which are monies, such as 401(k) plans, that are deposited in the mployees name with an investment firm, and are managed by the individual. DC Plans are entirely OUT of the hands of the company as soon as they are paid. They are usually a defined percentaged of payroll for the individual (e.g. $10,000 per month pay cheque would produce $1,000 deposit in investment account, if DC Plan was a 10% plan).
DB Plans, on the other hand, have funding requirements established by ERISA and the IRS. They allow a company to NOT fund the pension as long as it maintains its funding to a set percentage, usually 80%, of expected liabilities. It is the calculation of the liabilities and assets that creates the problems, and the willingness of the US Government to allow companies to NOT fully fund their plans, that has led to the dire problems.
DB Plans have what is called a 5 yr smoothing, such that any peaks or troughs in investment returns are smoothed out so as to avoid large payment requirements by companies when the markets are negative. On the surface, this makes sense, as companies can LEAST afford to pay large pension payments to the Plans when the economy is trending downwards. However, no-one foresaw such a lengthy downturn and companies willingness to ONLY fund at the minimum levels during economic difficulties.
In essence, the laws allowed companies to provide minimal funding, then, as liabilities increased, to STILL not fund the plans even to minimum levels, under what was erroneously termed Deficit Reduction Contribution Relief. WHat this allowed companies to do was not even pay the minimum and allow their pensions to become even higher out of balance. Assets decreased while liabilities, which are tied to employee longevity, continued to increase.
Therefore, as soon as a company sought Chapter 11 protection, the pensions were immediately on the chopping black. They require CASH infusions and bankruptcy in the US is all about conserving cash by not paying your debts in full. Thereafter, banks express an unwillingness to provide bankruptcy exit financing until the pension liabilities are wiped clean, so companies merely turn their pensions over to the PBGC.
The PBGC is a Quango that provides "insurance" coverage for pensions. However, they are becoming INCREASINGLY irritated by companies seeking Chapter 11 protection almost SOLELY to unload their pension obligations.
The maximum DB Plan benefit is somewhere in the region of $120,000 per year, whereas the maximum PBGC payout for a pilot who is foreced to retire at Age 60 is $29,000. Therein lies the rub for ALL employees who spent decades accruing this pension benefit only to have it snatched from before their eyes by mgmts who see it as merely another liability....regardless of the fact that this liability had been paid for in the collective bargaining process.
After all, just as Glenn Tilton said about his and his management teams contracts when asked if they were going to take large cuts, "A contract is a contract!" Unless of course you are considered "labor."
Hope that helps,
cityfan
I think there is a general misunderstanding of Chapter 11 and the pensions of US pilots.
Chapter 11 is a mgmt tool that allows the mgmt, at the discretion of the Creditors Committee established to represent the bests interests fo the enterprise, to reorganize the entity into a forward-looking, on-going company. Both the Federal Bankruptcy Judge and the Creditors Committee have to comply with the intended direction of the company coming out of BK.
One of the immoral by-products of Chapter 11 are the 1113c and 1113e sections, which allow the company to renege on contracts after a suitable period of "negotiation." During this time, most company tells unions they want $X billions of dollars in concessions and then the "negotiations" are to determine where the money will come from. The 1113c is a "consentual" change in the contracts after "negotiations." 1113e is the "emergency" changes to contracts that come when the mgmt convinces the judge that the need to save the dollars in the 1113e filing is dire and immediate for the well-being of the corporation's ability to reorganize successfully.
So, in short, a company tells its unions that they are filing an 1113c motion so start negotiating for 51 days. At the end of that time, if no agreement has been arrived at, they file an 1113e motion to get the cuts foreced on employees by the Judge. However, at that time they can also ask for MORE than they originally asked for....and often do (IAM at UAL).
As for the pensions, it is a difficult problem to overcome due to ERISA, which (perversely) was intended to protect the pensions of employees from corporate raiders and malcontents. It has done exactly the opposite and US Congress has been too myopic to change it. Clearly, the Bush Administration has declared war on its own citizens by having a clearly stated objective to rid US industry of Defined Benefit Plans.
Defined Beneft Plans are the type of pensions that set aside a percentage of your pay for an annuity type retirement payment. They are VERY different from Defined Contribution Plans, which are monies, such as 401(k) plans, that are deposited in the mployees name with an investment firm, and are managed by the individual. DC Plans are entirely OUT of the hands of the company as soon as they are paid. They are usually a defined percentaged of payroll for the individual (e.g. $10,000 per month pay cheque would produce $1,000 deposit in investment account, if DC Plan was a 10% plan).
DB Plans, on the other hand, have funding requirements established by ERISA and the IRS. They allow a company to NOT fund the pension as long as it maintains its funding to a set percentage, usually 80%, of expected liabilities. It is the calculation of the liabilities and assets that creates the problems, and the willingness of the US Government to allow companies to NOT fully fund their plans, that has led to the dire problems.
DB Plans have what is called a 5 yr smoothing, such that any peaks or troughs in investment returns are smoothed out so as to avoid large payment requirements by companies when the markets are negative. On the surface, this makes sense, as companies can LEAST afford to pay large pension payments to the Plans when the economy is trending downwards. However, no-one foresaw such a lengthy downturn and companies willingness to ONLY fund at the minimum levels during economic difficulties.
In essence, the laws allowed companies to provide minimal funding, then, as liabilities increased, to STILL not fund the plans even to minimum levels, under what was erroneously termed Deficit Reduction Contribution Relief. WHat this allowed companies to do was not even pay the minimum and allow their pensions to become even higher out of balance. Assets decreased while liabilities, which are tied to employee longevity, continued to increase.
Therefore, as soon as a company sought Chapter 11 protection, the pensions were immediately on the chopping black. They require CASH infusions and bankruptcy in the US is all about conserving cash by not paying your debts in full. Thereafter, banks express an unwillingness to provide bankruptcy exit financing until the pension liabilities are wiped clean, so companies merely turn their pensions over to the PBGC.
The PBGC is a Quango that provides "insurance" coverage for pensions. However, they are becoming INCREASINGLY irritated by companies seeking Chapter 11 protection almost SOLELY to unload their pension obligations.
The maximum DB Plan benefit is somewhere in the region of $120,000 per year, whereas the maximum PBGC payout for a pilot who is foreced to retire at Age 60 is $29,000. Therein lies the rub for ALL employees who spent decades accruing this pension benefit only to have it snatched from before their eyes by mgmts who see it as merely another liability....regardless of the fact that this liability had been paid for in the collective bargaining process.
After all, just as Glenn Tilton said about his and his management teams contracts when asked if they were going to take large cuts, "A contract is a contract!" Unless of course you are considered "labor."
Hope that helps,
cityfan