United Airlines, Chapter 11 status
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United must post profit in 3 months...
To avoid liquidation by its debtors-in-possession, United must turn a profit for the first quarter of 03. It's not gonna happen. This is from the 16 Dec AvWeek:
United's DIP Loans
Require Profit in 2003
DAVID BOND/WASHINGTON
The $1.5-billion debtor-in-possession financing agreements intended to get United Airlines through 18 months of Chapter 11 bankruptcy protection set high hurdles for--and impose a brisk pace on--the airline's restructuring attempts.
Bank One, providing an initial term loan of $300 million, and JPMorgan Chase, Citicorp USA, CIT Group/Business Credit and Bank One, sharing equally in a $400-million loan and an $800-million revolving credit facility, have imposed covenants that require United to operate profitably within three months. The carrier must maintain in-the-black operations through the rest of 2003 and end the year with $575 million in before-tax earnings (see tables).
Other covenants limit capital spending to $110 million per quarter during the first half of 2003, $116 million in the third quarter, $142 million in the fourth quarter, and $100 million per quarter in the first half of 2004; and require the carrier to keep at least $200 million in cash and cash equivalents at all times. And United must try again to secure a federal loan guarantee, this time for its Chapter 11 exit financing.
FAILURE TO LIVE UP to these and two dozen other covenants could trigger default on the financing. This in turn would allow the lenders to foreclose on United's collateral for the debt, which comprises much of its unencumbered aircraft and other assets. As described by United in its bankruptcy filing, foreclosure would "spell the end."
Moreover, access to financing is limited initially to $800 million--the $300-million Bank One loan, the $400-million four-party loan and $100 million of the revolver. For access to the remaining $700 million, United must achieve positive cumulative earnings, scheduled next October, and develop plans for $300 million in additional cost reductions. Lack of access to the $700 million would prevent United from meeting financial targets, again leading to default.
United began debtor-in-possession (DIP) financing talks late in September, even as it pursued Air Transportation Stabilization Board (ATSB) approval of a $1.8-billion loan guarantee, because it knew it would have to declare bankruptcy if the ATSB turned it down. It negotiated eventually with the four lenders and with GE Capital, which at one point submitted a draft proposal for $2 billion in bankruptcy financing, but on less favorable terms.
Todd Snyder, a managing director of UAL financial consultant Rothschild Inc., said in an affidavit that the lenders questioned the revenue projections in United's business plan throughout the negotiations. "Similar to the ATSB, the DIP lenders considered United's internal financial projections to be far too rosy," Snyder told the court. This led to a "club" facility in which each lender limited its risk by taking only a quarter of the $1.2 billion. Bank One's extra $300 million reflects its affiliation with First USA Bank, which co-brands United's frequent-flier credit card. First USA buys miles and distributes them to cardmembers' accounts for credit card purchases, a "significant source of revenue to United." Because of this relationship, Bank One was willing to provide the larger loan.
This double-DIP approach depended on approval of both facilities, Snyder said. Bank One wouldn't have made the initial loan without the second facility's back-end financing, because Bank One knew United would need much more money later on. And the three additional lenders "refused to provide a significant back-end loan without Bank One's substantial initial loan."
In the end, United adjusted its business plan for the DIP lenders in ways it wouldn't for the ATSB. "Like the ATSB, the DIP lenders did not believe that the business plan [presented to the ATSB] had a reasonable chance of succeeding," United told the court. "According to the DIP lenders, regardless of the size of the DIP loan, [United's] cost structure precluded [it] from achieving profitability. [United] then went back to the DIP lenders with a revised business plan that contained significant cost reductions." This plan will require concessions early in bankruptcy from labor and other stakeholders that go well beyond what failed two weeks ago to satisfy the ATSB.
For United to avoid breaching the DIP covenants it will need cost savings "virtually immediately," the carrier told the court. The bankruptcy process will have to deal with its labor contracts, preferably through agreements with its unions but through the court itself, if necessary "as a decidedly last choice."
United's Marching Orders
To avoid losing its $1.5 billion in debtor-in-possession financing, United Airlines must keep its cumulative losses, dating from Dec. 1, 2002, within these totals:
$964 million on Feb. 28, 2003
$881 million on Mar. 31, 2003
$849 million on Apr. 30, 2003
$738 million on May 31, 2003
$585 million on June 30, 2003
$448 million on July 31, 2003
$219 million on Aug. 31, 2003
$98 million on Sept. 30, 2003
It must make cumulative profits, dating from Dec. 1, 2002, of at least
$46 million by Oct. 31, 2003
$112 million by Nov. 30, 2003
And it must make cumulative profits of at least
$575 million during the 12 months ending Dec. 31, 2003
$901 million during the 12 months ending Jan. 31, 2004
$1.084 billion during the 12 months ending Feb. 28, 2004
$1.196 billion during the 12 months ending Mar. 31, 2004
$1.297 billion during the 12 months ending Apr. 30, 2004
$1.383 billion during the 12 months ending May 31, 2004
All amounts are earnings before income taxes, depreciation, amortization and rents.
Source: UAL bankruptcy court filings
United's DIP Loans
Require Profit in 2003
DAVID BOND/WASHINGTON
The $1.5-billion debtor-in-possession financing agreements intended to get United Airlines through 18 months of Chapter 11 bankruptcy protection set high hurdles for--and impose a brisk pace on--the airline's restructuring attempts.
Bank One, providing an initial term loan of $300 million, and JPMorgan Chase, Citicorp USA, CIT Group/Business Credit and Bank One, sharing equally in a $400-million loan and an $800-million revolving credit facility, have imposed covenants that require United to operate profitably within three months. The carrier must maintain in-the-black operations through the rest of 2003 and end the year with $575 million in before-tax earnings (see tables).
Other covenants limit capital spending to $110 million per quarter during the first half of 2003, $116 million in the third quarter, $142 million in the fourth quarter, and $100 million per quarter in the first half of 2004; and require the carrier to keep at least $200 million in cash and cash equivalents at all times. And United must try again to secure a federal loan guarantee, this time for its Chapter 11 exit financing.
FAILURE TO LIVE UP to these and two dozen other covenants could trigger default on the financing. This in turn would allow the lenders to foreclose on United's collateral for the debt, which comprises much of its unencumbered aircraft and other assets. As described by United in its bankruptcy filing, foreclosure would "spell the end."
Moreover, access to financing is limited initially to $800 million--the $300-million Bank One loan, the $400-million four-party loan and $100 million of the revolver. For access to the remaining $700 million, United must achieve positive cumulative earnings, scheduled next October, and develop plans for $300 million in additional cost reductions. Lack of access to the $700 million would prevent United from meeting financial targets, again leading to default.
United began debtor-in-possession (DIP) financing talks late in September, even as it pursued Air Transportation Stabilization Board (ATSB) approval of a $1.8-billion loan guarantee, because it knew it would have to declare bankruptcy if the ATSB turned it down. It negotiated eventually with the four lenders and with GE Capital, which at one point submitted a draft proposal for $2 billion in bankruptcy financing, but on less favorable terms.
Todd Snyder, a managing director of UAL financial consultant Rothschild Inc., said in an affidavit that the lenders questioned the revenue projections in United's business plan throughout the negotiations. "Similar to the ATSB, the DIP lenders considered United's internal financial projections to be far too rosy," Snyder told the court. This led to a "club" facility in which each lender limited its risk by taking only a quarter of the $1.2 billion. Bank One's extra $300 million reflects its affiliation with First USA Bank, which co-brands United's frequent-flier credit card. First USA buys miles and distributes them to cardmembers' accounts for credit card purchases, a "significant source of revenue to United." Because of this relationship, Bank One was willing to provide the larger loan.
This double-DIP approach depended on approval of both facilities, Snyder said. Bank One wouldn't have made the initial loan without the second facility's back-end financing, because Bank One knew United would need much more money later on. And the three additional lenders "refused to provide a significant back-end loan without Bank One's substantial initial loan."
In the end, United adjusted its business plan for the DIP lenders in ways it wouldn't for the ATSB. "Like the ATSB, the DIP lenders did not believe that the business plan [presented to the ATSB] had a reasonable chance of succeeding," United told the court. "According to the DIP lenders, regardless of the size of the DIP loan, [United's] cost structure precluded [it] from achieving profitability. [United] then went back to the DIP lenders with a revised business plan that contained significant cost reductions." This plan will require concessions early in bankruptcy from labor and other stakeholders that go well beyond what failed two weeks ago to satisfy the ATSB.
For United to avoid breaching the DIP covenants it will need cost savings "virtually immediately," the carrier told the court. The bankruptcy process will have to deal with its labor contracts, preferably through agreements with its unions but through the court itself, if necessary "as a decidedly last choice."
United's Marching Orders
To avoid losing its $1.5 billion in debtor-in-possession financing, United Airlines must keep its cumulative losses, dating from Dec. 1, 2002, within these totals:
$964 million on Feb. 28, 2003
$881 million on Mar. 31, 2003
$849 million on Apr. 30, 2003
$738 million on May 31, 2003
$585 million on June 30, 2003
$448 million on July 31, 2003
$219 million on Aug. 31, 2003
$98 million on Sept. 30, 2003
It must make cumulative profits, dating from Dec. 1, 2002, of at least
$46 million by Oct. 31, 2003
$112 million by Nov. 30, 2003
And it must make cumulative profits of at least
$575 million during the 12 months ending Dec. 31, 2003
$901 million during the 12 months ending Jan. 31, 2004
$1.084 billion during the 12 months ending Feb. 28, 2004
$1.196 billion during the 12 months ending Mar. 31, 2004
$1.297 billion during the 12 months ending Apr. 30, 2004
$1.383 billion during the 12 months ending May 31, 2004
All amounts are earnings before income taxes, depreciation, amortization and rents.
Source: UAL bankruptcy court filings
Join Date: Oct 2000
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DAL leadership meeting
Check out the following DAL stuff which is pretty interesting!
Subject: Delta Airlines Quarterly 3-day "Leadership Meeting" - with major Delta corporate leadership presentations
Delta Airlines Leadership Meeting--This past week all of the Chief Line Check Pilots, Base Chief Pilots, and some Fleet Captains attended the quarterly three day "leadership meeting".
(formerly known as the quarterly Chief Pilot Meeting) One of the big areas for Pilot Standards is that our boss Jim Graham as of 1 January 03 will report directly to the Director of Flight Operations and Pilot Standards will be moved under Flight Operations from Flight training and Standards.
Here is a recap of the major presenters at this past week's Leadership Meeting:
Joe Kolshak
* Pace and magnitude of Change in our industry is accelerating.
* UAL Bankruptcy
* 18-24 months before they emerge from bankruptcy.
* When they do emerge from bankruptcy they will be a much smaller carrier.
* Anticipate UAL network reductions in the 12 to 18 % range before they emerge from bankruptcy.
* UAL still burning $10 million a day from operations.
* UAL pension fund is under funded and in bad shape.
* UAL will probably park all their 747s
* Virgin Atlantic is not a likely white Knight to come to UALs rescue.
* Pacific operation and Heathrow slots are likely items that could be sold.
* DAL is most likely interested in some of the Pacific operation.
* Heathrow slots worth $500 Million but UAL will most likely ask $billion.
There is a high likelihood that the British will go to open skies at Heathrow in next 5 years making a high dollar purchase of Heathrow slots a possible bad investment.
* USAIR Bankruptcy
* Unless additional concessions are made by the employee groups and additional cost reductions are implemented by the airline it is increasingly likely that USAir will go into Chapter 7 liquidation.
* It is unlikely that USAir will sell its parts as a recovery strategy to emerge from Chapter 11 Bankruptcy.
* DAL Cash Burn
* We are burning $3-$4 million a day presently from operations
* We were cash positive until this quarter.
* We look to be cash positive again in early 03 and for the remainder of the year barring a catastrophic event.
* UAL Pilot Pensions
* UAL Pilots pensions at the very least have been drastically reduced.
* All of the UAL retirement ESOP plans are most likely worth zero.
* Pension Benefit Guarantee Corporation (PBGC) only guarantees a max of $28,000 annually for individuals retiring between 60-65 years of age and $44,000 annually for individuals retiring after 65 years of age.
* For pilots that have already retired the qualified portion of the annuity would probably be reduced by 50%.
* For those pilots that have not retired from UAL the PBGC safeguards could be their retirement from UAL.
Charlie Tutt
* What are we going to do on a day to day basis?
* We are not going to change from having a safe and secure operation.
* Continue to make the tough calls and they will be supported.
* Two things are fundamentally changing our industry.
* They are the Low Cost Carriers (LCCs) and the internet.
* Unit costs have to be reduced while still maintaining our critical mass.
* High cost legacy carriers (those mainline carriers in business before de-regulation) WILL NOT SURVIVE without adapting.
* USAir pilots have taken 25-30% pay cuts by position.
* UAL employee groups had three UAL Board of Director seats.
* Any two of these individuals could veto the hiring of a new CEO.
* Most likely scenario for these seats is that they will be eliminated during the bankruptcy proceedings.
* Delta is looking to cut costs by $billion in 03 and a cumulative $2.5 billion by 05. These cuts need to be permanent .(Do not look for snap backs)
David Watson (Director of Crew Resources)
* More furloughs will be announced in February.
* CRAF activation will most likely involved our 76s as we are the only supplier of med evac type aircraft and our 76s are the chosen ones.
* Several network initiatives are under way to use similar aircraft type primarily in certain regions to gain efficiencies.
* Low Cost Carrier (LCC) is still a work in progress.
* Will be crewed by mainline pilots out of existing bases.
* It is cost prohibitive to establish new 757 bases at this time.
* Our sick leave rate is up especially on the international F/O categories.
* Look for another advance entitlement/displacement to be posted in January or February.
* 777 & 76ER entitlements will be posted as well as more 727 & MD-11 displacements.
* Average regular line pilot flies on a 12 month average 52:19 monthly.
* Average reserve line pilot flies on a 12 month average 21:48 monthly.
* For September 02 those number were actually 54:00 hours for a regular line pilot and 27:00 hours for a reserve.
Mike Bell (Vice-President Schedule Development)
* Revenues are falling short of plan for the year.
* Yields are also below plan for the year.
* The present quarter is not a good quarter for us as we are still losing money.
* Delta is going after charter business as much as possible especially during this holiday season.
* MD-11 retirements to save $100 million annually after taking all factors into account including monthly lease payments and storage costs.
* Shuttle LFs are less than 50% using the 737-800s.
* Using the 737Gs beginning in early 03 will allow us to match capacity to demand on this segment of our operation.
* We use to be able to charge $200 per passenger on the shuttle.
* We now average $35-$45 per passenger.
* We are carrying about 40-50 people on average on each shuttle flight.
* Shuttle is not profitable today.
* We do have a wish list if USAir goes Chapter 7.
* Trans-Atlantic from PHL is one possibility.
* Facilities and Slots in the DCA & New York markets is another.
* Our wish list from UALs filing for Chapter 11 centers around their Pacific operation and their Heathrow slots.
* We are testing a premium coach product using some of our shuttle aircraft.
* These aircraft have all leather seating and 6 inch pitch seats.
* MD-11s leaving the fleet will save $100 Million annually.
* We presently are only flying 11 of our MD-11 in international service.
* We have 13 extra 76ERs that are flying domestic.
* At present our international fleet numbers 74 aircraft.
* 15 of those aircraft are MD-11s, 8 are 777s, and 51 are 76ERs.
* Mike Bell stated that the MD-11s are being STORED. Don't read too much into that but he did state that he thought the 73Gs returning to service just goes to show you that depending on the revenue environment anything is possible.
* DFW restructuring is under way.
* DFW loses money at present. Company is going to stick with it but fix it so it is profitable.
* That fix is to reduce the gauge both in terms of types and numbers of mainline departures flying into and out of DFW and increasing the number of RJs flying in this market to better match capacity to demand.
* Most of the loss (40%) in the DFW hub is attributed to the early and late bank of flight.
* We will be moving those banks to different times in the day to once again better match demand.
* We have had limited success in making pricing changes stick.
(Increasing fares)
* We can not unilaterally raise fares.
* We don't control the distribution channels.
* Internet is the main supplier of airline seats.
* When we make changes we try to do it approaching a weekend and see if it is matched on Monday morning. If not we have to retrench.
* We actively revenue manage every flight every day to accurately demand forecast so that if demand does not meet prediction we adjust pricing until it does.
* We overbook for see little actual oversell
* Our goal is to get every flight full while maximizing revenue.
* Every hub we fly today is unprofitable.
* On a market basis some markets are profitable. (About 20% of the markets we fly are profitable)
* All 21 767-400 aircraft are flying. we did have two until this fall in the desert.
* If the Iraqi situation escalates look for a reduction of about 10 international flights. No details on which city pairs.
John Salvaggio (President of the Low Cost Carrier)
* Aim of the LCC is to compete in an ever changing revenue environment.
* SWA and Jet Blue have changed the game.
* We used several focus groups to help identify what products we should offer.
* Our product on the LCC will have simplified fare structure and remove the hassle that fare searches produce.
* Fare structure will most likely be between $89-$199.
* Everything being done by the LCC will be looked at by Delta for possible implementation.
* Name of LCC is yet to be decided.
* Have already been selling tickets under the Delta Express label.
* Aircraft will be flown by Delta pilots that will work for Charlie Tutt.
* All seat on the LCC will be coach to start with.
* We get very little revenue for FC or even full fair coach seats.
(About 2% of our revenues)
* Our cost structure on the LCC will be lower than Jet Blue's.
* One goal is to keep the CASM on the LCC in the 7 cent range.
* John does not expect to be profitable the first year but would not be surprised if the operation did turn a profit in its first year.
Michele Burns (CFO)
* She feels it is 50/50 on whether or not USAir will go into Chapter 7.
* She feels USAir will not sell parts as a strategy for survival.
* UAL on the other hand according to Michele will most likely sell some parts as they reorganize.
* United States in Michele's opinion is too vast geographically to be served by point to point carriers. However, consolidation is needed as the US market does not need 6 or 7 Hub and Spoke carriers.
* Michele echoed the fact that Delta is facing unprecedented financial challenges.
* She sees little revenue recovery in the next year.
* The three areas of emphasis are cost containment/reduction, Liquidity, and matching capacity to demand.
* Airline industry capacity as measured in ASMs in the 3rd quarter of
02 compared to the 4th quarter of 00 is down 3.5%. Delta's capacity as measured in ASMs for the same period is down 4.4%.
* Delta's mainline capacity for this period is down 6.5% while our connection carrier capacity is up 34.4%%.
* Michele stated that RJs are producing system revenue and making segment profits that if not present would have resulted in an even greater ASM decrease than we experienced.
* Our revenues over this same period are down 14.9% and our RASM is down 2.4% YTD 2002.
* Our liquidity is at $2.6 Billion. AMRs is $2.8B, UALs is $1.3B, NWAC is $2.4B, CAL is $1.3 B, and LUV is $2.5B.
We do have borrowing power.CAL has NONE.
* Our outlook for 03 is not good but Michele's goal is to have the same amount of liquidity at the end of 03 hat we have going into 03.
* We are working with our suppliers and they are being more willing to partner with us to reduce costs or capital outlays without penalties.
We are Boeings largest customer and Boeing is cognizant of that fact.
* Our action plan is to match capacity to demand by utilizing the right aircraft on the right route at the right time.
* We must reduce costs by $1.5B in 03 and by a cumulative $2.5B by 05.
* We now manage for cost versus revenue generation.
* We will continue to leverage technology to expedite our customers through the airport and to their gates.
* We have the most Kiosks in the industry for self check-in.
* We are putting continued and increased emphasis on reservations call in center renewal.
Subject: Delta Airlines Quarterly 3-day "Leadership Meeting" - with major Delta corporate leadership presentations
Delta Airlines Leadership Meeting--This past week all of the Chief Line Check Pilots, Base Chief Pilots, and some Fleet Captains attended the quarterly three day "leadership meeting".
(formerly known as the quarterly Chief Pilot Meeting) One of the big areas for Pilot Standards is that our boss Jim Graham as of 1 January 03 will report directly to the Director of Flight Operations and Pilot Standards will be moved under Flight Operations from Flight training and Standards.
Here is a recap of the major presenters at this past week's Leadership Meeting:
Joe Kolshak
* Pace and magnitude of Change in our industry is accelerating.
* UAL Bankruptcy
* 18-24 months before they emerge from bankruptcy.
* When they do emerge from bankruptcy they will be a much smaller carrier.
* Anticipate UAL network reductions in the 12 to 18 % range before they emerge from bankruptcy.
* UAL still burning $10 million a day from operations.
* UAL pension fund is under funded and in bad shape.
* UAL will probably park all their 747s
* Virgin Atlantic is not a likely white Knight to come to UALs rescue.
* Pacific operation and Heathrow slots are likely items that could be sold.
* DAL is most likely interested in some of the Pacific operation.
* Heathrow slots worth $500 Million but UAL will most likely ask $billion.
There is a high likelihood that the British will go to open skies at Heathrow in next 5 years making a high dollar purchase of Heathrow slots a possible bad investment.
* USAIR Bankruptcy
* Unless additional concessions are made by the employee groups and additional cost reductions are implemented by the airline it is increasingly likely that USAir will go into Chapter 7 liquidation.
* It is unlikely that USAir will sell its parts as a recovery strategy to emerge from Chapter 11 Bankruptcy.
* DAL Cash Burn
* We are burning $3-$4 million a day presently from operations
* We were cash positive until this quarter.
* We look to be cash positive again in early 03 and for the remainder of the year barring a catastrophic event.
* UAL Pilot Pensions
* UAL Pilots pensions at the very least have been drastically reduced.
* All of the UAL retirement ESOP plans are most likely worth zero.
* Pension Benefit Guarantee Corporation (PBGC) only guarantees a max of $28,000 annually for individuals retiring between 60-65 years of age and $44,000 annually for individuals retiring after 65 years of age.
* For pilots that have already retired the qualified portion of the annuity would probably be reduced by 50%.
* For those pilots that have not retired from UAL the PBGC safeguards could be their retirement from UAL.
Charlie Tutt
* What are we going to do on a day to day basis?
* We are not going to change from having a safe and secure operation.
* Continue to make the tough calls and they will be supported.
* Two things are fundamentally changing our industry.
* They are the Low Cost Carriers (LCCs) and the internet.
* Unit costs have to be reduced while still maintaining our critical mass.
* High cost legacy carriers (those mainline carriers in business before de-regulation) WILL NOT SURVIVE without adapting.
* USAir pilots have taken 25-30% pay cuts by position.
* UAL employee groups had three UAL Board of Director seats.
* Any two of these individuals could veto the hiring of a new CEO.
* Most likely scenario for these seats is that they will be eliminated during the bankruptcy proceedings.
* Delta is looking to cut costs by $billion in 03 and a cumulative $2.5 billion by 05. These cuts need to be permanent .(Do not look for snap backs)
David Watson (Director of Crew Resources)
* More furloughs will be announced in February.
* CRAF activation will most likely involved our 76s as we are the only supplier of med evac type aircraft and our 76s are the chosen ones.
* Several network initiatives are under way to use similar aircraft type primarily in certain regions to gain efficiencies.
* Low Cost Carrier (LCC) is still a work in progress.
* Will be crewed by mainline pilots out of existing bases.
* It is cost prohibitive to establish new 757 bases at this time.
* Our sick leave rate is up especially on the international F/O categories.
* Look for another advance entitlement/displacement to be posted in January or February.
* 777 & 76ER entitlements will be posted as well as more 727 & MD-11 displacements.
* Average regular line pilot flies on a 12 month average 52:19 monthly.
* Average reserve line pilot flies on a 12 month average 21:48 monthly.
* For September 02 those number were actually 54:00 hours for a regular line pilot and 27:00 hours for a reserve.
Mike Bell (Vice-President Schedule Development)
* Revenues are falling short of plan for the year.
* Yields are also below plan for the year.
* The present quarter is not a good quarter for us as we are still losing money.
* Delta is going after charter business as much as possible especially during this holiday season.
* MD-11 retirements to save $100 million annually after taking all factors into account including monthly lease payments and storage costs.
* Shuttle LFs are less than 50% using the 737-800s.
* Using the 737Gs beginning in early 03 will allow us to match capacity to demand on this segment of our operation.
* We use to be able to charge $200 per passenger on the shuttle.
* We now average $35-$45 per passenger.
* We are carrying about 40-50 people on average on each shuttle flight.
* Shuttle is not profitable today.
* We do have a wish list if USAir goes Chapter 7.
* Trans-Atlantic from PHL is one possibility.
* Facilities and Slots in the DCA & New York markets is another.
* Our wish list from UALs filing for Chapter 11 centers around their Pacific operation and their Heathrow slots.
* We are testing a premium coach product using some of our shuttle aircraft.
* These aircraft have all leather seating and 6 inch pitch seats.
* MD-11s leaving the fleet will save $100 Million annually.
* We presently are only flying 11 of our MD-11 in international service.
* We have 13 extra 76ERs that are flying domestic.
* At present our international fleet numbers 74 aircraft.
* 15 of those aircraft are MD-11s, 8 are 777s, and 51 are 76ERs.
* Mike Bell stated that the MD-11s are being STORED. Don't read too much into that but he did state that he thought the 73Gs returning to service just goes to show you that depending on the revenue environment anything is possible.
* DFW restructuring is under way.
* DFW loses money at present. Company is going to stick with it but fix it so it is profitable.
* That fix is to reduce the gauge both in terms of types and numbers of mainline departures flying into and out of DFW and increasing the number of RJs flying in this market to better match capacity to demand.
* Most of the loss (40%) in the DFW hub is attributed to the early and late bank of flight.
* We will be moving those banks to different times in the day to once again better match demand.
* We have had limited success in making pricing changes stick.
(Increasing fares)
* We can not unilaterally raise fares.
* We don't control the distribution channels.
* Internet is the main supplier of airline seats.
* When we make changes we try to do it approaching a weekend and see if it is matched on Monday morning. If not we have to retrench.
* We actively revenue manage every flight every day to accurately demand forecast so that if demand does not meet prediction we adjust pricing until it does.
* We overbook for see little actual oversell
* Our goal is to get every flight full while maximizing revenue.
* Every hub we fly today is unprofitable.
* On a market basis some markets are profitable. (About 20% of the markets we fly are profitable)
* All 21 767-400 aircraft are flying. we did have two until this fall in the desert.
* If the Iraqi situation escalates look for a reduction of about 10 international flights. No details on which city pairs.
John Salvaggio (President of the Low Cost Carrier)
* Aim of the LCC is to compete in an ever changing revenue environment.
* SWA and Jet Blue have changed the game.
* We used several focus groups to help identify what products we should offer.
* Our product on the LCC will have simplified fare structure and remove the hassle that fare searches produce.
* Fare structure will most likely be between $89-$199.
* Everything being done by the LCC will be looked at by Delta for possible implementation.
* Name of LCC is yet to be decided.
* Have already been selling tickets under the Delta Express label.
* Aircraft will be flown by Delta pilots that will work for Charlie Tutt.
* All seat on the LCC will be coach to start with.
* We get very little revenue for FC or even full fair coach seats.
(About 2% of our revenues)
* Our cost structure on the LCC will be lower than Jet Blue's.
* One goal is to keep the CASM on the LCC in the 7 cent range.
* John does not expect to be profitable the first year but would not be surprised if the operation did turn a profit in its first year.
Michele Burns (CFO)
* She feels it is 50/50 on whether or not USAir will go into Chapter 7.
* She feels USAir will not sell parts as a strategy for survival.
* UAL on the other hand according to Michele will most likely sell some parts as they reorganize.
* United States in Michele's opinion is too vast geographically to be served by point to point carriers. However, consolidation is needed as the US market does not need 6 or 7 Hub and Spoke carriers.
* Michele echoed the fact that Delta is facing unprecedented financial challenges.
* She sees little revenue recovery in the next year.
* The three areas of emphasis are cost containment/reduction, Liquidity, and matching capacity to demand.
* Airline industry capacity as measured in ASMs in the 3rd quarter of
02 compared to the 4th quarter of 00 is down 3.5%. Delta's capacity as measured in ASMs for the same period is down 4.4%.
* Delta's mainline capacity for this period is down 6.5% while our connection carrier capacity is up 34.4%%.
* Michele stated that RJs are producing system revenue and making segment profits that if not present would have resulted in an even greater ASM decrease than we experienced.
* Our revenues over this same period are down 14.9% and our RASM is down 2.4% YTD 2002.
* Our liquidity is at $2.6 Billion. AMRs is $2.8B, UALs is $1.3B, NWAC is $2.4B, CAL is $1.3 B, and LUV is $2.5B.
We do have borrowing power.CAL has NONE.
* Our outlook for 03 is not good but Michele's goal is to have the same amount of liquidity at the end of 03 hat we have going into 03.
* We are working with our suppliers and they are being more willing to partner with us to reduce costs or capital outlays without penalties.
We are Boeings largest customer and Boeing is cognizant of that fact.
* Our action plan is to match capacity to demand by utilizing the right aircraft on the right route at the right time.
* We must reduce costs by $1.5B in 03 and by a cumulative $2.5B by 05.
* We now manage for cost versus revenue generation.
* We will continue to leverage technology to expedite our customers through the airport and to their gates.
* We have the most Kiosks in the industry for self check-in.
* We are putting continued and increased emphasis on reservations call in center renewal.
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>>* UAL Bankruptcy
* 18-24 months before they emerge from bankruptcy.
* When they do emerge from bankruptcy they will be a much smaller carrier.
* Anticipate UAL network reductions in the 12 to 18 % range before they emerge from bankruptcy.
* UAL still burning $10 million a day from operations.
* UAL pension fund is under funded and in bad shape.
* UAL will probably park all their 747s
* Virgin Atlantic is not a likely white Knight to come to UALs rescue.
* Pacific operation and Heathrow slots are likely items that could be sold.
* DAL is most likely interested in some of the Pacific operation.
* Heathrow slots worth $500 Million but UAL will most likely ask $billion. <<
Sounds pretty optimistic, how long ago was this meeting?
* 18-24 months before they emerge from bankruptcy.
* When they do emerge from bankruptcy they will be a much smaller carrier.
* Anticipate UAL network reductions in the 12 to 18 % range before they emerge from bankruptcy.
* UAL still burning $10 million a day from operations.
* UAL pension fund is under funded and in bad shape.
* UAL will probably park all their 747s
* Virgin Atlantic is not a likely white Knight to come to UALs rescue.
* Pacific operation and Heathrow slots are likely items that could be sold.
* DAL is most likely interested in some of the Pacific operation.
* Heathrow slots worth $500 Million but UAL will most likely ask $billion. <<
Sounds pretty optimistic, how long ago was this meeting?
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As UAL had hoped, the judge ordered the IAM to take temporary pay cuts to buy time for negotiating more permanent concessions. The numbers still look look bad but maybe this will let them make the first of several hurdles in the DIP financing package according to the article below:
Pay cuts ordered for UAL machinists
Judge rules to temporarily slash wages by 13 percent
CHICAGO, Jan. 10 — A U.S. bankruptcy judge on Friday ordered temporary 13 percent pay cuts for unionized machinists at United Airlines, buying the airline more time to negotiate broad concessions at its entire unionized work force.
A U.S. bankruptcy judge on Friday ordered temporary 13 percent pay cuts for unionized machinists at United Airlines, buying the airline more time to negotiate broad concessions from its entire unionized work force.
United, a unit of UAL Corp. and the world’s second-largest airline, filed for bankruptcy on Dec. 9.
Since then, four of the carrier’s five unions had agreed to temporary pay cuts to help the airline reorganize and meet specific financing requirements by lenders.
But the International Association of Machinists, representing about 37,000 workers, argued to the judge that the airline had not shown why the cuts were needed now.
In his ruling issued on Friday morning, U.S. Bankruptcy Judge Eugene Wedoff agreed with the airline that changes to the IAM’s collective bargaining agreements were “essential, at the present time, to continue United Air Lines Inc.’s business and to avoid irreparable damage to its estate.”
MUTED REACTION FROM UNION
In a message to members, the IAM had little reaction to the order other than to say it would advise rank-and-file workers of additional developments. The IAM said the temporary pay cuts will remain in effect until either a broader concession package is negotiated and approved by the court or until the court rejects the current collective bargaining agreements altogether and United imposes new terms.
“The reductions will be applied to each factor that makes up total hourly pay, including base rates and all individual premiums,” the IAM said.
Wedoff said to be fair to the other unions, which agreed to take pay cuts effective Jan. 1, the IAM union members’ pay will actually be cut by 14 percent from Friday until May 1. That would be equivalent to the 13 percent reduction retroactive to Jan. 1 that the company was seeking, he wrote.
Pilots’ pay is being cut the most, at 29 percent, and flight attendants’ salaries are being trimmed by 9 percent.
Smaller unions representing flight dispatchers and meteorologists are also taking 13 percent cuts.
United has about 80,000 employees, nearly 80 percent of whom are represented by labor unions.
SAVING $80 MILLION A MONTH
The airline, based in Elk Grove Village, Illinois, had some of the highest labor costs in the industry as it headed into bankruptcy. Already hurt by a slowdown in lucrative business travel, United saw its losses balloon after the Sept. 11, 2001, attacks on New York and Washington, and ultimately it was unable to keep enough cash to pay various debt obligations.
A source familiar with the matter told Reuters the magnitude of the pay cuts now secured from the unions represents the total amount of what was needed to meet requirements of loans known as debtor-in-possession financing.
The labor savings represent about $80 million per month in cash, he said. Now the airline has until May to make sweeping changes to work rules that unions follow, he said.
The institutions that have loaned United a total of $1.5 billion to keep flying in bankruptcy are J.P. Morgan Chase, Citigroup, Bank One and CIT Group.
Pay cuts ordered for UAL machinists
Judge rules to temporarily slash wages by 13 percent
CHICAGO, Jan. 10 — A U.S. bankruptcy judge on Friday ordered temporary 13 percent pay cuts for unionized machinists at United Airlines, buying the airline more time to negotiate broad concessions at its entire unionized work force.
A U.S. bankruptcy judge on Friday ordered temporary 13 percent pay cuts for unionized machinists at United Airlines, buying the airline more time to negotiate broad concessions from its entire unionized work force.
United, a unit of UAL Corp. and the world’s second-largest airline, filed for bankruptcy on Dec. 9.
Since then, four of the carrier’s five unions had agreed to temporary pay cuts to help the airline reorganize and meet specific financing requirements by lenders.
But the International Association of Machinists, representing about 37,000 workers, argued to the judge that the airline had not shown why the cuts were needed now.
In his ruling issued on Friday morning, U.S. Bankruptcy Judge Eugene Wedoff agreed with the airline that changes to the IAM’s collective bargaining agreements were “essential, at the present time, to continue United Air Lines Inc.’s business and to avoid irreparable damage to its estate.”
MUTED REACTION FROM UNION
In a message to members, the IAM had little reaction to the order other than to say it would advise rank-and-file workers of additional developments. The IAM said the temporary pay cuts will remain in effect until either a broader concession package is negotiated and approved by the court or until the court rejects the current collective bargaining agreements altogether and United imposes new terms.
“The reductions will be applied to each factor that makes up total hourly pay, including base rates and all individual premiums,” the IAM said.
Wedoff said to be fair to the other unions, which agreed to take pay cuts effective Jan. 1, the IAM union members’ pay will actually be cut by 14 percent from Friday until May 1. That would be equivalent to the 13 percent reduction retroactive to Jan. 1 that the company was seeking, he wrote.
Pilots’ pay is being cut the most, at 29 percent, and flight attendants’ salaries are being trimmed by 9 percent.
Smaller unions representing flight dispatchers and meteorologists are also taking 13 percent cuts.
United has about 80,000 employees, nearly 80 percent of whom are represented by labor unions.
SAVING $80 MILLION A MONTH
The airline, based in Elk Grove Village, Illinois, had some of the highest labor costs in the industry as it headed into bankruptcy. Already hurt by a slowdown in lucrative business travel, United saw its losses balloon after the Sept. 11, 2001, attacks on New York and Washington, and ultimately it was unable to keep enough cash to pay various debt obligations.
A source familiar with the matter told Reuters the magnitude of the pay cuts now secured from the unions represents the total amount of what was needed to meet requirements of loans known as debtor-in-possession financing.
The labor savings represent about $80 million per month in cash, he said. Now the airline has until May to make sweeping changes to work rules that unions follow, he said.
The institutions that have loaned United a total of $1.5 billion to keep flying in bankruptcy are J.P. Morgan Chase, Citigroup, Bank One and CIT Group.
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Are court ordered pay cuts preferrable to a long term concessionary contract that lasts longer than the present situation? The IAM may have gotten its members a better deal by going this route.
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What UAL Management wants from Pilots
This is what UAL will ask the Bankruptcy Court for:
Section 1113(c) Proposal Term Sheet
ALPA
Objective Restructure the current Agreement to enable the transformation of United consistent with the announced business plan.
Effective Date
[______] The effective date of the new Agreement will be the first calendar day of the calendar month following the execution of the new collective bargaining agreement. [________, 2003]
Term
[Six years:____] The amendable date of the new Agreement will be ______, 2009.
Revise the duration clause to provide:
ˇ§This Agreement shall become effective [________, 2003] and shall continue in full force and effect until [_______, 2009] and shall renew itself yearly without change unless written notice of intended change is served in accordance with Section 6, Title I of the Railway Labor Act, by either party at least thirty (30) but not more than sixty (60) days prior to [_______, 2009] or any year thereafter.ˇ¨
Compensation
Discuss methods of reaching cost saving objectives through compensation adjustments including:
„h Eliminate the base hourly pay increases in Section 3-B scheduled for May 1, 2003 and May 1, 2004.
„h Eliminate the international override payments incentive in Section 3-B-1-d.
„h Eliminate the incentive pay for late night flying in Section 3-B-7-a.
„h Revise the junior manning assignment override pay in Section 3-B-7-c to 10%.
„h Revise base hourly pay rates in Section 3-B on the Effective Date by reducing it by 29%.
„h The new reduced base hourly pay rates will be increased by 1.5% each year effective on the anniversary of the Effective Date until [_________, 2008].
„h Revise minimum monthly guarantee in Section 3-B-4-a from 75 hours to 60 hours.
Scope and Job Security
Discuss the following business flexibility enhancements that can be used in transforming United consistent with the business plan:
Low Cost Carrier Competitive Solution Create a United Sub-brand that can be deployed in markets that are identified as ˇ§low costˇ¨ markets and in which there is an inability to segment fares; the result to be a product that is competitive with Frontier, Jet Blue, Southwest, ATA, etc.
Furlough Protection
Eliminate furlough protection for all pilots as currently provided in Section 1-H-1 to allow the workforce to seek its proper level over the short and long term consistent with the business plan.
Number of Regional Jets and their deployment
Eliminate the restrictions in Section 1 on (i) the number of Small Jets; (ii) the operation of Small Jets; (iii) the relationship of Small Jets to the mainline fleet and number of mainline pilots; (iv) code sharing with carriers who fly over 70 seat RJs; (v) other feeder carrier limitations to enable small jets to be deployed in the appropriate markets consistent with the business plan.
Size of Regional Jets Revise Section 1-M-28 to seventy (70) seats in order to compete effectively in 70 seat markets consistent the business plan.
Number of Pilots
Eliminate Section 1-C-1-g minimum number of pilots related to SJs. Eliminate Section 1-H-2 absolute minimum number of pilots. Permit the number of pilots to be realized through the business plan.
Fleet Number
Eliminate Section 1-H-3 absolute number of aircraft. Eliminate Section 1-B-4-a restricting carriers to whom aircraft may be sold. Permit the number and type of aircraft to be realized through the business plan.
Number of Block Hours
Eliminate Section 1-H-4 absolute minimum number of block hours. Eliminate Section 1-C-3 minimum number of international block hours. Permit the number of block hours to be realized through the business plan.
Domestic Code Share Limitations Eliminate conditional language in Section 1-C-2-a and eliminate Sections 1-C-2-a (1), (2) and (3) and 1-C-2-b. Permit United to enter into domestic alliances as needed to respond to rapidly changing industry environment as indicated by the business plan.
International Code Share Limitations
Eliminate conditional language in Section 1-C-3 and eliminate Sections 1-C-3-a, b, c, d, and e; 1-C-5-a. Permit United to enter into international alliances as needed to respond to the rapidly changing industry as indicated by the business plan.
Route Transfer Eliminate Section 1-B-4-b to enable route transfer as needed in the business plan.
Cargo Eliminate Section 1-C-6 requiring Company to endeavor to ship all cargo on Company aircraft and preventing profit sharing on cargo with other carriers. Permit United to coordinate with other carriers to maximize revenue and respond to rapidly changing industry as indicated by the business plan.
Work Rules, Productivity and Efficiency
Discuss the following work rule changes that can be used in transforming United consistent with the business plan:
Hours Maximums
Revise monthly, actual and scheduled flight time limitations in Section 5-B-1 and 5-B-2; and Letter 91-2, L.1 and L.2 from 81/85 to 92 in all circumstances to permit more productivity. Eliminate bank provisions.
Duty Rig
Eliminate Section 5-G-3-a and related sections to remove scheduling restriction that penalizes certain IDs.
Trip Rig Revise Section 5-G-3-c and related sections to provide ratio of 1:4.5 to reduce penalty on certain IDs.
Minimum Day Eliminate Section 5-G-3-b and related sections to reduce penalty for certain IDs.
Days Off
Revise lineholders minimum days off to 10 days; revise reserves to 12 days of which 4 are moveable to increase productivity.
Atlantic Augmentation Eliminate Letter 01-14 and modify Letter 91-2 to affirmatively state that augmentation is not required on Atlantic operations under 8 hours.
QWL Letter
Revise Letter 00-20 to provide ˇ§best effortsˇ¨ to meet quality of life parameters.
Shuttle Letter Delete Letter 94-
Staffing
Discuss the following changes that can be used in transforming United consistent with the business plan:
International Relief Pilot
Create International Relief Pilot (IRP) applicable to two man crew aircraft to provide cruise pilot as augmented crew.
Manpower Formula
Eliminate manpower formula in Section 8-B. This provision is linked to the elimination of the minimum pilot provisions in Section 1.
Training Expense
Apply a 36-month freeze to each position award.
Preferential Bidding
Implement a preferential bidding system to replace line bidding as provided in Section 20. Amend/eliminate all provisions of the Agreement that are inconsistent with preferential bidding. Accordingly reduce the notice period for involuntary vacation leave from 45 days to 30 days.
Domicile Closing
Eliminate domicile closure language from US code share letter of agreement and permit any base to be closed where closure is warranted from a business plan perspective.
Training Staffing
Revise Section 1-B-3, Pilot Instructor Letter 98-1, 98-8, 89-2 to permit non-seniority list simulator instructors, sale of training center and greater flexibility in sale of simulator surplus time.
Benefits
Discuss the following benefit changes that can be used in transforming United consistent with the business plan:
Pilot Defined Benefit Plan
Revise multiplier in the Pilot Defined Benefit Plan as provided in Exhibit A.
Pilot Directed Account
Eliminate Company contribution to Pilot Directed Account as provided in Letter 00-18, B-2. Retain pilotsˇ¦ vested balances.
New 401(k)
Establish a 401(k) retirement account as set forth in Exhibit A.
Retiree Medical The employee contribution to the cost of retiree medical for pre and post Medicare retiree medical benefits may be modified consistent with Exhibit __.
Retiree Life Insurance
Revise Letter 00-19 and all other provisions of the Agreement as necessary to provide retiree life insurance as provided in Exhibit A.
Medical/Dental Plan Equality
Revise Letter 00-19, A and C and other provisions of the Agreement as necessary to replace all current medical and dental plans with a uniform plan (or plans) to be available to all Company employees as set forth in Exhibit A.
Medical/Dental Plan Contribution
Revise Letter 00-19, A and C and other provisions of the Agreement as necessary to provide that all employees shall contribute to the cost of coverage for all company-sponsored medical, dental plans as set forth in Exhibit A.
When an employee chooses a Medical HMO or Dental HMO option (if available), if the cost of the HMO or DHMO exceeds the cost the PPO, the employee share of the cost for the HMO or DHMO shall be equal to the employee share of the cost of the PPO option plus 100% of the additional cost.
Flexible Spending Account
Current program of Health and Dependent Care Accounts, with maximum annual contribution of $5,000 per account. Forfeitures to be used for plan administration.
Active Employee Life Insurance and AD&D, LTD
Revise Agreement as necessary to provide consistent with Exhibit A:
„h Company paid Life Insurance: One times annual base pay (max $200,000).
„h Contributory Life Insurance: Up to eight times annual base pay.
„h AD&D: Company-paid (none). Offer contributory coverage on same basis as current plan.
„h Revise pilot long-term disability plan as provided in Exhibit A.
Per Diem
Revise hourly per diem expense allowance in Section 4-A to $1.50 domestic and $1.75 international.
Vacation Accrual
Revise Section 11 to provide maximum 35 days of vacation accrual and pay.
Vacation Overlap
Eliminate the vacation overlap pay provision in Section 11-C-1 by paying 2.6 hours per vacation day.
Layover Hotels
Revise Section 5-G-1-c to eliminate the ˇ§downtown or downtown-likeˇ¨ requirement for layovers equal to or greater than 13 hours and treat all layovers as field layovers.
First Class Deadhead
Revise Section 5-D-3 and 5-D-4 to eliminate booking pilots in first class on and off line. Revise corresponding international provisions in Section 2-B.
Paid Moves
Discuss reaching cost savings objectives through revision of Section 10-A to provide paid moves only when a pilot experiences an involuntary domicile transfer. Further, only provide paid move when pilot actually moves to his domicile.
Sick Leave
Revise Agreement to provide that sick leave accrual, sick leave pay and medical leaves of absence shall be as provided under ˇ§Short Term Disability/Sick leaveˇ¨ in Exhibit A.
Occupational Sick Leave
Eliminate all current provisions providing for occupational sick leave or injury leave and/or pay. Occupational injuries shall be treated as sickness and sick leave, and pay during such sick leave shall be available as provided under ˇ§Short Term Disability/Sick leaveˇ¨ in Exhibit A.
Furlough Pay
Revise Agreement as necessary to cap severance pay at a maximum of eight weeks.
Sick Leave Pay
Revise Section 13-A to provide that pilot will be paid only for the actual hours that are debited from the sick leave account.
Company-paid Union Time
Revise Letter of Agreement 91-30 dealing with Company-paid ALPA ID drops.
Force Majeure
[To be discussed]
Grievance Withdrawals ALPA to withdraw specified grievances with prejudice. List to be provided.
Success Sharing Establish an appropriate success sharing program to ensure that employees participate in Unitedˇ¦s successful transformation.
This is the future of US Airline Industry under George Bush.
Section 1113(c) Proposal Term Sheet
ALPA
Objective Restructure the current Agreement to enable the transformation of United consistent with the announced business plan.
Effective Date
[______] The effective date of the new Agreement will be the first calendar day of the calendar month following the execution of the new collective bargaining agreement. [________, 2003]
Term
[Six years:____] The amendable date of the new Agreement will be ______, 2009.
Revise the duration clause to provide:
ˇ§This Agreement shall become effective [________, 2003] and shall continue in full force and effect until [_______, 2009] and shall renew itself yearly without change unless written notice of intended change is served in accordance with Section 6, Title I of the Railway Labor Act, by either party at least thirty (30) but not more than sixty (60) days prior to [_______, 2009] or any year thereafter.ˇ¨
Compensation
Discuss methods of reaching cost saving objectives through compensation adjustments including:
„h Eliminate the base hourly pay increases in Section 3-B scheduled for May 1, 2003 and May 1, 2004.
„h Eliminate the international override payments incentive in Section 3-B-1-d.
„h Eliminate the incentive pay for late night flying in Section 3-B-7-a.
„h Revise the junior manning assignment override pay in Section 3-B-7-c to 10%.
„h Revise base hourly pay rates in Section 3-B on the Effective Date by reducing it by 29%.
„h The new reduced base hourly pay rates will be increased by 1.5% each year effective on the anniversary of the Effective Date until [_________, 2008].
„h Revise minimum monthly guarantee in Section 3-B-4-a from 75 hours to 60 hours.
Scope and Job Security
Discuss the following business flexibility enhancements that can be used in transforming United consistent with the business plan:
Low Cost Carrier Competitive Solution Create a United Sub-brand that can be deployed in markets that are identified as ˇ§low costˇ¨ markets and in which there is an inability to segment fares; the result to be a product that is competitive with Frontier, Jet Blue, Southwest, ATA, etc.
Furlough Protection
Eliminate furlough protection for all pilots as currently provided in Section 1-H-1 to allow the workforce to seek its proper level over the short and long term consistent with the business plan.
Number of Regional Jets and their deployment
Eliminate the restrictions in Section 1 on (i) the number of Small Jets; (ii) the operation of Small Jets; (iii) the relationship of Small Jets to the mainline fleet and number of mainline pilots; (iv) code sharing with carriers who fly over 70 seat RJs; (v) other feeder carrier limitations to enable small jets to be deployed in the appropriate markets consistent with the business plan.
Size of Regional Jets Revise Section 1-M-28 to seventy (70) seats in order to compete effectively in 70 seat markets consistent the business plan.
Number of Pilots
Eliminate Section 1-C-1-g minimum number of pilots related to SJs. Eliminate Section 1-H-2 absolute minimum number of pilots. Permit the number of pilots to be realized through the business plan.
Fleet Number
Eliminate Section 1-H-3 absolute number of aircraft. Eliminate Section 1-B-4-a restricting carriers to whom aircraft may be sold. Permit the number and type of aircraft to be realized through the business plan.
Number of Block Hours
Eliminate Section 1-H-4 absolute minimum number of block hours. Eliminate Section 1-C-3 minimum number of international block hours. Permit the number of block hours to be realized through the business plan.
Domestic Code Share Limitations Eliminate conditional language in Section 1-C-2-a and eliminate Sections 1-C-2-a (1), (2) and (3) and 1-C-2-b. Permit United to enter into domestic alliances as needed to respond to rapidly changing industry environment as indicated by the business plan.
International Code Share Limitations
Eliminate conditional language in Section 1-C-3 and eliminate Sections 1-C-3-a, b, c, d, and e; 1-C-5-a. Permit United to enter into international alliances as needed to respond to the rapidly changing industry as indicated by the business plan.
Route Transfer Eliminate Section 1-B-4-b to enable route transfer as needed in the business plan.
Cargo Eliminate Section 1-C-6 requiring Company to endeavor to ship all cargo on Company aircraft and preventing profit sharing on cargo with other carriers. Permit United to coordinate with other carriers to maximize revenue and respond to rapidly changing industry as indicated by the business plan.
Work Rules, Productivity and Efficiency
Discuss the following work rule changes that can be used in transforming United consistent with the business plan:
Hours Maximums
Revise monthly, actual and scheduled flight time limitations in Section 5-B-1 and 5-B-2; and Letter 91-2, L.1 and L.2 from 81/85 to 92 in all circumstances to permit more productivity. Eliminate bank provisions.
Duty Rig
Eliminate Section 5-G-3-a and related sections to remove scheduling restriction that penalizes certain IDs.
Trip Rig Revise Section 5-G-3-c and related sections to provide ratio of 1:4.5 to reduce penalty on certain IDs.
Minimum Day Eliminate Section 5-G-3-b and related sections to reduce penalty for certain IDs.
Days Off
Revise lineholders minimum days off to 10 days; revise reserves to 12 days of which 4 are moveable to increase productivity.
Atlantic Augmentation Eliminate Letter 01-14 and modify Letter 91-2 to affirmatively state that augmentation is not required on Atlantic operations under 8 hours.
QWL Letter
Revise Letter 00-20 to provide ˇ§best effortsˇ¨ to meet quality of life parameters.
Shuttle Letter Delete Letter 94-
Staffing
Discuss the following changes that can be used in transforming United consistent with the business plan:
International Relief Pilot
Create International Relief Pilot (IRP) applicable to two man crew aircraft to provide cruise pilot as augmented crew.
Manpower Formula
Eliminate manpower formula in Section 8-B. This provision is linked to the elimination of the minimum pilot provisions in Section 1.
Training Expense
Apply a 36-month freeze to each position award.
Preferential Bidding
Implement a preferential bidding system to replace line bidding as provided in Section 20. Amend/eliminate all provisions of the Agreement that are inconsistent with preferential bidding. Accordingly reduce the notice period for involuntary vacation leave from 45 days to 30 days.
Domicile Closing
Eliminate domicile closure language from US code share letter of agreement and permit any base to be closed where closure is warranted from a business plan perspective.
Training Staffing
Revise Section 1-B-3, Pilot Instructor Letter 98-1, 98-8, 89-2 to permit non-seniority list simulator instructors, sale of training center and greater flexibility in sale of simulator surplus time.
Benefits
Discuss the following benefit changes that can be used in transforming United consistent with the business plan:
Pilot Defined Benefit Plan
Revise multiplier in the Pilot Defined Benefit Plan as provided in Exhibit A.
Pilot Directed Account
Eliminate Company contribution to Pilot Directed Account as provided in Letter 00-18, B-2. Retain pilotsˇ¦ vested balances.
New 401(k)
Establish a 401(k) retirement account as set forth in Exhibit A.
Retiree Medical The employee contribution to the cost of retiree medical for pre and post Medicare retiree medical benefits may be modified consistent with Exhibit __.
Retiree Life Insurance
Revise Letter 00-19 and all other provisions of the Agreement as necessary to provide retiree life insurance as provided in Exhibit A.
Medical/Dental Plan Equality
Revise Letter 00-19, A and C and other provisions of the Agreement as necessary to replace all current medical and dental plans with a uniform plan (or plans) to be available to all Company employees as set forth in Exhibit A.
Medical/Dental Plan Contribution
Revise Letter 00-19, A and C and other provisions of the Agreement as necessary to provide that all employees shall contribute to the cost of coverage for all company-sponsored medical, dental plans as set forth in Exhibit A.
When an employee chooses a Medical HMO or Dental HMO option (if available), if the cost of the HMO or DHMO exceeds the cost the PPO, the employee share of the cost for the HMO or DHMO shall be equal to the employee share of the cost of the PPO option plus 100% of the additional cost.
Flexible Spending Account
Current program of Health and Dependent Care Accounts, with maximum annual contribution of $5,000 per account. Forfeitures to be used for plan administration.
Active Employee Life Insurance and AD&D, LTD
Revise Agreement as necessary to provide consistent with Exhibit A:
„h Company paid Life Insurance: One times annual base pay (max $200,000).
„h Contributory Life Insurance: Up to eight times annual base pay.
„h AD&D: Company-paid (none). Offer contributory coverage on same basis as current plan.
„h Revise pilot long-term disability plan as provided in Exhibit A.
Per Diem
Revise hourly per diem expense allowance in Section 4-A to $1.50 domestic and $1.75 international.
Vacation Accrual
Revise Section 11 to provide maximum 35 days of vacation accrual and pay.
Vacation Overlap
Eliminate the vacation overlap pay provision in Section 11-C-1 by paying 2.6 hours per vacation day.
Layover Hotels
Revise Section 5-G-1-c to eliminate the ˇ§downtown or downtown-likeˇ¨ requirement for layovers equal to or greater than 13 hours and treat all layovers as field layovers.
First Class Deadhead
Revise Section 5-D-3 and 5-D-4 to eliminate booking pilots in first class on and off line. Revise corresponding international provisions in Section 2-B.
Paid Moves
Discuss reaching cost savings objectives through revision of Section 10-A to provide paid moves only when a pilot experiences an involuntary domicile transfer. Further, only provide paid move when pilot actually moves to his domicile.
Sick Leave
Revise Agreement to provide that sick leave accrual, sick leave pay and medical leaves of absence shall be as provided under ˇ§Short Term Disability/Sick leaveˇ¨ in Exhibit A.
Occupational Sick Leave
Eliminate all current provisions providing for occupational sick leave or injury leave and/or pay. Occupational injuries shall be treated as sickness and sick leave, and pay during such sick leave shall be available as provided under ˇ§Short Term Disability/Sick leaveˇ¨ in Exhibit A.
Furlough Pay
Revise Agreement as necessary to cap severance pay at a maximum of eight weeks.
Sick Leave Pay
Revise Section 13-A to provide that pilot will be paid only for the actual hours that are debited from the sick leave account.
Company-paid Union Time
Revise Letter of Agreement 91-30 dealing with Company-paid ALPA ID drops.
Force Majeure
[To be discussed]
Grievance Withdrawals ALPA to withdraw specified grievances with prejudice. List to be provided.
Success Sharing Establish an appropriate success sharing program to ensure that employees participate in Unitedˇ¦s successful transformation.
This is the future of US Airline Industry under George Bush.
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Yes, could be the future of the airline industry under dubbya,
HOWEVER, expect that nearly all financially straped airlines will do the same.
And why not?
Is UAL somehow unique?
(other than being in the biggest sinking boat...overpaid and underworked)
HOWEVER, expect that nearly all financially straped airlines will do the same.
And why not?
Is UAL somehow unique?
(other than being in the biggest sinking boat...overpaid and underworked)
Union Goon
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Everyone is crying about labor and how managment needs protection from the unions.
My question is who is going to protect the workers from spectacularly bad management of which United is the poster child?
Cheers
Wino
My question is who is going to protect the workers from spectacularly bad management of which United is the poster child?
Cheers
Wino
Moderate, Modest & Mild.
Seems like a cyclical pattern doesn't it - in times of pilot excess, tighten the screws further.
Well if they want to pay less, then they must expect to GET less. If they want to increase the hours from 60 to 65 before overtime cuts in fine - I'll fly slower.
The PROBLEM within most airlines today are the legions of NON-REVENUE PRODUCING (NRP) office workers drawing a salary off each aircraft.
There are too many "managers" drawing wages for doing what? Justifying their 5 and 6 figure incomes because they have downgraded pilots' travel from First Class to EY, or found a night-stop hotel that's $15 per night cheaper.
It's time to put the broom through the NRP's. Get rid of the parasites, and the dead wood.
How many staff per aircraft does your airline carry?
But how many actually CONTRIBUTE to its INcome?
Well if they want to pay less, then they must expect to GET less. If they want to increase the hours from 60 to 65 before overtime cuts in fine - I'll fly slower.
The PROBLEM within most airlines today are the legions of NON-REVENUE PRODUCING (NRP) office workers drawing a salary off each aircraft.
There are too many "managers" drawing wages for doing what? Justifying their 5 and 6 figure incomes because they have downgraded pilots' travel from First Class to EY, or found a night-stop hotel that's $15 per night cheaper.
It's time to put the broom through the NRP's. Get rid of the parasites, and the dead wood.
How many staff per aircraft does your airline carry?
But how many actually CONTRIBUTE to its INcome?
Thread Starter
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Yep, with all those work rules gone UAL would be no better than an ex-pat job (but with a 29% pay cut would still pay a lot more...).
Well, unless things get turned around soon, I don't think we'll have to worry about much of this opener anyway.
Well, unless things get turned around soon, I don't think we'll have to worry about much of this opener anyway.
Not a huge union guy, but Wino is correct. It was just a small number of years ago UA was making record profits. 911 and the economy are part of the new UA equation, but questionable management is also.
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Chapter 11 is a curious animal for those who live outside the USA. In other parts of the World, if a company is bust, it’s bust and goes into receivership. The receiver then decides on the best way of protecting the interests of the creditors, and that may well be to keep the company running as a going concern.
Given that Chapter 11 has as a possible outcome, UA continuing in its present form once revenues pick up again, it’s entirely feasible that we may see the airline fit and well again in the medium term. In other words, the authorities do not envisage that Chapter 11 as a mechanism for closing down a company, merely giving it ‘intensive care’ in the hope of a full recovery.
Assuming you hold contemporary American corporate governance in the same disdain as we do ours, one might be forgiven for thinking that the board of UA are ‘trying it on’. Certainly the document you describe looks like one-handed literature for airline execs to read in the privacy of the little boys room.
You might consider calling their bluff?
Given that Chapter 11 has as a possible outcome, UA continuing in its present form once revenues pick up again, it’s entirely feasible that we may see the airline fit and well again in the medium term. In other words, the authorities do not envisage that Chapter 11 as a mechanism for closing down a company, merely giving it ‘intensive care’ in the hope of a full recovery.
Assuming you hold contemporary American corporate governance in the same disdain as we do ours, one might be forgiven for thinking that the board of UA are ‘trying it on’. Certainly the document you describe looks like one-handed literature for airline execs to read in the privacy of the little boys room.
You might consider calling their bluff?
Last edited by Capt H Peacock; 11th Jan 2003 at 08:30.
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No bluff to call I'm afraid....
The way it works is that this letter is part of a Motion filed by the Company with the Court.
We have X number of days to negotiate an agreement with the Company; if no agreement by the specified date, the company presents this with their justification of dollars saved to the Court and asks for it.
The Union can provide rebuttals, but in the end, if it is in the needs of the Company to stay in business, the Judge can approve or modify it as he sees fit.
One of the reasons I posted this, is that if we do emerge from bankruptcy, no Airline in the US will be able to compete with us.
As we once set the bar for the highest salaries in the US; within two years of that acheivement we will set the bar for the lowest salaries soon and working conditions unheard of before.
Just as an aside, with the pay cuts approved by the Union, we appear to save UAL about 7 million dollars a day.
Losses are currently thought to be five and a half million dollars a day, no one outside of the bean counters knows for sure.
This gives UAL an instant profit of 1 1/2 million a day right now.
That 20 million dollars a day lost so often quoted was the result of one time charges related to grounding the aircraft during the one particualar month.
American and Delta will have to file for bankruptcy to match UAL's cost savings.
Overpaid and underworked?
Looking at my logbook, I averaged 82 hard hours a month last year with four weeks of vacation. (19 years with UAL). I think this would be close to the average for 767 Int'l pilots holding a line in my domicile. Simply because this is what the lines are being built to.
I will admit that I almost exclusively fly international, which makes for more productive flying (because of less sits between shorter flights)
Overpaid is in the process of being corrected very soon....
The way it works is that this letter is part of a Motion filed by the Company with the Court.
We have X number of days to negotiate an agreement with the Company; if no agreement by the specified date, the company presents this with their justification of dollars saved to the Court and asks for it.
The Union can provide rebuttals, but in the end, if it is in the needs of the Company to stay in business, the Judge can approve or modify it as he sees fit.
One of the reasons I posted this, is that if we do emerge from bankruptcy, no Airline in the US will be able to compete with us.
As we once set the bar for the highest salaries in the US; within two years of that acheivement we will set the bar for the lowest salaries soon and working conditions unheard of before.
Just as an aside, with the pay cuts approved by the Union, we appear to save UAL about 7 million dollars a day.
Losses are currently thought to be five and a half million dollars a day, no one outside of the bean counters knows for sure.
This gives UAL an instant profit of 1 1/2 million a day right now.
That 20 million dollars a day lost so often quoted was the result of one time charges related to grounding the aircraft during the one particualar month.
American and Delta will have to file for bankruptcy to match UAL's cost savings.
Overpaid and underworked?
Looking at my logbook, I averaged 82 hard hours a month last year with four weeks of vacation. (19 years with UAL). I think this would be close to the average for 767 Int'l pilots holding a line in my domicile. Simply because this is what the lines are being built to.
I will admit that I almost exclusively fly international, which makes for more productive flying (because of less sits between shorter flights)
Overpaid is in the process of being corrected very soon....
Last edited by A-V-8R; 11th Jan 2003 at 12:21.
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Kaptain M, couldn't agree with you more. I often wonder how airlines justify so many management types. Sending peices of paper to one another, then patting each other on the back and awarding each other massive pay rises doesn't seem to help profitability the way I see it.
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Kaptin M is most certainly correct about the non-revenue producing folks in many companies....a clean sweep is needed in an effort to remain competitive (or indeed alive).
But, as to flying slower...not a good idea, as flt ops management would find out it in short order. Not much you can hide from the quick access recorder.
But, as to flying slower...not a good idea, as flt ops management would find out it in short order. Not much you can hide from the quick access recorder.
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Just a question to those in the know. Wasn't United largely owned by the employees, who also had a seat or two on the board?
If this is the case, isn't a bit harsh to be blaming management for the problems?
If this is the case, isn't a bit harsh to be blaming management for the problems?
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Not only did the employees own the majority of UAL, but they also vetoed any cost savings programmes that would have an adverse effect on their take-home pay and negotiated themselves massive pay increases. Most companies build up reserves for rainy days, but the employees saw reserves as available money that they could spend on themselves.
Bad idea!
Bad idea!
As for people on an airline's payroll, when Howard Hughes bought Air West Airlines many years ago, he was reported to have walked through the corporate offices, asking people what their job was. People who had troubling describing their function(s) were kicked out.
Is there no modern version of Howard Hughes? Incidentally, Hughes had been an experienced pilot and designer in his younger years. Many early entrepreuners reportedly had no backgrounds as accountants or lawyers-they were supposedly very interested in aviation.
Is there no modern version of Howard Hughes? Incidentally, Hughes had been an experienced pilot and designer in his younger years. Many early entrepreuners reportedly had no backgrounds as accountants or lawyers-they were supposedly very interested in aviation.