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chipmunn
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oldiebutgoody
Veteran
- Aug 23, 2002
- 2,627
- 945
Chip,
Great info. Do you have any idea how US is doing right now? Are they obligated to release anything? I'm just wondering if any of the cost cutting measures are having ANY effect on the cash burn right now. I recently saw something (can't remember where, maybe the ALPA board) in an article which indicated that US may be much better suited than other airlines to deal with a war scenario. I'm really hoping that the huge cuts in wages and benefits are helping US in some way to weather this storm. I saw that post which was attributed to an email from Dave which indicated that pensions and work rules needed further examination, but it really sounds like these issues are not just US's problem, not even just an airline industry problem, but a national problem arising from the poor investment performance of the funds.
Great info. Do you have any idea how US is doing right now? Are they obligated to release anything? I'm just wondering if any of the cost cutting measures are having ANY effect on the cash burn right now. I recently saw something (can't remember where, maybe the ALPA board) in an article which indicated that US may be much better suited than other airlines to deal with a war scenario. I'm really hoping that the huge cuts in wages and benefits are helping US in some way to weather this storm. I saw that post which was attributed to an email from Dave which indicated that pensions and work rules needed further examination, but it really sounds like these issues are not just US's problem, not even just an airline industry problem, but a national problem arising from the poor investment performance of the funds.
oldiebutgoody
Veteran
- Aug 23, 2002
- 2,627
- 945
More great info! Thanks. Now another question. Can the employees themselves request some sort of relief on the pension funding issue (not to create a firestorm here, just a question)? I guess what I want to know is whether some kind of agreement can be used to possibly postpone some contributions, giving the company more leeway in the financial situation, or whether it would require a total restructuring of the retirement plans. Can unions agree to somethiing like this, or does the government have absolute rules regarding pension funding limits? Could somekind of agreement be concluded which gives the company the relief it needs, but when (if) things return to a more profitable level the company would make up the amount which is given in relief? This might be preferable to totally canning the defined benefit plans for most folks.
OP
chipmunn
Guest
- Thread Starter
- Thread starter
- #4
Oldiebutgoody:
US are not meeting its revenue targets, which are part of the ATSB business plan and draft “Plan of Reorganizationâ€. The company must convince the ATSB and court that it can obtain a 7 percent profit margin, which can be accomplished through cost cuts or revenue gains to change the bottom line.
The only US cost measures realized is from W-2. Productivity changes and head count reductions are not saving the company money until all severance ahs been paid. There have been additional savings from reduced lease expenses on facilities and aircraft rentals, but those just started to take affect.
US is better suited than other carriers to weather a war in the Middle East because we have the least international exposure. The greatest amount of revenue loss during the 1991 Gulf War was in the international markets, primarily transatlantic, due to passenger fear of leaving the country.
In regard to pensions, the problem is with the bond market. When the FOMC lowers interest rates bond prices go up and yields go down. Bonds are secure investments, which is responsible fund manager investments, however, when prices go up and yields go down there is less interest expense that is placed back into the fund. This lack of retirement fund interest income reduces the amount of money the security produces; thus the fund becomes underfunded. The problem for company’s who have a cash outflow, is if they do not have the funds to keep operating they surely do not have the funds to keep the pensions fully funded.
The retirement fund problem is not unique to US Airways and is being felt throughout the country. The problem for all corporations is how to fund a defined benefit plan when you need every penny of your capital to keep the business an ongoing concern.
With the PBGC a member of the unsecured creditors committee, who must agree to the Plan of Reorganization, you can bet this issue is being closely watched.
Since the US equity security is trading OTC, I believe the company is still required to issue quarterly earnings report.
Chip
US are not meeting its revenue targets, which are part of the ATSB business plan and draft “Plan of Reorganizationâ€. The company must convince the ATSB and court that it can obtain a 7 percent profit margin, which can be accomplished through cost cuts or revenue gains to change the bottom line.
The only US cost measures realized is from W-2. Productivity changes and head count reductions are not saving the company money until all severance ahs been paid. There have been additional savings from reduced lease expenses on facilities and aircraft rentals, but those just started to take affect.
US is better suited than other carriers to weather a war in the Middle East because we have the least international exposure. The greatest amount of revenue loss during the 1991 Gulf War was in the international markets, primarily transatlantic, due to passenger fear of leaving the country.
In regard to pensions, the problem is with the bond market. When the FOMC lowers interest rates bond prices go up and yields go down. Bonds are secure investments, which is responsible fund manager investments, however, when prices go up and yields go down there is less interest expense that is placed back into the fund. This lack of retirement fund interest income reduces the amount of money the security produces; thus the fund becomes underfunded. The problem for company’s who have a cash outflow, is if they do not have the funds to keep operating they surely do not have the funds to keep the pensions fully funded.
The retirement fund problem is not unique to US Airways and is being felt throughout the country. The problem for all corporations is how to fund a defined benefit plan when you need every penny of your capital to keep the business an ongoing concern.
With the PBGC a member of the unsecured creditors committee, who must agree to the Plan of Reorganization, you can bet this issue is being closely watched.
Since the US equity security is trading OTC, I believe the company is still required to issue quarterly earnings report.
Chip
oldiebutgoody
Veteran
- Aug 23, 2002
- 2,627
- 945
Good points. I am just wondering what options there are which might help. I agree with your points about underfunding the accounts, especially in light of US's precarious situation.
More great info! Thanks. Now another question. Can the employees themselves request some sort of relief on the pension funding issue (not to create a firestorm here, just a question)? I guess what I want to know is whether some kind of agreement can be used to possibly postpone some contributions, giving the company more leeway in the financial situation, or whether it would require a total restructuring of the retirement plans. Can unions agree to somethiing like this, or does the government have absolute rules regarding pension funding limits? Could somekind of agreement be concluded which gives the company the relief it needs, but when (if) things return to a more profitable level the company would make up the amount which is given in relief? This might be preferable to totally canning the defined benefit plans for most folks. By the way, do you have any info as to how bad the numbers will be for the 3rd quarter? I know that you don't know, just wondering if you had heard anything.
pension ? What is that ? Please explain it to me!
pension ? What is that ? Please explain it to me!
JFK Fleet Service
Veteran
[P]
[BLOCKQUOTE][BR]----------------[BR]On 10/19/2002 4:25:29 PM oldiebutgoody wrote:
[P] Could some kind of agreement be concluded which gives the company the relief it needs, but when (if) things return to a more profitable level the company would make up the amount which is given in relief.[/P]
[P]----------------[/P]
[P][FONT size=1]I'd be careful with something like that, Pan Am did something similar and they ended up with a vast shortfall in the pension funding.It was in fact one of the reasons Pan Am was picked apart at the end instead of merged intact into another carrier.Any carrier purchasing them would have immediately assumed responsibility for that pension liability.[/FONT][/P]
[P][FONT size=1]Of course selling both the Pacific Division and the LHR authorities to UAL within 5 years of each other didn't help with any kind of long term business strategy, but that is another issue in itself.[/FONT][/P]
[P][FONT size=1][/FONT] [/P][/BLOCKQUOTE]
[P][/P]
[BLOCKQUOTE][BR]----------------[BR]On 10/19/2002 4:25:29 PM oldiebutgoody wrote:
[P] Could some kind of agreement be concluded which gives the company the relief it needs, but when (if) things return to a more profitable level the company would make up the amount which is given in relief.[/P]
[P]----------------[/P]
[P][FONT size=1]I'd be careful with something like that, Pan Am did something similar and they ended up with a vast shortfall in the pension funding.It was in fact one of the reasons Pan Am was picked apart at the end instead of merged intact into another carrier.Any carrier purchasing them would have immediately assumed responsibility for that pension liability.[/FONT][/P]
[P][FONT size=1]Of course selling both the Pacific Division and the LHR authorities to UAL within 5 years of each other didn't help with any kind of long term business strategy, but that is another issue in itself.[/FONT][/P]
[P][FONT size=1][/FONT] [/P][/BLOCKQUOTE]
[P][/P]
[blockquote]
----------------
On 10/19/2002 3:39:57 PM chipmunn wrote:
Oldiebutgoody:
US are not meeting its revenue targets, which are part of the ATSB business plan and draft “Plan of Reorganization”. The company must convince the ATSB and court that it can obtain a 7 percent profit margin, which can be accomplished through cost cuts or revenue gains to change the bottom line.
The only US cost measures realized is from W-2. Productivity changes and head count reductions are not saving the company money until all severance ahs been paid. There have been additional savings from reduced lease expenses on facilities and aircraft rentals, but those just started to take affect.
US is better suited than other carriers to weather a war in the Middle East because we have the least international exposure. The greatest amount of revenue loss during the 1991 Gulf War was in the international markets, primarily transatlantic, due to passenger fear of leaving the country.
In regard to pensions, the problem is with the bond market. When the FOMC lowers interest rates bond prices go up and yields go down. Bonds are secure investments, which is responsible fund manager investments, however, when prices go up and yields go down there is less interest expense that is placed back into the fund. This lack of retirement fund interest income reduces the amount of money the security produces; thus the fund becomes underfunded. The problem for company’s who have a cash outflow, is if they do not have the funds to keep operating they surely do not have the funds to keep the pensions fully funded.
The retirement fund problem is not unique to US Airways and is being felt throughout the country. The problem for all corporations is how to fund a defined benefit plan when you need every penny of your capital to keep the business an ongoing concern.
With the PBGC a member of the unsecured creditors committee, who must agree to the Plan of Reorganization, you can bet this issue is being closely watched.
Since the US equity security is trading OTC, I believe the company is still required to issue quarterly earnings report.
Chip
----------------
[/blockquote]
Interestingly enough many of the productivity givebacks in the IAM TA are having the opposite effect. Extending the work day by a half hour is not, in any way, increasing productivity. All it means is they stand in line a little longer waiting for the clock to change.
When it comes to the lost holidays and vacation, almost everyone plans on using sick time to make it up. Sick time is much, much more expensive for the company to deal with than planned vacation - because there is no control over when it happens.
So, it appears that management did nothing more than tick people off. TPA is still putting out pretty good work and at a reasonable rate (no work slowdowns, etc), however no one is going the extra mile either.
----------------
On 10/19/2002 3:39:57 PM chipmunn wrote:
Oldiebutgoody:
US are not meeting its revenue targets, which are part of the ATSB business plan and draft “Plan of Reorganization”. The company must convince the ATSB and court that it can obtain a 7 percent profit margin, which can be accomplished through cost cuts or revenue gains to change the bottom line.
The only US cost measures realized is from W-2. Productivity changes and head count reductions are not saving the company money until all severance ahs been paid. There have been additional savings from reduced lease expenses on facilities and aircraft rentals, but those just started to take affect.
US is better suited than other carriers to weather a war in the Middle East because we have the least international exposure. The greatest amount of revenue loss during the 1991 Gulf War was in the international markets, primarily transatlantic, due to passenger fear of leaving the country.
In regard to pensions, the problem is with the bond market. When the FOMC lowers interest rates bond prices go up and yields go down. Bonds are secure investments, which is responsible fund manager investments, however, when prices go up and yields go down there is less interest expense that is placed back into the fund. This lack of retirement fund interest income reduces the amount of money the security produces; thus the fund becomes underfunded. The problem for company’s who have a cash outflow, is if they do not have the funds to keep operating they surely do not have the funds to keep the pensions fully funded.
The retirement fund problem is not unique to US Airways and is being felt throughout the country. The problem for all corporations is how to fund a defined benefit plan when you need every penny of your capital to keep the business an ongoing concern.
With the PBGC a member of the unsecured creditors committee, who must agree to the Plan of Reorganization, you can bet this issue is being closely watched.
Since the US equity security is trading OTC, I believe the company is still required to issue quarterly earnings report.
Chip
----------------
[/blockquote]
Interestingly enough many of the productivity givebacks in the IAM TA are having the opposite effect. Extending the work day by a half hour is not, in any way, increasing productivity. All it means is they stand in line a little longer waiting for the clock to change.
When it comes to the lost holidays and vacation, almost everyone plans on using sick time to make it up. Sick time is much, much more expensive for the company to deal with than planned vacation - because there is no control over when it happens.
So, it appears that management did nothing more than tick people off. TPA is still putting out pretty good work and at a reasonable rate (no work slowdowns, etc), however no one is going the extra mile either.
OP
chipmunn
Guest
- Thread Starter
- Thread starter
- #9
Pension plans can be changed with options such as changing the distribution or changing the multiplier to maintain a defined benefit plan. Another option is to change the defined benefit plan to a defined contribution plan, although I believe this is less desirable.
The problem for all of the retirement plans is that they are underfunded and by law may require company contribution(s). But with the company experiencing a cash outflow, further pension contributions could cause the company to run out of capital to run the airline during its reorganization.
I suspect the company knows exactly what its cash balance is; however, with lease agreements in flux a clear cost picture is likely unavailable because it changes every day that a new lease agreement is obtained.
Chip
The problem for all of the retirement plans is that they are underfunded and by law may require company contribution(s). But with the company experiencing a cash outflow, further pension contributions could cause the company to run out of capital to run the airline during its reorganization.
I suspect the company knows exactly what its cash balance is; however, with lease agreements in flux a clear cost picture is likely unavailable because it changes every day that a new lease agreement is obtained.
Chip
usfliboi
Veteran
- Aug 20, 2002
- 2,070
- 270
Question. Didnt the pension problem get brought up during the reorginzation attempts prior to filing bk? Why wasnt it addressed then. nothing has changed since then it was bad then and im sure getting worse? Was this something that was taken off the table and for what reason?
Blueskies/400 UpperDeck
Member
- Aug 22, 2002
- 87
- 0
US is better suited than other carriers to weather a war in the Middle East because we have the least international exposure. The greatest amount of revenue loss during the 1991 Gulf War was in the international markets, primarily transatlantic, due to passenger fear of leaving the country.[BR]Now, folks don't take this the wrong way. I am merely replying to the above statement. How is it that US will weather the war in better shape than the other carriers when US is already in bankruptcy and shrinking into a regiional carrier? US has not survived THIS storm. And what is left of US surviving an even bigger storm is highly unlikely. The statement above is just a very unrealistic statement.
OP
chipmunn
Guest
- Thread Starter
- Thread starter
- #12
Blueskies:
US does not have signficant international exposure whereas large Flag Air Carriers have more exposure. Just like during the Gulf War, international carriers will be badly hurt because of passenger reluctance to leave the country.
Second, US is not paying pre-petition bills and has eliminated hundreds of millions of dollars debt.
Provided US maintains its debtor-in-possession financing (with the next installment of $200 million scheduled to be recieved from RSA on November 7) and can match its costs with revenues, the airline will be fine.
If revenue deteriorates to the point where cost cuts can not prevent liquidity deterioration, then the airline will be in trouble, which oculd occur.
Chip
US does not have signficant international exposure whereas large Flag Air Carriers have more exposure. Just like during the Gulf War, international carriers will be badly hurt because of passenger reluctance to leave the country.
Second, US is not paying pre-petition bills and has eliminated hundreds of millions of dollars debt.
Provided US maintains its debtor-in-possession financing (with the next installment of $200 million scheduled to be recieved from RSA on November 7) and can match its costs with revenues, the airline will be fine.
If revenue deteriorates to the point where cost cuts can not prevent liquidity deterioration, then the airline will be in trouble, which oculd occur.
Chip
Blueskies/400 UpperDeck
Member
- Aug 22, 2002
- 87
- 0
I would agree with you Chip if we were in the same situation that Pan Am found itself in after being hit by terrorist. That is not the case in this instance. U went bankrupt because of many factors. One of which was the dramatic drop in DOMESTIC travel. I don't think you can make an argument that Americans now feel safe flying Internationally and not domestically. That they somehow feel that terrorist are only interested in striking domestically. Furthermore, to somehow continue to speak of U as a major competitor of the major 5 is not realistic. As U must reduce it's size to remain a viable company after Chapt. 11, it must restructure itself to compete with SW, JB. Likewise, for the remaining large carriers. Clearly, any kind of military action is going to have an adverse affect on the industry. But it won't just be on international routes. Which does not bode will for weak airlines that have had trouble surviving in the current enviornment. At this point it is pure conjecture as to what kind of operation, and eventual size that U will be. If it survives Chapt.11. That is the FIRST big hurdle that U must overcome. I don't see any advantages to the situation for U over carriers with large international operations during a war.
hopethingswillbeok
Advanced
- Aug 20, 2002
- 167
- 0
everyone is sad about the company not being able to contribute to their pensions.....well freeze them like they did the agents and ramp in 1989,,,,enjoy the 401, as your only retirement.......then you will understand all of our complaints in the past......once again thank you cwa....did they get our retirement back......like i said before, they would not even speak to the company about it.....thank you cwa......a bunch of a.sholes...
