Scab Hotels Cost NWA Big $$$

[Hackman]

The NWA scab program costing NWA big.

NWA is heading for Chapter 7 in a fast hurry, but Dougie Stealin' and his band of criminals still raking in the $$$$$....

What a racket...

http://www.kstp.com/article/stories/S12114.html?cat=1

 

[finman]

The NWA scab program costing NWA big.

NWA is heading for Chapter 7 in a fast hurry, but Dougie Stealin' and his band of criminals still raking in the $$$$$....

What a racket...

The word "criminal" sure does get bantied about a lot on this message board. What criminal activity would you be referring to? Just curious if you had some specific examples.

And by the way, it is not against the law to accept payment to work in an executive position that very few people have the skillset to fill, nor is it criminal to sell stock in a company that everybody in the investing communitiy knew was nearly bankrupt.

 

[Saabmeister]

The word "criminal" sure does get bantied about a lot on this message board. What criminal activity would you be referring to? Just curious if you had some specific examples.

And by the way, it is not against the law to accept payment to work in an executive position that very few people have the skillset to fill, nor is it criminal to sell stock in a company that everybody in the investing communitiy knew was nearly bankrupt.

Oh yeah, 'cause the Management at NWA sure has done a great job, and they really deserve that salary and their bonuses for screwing over other groups and forcing them to take pay and jobcuts, all while they aren't paying their own bills.

 

[finman]

Oh yeah, 'cause the Management at NWA sure has done a great job, and they really deserve that salary and their bonuses for screwing over other groups and forcing them to take pay and jobcuts, all while they aren't paying their own bills.

You have to aknowledge that the management of legacy carriers have been dealt an awfully tough hand over the last 4-5 years. It doesn't matter how well you manage a company if you're stuck with labor costs that aren't in line with the fares that can be charged.

As I'm sure you're well aware, the fares that were charged during the regulation era were cost+ and were set by the government. This basically created a business model where cost control was unneccesary, so one could argue that a well trained monkey could run an airline during that era. Using your logic, the managers of this period must have been geniuses, because there was a hefty profit every year.

It has taken until today for the ill-effects of regulation to come to bear. With competition from start-ups not shackled by regulation era work rules and pay rates, the revenue per seat mile began to erode for the legacy carriers. The only area of the operation that hadn't been skinned to the bone was contract labor, which needed to be reduced in order fix the business model to create sustainable profits.

Almost all legacy carriers have either been in, are in, or narrowly escaped bankruptcy as a result of this revenue erosion combined with regulation era labor productivity. It is foolish to assume that this must mean the the management teams at all of these companies must be buffoons and are over-paid. There is a reason about a third of the top ranks of NWA management have left for lucrative positions at other companies. It is because they are highly skilled people that are actually underpaid by market standards.

It might pain you to accept this, but if NWA were to let all of it's top management team leave for better positions, NWA would not be able to survive as a company. As such, bonuses of some sort have to be available to retain top talent in the organization.

I have to assume from the tone of your post and several with like comments that you would prefer that NWA continue employing a set number of people at the higher pay rates and just file for Chapter 7 when all of the cash is gone. NWA can't raise fares, so something has to give. You could cut all of the executive pay by half and it would be a drop in the bucket toward the bottom line, so please refrain from the tired "overpaid executive" bit.

 

[Saabmeister]

Yes, they have been dealt a tough hand.

What logic did I use that would make managers in the era of regulation geniuses?

Does labor need to take some cuts? Sure.

Did I say that because all legacy carriers are near or have been in bankruptcy they are buffoons? No, but I dont think the NWA team is doing a very good job.

Why wouldn't NWA be able to survive if management left? They change executives all the time.

No, I don't necessarily want NWA to go to CH 7. I do think paycuts are necessary. I just think it's bullsh*t for executives to give themselves bonuses after they force other groups into concessions.

Oh, and please refrain from the tired "talented, underpaid executive" line.

 

[finman]

Yes, they have been dealt a tough hand.

I'm glad we can at least agree that it's a complicated and painful situation and that there are no easy answers. We come from two different sides of the situation, so naturally have two different perspectives on how NWA arrived at this point and how best to right the ship.

Executives in NWA are mainly made up of poeple that have spent their entire career at NWA and worked their way up the ladder, gaining valuable knowledge and industry insight along the way. That cumulative knowledge is what NWA has to try to maintain through this process, especially as it relates to the operations areas. The Finance areas are more fluid, as executives tend to bounce around more often in those functions.

If NWA intends to come out of bankuptcy with a strong company, then they need those industry veterans at the helm. I think way too much is made of the incentives that have been available to those select people, as it generally just an attempt to keep their salary at a market level range.

The cold hard truth is that you simply can't compare executive compensation to contract labor. A pilot making $150K per year can't leave NWA and earn even half of that working anywhere else, where a top executive can leave and likely make more than his/her original salary. It would be irresponsible to treat them exactly the same when the labor markets are entirely different. I'm not sure why this is even point of argument, when the distinction is so painfully obvious. I'm guessing that this is where logic takes a back seat and emotion and class envy rears its ugly head.

 

[PRINCESS KIDAGAKASH]

If I remember correctly, It was NWA management that refused to raise airfares almost everytime when all the other airlines tried to raise fares. NWA management is responsible for alot of the losses at the "legacy" carriers. NWA management dug their own grave site by their stupidity and now they want the employees of NWA to pay for the funeral.

 

[finman]

If I remember correctly, It was NWA management that refused raise airfares almost everytime when all the other airlines tried to raise fares. NWA management is responsible for alot of the losses at the "legacy" carriers. NWA management dug their own grave site by their stupidity and now they want the employees of NWA to pay for the funeral.

NWA sets its fares in a manner that maximizes revenue, and it is not a simple process. Every market at every time of day at every point in time has a different supply and demand, and thus a different price point. Every fare decision is based on revenue maximization, so one must conclude that the decision to not raise fares in those instances was due to analysis that showed that we would lose enough market share from that particular decision that would not be more than offset by the increase in fares for the passengers we kept.

NWA has a revenue premium among all major airlines, which means we are able to charge more per seat mile due to our route structure and pricing tactics. This would suggest that fares are not the problem.

 

[Saabmeister]

The cold hard truth is that you simply can't compare executive compensation to contract labor. A pilot making $150K per year can't leave NWA and earn even half of that working anywhere else, where a top executive can leave and likely make more than his/her original salary. It would be irresponsible to treat them exactly the same when the labor markets are entirely different. I'm not sure why this is even point of argument, when the distinction is so painfully obvious. I'm guessing that this is where logic takes a back seat and emotion and class envy rears its ugly head.

I don't see what logic you're talking about. If executives don't want to stay with the company and they need bonuses for cutting other groups to stay, then let them.

You talked about how they have gained valuable knowledge along the way and that it was necessary. If airlines are in so much trouble, are new people with new ideas such a bad thing?

And one last question: what the hell do you know about me or anybody else and my class.

 

[finman]

I don't see what logic you're talking about. If executives don't want to stay with the company and they need bonuses for cutting other groups to stay, then let them.

You talked about how they have gained valuable knowledge along the way and that it was necessary. If airlines are in so much trouble, are new people with new ideas such a bad thing?

And one last question: what the hell do you know about me or anybody else and my class.

Do you think executive level talent grows on trees? It's cheaper to entice a person that has years of experience and a wealth of knowledge by giving him a boost in pay than to go out and do an executive search for his replacement (which would come in at a market level salary, of course).

Certainly, fresh new ideas are welcome and needed in the airline industry, but that transition can't occur overnight, and as I noted above, it's very expensive to replace people in key positions.

Lastly, you can't seriously contend that a lot of the anger and hatred of high-paying executives doesn't stem from either a) a fundamental misunderstanding of what they actually do and how few people can do what they do, or 'B) envy of the success that these people have achieved.

 

[Saabmeister]

Do you think executive level talent grows on trees? It's cheaper to entice a person that has years of experience and a wealth of knowledge by giving him a boost in pay than to go out and do an executive search for his replacement (which would come in at a market level salary, of course).

Certainly, fresh new ideas are welcome and needed in the airline industry, but that transition can't occur overnight, and as I noted above, it's very expensive to replace people in key positions.

Lastly, you can't seriously contend that a lot of the anger and hatred of high-paying executives doesn't stem from either a) a fundamental misunderstanding of what they actually do and how few people can do what they do, or 'B) envy of the success that these people have achieved.

No, executive level talent doesn't grow on trees. I'm saying that, in my opinion, NWA needs a new team. You said in response to the Princess, that fares aren't the problem. I think they are a major part of the problem, but even if they aren't, why wouldn't an airline raise fares along with everybody else? Wouldn't that mean more revenue?

And lastly, yes, I can seriously contend that alot of the anger and hatred of high-paying executives doesn't stem from misunderstanding and envy. I'll be honest, I don't understand everything executives do. I would bet though, that there are people out there who can do their job, and even do it better. Then again, they went to school for it, etc. etc. I'm not one of those people, and I don't want to be one of those people. And really, who doesn't want to be rich and rake in six or seven figures a year. I know I would. But I didn't go to school for that. If executives do a good job, run a profitable company, and DONT screw their employees, then why shouldn't they get paid and get bonuses? I've got no problems with that. I understand that they have a difficult job. Everybody does in one way or another.

 

[Bob Owens]

Do you think executive level talent grows on trees? It's cheaper to entice a person that has years of experience and a wealth of knowledge by giving him a boost in pay than to go out and do an executive search for his replacement (which would come in at a market level salary, of course).

Certainly, fresh new ideas are welcome and needed in the airline industry, but that transition can't occur overnight, and as I noted above, it's very expensive to replace people in key positions.

Lastly, you can't seriously contend that a lot of the anger and hatred of high-paying executives doesn't stem from either a) a fundamental misunderstanding of what they actually do and how few people can do what they do, or 'B) envy of the success that these people have achieved.

How much "talent" does it take to lose money?

I love hearing about how complicated pricing is. The planes are running with historically high load factors and the difference between breaking even and a loss was only around $12/ticket.

If load factors are high you could raise your fare by $25 to make up for the fact that some of your passengers will jump on a lower priced competitor and at least break even. $25 is not going to keep anybody home.The fact is the number of seats availible on any given day is finite. If the other guy is full then whoever else wants to go will have to pay your price.

There is no shortage of executive talent. Its more of an "old boys club" than a heated market for the "gifted few".

The fact is there are plenty of people who can do what they do-lose money.

With the way these guys are performing it just reinforces the saying "Its not what you know but who you know."

The fact is that executive compensation is set by other executives who have a vested interest in seeing the compensation of their peers grow. As "the going rate" increases then they too are likely to benifit.

MBAs are more plentiful now than ever before. Not all executives are MBAS but the plentiful suppply of people who posess the "talents" to be an executives should drive compensation down, not up. So yes, since diplomas are made of paper they do grow on trees.

Finman is full of crap and he knows it. Selling that same old tired BS about how those employees should be treated differently from the rest.

Could you imagine if workers sat on both sides of the table at negotiations?

Well that what executives face. Executives determine executive compensation.

Nice deal isnt it? Lets say that mechanics at AA are going for their contract and on the other side of the table sat mechanics from the LIRR, Avis,and Con Ed.

Well what do you think the result would be?

Guaranteed that the mechanics at AA would get pretty much everything they wanted because then when each of those other mechanics went for their contract the least they could expect is what the mechanics at AA got since after all "thats the going rate for people with that 'skillset", "talent" etc.

This I'll scratch your back and you scratch mine is one reason why executive compensation has risen so dramatiaclly over the last twenty years. There certainly is no shortage but the people who decide what to pay these people have no interest in letting the low end of "the market" determine their pay rates.

 

[Bagbelt]

I've seen managers who are talented and smart airline people stuck at level 3-4 for years while guys on the fast track weren't general managers (level 5's) long enough to have a cup of coffee before hitting vp. I don't begrudge anyone what they make, but we've got guys who can't take a dump w/o calling HDQ. If they can get jobs on the outside than take-em, please.

 

[finman]

How much "talent" does it take to lose money?

I love hearing about how complicated pricing is. The planes are running with historically high load factors and the difference between breaking even and a loss was only around $12/ticket.

If load factors are high you could raise your fare by $25 to make up for the fact that some of your passengers will jump on a lower priced competitor and at least break even. $25 is not going to keep anybody home.The fact is the number of seats availible on any given day is finite. If the other guy is full then whoever else wants to go will have to pay your price.

There is no shortage of executive talent. Its more of an "old boys club" than a heated market for the "gifted few".

The fact is there are plenty of people who can do what they do-lose money.

With the way these guys are performing it just reinforces the saying "Its not what you know but who you know."

The fact is that executive compensation is set by other executives who have a vested interest in seeing the compensation of their peers grow. As "the going rate" increases then they too are likely to benifit.

MBAs are more plentiful now than ever before. Not all executives are MBAS but the plentiful suppply of people who posess the "talents" to be an executives should drive compensation down, not up. So yes, since diplomas are made of paper they do grow on trees.

Finman is full of crap and he knows it. Selling that same old tired BS about how those employees should be treated differently from the rest.

Could you imagine if workers sat on both sides of the table at negotiations?

Well that what executives face. Executives determine executive compensation.

Nice deal isnt it? Lets say that mechanics at AA are going for their contract and on the other side of the table sat mechanics from the LIRR, Avis,and Con Ed.

Well what do you think the result would be?

Guaranteed that the mechanics at AA would get pretty much everything they wanted because then when each of those other mechanics went for their contract the least they could expect is what the mechanics at AA got since after all "thats the going rate for people with that 'skillset", "talent" etc.

This I'll scratch your back and you scratch mine is one reason why executive compensation has risen so dramatiaclly over the last twenty years. There certainly is no shortage but the people who decide what to pay these people have no interest in letting the low end of "the market" determine their pay rates.

Air fares are almost entirely price elastic, so yes, a $25 increase in fares will likely result in a net reduction in revenue, as poeple either don't fly or choose to fly other airlines. NWA charges as much as it can on every single route to squeeze every penny it can out of the passengers. If it were simple as raising all fares and the problem would be solved, don't you think that would have been done already? I don't try to pretend that I know anything about fixing airplanes, and you probably shouldn't pretend to know anything about airfare pricing. It pains me when I hear people make such oversimplified assumptions about pricing. Rest assured, NWA has a team of analysts that do nothing but scour through our prices and raise them as high as they can to ensure revenue maximization on every route.

The whole discussion on executive pay is getting a little tired. I get it. You don't have a clue what executives do or what their market rate is, so you choose to believe that it's all a country club mentality. I guess if that makes you feel better about yourself than so be it. In the grand scheme of things, their pay is a drop in the bucket, so I still don't know why it gets brought up so much. I'm just trying to add some balance to this board.

As an aside, an MBA gets a person in the door, but doesn't necessarily make them a leader in a large organization. Also, the board of directors hire the executives, and they are beholden to the stockholders, who don't want to pay executives any more than they're worth.

I realize that people are pretty much set in their opinions, but when presented with factual information from someone that has more familiarity with the topic at hand, it would probably add credibility to your future posts if you at least aknowledge the most basic and fundamental misrepresentations that get thrown around on this forum.

If you just want this board to be an echochamber of scab and management bashing, rather than an exchange of ideas from all sides, then I'm not sure what purpose it serves.

 

[PRINCESS KIDAGAKASH]

Finman, what a spin meister you are. You must have worked at Enron or was it MCI-Worldcom. NWA was losing billions the same time as all the other legacies(along with some LCC's) and yet NWA management refused to go along with necessary fare increases. NWA management is a bunch of knuckleheads,like you, who need to be replaced with managers with some common sense. The management at NWA flew the airline industry right into the ground.