10-K Usairways Group
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SparrowHawk
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Was anyone else as unimpressed as I was? Strong operating income but not building up cash? I'm no financial genius, however you'd think with below market wages and a very high amount of "Ancillary Revenue" that the company would be building cash faster. At the date the merger closed the new US Airways had 2.5 billion in total cash then versus 2.312 Billion now!
BoeingBoy
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Not that US set the world on fire for the year, in general airlines build cash (especially the unrestricted kind) in the 2nd and 3rd quarters and burn cash during the 1st and 4th quarters. It's just the seasonal nature of the industry. The big exception is if cash is raised from sources other than operations in the normally weak quarters - loans and equity offerings primarily. Sale/leasebacks and EETC's just recover cash already spent.
Jim
Jim
SparrowHawk
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I sure would like to see them get rid of some of the debt now that they are likely to have some cost increases due to new labor contracts, Granted the new airline is light years ahead of its predecessors financially it's just that IMO if they're trying to grow through M & A they need a better set of numbers, not that the ones they posted are bed they should be better.
BoeingBoy
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Well, they don't have a lot of cash to play with. They need to keep $1.4 or $1.3 billion unrestricted to avoid default on the credit card processor agreement (IIRC, the $1.4 is 8 months of the year and the $1.3 is the other 4 months). $500 million for a rainy day (if Israel bombs Iran's uranium enrichment facilities it'll be rainy enough to need an ark). What's left - $100 to $200 million. Not much to be paying down debt. In fact, that huge loan MM keeps preaching doom and gloom over is basically interest only with a big balloon payment at the end, so they need to roll that over in another year or two, probablly borrowing more than the payoff.
Jim
Jim
SparrowHawk
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I know, I saw that huge balloon payment coming due IIRC in 2014. Boyo Boyo that smacks of playing with money instead of running an airline.
CallawayGolf
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The plan has always been to renegotiate those ballon payments closer in to 2014. Everyone knows that kind of cash isn't going to come out of the business in 2014. The Treasury department will not let those lump sum payment become a reality on Parker or Kerr's watch. They are managing the airline just fine.
SparrowHawk
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They are? I must have missed that memo!
A 7 year pilots dispute and everything is fine.
A convict for a CEO and everything is fine
Wages so low that many US employees qualify for Food Stamps and everything is fine!
Consumer Complaints still among the highest and everything is fine.
I love the phrase "The Plan". Seems to me like the real plan was to push as much debt into the future so the Tempe Frat Boys could hit their bonus numbers TODAY and to hell with tomorrow. Hey I was in Sales so i know all about leveraging your comp plan. When you manage to your quarterly/yearly bonus you make decisions that might not be in the best interests of anyone but yourself.
You see everything is all peaches and cream. I see two guys lining their pockets with little concern for the long term viability of US Airways. If they pull off a merger they cash in. If the whole thing blows into a C-11 they get hefty retention bonuses. Either way they win. Either way Customers, Employees get screwed. I've observed Parker's species in its natural habitat and I for one am not fooled.
CallawayGolf
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News flash: Doug works for the shareholders. If they had concerns over his management or compensation they could terminate him tomorrow. It's their money and their business to run so they get to make the decisions not you or me.
Funny how Doug is the longest current tenured CEO among the majors and has never let the company go into bankruptcy but you think he's only in it to line his pockets and get out. How many raise and bonus offers has he turned down when offered by the BOD? How long did he go without a paycheck after 9/11? How much money does he personally have invested in US that would be lost if the company is mismanaged?
Is US the only airline with employees on food stamps? Are there no other Fortune 500 companies with employees who want more money or who have employees who turn entry-level jobs into a lifetime career and then try to raise a family on a job that can never command the kind of wages required for an average family. Did US force any any employee or customer to take a job or buy a ticket, or was that a matter of personal choice?
The pilots? Are you kidding me? How many intermural federal lawsuits need to filed on the seniority issue for you to finally acknowledge that the only ones responsible for not having a new contract are the pilots, or more specially the east pilots?
SparrowHawk
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Technically he is employed by the Board of Directors. Which if you look is mostly a group of rubber stamp sycophants. Most of whom date back to pre merger days and many are from the old East operation. This would be the same BOD who granted nearly 30 Million in executive severance packages to the Steve Wolf, Larry Cohen and David Seigel and I know I'm forgetting someone. So don't try to pee on my sneakers then say "Oh Look Bob it's raining"
Near as I can tell and I haven't had time to look but the only "skin" he appears to have in the game are his stock options which were awarded him as part of his compensation. I've seen nothing that indicates he has one dime of personal assets invested. All of the money invested in US Airways, came from the Rubber Stamp BoD as options.
He's also the only one who's served prison time. Even Doug knows you don't accept increases in Salary or Bonus when you haven't given out a raise to the majority of your employees in close to ten years. What you do is what Doug did, Line your pockets with Stock options
Don't know, don't care about other airlines or companies, this is a board about US Airways. Funny thing is WN seems to be able to fork over significant wages for the same type of work, Ever wonder why? I posted an excerpt from Herb Kelleher at WN and a book review from Hal Rosenbluth and I can guarantee you Doug will never ever be in their league as a Leader.
For maybe 6 months post merger, Doug had an opportunity to show true leadership and guide the pilots through a tough spot. What's funny is that one of the most militant pilot groups, DL seemed to find common ground and have a successful merger. Also sometime in March CO/UA will have there version of the cut-over to SHARES. Let's see how that works out. Want to bet it's seamless compared to the Tempe Frat boy debacle. Oh and did I mention that the pilot groups at UA/CO and WN/FL came to agreement in short order? WHY? It's called LEADERSHIP, others have it Doug doesn't.
The current leadership and plantation mentality at LCC IS ,HAS, and WILL be the problem. For ALL employees and the flying public. They DO NOT care about the HELP or the CUSTOMERS ....................................................................................
CallawayGolf
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When someone uses the term “technically” to refute someone else’s position it generally means they are delving into tenuous territory. CEO’s are appointed by the BOD, but the BOD, CEO, and all of the executives have a fiduciary responsibility to the shareholders of the corporation. Now “technically” Doug is the Chairman of the Board of Directors to which you say he “technically” reports. So, in other words, you are claiming that Doug the CEO reports to Doug the Chairman of the Board. So, “technically”, who does Doug the Chairman of the Board report to?
Back in 2008 Doug invested 100% of his annual salary in common shares of LCC. That’s half a million dollars of his pre-tax earnings (i.e. he invested significantly more than his net take home salary) to show his personal commitment and confidence in the long-term success of the airline. IIRC stock price was hovering around $2/share at that time so this personal investment translated into personal risk if he underperformed or under-delivered. Based on the stock price over the last few months he would walk away with 3-5x his money; gee I wonder why he doesn't cut and run while the money is right there for him to grab? Now that doesn’t count the Restricted Stock Units (RSUs) or Stock Appreciation Rights (SARs) he has earned by leading the company for more than ten years. If the stock performs poorly or he leads the company into bankruptcy, all of that at-risk compensation he “technically” earns would “technically” equal zero if he wasn’t good at doing his job.
You don’t understand the difference between spending a night in the county jail and “served time in prison?” If you want to be taken seriously rather than just an irrational guy with a grudge, then you might want to get your terms correct while you are casting pejorative aspersions against your sworn enemy.
Non-contract employees routinely receive raises, triple-play bonuses and other pay and benefits since the 2005 merger. All of the contract/represented employees are getting exactly what they negotiated whenever they ratified their agreements. Some have done it more than once since the merger. The fact that the pilots and flight attendants don’t have a new CBA is more a reflection on them than it is on Doug. Offers for pay improvements have been made to both groups so you have no legitimate right to blame Doug for their union’s ineptitude and unrealistic expectations. You’re in the office equipment sales business. Have you ever had a customer sign a 5-year lease and then come back in a year and ask you to lower their lease payments without re-negotiating a new contract? In other words they want more than what they agreed to even though they have a lease agreement that states otherwise. Would you let them pay less just because or would you (I know the leasing company) allow them to pay less just because they now regretted signing a contract some time ago?
Of course you don’t care. If you did you might find out that lots of people in America qualify for state or federal assistance in some wealth transfer program. There are 185 federal, means-tested social wealth transfer programs that people can qualify for. In fact, roughly 50% of America is receiving some kind of federal assistance and interestingly enough roughly 50% of Americans pay no federal income tax at all. I can’t wait to see what America looks like when those rations get to 2:1 or 3:1 instead of 1:1 relationship between producers and recipients.
There are night and day differences between the HP/US merger and those that have taken place since. Did any of those other mergers involve roughly 1/3 of the pilots at one airline being on furlough at the time? Did those other mergers have the bottom active pilot at one airline with 17 years of service while the other airline’s bottom pilot had less than one year of service? Did those other mergers learn anything by watching what the pilots did to each other at HP/US so as to not repeat the same mistakes? Do you think they people responsible for the reservations migrations learned anything from what happened at US so as to not make the same mistakes? If they didn’t then they are fools.
Here, I’ll give you one. Doug was the champion of industry mergers and consolidation long before most other CEOs would consider such a bold move. He didn’t just talk about them, he actively pursued options and was on the leading-edge of the waves of consolidation we have seen in the last seven years. As Steve jobs might have confirmed, you can be more successful at being second to market than you can be by being first to market. Doug was first to market on mergers and not everything went smoothly just as you suggest. Other airline CEOs and BODs saw the risks Doug took and also saw the value he produced and then decided to take the plunge after Doug hoping to gain the benefits while side-stepping some of the landmines Doug encountered along the way. So, Doug’s mistake was being industry leader rather than the industry follower in regard to mergers, but it may be that if Doug didn’t do it, nobody else would have either. Nevertheless, no matter how you slice it, HP and US are far better off with Doug taking the risk and charting new courses than if he had worried that the risk of making a few mistakes would have outweighed the benefit of completing the merger. He is and was the right man for the job IMO and in the opinion of the BOD/shareholders who retain his services year after year and probably will for many years to come.
BoeingBoy
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Since airline mergers have been happening for 80 or so years, it's hard to believe that Doug was the champion of such things before anyone else...
While Parker isn't the worst airline CEO that ever existed, he doesn't walk on water without getting his feet wet either...
For instance, his insistence on a cost neutral pilot contract for nearly 1.5 years was a mistake. If not for that, it's entirely possible that a joint contract could have been ratified before the Nic award came out and the last nearly 5 years of seniority battles wouldn't have happened. So he played as much a role in that as anyone.
Jim
