Alpa Negotiator Speaks Out

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Sep 11, 2002
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Too many clowns and not enough circuses. I will be available via phone should the need arise. You have my permission to use this as you see fit.

Warmest regards,

Don

Don M. Hollerbach CPA, CFE, CVA, CDFA

Memorandum

To: My Fellow Pilots and Families
CC: Record
From: Don M. Hollerbach CPA, CFE, CVA, CDFA
Date: 9/11/2004
Re: Memo for Record 040910

Ladies and Gentlemen:

Please excuse my absence from the meeting today but I have chosen to attend my son’s varsity football game which at this point is important to me given the time that I have already invested in this process that has ended with no resolution. I have already missed three of them and choose not to miss any more. Given the position that the pilot group and the company are in, it is even more important to spend time with family as it is readily apparent that we are headed for Armageddon.

The Financial State of the Airline

Let there be no mistaken impression, the airline is in dire financial condition. The cash position is poor and the forecast is for a cash burn that if unchecked will cause the company to be unable to meet its obligations as a going concern. There are creditors that have access to the cash in the treasury if certain covenants are not maintained and the covenants will not be maintained given the future projections. Once the cash position is breached, the airline will probably begin to shed assets as the lease agreements will not be fulfilled. Certain lease agreements are for airplane assets that currently are below market and the leasor will reclaim those assets in order to release them for a higher net lease and the leasee has already been identified—and it is not US Airways.

The credit rating is going down like an anvil. As the credit rating goes down, certain groups have the ability to demand cash on deposit in order to provide services that we need. They do this in order to reduce their business risk while dealing with the Company. This is another drain on the cash position.

Revenues are suffering the effects of pressure on the marketplace. Revenue projections are down due to this pressure and while restructuring the revenue generation of the airline, our costs have not been restructured and the gap remains wider than necessary which once again affects, you guessed it, cash.

I have been granted access to the company’s books of financial record, the covenants associated with the loans, the loan documents themselves, the agreements with most of the credit card companies and the financial model of the restructuring plan. In concert with Michael Glanzer, Robin Gise of Cohen, Weiss & Simon, Amy Alperi of ALPA Economic & Financial Analysis and other professionals, we conducted reviews using methodologies that replicated audit by exclusion. We are going into bankruptcy without any unencumbered assets which means that we are hocked up to our ears and beyond. Everything is mortgaged and we have nothing of real value to borrow against. We are eating ourselves and the only thing to sustain us is current cash flow. Period.

Our current audit opinion letter that accompanied the audit report of last year signals the trouble we are in by an outside audit firm. Going concern is a concept that questions our ability in our current condition to sustain ourselves as a business. The auditor put the world on notice that there was a definite concern that we would be able to continue. I can only assume that given the current situation that his paragraph in the opinion will remain and may be more strongly worded.

The Glanzer Report

I find nothing materially misstated in this report. Unlike the PHL First Officer representative who asserts that he came to a different set of conclusions based on no formal financial training, professional expertise or study of the relevant facts on any other level other than a cursory one, I find the report reasonably accurate based on the facts as we know them today. Given the professional resumes of the two contrasting views, I would tend to believe the professional and discount heavily the opinion of the amateur in this area as would any prudent investor or reader.

Dysfunctional Paternalism

There should not be any confusion about the process that has occurred over the past months. There has been deceit and manipulation of the negotiating process by the PIT and PHL representatives. It is documented and verifiable. In my estimation, I have wasted 4 months of my life involved in a process that was doomed from the start because the constraints that were placed in the way of a negotiated settlement prior to bankruptcy and the conduct of those individuals.

The four representatives from PHL and PIT have shown via the roll call vote their lack of faith in the pilot group and have attempted to save you from yourselves. They have denied the 3,000+ pilots of USAirways the right of self determination. Because of that, we are where we are heading into bankruptcy with no protections at all for our contract. But then, you were saved from yourself.

The Problem and the Solution

We are where we are. We are in a situation where we have a failing company and a decision to make as to whether we wanted to engage in a solution with the company or to wait for the outcome which the company and the creditors will dictate. Unfortunately, given recent events, we are in the second category. The company will be forced to make less than optimal choices because the ATSB, GE and the credit card companies are making the calls to protect their investments. Cash is King and he who controls the cash wins. The PIT and PHL representative have dictated this course for our group. I would expect the same stoned faced, indignant behavior from these individuals as we receive what the creditors deem appropriate for an economic solution. I would also expect no whining from them as they have decided for you that this is a better solution.

Leverage has always been the battle cry. Well, your leverage is gone. With no contract protection, there can be furloughs out of seniority, discipline without recourse, no scope protection at all and we as a group have become the leveraged. Welcome to the Full Nelson.
It will only be out of the benevolence of management that any reasonable solution will be obtained and that is not necessarily the best place to be but once again thanks to our reps from PHL and PIT we are where we are.

Dispelling Myths

1. A Promise to Pay Has as Much Value as Cash—In the world of valuation, a promise to pay cash has less value than the actual cash. It all goes back to the bird in the hand is worth two in the bush. Therefore, notional promises to pay cannot have the same value as cash flow today and to think otherwise has no support in theory or practice in the real world. Call the financial advisor or accountant of your choice and they will support this.

2. We Want a Promise to Pay—Given the truth of the statement above, everyone else in the world wants the company’s cash except the PHL and PIT reps and one member of the negotiating committee. Is everybody else in the world wrong and these individuals correct? So these misguided individuals would rather take a 23% pay cut and reduction in current cash available to them for use at their discretion to protect an unsecured debt and promise to pay in the future and not factor a discount to that promise to pay. The promise to pay is not cash. The company has already shown it’s unwillingness to pay cash as the LTD pilots did not get cash contributions to their DC but notional entries because the company was unwilling to deposit the cash. So guess what—the notional amount has less value in theory and in practice.

a. Get over it—a promise to pay (notional money) does not have the same value as cash!

b. Everybody else in the world wants the company’s cash so we should too because current cash pays current bills and results in the ability to survive—duuhhhhhh!

3. We Would Have Made A Profit Had We Not Paid The ATSB $250 Million Dollars—Once again, the PHL reps don’t get the fact that a payment of debt is not an expense but a reallocation of assets with a reduction in liabilities. I received a phone call that Ira Josephson reported the profit theory as true. Call whatever financial professional you want but this is not true and is blatantly false. If it were true, then every time you receive a loan for a car, you should show it as income on your personal tax return and every time you repay the loan you should take it as a deduction. It would be really horrible to have to report to the IRS that you have $200,000 of income based on a home mortgage for your house and you don’t have the cash to pay the taxes on it. So for the last time, this is not true and Pacioli, the Italian monk who is the father of accounting is rolling in his grave because some people are too stupid to get this after multiple explanations. Just take it as fact because there are just some things you need to believe like if you jump out of an airplane without a parachute, you are going to bust your ass.

What Should We Do Now

1. Personally thank the 4 individuals who have placed you in the situation that you are in because they have been protected you from yourself by not allowing you to voice your position by vote.

2. Go home and be with your family—Enjoy your loved ones and get reacquainted because very possibly, they may be all you have left.

3. Remove any restrictions from those who will go back into battle to try to salvage your careers because that task has been made monumentally more difficult because of the deceit and manipulation that has occurred to date.

4. Fly your airplanes and trips like they may be your last because that may very well be the case.

5. Personally thank the valiant who have struggled to provide you with your voice and who have been unable due to the misguided fools who go to such lengths to manipulate your lives.

I wish everyone good fortune under these trying times. I will be available via phone should anyone have a question.


Warmest regards,

Don M. Hollerbach CPA, CFE, CVA, CDFA
 
Interesting.

I find it interesting that the finger pointing at the RC4 is so vicious.

Despite the tragedy involved here it's sort of funny that the fingers are still not pointing at the real culprit.

Ted Kennedy for sponsoring the Airline Deregulation Act of 1978? No
Jimmy Carter for signing it? No
Southwest Airlines Co for surviving Braniff's attempts to put them out of business, eventually getting enough mass to where their pricing structure harms other carriers? No
The traveling public for getting wise and using the internet to find their own reasonably priced travel? No
US Airways employees for having given twice at the office? No
Al Qaeda for the attack which damaged the US airline industry? No
(Note: they are guilty of lots of things.....but U's problems existed before 11 Sep 01)

The real culprit is the management of this carrier. Not the pilots. Not the Gang of Four. Not the reservations agents. Not the lav dumpers. Management.

Management was solely responsible for building an airline with such an inefficient structure that it cannot be fixed.

Maybe the Gang of Four thinks it is time to quit throwing good money after bad....that it is time to take the patient off of life support.

Maybe putting the thing into Bankruptcy and, with any luck, having a BK judge turn the whole shooting match over to a trustee will help. Certainly, it cannot be any worse.

Ever seen those guys on the street corner or at an intersection holding up a sign "will work for food"?

I am convinced that hiring one of those guys as President/CEO of USAirways would cause no more harm to the firm than what has been done to a once proud organization.

Yes, labor had some culpability early on.....Parity plus one.....work rules where a FA helping to straighten up the cabin in between flights would have a grievance filed for taking utility work...but after a couple of givebacks, there's much less blame for the rank and file.

And plenty of blame to go around at CCY.

Bottom line - maybe the BK judge will hire the guy with the sign. All it will cost you is a couple of cans of pork and beans and maybe a box of pop tarts.
 
2. We Want a Promise to Pay—Given the truth of the statement above, everyone else in the world wants the company’s cash except the PHL and PIT reps and one member of the negotiating committee. Is everybody else in the world wrong and these individuals correct? So these misguided individuals would rather take a 23% pay cut and reduction in current cash available to them for use at their discretion to protect an unsecured debt and promise to pay in the future and not factor a discount to that promise to pay. The promise to pay is not cash. The company has already shown it’s unwillingness to pay cash as the LTD pilots did not get cash contributions to their DC but notional entries because the company was unwilling to deposit the cash. So guess what—the notional amount has less value in theory and in practice.


Basically Don, it shows me that the rest of you are cowards, and only see the books the way you and the company wants you to see them.

As far as paying down the loan $250,000,000 in March, I 've said this a million times on this post, and obviously, this thinking is not islolated to me....

IF THE COMPANY WAS CASH SENSITIVE WHY DID THEY PAY DOWN SO MUCH OF THE LOAN (ESPECIALLY A LOAN THEY CAN'T USE ANYWAY), WHY DID THEY NOT NEGOTIATE LESS FOR THE TWO KNUCKLEHEADS OFFICERS WHO LEFT THE COMPANY WITH $7 MIL.,
!!!!

Stupid is as stupid says.

If ALPA HAD agreed to that proposal, they would get what they deserve...NOTHING!

And that last co. proposal would have negatively EFFECTED every other group on this property in their negotiatons.
 
If this is where we come too in the negotiation process--30,000 + employees hijacked by 4 reps--and unable to cast a vote yes or no for the 3000+ pilots---then we deserve exactly whats coming to us----THE JUDGE !! my .02$ and my opinion. Twooo GL to all
 
PITbull said:
If the pilots had agreed to that proposal, they would get what they deserve...NOTHING!
[post="178480"][/post]​

Gotta love this. A nurse by training with little or no formal education in finance castigating a person who is a CPA and financial planner.

Typical steel mill mentality.

Lindy
 
Hey man.. times are tough... my hats off to the ballsy union members standing up to man.. I thought many would have caved before the **** hit the fan. Right or wrong, you union folks have a lot of courage and stick together for most part. Keep your pimp hand stong.
 
I understand the negotiation process...

These 4 reps are sticking their necks out and their reputations to get ALL the pilots a better deal.

IF SOME PILOTS DON'T BELIEVE THAT THEN THEY ARE JUST PLANE STUPID.

After all these down-your-throat-last-minute-in-your-face- proposals, you would think just one group, and I mean just one group (other than the greatest union...IAM) would have balls enough to say.... "enough, it will be on OUR terms".


MISTAKE #1: Pollock should not be sitting on the USAirways Board representing ALPA. Major conflict of interest between the stakeholders interest and the rank and file ALPA members!
 
lindy said:
Gotta love this. A nurse by training with little or no formal education in finance castigating a person who is a CPA and financial planner.

Typical steel mill mentality.

Lindy
[post="178485"][/post]​

Lindy,

Let me correct you...nurse by degree and training.

And, I know who you are and YOU HAVE NO FORMAL EDUCATION.

And, you have no idea what my business degree is in!
 
PITbull said:
Lindy,

And, I know who you are and YOU HAVE NO FORMAL EDUCATION.

Once again, PB, you have no idea who I am. I could walk past you at anytime
and you would not recognize me. What an egotist you are.

Lindy
 
I have no horse in this race, but as a chronic lurker, here is my 2 cents. The company is in deep trouble and will probably go CH7 no matter what labor does at this time. If US only goes CH11 all workers will get the same whether deals are struck now or not, and either way they are going to be terrible (I believe unacceptable, but that is an individuals choice). The company isn't going to say, for example, we need "300 mil" from the pilots and "200 mil" from the mechanics but since the pilots gave us 250 mil before CH11 we will take the extra 50 mil from the mechanics. The only result I see in signing a deal now is it shows future investors you are willing to do anything to save your job. And although that attitude might get an investor interested in financing a recovery from CH11, deals now will not effect filing CH11 or not, but will make US look more favorable to an outside investor. Only problem is: The outside investor will be interested because they will think they will be able to get more, without causing a union to use self help, since you have taken so much crap, with little resistance.
As for as the RC4 (don't know what it stands for), preventing a vote when they ran on a platform of allowing votes (all I know of this is from these boards, so I do not know exactly what was promised), people are talking apples and oranges. My take is, the previous CHANGE to the contract was enacted without membership ratification, as required. The case here is they (RC4) are opting for the STATUS QUO. I doubt they ran on a platform of taking every company proposal to the membership, as opposed to NOT CHANGING the current agreement without ratification. Their job (the MEC) is to vote on proposals the NC comes up with in talks with the company, if it does not pass it doen't go to the membership. My understanding is in the past a deal was worked by the NC, agreed to by MEC and THEN not sent to the membership, big difference. If you feel they shouldn't be able to use their majority powers, change the union by laws, or convince enough of THEIR constituents to call for a recall or to just convince them to vote differently. What an LGA pilot thinks doesn't and shouldn't have any standing. If my Senator said 51% of New Yorkers are against this bill, and I am against it also, but in Delaware 95% want this bill so I will vote with them, just because they keep crying in the papers how unfair the Senate is, I would be pissed.
ALL of the workers, at EVERY airline, have given a trmendous amount, financially, emotionally and psycologically in the past 3 years. So please do not say any worker or group of workers has DRIVEN ANY company into CH11 or CH7. Because one refuses to give more does not make that person unreasonable! Someone (and organized labor ALWAYS seems to be blamed) will put the final nail in any coffins, but noone will be putting all of the nails in, so don't try to pass blame. To say the Eastern mechanics MADE Eastern go bankrupt is wrong and naive. There has to be a point when labor says "We have given enough", and that point is probably about now for UA (my opinion)

B.N.
 
lindy said:
Once again, PB, you have no idea who I am. I could walk past you at anytime
and you would not recognize me. What an egotist you are.

Lindy
[post="178518"][/post]​

Want to bet? How I know....when you walk by, I already know its you.

You talk to too many people.
 
lindy said:
Gotta love this. A nurse by training with little or no formal education in finance castigating a person who is a CPA and financial planner.

Typical steel mill mentality.

Lindy
[post="178485"][/post]​

Well, I will certainly take a nurse (if that is true) by training with no formal education* over a mean, negative, hostile and arrogant person that lumps everyone into a steel mill mentality that sees things differently than herself. I'll put my education up against yours. I was raised in Pittsburgh, I have a Ph.D., my grandfather and uncles worked in those mills. They worked hard and paid their bills and raised their kids to be honest, good and nice people. You have a problem with hard working, honest, nice people? Well I suppose that says everything about you, doesn't it?

*I've yet to encounter a nurse that didn't have a formal education.
 
lindy said:
Once again, PB, you have no idea who I am. I could walk past you at anytime
and you would not recognize me. What an egotist you are.

Lindy
[post="178518"][/post]​

AHHH. but she would, she would know you by the smell of Fear.
 
Don Hollerbach is dead on accurate.

Yesterday the RC4 roll called a negotiating resolution without a senatorial vote, totally disregarding the other 8 MEC members, that was not recommended by ALPA's financial advisors, ALPA's legal advisors, ALPA's bankruptcy counsel, the MEC Officers, and the majority of the MEC.

The RC4 are on a path of destruction that is jeopardizing every employee’s job at this company. NC member and CPA and fraud auditor Don Hollerbach is very accurate about these 4 despicable men.

US Airways could enter bankruptcy and the pilot's will have no S.1113 protection, no 279 ,minimum fleet count, no minimum block hours, no fragmentation rights (currently 15% and the best in the industry), no contingent acquisition rights, and the potential for out of seniority furloughs.

Moreover, the NC chairman went flying a 3-day trip today.

The good news is the company is considering out of seniority furloughs to rid them self of trouble makers like the RC4 and those who abuse the system. Maybe there is another way to skin a cat.

Finally, I believe the company has a better chance of surviving today than yesterday. Why? The employee cuts will be deeper (which ALPA's advisors predicted and they're happening with every new company proposal) and the company will be able to seek out of seniority furloughs riding them self of bad employees who up to know have been protected by a union.

Respectfully,

USA320Pilot
 
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