America West Operation Bears Cost of Merger
The 10-Q SEC Quarterly Report filed by US Airways, Inc. showed a consolidated net profit of $263 million. When broken down further, it showed a profit for US Airways and a slight loss for America West. When we dug a bit deeper into the financials, we found the following note:
“The operating expenses of AWA reflect expenses for certain services shared with US Airways. During the first six months of 2007, in anticipation of merging to a single operating certificate, operations of AWA and US Airways continued to be integrated, including the migration to a single reservation system in early March. During the second quarter and first six months of 2007, shared services included reservations, technology and data processing services and corporate functions such as tax, legal, compliance.â€
This essentially means that for financial purposes, America West (financially at the very least) is bearing some of the huge administrative costs from our acquisition of US Airways in 2005. It bears pointing out that America West registered large profits for 2005 and 2006 and would have been very profitable save for these expenses that have been thrust upon us as a result of the merger. We have posted the entire 10-Q on the AWA MEC website for those who are interested.
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More Work for Less Pay
The following is the approximate economic gain that the average East pilot would have received under management’s first proposal:
Captain: $28,975
First Officer: $15,766
These figures include an additional 10 days of vacation for pilots at the top of the accrual scale. Of course, this does not include the substantially improved work rules East pilots would gain, as well as full pay for deadheads, much improved pairing constructions rules, more golden days, 12 to 13 total days off for reserve pilots, etc.
To “pay it forward,†if we could have generated a joint contract by December 2007 prior to the East meltdown, and the East continues down the path of separate operations with no gain likely until at least two years past their amendable date of December 2009, that means the East MEC have likely forfeited the following amounts on behalf of their pilots:
Captain: $115,900
First Officer: $63,064
These total figures do not include the higher rates to achieve ratification or any outlying year increases, nor do they include any increased payments to the DC retirement plan.
===================
Volunteer Expenses
Last year, the America West MEC officers, all those who served combined, were reimbursed $45,599 in expenses. By comparison, the East MEC officers were reimbursed approximately $86,331. Several other MECs, many smaller than ours, also reimbursed a higher level of member expenses.
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Educating the Truth
During the Arbitration Board hearings, the US Airways MEC tried in vain to prove that their Profit Sharing and Stock Plan already gave them an “equivalent†contract to the America West pilots. This presentation lasted nearly an hour and culminated in a short exchange between the Arbitrator and the witness (Don Hollerbach of the AAA MEC Negotiating Committee). We think it speaks for itself:
CHAIRMAN NICOLAU: Mr. Hollerbach, I am not sure. Who is getting these adjusted rates now?
THE WITNESS: I am sorry.
CHAIRMAN NICOLAU: Who is getting these adjusted rates?
THE WITNESS: No one is getting these adjusted rates, this is what these -- well, to be quite honest with you, the adjusted rates are what our rates would have been, based on what we have actually received on a per hour basis.
MR. BRUCIA: Are you saying they are equivalents?
THE WITNESS: Equivalents.
CHAIRMAN NICOLAU: Whose rates, USAir --
THE WITNESS: U.S. Air's rates plus the value of the stock options, what the value of the $70 million lump sum would be and the value of the profit sharing.
CHAIRMAN NICOLAU: Does this mean the new company doesn't have to bring the USAir pilots up to the America West scale.
THE WITNESS: No.
MR. FREUND: Works for us.
CHAIRMAN NICOLAU: Okay.
MR. KATZ: There is a distinction that I think you have been explaining between the adjusted rates in these box for USAir pilots and the adjusted rate calculation for the America West pilots.
CHAIRMAN NICOLAU: I didn't hear it.
Source: AAA/AWA Seniority Integration Hearing Transcripts
Volume 14, January 22, 2007
The 10-Q SEC Quarterly Report filed by US Airways, Inc. showed a consolidated net profit of $263 million. When broken down further, it showed a profit for US Airways and a slight loss for America West. When we dug a bit deeper into the financials, we found the following note:
“The operating expenses of AWA reflect expenses for certain services shared with US Airways. During the first six months of 2007, in anticipation of merging to a single operating certificate, operations of AWA and US Airways continued to be integrated, including the migration to a single reservation system in early March. During the second quarter and first six months of 2007, shared services included reservations, technology and data processing services and corporate functions such as tax, legal, compliance.â€
This essentially means that for financial purposes, America West (financially at the very least) is bearing some of the huge administrative costs from our acquisition of US Airways in 2005. It bears pointing out that America West registered large profits for 2005 and 2006 and would have been very profitable save for these expenses that have been thrust upon us as a result of the merger. We have posted the entire 10-Q on the AWA MEC website for those who are interested.
==================
More Work for Less Pay
The following is the approximate economic gain that the average East pilot would have received under management’s first proposal:
Captain: $28,975
First Officer: $15,766
These figures include an additional 10 days of vacation for pilots at the top of the accrual scale. Of course, this does not include the substantially improved work rules East pilots would gain, as well as full pay for deadheads, much improved pairing constructions rules, more golden days, 12 to 13 total days off for reserve pilots, etc.
To “pay it forward,†if we could have generated a joint contract by December 2007 prior to the East meltdown, and the East continues down the path of separate operations with no gain likely until at least two years past their amendable date of December 2009, that means the East MEC have likely forfeited the following amounts on behalf of their pilots:
Captain: $115,900
First Officer: $63,064
These total figures do not include the higher rates to achieve ratification or any outlying year increases, nor do they include any increased payments to the DC retirement plan.
===================
Volunteer Expenses
Last year, the America West MEC officers, all those who served combined, were reimbursed $45,599 in expenses. By comparison, the East MEC officers were reimbursed approximately $86,331. Several other MECs, many smaller than ours, also reimbursed a higher level of member expenses.
===================
Educating the Truth
During the Arbitration Board hearings, the US Airways MEC tried in vain to prove that their Profit Sharing and Stock Plan already gave them an “equivalent†contract to the America West pilots. This presentation lasted nearly an hour and culminated in a short exchange between the Arbitrator and the witness (Don Hollerbach of the AAA MEC Negotiating Committee). We think it speaks for itself:
CHAIRMAN NICOLAU: Mr. Hollerbach, I am not sure. Who is getting these adjusted rates now?
THE WITNESS: I am sorry.
CHAIRMAN NICOLAU: Who is getting these adjusted rates?
THE WITNESS: No one is getting these adjusted rates, this is what these -- well, to be quite honest with you, the adjusted rates are what our rates would have been, based on what we have actually received on a per hour basis.
MR. BRUCIA: Are you saying they are equivalents?
THE WITNESS: Equivalents.
CHAIRMAN NICOLAU: Whose rates, USAir --
THE WITNESS: U.S. Air's rates plus the value of the stock options, what the value of the $70 million lump sum would be and the value of the profit sharing.
CHAIRMAN NICOLAU: Does this mean the new company doesn't have to bring the USAir pilots up to the America West scale.
THE WITNESS: No.
MR. FREUND: Works for us.
CHAIRMAN NICOLAU: Okay.
MR. KATZ: There is a distinction that I think you have been explaining between the adjusted rates in these box for USAir pilots and the adjusted rate calculation for the America West pilots.
CHAIRMAN NICOLAU: I didn't hear it.
Source: AAA/AWA Seniority Integration Hearing Transcripts
Volume 14, January 22, 2007
