Big Airlines: Not Much Runway Left

[USA320Pilot]

This thread was started to simply post an article, but the “just say noâ€￾ crowd has turned it into another thread to voice their opinion. Therefore, we can too, especially since there is new information this week that could be of interest

I understand management believes that ALPA, AFA, TWU-SIM, TWU-FCTI, TWU-DIS, and the IAM-Trainers will obtain new labor accords with a S.1113 bankruptcy protection letter.

Then the company can file for a “pre-packaged judicial reorganizationâ€￾ and can preserve the ATSB guaranteed loans/current equity. As in any bankruptcy, the debtor has the right to affirm current agreements and pay the debt, renegotiate terms, or reject the agreement. As long as US Airways continues to pay the loan that are guaranteed, there is reason to believe the ATSB will not call in the loans for immediate payment.

During the restructuring the company is expected to reject certain leases. For example, the company has 6 gates in Buffalo and 3 gates in St. Louis, but only needs a couple of gates in each city. The Facilities Department has been evaluating the new business plan excess facilities and is preparing to reject those agreements.

In regard to labor, the CWA, IAM-M, and IAM-FSA have been resistant to enter into “Transformation Planâ€￾ negotiations, even though the company has asked to meet with these unions to discuss their contracts, and in the case of the IAM-M, discuss cost effective ways to conduct A320 overhaul in-house.

If these unions do not agree to an agreement, then the company is expected to enter bankruptcy and file a S.1113 motion against any union without a deal. If the bankruptcy court approves the motion, then the company can unilaterally impose a contract on any union without a new deal. In response, the union can seek self help and the company can use replacement workers or in the case of the IAM-M, outsource all heavy maintenance. As you know, the company has the right to close the Pittsburgh maintenance facility this winter and can move B737 overhaul to a new location. In addition, the company could seek to close the Charlotte maintenance facility, thus immediately outsourcing all heavy maintenance through the S.1113 process.

It’s unclear at this time how this will affect the CWA and IAM-FSA, but with the Pittsburgh Reservation Facility lease rejection, reduced cal time from 5 to 3 minutes, Kiosks, and boarding pass readers, these employee groups have their challenges too.

There is no question this industry is undergoing change and I wish the current fundamental pressures exist, but they do and there is no hiding from the fact that as Business Week said, “The major carriers must remake themselves -- or go down trying.â€￾

Respectfully,

USA320Pilot

 

[700UW]

When will you ever get it right?

IAM- MTC Trainers are part of DL 142, they are not going into negotiations just like the rest of the IAM represented employees.

Second, the company files an 1114 motion, not an 1113, 1113 is the guide you have to follow for an 1114 to be enacted.

And the company can file with the court to outsource your flying to Mesa too.

Get real, get a life.

 

[BoeingBoy]

"As long as US Airways continues to pay the loan that are guaranteed, there is reason to believe the ATSB will not call in the loans for immediate payment."

Except for the prepayment earlier this year, we are not making payments on the loan. We are paying "guarantee fees" to the ATSB (of 4% of the outstanding balance as someone corrected me a while back), but payments to the lenders doesn't start till either 2005 or 2006.

Jim

 

[USA320Pilot]

BoeingBoy:

Let me re-phrase my comment, the company believes it can restructure in bankruptcy as long as it continues to meet the ATSB's terms. Apparently the company and the ATSB have recently discussed this option and that is why the airline has hired bankruptcy and legal advisors.

At last week's MEC meeting ALPA bankruptcy attorney Richard Seltzer briefed the MEC on the importance of having a new labor accord before the filing and the consequences for any union who does not have a new accord. Moreover, I now understand that ALPA Negotiating Committee (NC) Chairman Doug Mowrey agrees with Seltzer and that is the major reason ALPA provided the company with an opener worth $211 million per year.

Finally, the company does not want to enter bankruptcy, but if all stakeholders refuse to participate in the new business plan then management believes they have no option but to seek to abrogate contracts in court. Considering the company won virtually every motion during the last formal reorganization, I can understand the company's opinion and thoughts, as they try to lowwer unit costs to about 7.5 cents, including fuel.

Respectfully,

USA320Pilot

 

[700UW]

The company can't get financing with labor unrest, that is why they don't want to file, because if they file they will never come out.

 

[BoeingBoy]

"as they try to lowwer unit costs to about 7.5 cents, including fuel. "

And therein lies the problem.

First, the timetable is too long - in the Q & A with the negotiating committee management stated that CASM down 2.1 cents in the 2006-2007 time frame if they get everything they want. Note that this only puts us in the lower tier of today's legacy carrier ranks - where we will rank then is anyone's guess.

Second, this completely ignores the express operation. Either Express will operate in some fantasy land where LCC's don't exist, or their costs matter too. BTS calculates that our domestic system CASM (including Express) was over 16 cents. Note that their calculations are based on company supplied data.

Third, that is lower than WN's CASM and they're a single fleet type airline. Just the extra cost of operating multiple fleet types makes that goal highly unlikely. The only airline that has those CASM figures today is B6 - a single fleet type operator with the longest average stage length in the industry, not to mention being a young, rapidly growing carrier. None of those factors appear to be in our future.

Jim

 

[jimntx]

The company can't get financing with labor unrest, that is why they don't want to file, because if they file they will never come out.

The labor groups may not be the only ones preventing a second emergence from bankruptcy. You may find the creditors committee may be less than amenable to taking another hit on the money owed to them.

Remember the role of the court is, primarily, to protect the interests of the creditors--and the only people lower on that list than the stockholders are the employees. Don't kid yourself that the court's role is to assist a failing company in becoming a going concern. IF all concerned agree that the company is/could be a going concern, then that is probably the best course for protecting the interests of the creditors. However, if there is not consensus on this issue, the Ch. 11 can quickly become a Ch. 7 for the purpose of getting as much return for the creditors as possible. And, the creditors committee's opinion carries a lot more weight with the court than the company management's opinion.

 

[BoeingBoy]

Just out of curiosity, can anyone cite an example of a corporate bankruptcy that left the stockholders harmless and only affected employee contracts?

Since the ATSB is not only the guarantor of the loan, but also a stockholder, I just wondered if any corporation had pulled off this feat before.

Jim

 

[700UW]

Jim, they are not a stockholder, they have warrants that they can purchase to be a stockholder.

 

[BoeingBoy]

700UW,

I believe that they hold preferred shares in conjunction with the warrents. The preferred shares must be relinquished if or when the warrents are exercised.

I guess it's really semantics. If the stockholders are held harmless, the warrents still have potential value. If the stockholders take a bath, the warrents become worthless.

Jim

 

[usairways_vote_NO]

This thread was started to simply post an article, but the “just say noâ€￾ crowd has turned it into another thread to voice their opinion. Therefore, we can too

This thread was started as usual to have your say. From what I understand topics are started to have discussions about various issues and get different opinions.

Unfortunalty you post your opinions as facts for the most part.

You are correct though the "just say no" is a crowd while the "just say yes" may be becoming a dieing breed.

How could management believe or know if union group will obtain new labor accords? Please tell us did you get that from crystal ball or your very reliable sources that know you post everything you get your hands on in a public forum.

Even if you had these so called sources what prevents them from feeding you bull just to have you post it in a public forum for their own agendas?

I would even bet you post anonymous emails you receive as fact if it fits in your mantra.

hmm it would be interesting to see if thats true.

 

[funguy2]

A couple of interesting points:

S1113/1114 of the BK code:

I was under the impression that the era of going to BK court, filing S1113/1114 to void union contracts, and then imposing new contracts at the companies sole discretion died after the CAL Bankruptcy of Frank Lorenzo. My understanding is that the current law under S1113/1114 requires the company to bargain in good faith, reach an impasse, and go through a cooling off period... All of which could take years... And then, even if it all does occur, the President of the U.S. can still prohibit a strike.

At anyrate, this process is not as simple as USA320Pilot makes it seem.

Prepackaged BK

The failure of the company to abrogate certain contracts, such as the examples of facilities in Buffalo and St. Louis is clearly a failure to reoganize correctly in BK 1. One must keep in mind that Chapter 11 is not a court-supervised revamping of a business plan. Chapter 11 is about restructuring debt. Since US Airways had already restructured most of its debt in BK 1 at what I presume to be near historical lows (although including a "BK premium," anyone with bad credit never gets the best interest rates, but presumably a time of extreme low interest rates is a good time to go Ch. 11), I am not sure that there is much benefit to a BK, other than fixing the failings of BK 1. And remember, in BK, it is possible for the company to lose control of its decisions to the judge, creditors, and even potentially a trustee. There are lots of reasons to avoid this avenue.

ATSB as warrant-holder

Since the ATSB holds warrants to acquire (and presumably profit from) US Airways stock, should US Airways go to BK court again, the stock will, with almost 95% certainty, be voided. Thus, I presume, any securities, such as warrants, become void if the security no longer exists. ATSB then loses its profit motivation to keep the loan. This will be very difficult for the administration to deal with, thus I would expect the loan to get called.

Furthermore, if the loan is not called, covenents will be broken anyway and force the loan into default, outside of some extra-ordinary cash infusion (such as an outside investment, asset sale, or real profit (least likely in my opinion)).

Lastly, if US Airways defaults on its ATSB loan, I would not expect a federal BK judge to be very kind in terms of giving extensions, etc. I would expect a federal BK judge to be very "by the book" to a company that has defaulted on a loan to the federal government (which, technically, US Airways has already done once, but they did make good on the terms of a default).

 

[tadjr]

In regard to labor, the CWA, IAM-M, and IAM-FSA have been resistant to enter into “Transformation Planâ€￾ negotiations, even though the company has asked to meet with these unions to discuss their contracts,

Just a big correction to your latest "report"....

CWA’ers and US Airways management met on Tuesday, 6/15, to discuss MidAtlantic Airways, Work-at-Home, and to set a date for management’s detailed restructuring presentation...

CWA’ers met with management on 6/22 to hear the details of their Transformation plan...CWA presented alternatives...


Not sure where you're getting your info about CWA, especially since there have been SEVERAL threads on THIS VERY BOARD discussing the meetings with the company that they've had. Now, if you're playing word games, then yes, CWA hasnt agreed to open contract negotiations, yet, but they are talking with the company.
If its an oversight on your part, you might have an idea why some find your posts hard to accept due to the glaring inaccuracies you post. If its not an oversight and you're using word games as another attempt to force others into something you want them to do, I'm afraid it isnt going to work this time... :down:

 

[diogenes]

http://www.iam141.org/usairway.htm#MDAupdate6-17-04



And, if you'll have a look here, the IAM is talking with the company.

Facts sure get in the way of a good theory, don't they?

 

[usairways_vote_NO]

http://www.iam141.org/usairway.htm#MDAupdate6-17-04



And, if you'll have a look here, the IAM is talking with the company.

Facts sure get in the way of a good theory, don't they?

That is MDA Negotiations District 141 nothing more

And that the facts