Corporate Options

[USA320Pilot]

Today Ted Reed of the Charlotte Observer reported: On his first full day on the job as US Airways' chief executive, Bruce Lakefield pledged to smooth relations with labor and also oversaw the unveiling of the airline's latest plan to reduce costs and increase flying.

The airline's board of directors, meeting Tuesday near Montgomery Ala., approved the plan, said Bill Pollock, a board member and president of the US Airways chapter of the Air Line Pilots Association. The plan -- which includes flying planes more hours, increasing use of key Northeast airports and buying more regional jets -- can only be implemented if costs are brought down, he said.

"It's conditioned on achieving a cost structure that provides for a modest return to cover the cost of doing these things and that makes the company viable for the long term," Pollock said. Specifics will be divulged to unions in negotiations expected to begin next month.

Bruce Lakefield said: "Given the radical, swift and permanent changes in our industry brought on by the low-cost carriers, US Airways must achieve lower costs to remain competitive and return to profitability. In your heart of hearts, we believe that most of you know this."

USA320Pilot comments: Bill Pollock said the new business plan can only be implemented if costs are brought down, therefore, what happens if costs are not brought down?

There is reason to believe the company has two options: Asset sales and an orderly liquidation or a pre-packaged bankruptcy reorganization where the company could reject excess leases and then file a S.1113 motion with the bankruptcy court to unilaterally change labor contracts.

Thus question could be, would labor be better off with consensual accords or court ordered agreements?

Regards,

USA320Pilot

 

[GadgetFreak]

While anything is possible, it seems very unlikely that a second bankruptcy would be done to continue operating. Financing would likely be difficult, plus as I understand it, it would cut the current owners (RSA) out of any payback since the people financing second time around would be first in line. It seems that it is either make a go of this or liquidate. On the other hand, I dont believe RSA wants to liquidate. If they did, they would have.

 

[fatburger]

I luv how we always have two options.........liquidation or bankruptcy! Wouldn't it be nice if our highly paid management thought outside the box and came up with options that the employees could feel good about coming to work for. eg. America West price structuring for one!!

Im tired of everything resting on the employees shoulders. Siegel couldn't get the job done and now Lakefield and Bronner want basically the same thing with no plan "going forward" at all. It's the s.o.s at this company with the s.o. 320capt spewing off do or die scenarious. S.O.S does nothing for employee morale.

enough ranting for one day.

-fatburger-

 

[2aisle$mile]

For starters, nothing is consensual when you have the fear, threat and indimitation of liquidation at stake. I thought the day would never come when I would say this or feel this way, but for Mr. Dave to walk away from this company with a multi-million dollar parachute after 1) starting A LOT of this mess and 2) telling us how important cost cutting measures were to our survival just two weeks ago, the remaining management members and Bronner should seriously considering SHOVING the idea of additional employee cost cutting measures where the sun doesn't shine.

 

[repeet]

Bruce Lakefield said: US Airways must achieve lower costs to remain competitive and return to profitability. In your heart of hearts, we believe that most of you know this."

My heart of hearts knows this:
Fool me once, shame on you.
Fool me twice, shame on me.
Try and fool me a third time, it's WAR.

 

[GadgetFreak]

fatburger, I couldnt agree more. I think management can (at least in theory) come up with a plan for lower costs (by the way this is absolutely necessary) and increasing revenue by revamping the product, possibly along the lines of America West. Whether they have time to do that, and whether they will get enough cooperation from the employees and passengers is another story. There are in theory several ways they can cut costs, but unfortunately they all come down to either paying people less or doing the same work with fewer people paid the same. I agree that the costs cutting alone wont be enough, but it has to be part of the solution. The people running the show are looking at numbers and when they reach a certain point they will pull the plug. I have no doubt whatsoever about that.

As far as the former CEO is concerned it seems that the 4 million was a bargain to get rid of him. A lot of people, me included thought that things couldnt possible be successful with him in charge. And from my perspective, not just because of labor conflict. His severence is what, 4 days losses. Big deal, it doesnt matter a whit in the long run, but that fact that he is gone is important I think.

And as far as war, those are best not fought when you have absolutely no chance in the world of winning. I forget who said "discretion is the better part of valor" but they were right in virtually all situations.

 

[Phoenix]

And as far as war, those are best not fought when you have absolutely no chance in the world of winning. I forget who said "discretion is the better part of valor" but they were right in virtually all situations.

"War is an ugly thing but not the ugliest of things; the decayed and degraded state of moral and patriotic feelings which thinks that nothing is worth war is much worse. A man who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself."

John Stuart Mill
19th Century

 

[Winglet]

If the company, including Lakefield was serious, they'd have ALREADY implemented changes (the so-called 2 cent operational cost reduction). They HAVEN'T, so what that tells me is that THERE IS NO PLAN FOR ADDITIONAL 2 cent OPS COST REDUCTION. What Lakefield wants is a 4+ cent cost reduction from employees.

A320pilot . . . . . if you're serious about saving the company, and you consider the management that U has now, the only way to do it is to just decertify the unions and make everyone an at-will employee. That way management can quickly compensate for their own buffonery.

Lakefield's cut from the same cloth as the rest. I'll bet Dave and the BOD have a big smile on their faces right now (only Dave has a $4.5++ million smile on his). Their only "plan" is working out just great. How many cycles of "new" labor-friendly CEOs with associated round of concessions have to happen before everyone wises up to what's going on?

 

[ktflyhome]

Maybe we will have another Webcast coming soon and all be told again what the New Going Forward Plan will be.

 

[Winglet]

You mean the "Going Deeper" plan, don't you?

 

[GadgetFreak]

Phoenix, that is an outstanding quote and I agree with it in general. I dont see it applying to this situation however. I should have been more clear. I dont think, by saying labor wont win, that management will. There wont be a winner, everyone will lose. And no important principles will be made. This has happened before and will happen again unfortunately. And this wont provide benefit to anyone. The concept of "mutually assured destruction" didnt exist in Mill's time. Neither in economics nor real war.

 

[USA320Pilot]

I’m not the originator of this thought and it has been discussed inside of ALPA. However, if the company cannot lower its unit costs to acceptable levels then a bankruptcy filing could occur.

Apparently, the company has been documenting in the news media, employee messages, speeches, and the webcast the need to engage labor to discuss the “Going Forward Plan, but up to this point no union has begun negotiations. Therefore, the fear is if Lakefield’s attempts to bring labor peace and new labor accords is unsuccessful, Bronner could file a S.1113 motion and any union who does not reach a consensual accord could have a contract imposed by the bankruptcy court.

Obviously, a Chapter 11 filing would be complicated by the ATSB owning 10% of the company, however, I understand a pre-packaged bankruptcy filing with the labor the target could be endorsed by the creditors as a means to further restructure.

Finally, there are reports the "Going Forward Plan" could be fully disclosed as early next week.

Regards,

USA320Pilot

 

[700UW]

The sky is falling! The sky is falling!

 

[BoeingBoy]

700UW,

That's ok, I'm still waiting for this forecast from April 7 to come true...

"GECAS and S&P will likely not put up with this nonsense and we could see GECAS pull RJ financing, more lost revenue and feed, and then a S&P credit rating downgrade in the immediate future."

Jim

 

[Phoenix]

Phoenix, that is an outstanding quote .... The concept of "mutually assured destruction" didnt exist in Mill's time. Neither in economics nor real war.

Of course it is an outstanding quote. That is why I used it.

Its concept most cerainly applys.

It doesn't have anything to do with winning or loosing. It has to do with having something valuable enough that you will risk loosing it while you fight to keep it, rather than giving it away in order to purchase a promise of being able to keep less. (and that from liars who will be back to sell moore promises of peace later)

Cheers