I cant believe this

tug_slug

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Sep 9, 2002
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[P]I came across this article awhile back, it upsets me everytime I read it. Im sure that once you read it you''ll feel the same way.[/P]
[P]Common Sense Airing My Complaints[BR] [BR]By James B. Stewart [BR]August 13, 2002 [BR]Note: This column was originally published on SmartMoney Select, our premium, subscription-based website. To access this and other content from SmartMoney Select on a daily basis, click here.[/P]
[P]WITH US AIRWAYS GROUP (U) now in bankruptcy, the prospect that United Airlines parent UAL (UAL) will be the next to go has been gaining currency. Its quest for $1.8 billion in federal-loan guarantees seems snagged, with The Wall Street Journal editorial page the latest to denounce any federal handout. The stock fell more than 40% this week to below $3, which means it has crossed my automatic $5 sell threshold. It''s hard to believe that this was a $40 stock little more than a year ago, and that it traded close to $100 back in October 1997. [/P]
[P]I''ve never invested in an airline stock, nor have I ever recommended one. It''s a peculiar industry, paradoxically both too competitive and not competitive enough, heavily regulated but held to free-market standards. Still, I once thought about buying UAL stock. Not only did it have an enviable route system, including Pan Am''s lucrative old Pacific routes, but I was also intrigued by the high degree of employee ownership. United''s pilots own a quarter of the company, with other unionized workers holding smaller shares. Just as stock options were supposed to align top executives'' interest with those of shareholders, so would ownership align the interests of unions, who''d previously shown a ruinous ability to divert profits from shareholders into their own pockets. [/P]
[P]This appealing theory began to unravel when I boarded a United flight from Sydney, Australia, to Los Angeles several years ago. When I asked for a pillow, the United flight attendant curtly suggested I get it myself from the overhead bin. So I mentioned the high level of service I''d just experienced on my previous flight on Singapore Airlines. If you want a geisha, go out and hire one, was the retort. So much for the friendly skies. [/P]
[P]I should add that on many other United flights I''ve found nothing to complain about. But I also detected no evidence that having an ownership stake had enhanced employee service in any way. More fundamentally, it doesn''t seem to have stopped United''s pilots'' union from negotiating a damagingly high compensation package, and then using its clout on the board to make sure management accepted it or else. [FONT color=#ff0033]The fact that the company is teetering on bankruptcy is evidence that the airline''s employees have used their status as owners simply to plunder the company for their own benefit, at the expense of other shareholders[/FONT]. They may not have done anything unlawful, in contrast to chief executives who''ve fraudulently driven up their companies'' stock prices, cashed out their options and then fiddled while Rome burned. But they share a high level of self-interest and indifference to shareholder value. [/P]
[P]So the economic theorists are going to have to go back to the drawing boards. My own view is that no structural arrangement will ever entirely protect shareholder interests if significant executives or groups of employees have no respect for shareholder interests to begin with. This has long been a problem in some segments of the entertainment industry, which, like airlines, has shown a distressing willingness to favor executives, top employees and talent at the expense of shareholders. (Consider how few feature films are actually profitable.) There''s no substitute for a long-term commitment to fairness and integrity, measured in a myriad of decisions, large and small, that demonstrates to investors that shareholders come first. [/P]
[P]Some smart people are investing in airlines now, including the Texas Pacific Group, which is helping US Airways through bankruptcy. Airlines are cyclical, and have been doubly hurt by fallout from Sept. 11 and the recession. Most of their stocks seem cheap, with AMR (AMR), parent of American Airlines, and Continental Airlines (CAL) both under $10 a share. If you believe the economy will recover, and that travelers will return to airports in pre-Sept. 11 numbers someday, as I do, then you might consider buying shares in Southwest Airlines (LUV), which is actually profitable even now, or Continental, which I rate the best airline and route system. Or, like me, you can sidestep the airlines themselves as too risky and buy Boeing (BA) (whose shares I own), which is a good proxy for the health of the airline industry and has the added appeal of a big defense business. [/P]
[P]I''m not holding my breath, but if US Air''s bankruptcy leads to more rational costs and pricing in the airline industry, and even some respect for shareholders, then so much the better. [/P]
 

Boomer

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Aug 20, 2002
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Tug_Slug,

Didn't you identify yourself as a stores clerk at US Airways that very vocally supported the concession package and then went on to ridicule anyone from anywhere but US Airways that posted their opinion on that board.

Seems funny that you would be posting comments that could be construed as advocating concessions on UALs' boards.
 

Farley

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Aug 21, 2002
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The pretext is that Shareholder value is all that matters. Why shouldn't a company provide value to it's employees as well? Is that so far fetched?
 

mancityfan

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Aug 20, 2002
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[blockquote]
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On 10/1/2002 9:41:50 AM Farley wrote:

The pretext is that Shareholder value is all that matters. Why shouldn't a company provide value to it's employees as well? Is that so far fetched?
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[/blockquote]

No, it is not so far fetched, especially when they ARE the major shareholders!!!

UAL's problems come from being run as a cash cow which spins off its wealth to shareholders who are NOT married to the company, but merely in it for the concurrent business deals in which they participate.

Take AXA, for example, a money manager that has its HQ in France. UAL buys LOTS of Airbus aircraft from...France, and finances those same aircraft through...?? Well, no guessing who makes the money from THAT deal.

Add to that the nice run-up in stock value AXA received from the employee buy-out and strong economy while nearly all employees were making historically low wages, and you have the ability of ONE FOREIGN COMPANY (AXA) to exercise majority control over a completely (?) separate DOMESTIC U.S. COMPANY (UAL) through a minority stockholding (U.S. airlines are not allowed to be majority owned by Foreign entities), and thus able to funnel BILLIONS in financing (and thus UAL profits!) to their own subsidiaries.

When the going gets tough in the U.S. airline industry and the U.S. stock market, lo and behold, AXA withdraws, sells their minority stake, but ends up having taken BILLIONS of dollars OUT of UAL. Then come the employees, MAJORITY stakeholders, who expect (after being promised by mgmt for nearly 6 years) to receive a minimum of inflation-adjusted wages for their last 6 years of sacrifice. Of course, when Wall Street hears that the raises are almost 40%, they forget to mention that the time period covered by that raise is ELEVEN YEARS! So, the pilots, and shortly thereafter, the mechanics become the people who are considered to have robbed the company and stolen all the shareholder value! Nice and neat, but TOTALLY UNTRUE!!

Hello, does ANYONE have more than a 5 second attention span?!

They are three things that are foregone conclusions in life: 1. Death; 2. Taxes; 3. The business media will ALWAYS take the anti-labor view of the world.

Once this is understood, it makes no more sense to even argue that airline labor wages are, and have been for a VERY LONG TIME, losing ground to inflation, and thus their buying power is constantly being eroded. No matter the number, the number is ALWAYS shrinking relative to other workers in other industries, and the price of everything one purchases.

Whether anyone cares, other than airline labor, is also not in doubt...they don't! Must we go over this constantly, or will it suffice to say that people will ALWAYS say that airline labor is overpaid and underworked because they have no idea what we do and how hard we have to work to be able to do it?

mancityfan
 

Tango-Bravo

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Aug 29, 2002
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[blockquote]
----------------
On 10/1/2002 9:41:50 AM Farley wrote:

The pretext is that Shareholder value is all that matters. Why shouldn't a company provide value to it's employees as well? Is that so far fetched?
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[/blockquote]


Southwest has always shunned the pretext that shareholder value is all that matters. In fact, shareholder value ranks third in their priorities which are: 1) Take care of the Employees, who will 2) Take care of the Customers, which will 3) Make the Shareholders happy. It has been consistenly successful for over 30 years in the best of times, the worst of times and everything in-between.

The managements of the full-service majors have demonstrated that they are either 1) so stupid or inattentive that they've missed the obvious formula for success or 2) they are so determined to avoid acknowledging that Herb is right that they prefer to remain in their ongoing malaise than to do what works to the benefit of all concerned.
 

JS

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Aug 24, 2002
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Re Why shouldn't a company provide value to it's employees as well? Is that so far fetched?

The company already does that. It's called a paycheck.