IAM in T/A - Now we need ratification and the loan

[UnitedChicago]

United Workers Agree to Concessions
.c The Associated Press
CHICAGO (AP) - The union representing 37,500 United Airlines machinists announced tentative agreements Wednesday on $1.5 billion in wage and benefit concessions, removing a critical obstacle from United''s bid to avoid a bankruptcy filing.
The International Association of Machinists was the only employee group not to have committed to its share of $5.8 billion in labor cutbacks - the centerpiece of United''s financial recovery plan.
The financially ailing carrier hopes the cuts are steep enough to persuade the government to grant a much-needed $1.8 billion loan guarantee that it says it needs soon in order to stave off the necessity of a Chapter 11 bankruptcy filing by year''s end.
The mechanics, baggage handlers, reservations employees and other workers represented by the IAM will vote Nov. 27 on the tentative agreements.
Union leaders said they agreed to the cutbacks in order to help prevent a bankruptcy filing.
``Too many airlines have been forced into bankruptcy, never to return,'''' said Randy Canale, president of IAM District 141, one of two districts involved in the agreements. ``Despite obstacles and unprecedented economic pressures, I still believe our greatest days lie before us.''''
All the labor reductions are to take place over the next 5 1/2 years.
United''s 8,800 pilots already have ratified $2.2 billion in cutbacks, and its flight attendants are voting on a tentative agreement for $412 million in wage reductions, with results expected to be announced next week.
The airline announced earlier this week that salaried and management employees will contribute another $1.3 billion in labor savings. United''s top executives will provide the rest.

11/20/02 17:27 EST

 

[UnitedChicago]

Has anyone heard any credible buzz about the chances of loan approval with all 6 unions in T/A's?

 

[MrMarky]

I must say the IAM at US and at UA have acted much more soberly and responsibly than previous IAM's at Eastern and TWA, who chose confrontation and bluff calling because they didn't believe management when management said they have no more to give. Now, a few liquidations later, they're believers.

UAL's unions have now agreed collectively, to $5.8 billion in concessions/givebacks over 5 1/2 years to help bring the airline back to financial health over the long term, and to secure a $1.8 billion ATSB loan guarantee over the short term--maybe. The employees will never recover these givebacks.

So that brings me to a possibly naive question:

Why not just have the unions guarantee the loan and to he11 with the ATSB???

Or, have the unions actually do the loan itself, an investment they will likely recover with interest??

Granted, under this scenario UAL would be obligated to repay at least some of the long-term concessions, say $2 billion (proposed loan amount) out of $5.8 billion in concession. But in essence, the labor groups and management workers are gifting $5.8 billion long term so that United can qualify for a $2 billion loan short-term. The unions could forgive the principal, leaving the agregate $5.8 billion concessionary agreement intact, and still recover a good chunk of their sacrifice through interest payments the airline will otherwise have to pay to a financial institution. Why pay the interest to banks when the employees could stand a chance of recovering some of their 'investment' by collecting those same interest payments instead, and the ATSB and their demands don't even have to figure into the equation.

I know some financial genius is going to make mincemeat out of this scenario, but go ahead because it makes sense to me unless somebody can demonstrate otherwise.

Marky

 

[Bob Owens]

Sober & Responsible? If you recall EAL and TWA both repeatedly gave back. It didnt help. In the end all those workers had to show for their sacrifice was less money in the bank to carry them on the long road back to top pay at some other carrier. They helped make a lot of executives rich though, they always get theirs. You people have to sacrifice so we can keep giving those at the top their millions. Why dont those at the top work for nothing? No, no thats for all you Saps who think if you give enough back that you can save your seniority. They will never get back what they sacrifice now. Not in the long term, not ever. One thing that has changed in favor of the UAL workers is that EAL and TWA were never serving as big of a market as UAL is serving now. There were more carriers back in the EAL/TWA/Pan Am days. The country, and the economy could easily weather a few few casualties to Chapter 7. The fact is that UAL closing their doors would have a big negative effect on the entire economy. More than Chrysler would have and they got bailed out, so did Steel, and what about the Railroads. None of those workers were forced to give up thier paychecks. If UAL were to cease operations communities would become isolated, other industries such as tourism would be severely effected,even large cities like SFO and ORD would be hard hit. There would be tremendous political pressure to get them flying, even if it took direct government aid. What did Bush say back in December? Did he not say that due to the state of the economy he would not allow UAL to cease operations due to a strike? Did he not slap you with a PEB and talk about the publics right to fly. Well did that right to fly suddenly become subordinate to a 7% ROI for investors? You are being Bushwhacked once again. In a year or two when they are making money again and you complain because you cant pay your bills they will simply say Sorry we have a contract THAT YOU AGREED TO. If they are so desperate then offer them a year to year deal that allows you to bring your wages back up if their profits return. Thats more than fair, this whole ATSB is nothing more than a Bush/Greenspan scam to establish that Stockholders take priority over the workers.A 7% ROI!! Thats better than most Blue Chip stocks! Its certainly way above the historical rate for this industry. Dont do it fellas, your families are counting on you to show that you have a pair. Dont sell yourselves cheap like a whore, get what you are worth. Dont get roped into long term concessions as a remedy for cyclical downturn. They are going to do a lot of huffing and puffing but in the end they have to have the ability to move people, while there is still excess capacity there is not enough of it to make up for UAL if it should stop operating. Call their bluff, you've already lost enough, dont let them make it worse.

 

[La Treal]

Even though all the other posters will probably disagree.
That was a H-E-L-L of a post. Made total sense to me.
Fact of the matter is union workers will never get what they are giving up back, but you can rest assured that whatever management gives up now will be quietly given back. Whomever does not agree with that is in denial. I've sat back and read certain management try to convince the union workers that if they dont want to give, that the failure of the comapany will be on their heads but fact of the matter is management should manage. When it is time for annual reviews, if their performance is good and they have accomplished their goals it is garanteed that they will get a raise. When it is time for the unions to negotiate the company will fight no matter what the financial position is.
If any airline shuts its door it is because of BAD MANAGEMENT period.
A union can only expect what is in the contract that management agreed to.

PS. I am not in a union.

 

[Busdrvr]

[blockquote]
----------------
On 11/20/2002 940 PM Bob Owens wrote:

More than Chrysler would have and they got bailed out, so did Steel, and what about the Railroads. None of those workers were forced to give up thier paychecks. If they are so desperate then offer them a year to year deal that allows you to bring your wages back up if their profits return. Thats more than fair, this whole ATSB is nothing more than a Bush/Greenspan scam to establish that Stockholders take priority over the workers.A 7% ROI!! Thats better than most Blue Chip stocks! Its certainly way above the historical rate for this industry.
----------------
[/blockquote]

Catch a CLUE!!! The DEMS were the MAJORITY party in the Senate that pushed the most onerous conditions of the ATSB. I'd expect Fitz to be worried about the taxpayer, but 60 million bucks later NJ gave us the second of two self serving limosine liberals that frankly are worse than ANY repub. Wolves in Sheeps clothing! FWIW, Tommy Daschles WIFE is a lobbyist for NWA and AMR. Think that has any effect on law and the way the ATSB acts?

CHICAGO, IL, October 7, 2001 (CN)--Continuing their drive to ensure U.S. taxpayers receive something in return for providing $15 billion in cash and loan guarantees to the troubled airline industry, U.S. Senators Peter G. Fitzgerald (R-IL) and Jon Corzine (D-NJ) are urging Treasury Secretary Paul O’Neill and other members of the Air Transportation Stabilization Board (ATSB) to demand that airlines that accept federally guaranteed loans, in return, provide taxpayers with an equity stake in their companies. Fitzgerald and Corzine went on to explain that providing federally guaranteed loans at a price—stock in their companies—would deter airlines from seeking loans guarantees they do not need.

“Hard working U.S. taxpayers should not be asked to bail out the airline industry with absolutely no strings attached,â€￾ the senators wrote this week in letters to Secretary O’Neill and other ATSB members, urging them to take advantage of this key provision. “If the federal government is going to guarantee as much as $10 billion in loans to the industry, the taxpayers deserve something in return and should be vigorously protected.â€￾ Fitzgerald and Corzine said that requiring the airlines to provide the federal government with equity in their companies would help compensate taxpayers for the risk they assume in guaranteeing loans to the industry.

 

[UnitedChicago]

Quite frankly...I'm getting a little sick of all the bickering about coulda shoulda woulda. Can we live in the present and save all the history of bailouts for another day?

Can we focus tomorrow's posts on any intelligence coming out of the ATSB? I'm on the edge of my seat.

To that point...UAL777Flyer...are you hearing anything?

Oh and congrats to Mr. Tilton, his negotiating team and the union leaders on reaching this point. No one thought it could be done. If they do need to file, I would imagine that UA employees would at least recognize that Tilton is a breath of very very fresh air. I only wish her were younger so he could be CEO for more than 5 years!

 

[UAL777flyer]

Nice to know that my sources were correct this time around!

 

[Busdrvr]

[blockquote]
----------------
On 11/20/2002 10:59:53 PM avek00 wrote:


No third party would do as you're suggesting because UAL is simply too much of a credit risk.

----------------
[/blockquote]

Only partly true, UAL could in fact likely get a loan and full financial backing from one of our foreign partners, specifically LH and Singapore. But the paradox is, our airlines are too important to the economy and the military (CRAF) for the government to allow any foreign entity to own over 25% of one. we are also too important to strike. But when we need anything, well they can live without us right? Either we are too important or we aren't. It's sad that we're being squeezed by our own government.

 

[avek00]

[blockquote]
----------------
On 11/20/2002 7:23:37 PM MrMarky wrote:

I must say the IAM at US and at UA have acted much more soberly and responsibly than previous IAM's at Eastern and TWA, who chose confrontation and bluff calling because they didn't believe management when management said they have no more to give. Now, a few liquidations later, they're believers.

UAL's unions have now agreed collectively, to $5.8 billion in concessions/givebacks over 5 1/2 years to help bring the airline back to financial health over the long term, and to secure a $1.8 billion ATSB loan guarantee over the short term--maybe. The employees will never recover these givebacks.

So that brings me to a possibly naive question:

Why not just have the unions guarantee the loan and to he11 with the ATSB???

Or, have the unions actually do the loan itself, an investment they will likely recover with interest??

Granted, under this scenario UAL would be obligated to repay at least some of the long-term concessions, say $2 billion (proposed loan amount) out of $5.8 billion in concession. But in essence, the labor groups and management workers are "gifting" $5.8 billion long term so that United can qualify for a $2 billion loan short-term. The unions could forgive the principal, leaving the agregate $5.8 billion concessionary agreement intact, and still recover a good chunk of their sacrifice through interest payments the airline will otherwise have to pay to a financial institution. Why pay the interest to banks when the employees could stand a chance of recovering some of their 'investment' by collecting those same interest payments instead, and the ATSB and their demands don't even have to figure into the equation.

I know some financial genius is going to make mincemeat out of this scenario, but go ahead because it makes sense to me unless somebody can demonstrate otherwise.

Marky
----------------
[/blockquote]

MrMarky:

No third party would do as you're suggesting because UAL is simply too much of a credit risk.

In order to safely lend United any money, a lender will require one of two things: final loan guarantee approval from the ATSB, or superpriority status for DIP financing under Chapter 11 of the US Bankruptcy Code. While UAL may have a substantial amount of unencumbered assets, the valuation of said assets have decreased immensely in the post-9/11 operating environment. Hence, UA must offer additional protection to any prospective lenders through one of the means stated above.

 

[autofixer]

Busdrvr, How much CRAF is being used right now? There is a huge build up in southwest Asia. It is a NEW world since 9-11. Do not have a self inflated world view...the Romans did.

 

[avek00]

[blockquote]
----------------
On 11/20/2002 11:08:37 PM Busdrvr wrote:

[blockquote]
----------------
On 11/20/2002 10:59:53 PM avek00 wrote:


No third party would do as you're suggesting because UAL is simply too much of a credit risk.

----------------
[/blockquote]

Only partly true, UAL could in fact likely get a loan and full financial backing from one of our foreign partners, specifically LH and Singapore. But the paradox is, our airlines are too important to the economy and the military (CRAF) for the government to allow any foreign entity to own over 25% of one. we are also too important to strike. But when we need anything, well they can live without us right? Either we are too important or we aren't. It's sad that we're being squeezed by our own government.

----------------
[/blockquote]


Busdrvr:

I dare say that all regulatory restrictions aside, LH and SQ would NOT lend UAL a meaningful amount of money in the absence of a loan guarantee or Chapter 11 filing. From a dollars and sense standpoint, UA is simply too risky a firm in which to invest serious money absent additional safeguards to protect the investment. This is the reason why UAL has been shut out of the post-9/11 capital markets, and must take (or be the recipient of) action soon to offer an additional incentive to prospective investors.

 

[spacewaitress]

[blockquote]
----------------
On 11/20/2002 940 PM Bob Owens wrote:

Sober & Responsible? If you recall EAL and TWA both repeatedly gave back. It didnt help. In the end all those workers had to show for their sacrifice was less money in the bank to carry them on the long road back to top pay at some other carrier. They helped make a lot of executives rich though, they always get theirs...

----------------
[/blockquote]

I don't disagree with a lot of what you said in your post, but reality is reality. The union negotiators would not have agreed to these tentatives if they weren't equitable. No one is going to be at todays wages until the end of the 5 1/2 years, from what I've seen. Different work groups will progress at different rates depending on the size of their sacrifice. The stock options and profit sharing are being applied relative to the amount of everyone's givebacks. Everything collected in this proposal is right up front fair. And I have never seen that before. It shows that Tilton is making it clear that (at least in this) we are all valued equally and I believe he is setting the groundwork for BIG BIG changes around here. So far the mans actions have impressed me as being on the right side of valuing these employees, and being responsible to them.

He's got an awesome job to do and who knows, he may be just the man that we need right now. So far, I'm impressed that the outcome of these negotiations are different, the provisions for recovery of wages are inclusive and equally applied to all.

Once this guy starts to change the sick culture that has plagued this airline for far too long, then we will be running rings around the competition. We, all of us, are just too good to do less. I HAVE ALWAYS BELIEVED THAT ABOUT THE PEOPLE AT THIS GREAT COMPANY.

Call me pollyanna if you like, but this could be good...it could be great!!

 

[UnitedChicago]

I'm afraid I'm officially getting near the end of my eternal optimism and glass half fool outlook.

If you add up the tentative union deals...the savings look like this (at least what has been reported in the press):

ALPA: $2.2B
AFA: $.412M
IAM: $1.5B
Salaried: $1.3B
PAFCA: $??

Total: $5.411B

Difference: $.388M

UA has said that the top 40 executives will make appropriately significant salaray cuts.

However, if you take the difference of $.388M divided by 40 (executives) and then 5.5 (years), that would be an average wage concession for these 40 top executives of $1.76M per year. I know these 40 are paid well...but not in the $1M range. There's no way in my mind they can close the gap.

The big unkown is how much are the meteorologists contributing?

This is why I'm losing my optimism. If UA doesn't hit $5.8B then I think it's a good bet we won't get a loan.

Comments please. Am I missing something??

 

[UAL777flyer]

LaTreal,

I think your comments regarding management are inaccurate. The days of UA management employees achieving their goals and performing above expectations and getting a guaranteed raise are over. I've achieved my goals and performed above expectations, yet the last raise I got that was not promotion-related was after the ESOP. There has been no PIP payout since and there have been no merit raises since. And our ERP plan says there won't be any salary increases until at least 2004. So I don't understand how you can possibly say that raises are guaranteed. And your comment about any airline shutting its' doors is because of bad management is completely ignorant. History has shown that this industry's problems have just as much to do with organized labor as they do with bad management. It takes two to tango. I don't like the system any more than you do. I wish all employees could get raises at the same time and give back concessions (if they're needed) at the same time. But some are in unions and some are not. Union employees know the deal when taking the job and management/salaried employees know it taking theirs. Being in a union affords protections that are not afforded to management/salaried workers. My job security is determined by my work performance, not my seniority. Union workers are protected by their seniority. Mine means nothing. Being in a union means the company must negotiate what they take and what they give. That can be viewed as a double-edged sword. Being in management or salaried means they can take what they want from you when they want and you don't have any control over it. I just think you need to probe deeper to examine the pros and cons of being in a union vs. being in management/salaried. Neither classification is perfect. They both have advantages and drawbacks. But at the end of the day, we all make our choices. I can't complain too much about being a member of management because I knew what I was getting into when I took the job. The same can be said for unionized employees.

UnitedChicago,

Haven't heard anything lately. We were briefed after the company sent a delegation of officers to the ATSB last week. The briefing was said to have gone very well and UA was able to give more specifics about our turnaround. However, we were also told that it's pretty tough to call right now. It could probably go either way. So who knows. When it come to the feds, anything is possible.

I echo your remarks about Glenn Tilton. People need to realize that he is the right kind of kick ass and take names leader that UA has needed for years. If we're all willing to work with him (which I think has now been proven with the last of the union T/A's), despite the pain involved, we'll emerge from this a stronger, more competitive airline.