January 15 Airline News - Evening Edition

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[FONT face=Times New Roman size=3]Missiles seen as growing menace to airliners[/FONT][BR][BR][FONT face=Times New Roman size=3]WASHINGTON (USA Today) - U.S. officials are increasingly worried that terrorists will use shoulder-fired, heat-seeking missiles to shoot down one or more U.S. airliners. The concern comes in part because such attacks would be so devastating, but also because intelligence information suggests terrorists are making those attacks a priority.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://www.usatoday.com/news/nation/2003-01-15-stinger-usat_x.htm][FONT face=Times New Roman size=3]http://www.usatoday.com/news/nation/2003-01-15-stinger-usat_x.htm[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]US low-fare, regional airline growth seen in 2003[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]CHICAGO (Reuters) - The U.S. airline industry likely will see no overall growth in 2003 as large carriers cut capacity to stem losses, but smaller low-cost and regional airlines are expected to grow at the expense of larger rivals.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/rc/030115/airlines_growth_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/rc/030115/airlines_growth_1.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]The Boyd Group/ASRC Predictions – Year 2003[BR][/FONT][/STRONG][BR][FONT face=Times New Roman size=3]The Boyd Group/ASRC focuses on futurist consulting. In this endeavor, we are constantly reviewing trends as they evolve. Unlike other consulting firms, we're not afraid to publish our forecasts and predictions. Here are some of the key issues to watch in the coming 12 months.[BR][BR]Overall, 2003: The Year of the Draggin’[BR][BR]Draggin’ traffic growth, draggin’ demand, draggin' capacity, draggin’ aviation leadership from Washington, and draggin’ financial returns for the airline industry.[BR][BR]Year 2003 appears to be one of a lot of tough changes. One where the airline and airport industries adjust to a new environment. The airline industry is trying to close an enormous gap between costs and adjusted, post 9/11 revenues. One major airline system actually has the distant potential of going out of business, inflicting damage on many segments of the industry. [BR][BR]Along with that, the intrusion of a poorly-conceived new security bureaucracy will continue to choke not only airport throughput but also basic airport planning. The federal government and the Administration can't pass by a microphone without telling the world that we're at war. Then they proceed to inflict much of the cost of that war on airlines and airports, all the while ignoring the billions that continue to be wasted by the TSA. As for airports, the TSA is an enormous disaster. It's very difficult to plan for the future when airports are, as one aviation director described it, effectively under military occupation by an increasingly autocratic and non-focused TSA. [BR][BR]Unfortunately, these processes have not yet run their courses, and there is as yet no real light at the end of the tunnel. The airline industry struggles to re-structure. The airport industry is on hold pending the TSA deciding which end is up, and the on-going mess with the air traffic control system has simply been masked by reduced traffic putting less strain on the creaking system, while the FAA continues to lag behind in virtually every major upgrade program.[BR][BR]It would be great to state that the situation has stabilized, but it has not. The lack of leadership from Washington, whether it's from the DOT or from a couple of the alphabet organizations that purport to represent the industry, represents a situation that is hemming in the growth and the efficiency of US aviation. Based on known and projected aviation trends, 2003 will be a year of transition, at best. [BR][BR]General Trends[BR][BR]Prediction: Traffic – Declines In 2003. Slow Growth Thereafter[BR][BR]This is a smaller airline industry. There will be no quick return to pre-9/11 traffic levels. The industry is different. The economics are different. Consumers are different. [BR][BR]Some have predicted a return to year 2000 enplanement levels by 2004. We hope they're right. We also hope there is a Tooth-Fairy, which is just about as likely. [BR][BR]Unless there is a near-boom in the economy, a return to year 2000 enplanements is years away. In that last normalized year, enplanements (note: enplanements, not passengers) was approximately 695 million. Year 2002 will clock in at about 631 million enplanements. To get back to the year 2000 level by, say, 2005, would require traffic growth in the 5% range in 2003 and 2005. [BR][BR]That’s not in the cards. Year 2003 traffic is expected to decline by 2.0% to as much as 2.5%, depending on how deep capacity cuts are across mega carrier systems. (And, please, don’t tumble to the nonsense that Southwest and jetBlue will pick up the difference.)[BR][BR]Enplanements will be materially affected by three main drivers:[BR][BR]Capacity reductions[BR][BR]Fleet shifts[BR][BR]Pricing activity[BR][BR]The fun part of trying to predict this is that each of the above is basically a circular reference to the others. As airlines reduce capacity, that results in large part shifting to smaller aircraft. Smaller aircraft change the entire cost-to-revenue mix – higher per-seat costs, and fewer discount seats. That affects the pricing mix which in turn affects the levels of demand. Add in the fact that key sectors of the traffic base are increasingly price-resistant, and it all points to an airline industry stuck between a rock and a hard place.[BR][BR]The Airports:USA analyses of airline strategies and national traffic demand point to a year 2003 enplanement decline in the range of 2.0% to 2.5%. Key trends to watch are:[BR][BR]The levels to which majors will shift capacity downward in 2003.[BR][BR]The amount of system capacity shifted to small jet providers, a.k.a. regional partners.[BR][BR]Shocks to the system caused by wholesale failures, such as a Chapter 7 filing from United.[BR][BR]More information will be posted over the next months at www Airports:USA.com.[BR][BR]Airline Structural Changes[BR][BR]Broken Hubbing & Low Fare Airlines – Fantasy Lives [BR][BR]The Hub-And-Spoke model is broken. [BR][BR]That’s the latest refuge of in-the-know analysts and some in the media who don’t have a clue about the airline industry. We all know, is the mantra, that low-fare airlines, for example Southwest and jetBlue, are the model of the future. The hub-and-spoke model no longer works. This usually comes from people who are not as informed as they need to be regarding the nature of the hub-and-spoke system. It’s not worth the time to try to reason with the peanut gallery of otherwise intelligent journalists who have bought into this nonsense. [BR][BR]But it’s fun to read their occasional stories about how airlines such as AirTran and Frontier are examples of the new, point-to-point model. Sure.[BR][BR]Start-Up & Low-Fare Airlines[BR][BR]As in prior forecasts, the market for new start-up airlines hovers between thin and none. A great way to lose money. [BR][BR]However, it is very possible that we could see some poor souls (at least, that's what they will be eventually) attempt to start turboprop airlines to serve all those small airports that are either underserved or not served at all. A great way to go down the financial tube. [BR][BR]There will be limited expansion of existing discount airlines, and most will be between large markets, or at least to airports that are gateways to large markets. As mega-carriers (the latest buzzword is legacy airlines) re-structure, don't look for Southwest and the very few other discount airlines to march across the countryside bringing low-fare victory to the downtrodden masses. Note that Southwest has stated it will do very little expansion in the coming year. AirTran is apparently focused on bigger markets, such as ATL-DEN. Frontier is concentrating on big leisure destinations. [BR][BR]There are very real limits to the expansion allowed by the Southwest model or by the economics of the low-fare model. [BR][BR]Mega-Carrier Shifts[BR][BR]As of this date, it appears that only one mega-carrier, United, is in danger of becoming a footnote in airline history. US Airways, also in chapter, has a clear plan to survive. And while it is no guarantee, that puts the airline leagues ahead of United. [BR][BR]It isn't a pleasant thought, but the fallout from a United Airlines failure must be considered. As of January, 2003, the airline's management has not announced any substantive programs to turn the company around. The credibility of United senior management has been hurt by a number of mis-steps. These include a filing with the ATSB that was predicated on numbers nobody could believe, shifting projections of the amount of labor concessions needed, and indications that the airline was planning to start another internal low cost airline within the existing one.[BR][BR]In the worst case, here's what could be the outcomes of a United Airlines failure:[BR][BR]At ORD, AA would expand, and there would be some increases in service to other connecting hubs to grab the local share. A full-blown replacement of the United hub would be problematic, but one could see in the near term some mini-hubbing by a couple of carriers.[BR][BR]Denver: Some replacement of the United hub is a strong possibilities, by the usual suspects.[BR][BR]Tokyo: The fifth-freedom rights of United at Tokyo would have great value to perhaps American, assuming they have the wherewithal to pick it up. [BR][BR]San Francisco: It's an important, if declining, Pacific gateway. An airline with a large Asian presence might find some value in replacing some of the service left by United. If American would grab the Tokyo portion of United’s assets, plan on the possibility of AA filling in the United vacuum at SFO. Remember, right after American bought Air California in the mid-1980s, they instantly became the largest carrier at San Francisco. Whereupon they moved most of their assets to an ill-conceived San Jose hub. But it is an open issue if a United replacement at SFO (whoever that might be) would be interested in also replacing much of the small community feed now operated by United Express.[BR][BR]Washington/Dulles: Most likely, a lot of United’s IAD international operation will be an unwanted orphan. [BR][BR]South America: A big who cares here. For the foreseeable future, there’s limited value to United’s Latin route system, or, for that matter, the same can be said for a large portion of the markets in the region. Continental was pretty clear when it decided not to enter the Argentina market – the place is an economic basket case. Columbia is crawling with drug loads and rightist militias. Venezuela is run by certified nut case. And that’s the high points. Besides, American owns South America. Add in tough competition from Continental and Delta, and the result is that nobody will find much of value in trying to replace United there. [BR][BR]UAX System: The smaller feed markets into ORD, DEN, and SFO will be seriously threatened with material losses of air service. Unless there is a replacement at these hubs of the size and scope of United’s operation, there will be lots of airports hurting should United fail.[BR][BR]Major Trend: Emergence SJPs As An Industry Force[BR][BR]One of the most visible areas of change this year will be the extent to which mega-carriers restructure their route systems.[BR][BR]As part of that process, there will be much in the media about regional jets and regional airlines and the role they will play. In both cases, the tern regional is out of date. The small jets are anything but regional in application. And the entities that operate them have in most cases long since ceased being anything vaguely close to what is implied by the term regional airlines. [BR][BR]So, let’s start with this: There is no regional airline industry. It’s gone. There simply is no longer a definable segment of the airline industry that is focused on serving small airports. It disappeared long ago.[BR][BR]In fact, there are very few regional airlines left. What we have today is an industry that has evolved into the real growth area of aviation: Small Jet Providers, or, SJPs for short. [BR][BR]In a 1986 published white paper that was presented to the President’s Council of the Regional Airline Association, we made some predictions about what the newly-approved practice of code-sharing would bring. At the time, a lot of regional airline presidents were enamored with the idea of painting their ratty Beech-99s in Eastern’s colors (or whoever.) Not to mention the vast prestige of getting a C1-R pass card that gave them – like, wow - positive space travel on the big guy. Hey, some reasoned, just how bad can code-sharing be? [BR][BR]It depended entirely on the whim and strategic direction of the major partner. Actually, partner was not an accurate term for the smaller airline. Captive would be more appropriate, we suggested, back in 1986. The white paper cautioned the regional airline natives against becoming distracted by such shiny objects offered by the big guys from afar. [BR][BR]We pointed out – correctly - that the code-sharing agreement was essentially quit-claim deed giving the regional’s route system and its independence to the major partner. Once done, there was no going back. Depending on the major partner and its future, the deal could work well, or work really, really badly. The regional’s former routes were now operated in the major’s name and identity. If the major wanted to dump the regional and pick up another, there was no place to go, as carriers such as Rio, Royale, and Trans-Colorado (among others) eventually discovered.[BR][BR]In the long term, we predicted, the system would evolve from dual regional and major route systems into a single one directed and dominated by the major, with the regional merely providing lift where the major dictated. And while code-sharing has had benefits, the downside is that it eliminated the independence – and the future potential expansion – of a host of
potential new competitors[BR][BR]And that’s exactly where we are today. Big, (and well-run, by the way) entities such as Skywest, Mesa, and Chautauqua, among others, are really no longer airlines in the traditional sense. They have limited, if any, route systems of their own. Many don’t have much in the way of traditional airline marketing and product infrastructure, like reservations systems, revenue accounting, even pricing and ticket stock. Except in a very few markets, a consumer cannot even book a seat on one of these entities. That’s because they’re no longer direct sellers to the public.[BR][BR]These companies are not in the business of competing for passengers, per se. Today, what were once independent regional airlines have by-and-large evolved into the business of selling lift to major airlines – specifically small jet lift (and, to a declining degree, turboprop lift as well.) The major pays for it, decides where it will operate, and does most of the scheduling. Therefore, they are not airlines but instead are part of a new segment of the airline industry - vendors of capacity and lift to major carrier systems. These include independently-owned and internally-owned SJPs, like American Eagle.[BR][BR]Going forward, it is important to recognize this distinction. It represents an entirely different industry, with different dynamics, a different product cycle, and most importantly – a different customer base. As independent airlines, the customer was the flying public. Today, the immediate customers are the major airline systems to which these companies sell lift. Events affecting major airlines will affect these SJPs just as surely as shifts in demand for PCs affect suppliers of memory chips.[BR][BR]With this background established, we can suggest the following trends to watch in 2003:[BR][BR]Watch For: Pull-Backs In Small Airport Service[BR][BR]Small to mid-size airports are facing a tough year. As turboprops are replaced and small jets are re-deployed into mainline markets, losses of air service are inevitable at a number of smaller airports.[BR][BR]Plan on seeing mega-carriers continuing to shift SJP lift over the next 12 months out of thin markets and into replacement of mainline aircraft on what have been traditionally mainline, large-jet markets. [BR][BR]In that process, several airports may be squeezed out of the scheduled air transportation system. Forget wide-scale replacement of these RJs with turboprops. Consumers are increasingly turboprop-averse, and mega-carriers are having their SJPs retire them. [BR][BR]As we’ve said before, the economics of 50-seat jets are not well-suited to small community service. Those unfortunate communities who coughed up money for that ridiculous Proposition RJ boondoggle of a few years back might want to ask for their money back. [BR][BR]Prediction: Increasing Consumer Resistance to Small Jets. [BR][BR]You betcha. Resistance. [BR][BR]That’s because from an ergonomic standpoint, these are not aircraft well suited to long-haul passenger service. There’s a limit to human endurance – try nesting yourself in a window seat for nearly three hours (enplanement to deplanement) on a CRJ next to a woman of substance on her way to a Jenny Craig convention. It's an experience not to forget. [BR][BR]So by all means, therefore, do forget the less-than-a-centimeter-in-depth media stories about how much passengers just love regional jets. This is not to say that small jets are not fine machines, only that they do have cabin and seat size issues that come to bear on increasingly-longer stage lengths.[BR][BR]Nevertheless, going forward in 2003, the applications of small jets will continue to be focused in large part on down-gauging from 737 and similar airliners. And that means material shifts in cabin comfort that will have a consumer backlash. Take it to the bank.[BR][BR]Example: That Delta customer who finds he must ground-level board an RJ in DFW to fly to Denver may well re-think his level of brand-loyalty. Again we emphasize that this is not to say that <51 seat jets (as well as the longer-fuselage Canadair 70 & 86 seaters) are not fine aircraft. But they have ergonomic limitations for longer haul applications, and/or in competitive markets where the alternative larger jets could be a deciding factor in airline choice. They have cabins with nonstandard overhead storage, and less passenger room than the 737s they may be replacing on markets that entail an in-cabin experience, boarding to deplaning, of two to three hours.[BR][BR]Prediction: Year 2003: Mixed Success In SJP Missions. [BR][BR]But successful application of these small RJs will depend on time-and-place considerations. Therefore, write this down, the expanded use of SJPs by major carriers will have very disparate results in 2003. Some successful. Some much less so.[BR][BR]The American Airlines experiment running Embraers on a DCA-LGA-BOS shuttle would appear at first blush to be lunacy, especially when the competition is operating very roomy 737NGs and A-320s. But when the specific market is considered – huge concentrations of populations containing tens of thousands of AAdvantage members, the concept of snaring 15 or 16 of them per flight who are eager to pay Jolly-Roger fares to Boston represents not only a strong potential, but also a miniscule part of the market where AA can make a buck and retain brand loyalty. [BR][BR]Besides, these East Coast shuttle markets tend to have passengers who’ll put up with untold amounts of human misery, as anybody who remembers the Eastern Shuttle can testify.[BR][BR]But it’s unclear how many such mission applications may be out there. Let’s go back to the Delta decision to replace its DFW-DEN service with RJs. To be sure, the concept is to reduce sector costs and retain the premium-fare customers. That sounds great, but let’s remember that the premium fare customer might demand more than a product that makes him leave his carry-on under the wing, then sit in a tight seat with no earthly chance of using a laptop unless it’s surgically pre-attached to his solar plexus. [BR][BR]DFW-DEN, like most markets, is not a strong out-and-back shuttle market like LGA-BOS. This Delta RJ product competes with United with its Economy-Plus seating, American, with its entire-coach extra legroom, and Frontier, with its low walk-up fares and inflight service that’s a throwback to the 1950s when flight attendants actually cared about passengers. Tough competition for that premium passenger.[BR][BR]Then take the Delta-loyal premium passenger in Austin, where that weekly trip to Denver now entails not one, but two Encounters-Of-The-RJ-Kind, with a DFW connection. That low-fare Frontier AUS-DEN nonstop starts to look a whole lot better. [BR][BR]Another issue is that these small jets, (again, while fine airplanes) have relatively high per-seat costs, and by virtue of their size, have limitations in being able to feed the hub-beast. [BR][BR]Summary Prediction: Some re-thinking of how small RJs are used by the end of 2003. [BR][BR]Airport Security – More Bungling. More Calls For Patriotism[BR][BR]The Transportation Security Administration is achieving just what the terrorists wanted – the choking of our air transport system, and hence, our economy.[BR][BR]Ignore the happy-face media stories put out by some reporters who don’t have the brains to ask anything beyond what the TSA gives them. This TSA nightmare is deterring passenger travel. And plan on this – they will attempt to steal more money from consumers by proposing to raise the max-$10 security fee charged on passenger tickets. Airlines know that in this environment, any increase in costs reduces revenues. The president of AirTran has stated that even a dollar increase can have an effect.[BR][BR]We have seen little more than bungling and – in some cases – outright lies from this now-sacred TSA. They lied last February in telling the nation that all checked luggage is being screened for explosives. They lied again in saying it was in place on 12/31/02.[BR][BR]How safe can aviation be when the people in charge of security cannot be trusted to tell the truth? How safe can we be with example after disgusting example of failures of the TSA to accomplish basic screening, even though they have hired 50% more screeners than authorized by congress? How safe can airports be when there is not a shred of machinery in place to assure accountability from the TSA?[BR][BR]Prediction: The TSA will continue to flummox airports, without a material improvement in security.[BR][BR]Prediction: As they increase the scope of their security beyond half-baked passenger screening, the result will be continued Keystone Kops incompetence, punctuated with calls for the nation to understand what a huge job the TSA has.[BR][BR]Prediction: The TSA will call for more funding, in light of increased threats of terrorism. The money, as has been the case in the last year, will be used to grease an incompetently-managed rogue bureaucracy that is above any real scrutiny.[BR][BR]Prediction: As consumers increasingly get fed up with what is clearly inept screening, the now-friendly attitude of TSA screeners will turn more Gestapo-esque. This will be especially true as those screeners realize they are in a dead-end job, directed by hacks, and disliked by the flying public. [BR][BR]Prediction: Several leaders in the airline industry will continue their Stockholm-syndrome praise of the TSA, even as it continues to raise airline costs and waste money. [BR][BR]Standby for more idiocy from the TSA. But don’t dare criticize it – that means you’re not a patriot – that means you’re against protecting the American public. And if you criticize it at an airport screening point, that could mean you’re going to jail – for questioning as some citizens have found to their chagrin.[BR][BR]Fleet Trend Predictions[BR][BR]Last year we predicted that 727s would become as rare as a shark attack in Nebraska. By mid-2003, they will almost all be retired from passenger service in the US. Beyond that, the hottest properties in 2003 will be desert parking space for a whole passel of MD-80s, 737-300/500s, 747-400s, and an occasional just-off-the-line new aircraft waiting for a deferred delivery.[BR][BR]Regional jet <51 seats – there could be some knee-jerk orders that will be regretted within 18 months. As noted above, there is a limited niche for these aircraft, and their economics are pretty tight. It is believed that United is putting the full court press on their current and potential small jet providers to buy several hundred more 50-seaters for UAX applications in replacing mainline flying. Big time risk for the SJPs.[BR][BR]Watch for strong interest in the Embraer 170/190 series by the end of 2003, both domestically and from non-US carriers. These are essentially mini-737s. Ergonomics are more compatible with larger jets than are commuter-cabin 50-seaters, and it appears their economics are likely to be far better for 737-type replacement. This, unfortunately, does not apply to the 70 and 86-seat CRJ aircraft. They have most of the same cabin limitations (an hence, less service transparency with larger jets) as do the 50-seat CRJs. [BR][BR]On the high-end, Airbus will score additional orders for the A-380 jumbo, but our fleet forecasts indicate that it's still unlikely the market globally for these behemoths is more than about 250 - 300 units. (And, in fairness to Airbus, there were probably people in the 1930s who said the DC-3 was too big, too.)[/FONT][STRONG][BR][BR][FONT face=Times New Roman size=3]Lufthansa: Won't Help United Financially[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]ON BOARD A BOEING 747 OVER THE ATLANTIC (Reuters) - Deutsche Lufthansa AG said on Wednesday its bankrupt U.S. partner United Airlines was making progress with its restructuring and did not need the German airline's financial assistance.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/rb/030115/airlines_lufthansa_3.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/rb/030115/airlines_lufthansa_3.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]United Likely to Lose Employee Ownership[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]CHICAGO (Reuters) - Bankrupt United Airlines is on the verge of losing its status as one of the world's largest employee-owned companies, as sales by various employee stock plans trigger a loss of control for union owners, sources familiar with the matter said.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/rb/030115/airlines_united_4.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/rb/030115/airlines_united_4.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]UAL CFO: Bookings Far Ahead Of Last Year On Fare Sales[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]CHICAGO (Dow Jones)--UAL Corp.'s United Airlines has experienced a boom in bookings thanks to several fare sales the airline initiated since the start of the year, the UAL's chief financial officer said Wednesday.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/djus/030115/1437000724_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/djus/030115/1437000724_1.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]Several UAL Contested Items Moved To Later Hearings[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]CHICAGO (Dow Jones) - Several high-profile items slated for UAL Corp.'s bankruptcy court hearing Wednesday, such as the pay package for its chief executive, have been delayed to later hearings due to objections.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/djus/030115/1445000733_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/djus/030115/1445000733_1.html[/FONT][/A][BR][BR][FONT face=Times New Roman size=3]UAL Trustee denies creditor request[/FONT][FONT face=Times New Roman size=3] [/FONT][BR][BR][FONT face=Times New Roman size=3]ARLINGTON (theHub.com) - The U.S. Trustee overseeing United has denied a request from a group that holds secured aircraft bonds to form a committee to represent their interests in the airline's restructuring. The group, which represents more than 25 institutions that hold about $3 billion of special aircraft-backed securities, had requested permission to form a second official committee because their interests differ from an unsecured creditors committee, which was appointed shortly after United filed for bankruptcy on Dec. 9.[BR][BR]As part of ongoing efforts to cut costs, United said it will focus on renegotiating aircraft lease payments, and is on a short timeline to identify which financed aircraft it will need after the restructuring, and then separately renegotiate each agreement.[/FONT][BR][BR][FONT face=Times New Roman size=3]United flight attendants fight exec incentives[/FONT][BR][BR][FONT face=Times New Roman size=3]DENVER (Denver Post) - United Airlines' flight attendants are trying to block the company's plan to spend as much as $95 million to retain top officers and managers during bankruptcy. [/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://www.denverpost.com/Stories/0,1413,36%257E26385%257E1110600%257E,00.html][FONT face=Times New Roman size=3]http://www.denverpost.com/Stories/0,1413,36%257E26385%257E1110600%257E,00.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]Continental Sees Net Loss for 2003[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]NEW YORK (Reuters) - Continental Airlines, the No. 5 U.S. airline, expects to report a net loss for the first quarter and all of 2003, Chief Executive Gordon Bethune said on Wednesday on a conference call with analysts.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/rb/030115/airlines_continental_outlook_2.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/rb/030115/airlines_continental_outlook_2.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]S&P comments on Continental Airlines[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]NEW YORK (S&P) - Continental Airlines Inc. reported a fourth-quarter 2002 net loss of $109 million, an improvement on the $149 million loss a year earlier (when travel was very depressed in the wake of the Sept. 11, 2001 events) and likely to be better than the losses reported by most other large U.S. airlines. Standard & Poor's Ratings Services said its rating and outlook on the airline are not affected. Still, the fourth-quarter results, and the full-year net loss of $451 million, indicate the continuing weak airline industry revenue conditions, which could worsen in any U.S. war with Iraq and/or renewed domestic terrorism. Management projects a first-quarter and full-year 2003 loss, even without any such crisis.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/rc/030115/airlines_continentalairlines_s_p_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/rc/030115/airlines_continentalairlines_s_p_1.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]Continental Call: Plans To Implement Alliance In 3Q[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]NEW YORK (Dow Jones)--After reporting a narrower-than-expected fourth-quarter loss, Continental Airlines Inc. said Wednesday it expects to post a first- quarter deficit, followed by a likely loss for the full-year period.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/djus/030115/1230000607_2.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/djus/030115/1230000607_2.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]Continental Call: Pension Gap Not As Severe As Rivals'[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]HOUSTON (Dow Jones) - Continental had a pension shortfall of about $1.1 billion at the end of 2002, with plan assets of about $2 billion and projected obligation of about $900 million, according to Jeff Misner, the company's senior vice president and chief financial officer.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/djus/030115/1505000749_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/djus/030115/1505000749_1.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]Continental Call: Co Feels 'OK' About Domestic Bookings[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]HOUSTON (Dow Jones) - Continental, which is currently in contract negotiations with its pilots, intends to offer the group competitive wages and reach a contract that's fair to the company and the employees, said Bethune, the company's chairman. [/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/djus/030115/1505000750_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/djus/030115/1505000750_1.html[/FONT][/A][STRONG][BR][BR][FONT face=Times New Roman size=3]Continental Express goes all jet[/FONT][/STRONG][BR][BR][FONT face=Times New Roman][FONT size=3]ARLINGTON (theHub.com) - Continental Express has converted to an all jet fleet since adding 18 new extended-range regional jets and retiring its last 12 turboprops in the fourth quarter, 2002, bringing its operating fleet to 188 Embraer regional jets. Continental Express is operated by ExpressJet Airlines, and is based out of hubs in New York, Houston and Cleveland.[BR][BR][STRONG]Some Creditors Say US Airways Depriving Them Of Plan Vote[/STRONG][/FONT][/FONT][BR][BR][FONT face=Times New Roman size=3]WASHINGTON (Dow Jones) - A group of equipment trust certificate holders says US Airways Group Inc. is seeking to deprive it of its right to vote on the airline's proposed reorganization plan.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://biz.yahoo.com/djus/030115/1301000633_1.html][FONT face=Times New Roman size=3]http://biz.yahoo.com/djus/030115/1301000633_1.html[/FONT][/A][BR][BR][FONT face=Times New Roman size=3]Lawmakers going to bat for US Airways pensions[/FONT][BR][BR][FONT face=Times New Roman size=3]FINDLAY TWP. (Beaver County Times) - The pilots want it. US Airways wants it. But the Pension Benefit Guaranty Corp., the federal corporation created to protect pension plans, says no.[/FONT][BR][BR][FONT face=Times New Roman size=3]Complete Story: [/FONT][A href=http://www.timesonline.com/site/news.asp?brd=2305][FONT face=Times New Roman size=3]http://www.timesonline.com/site/news.asp?brd=2305[/FONT][/A] [BR][STRONG][FONT face=Times New Roman size=3][BR]US Airways discusses pension issue [BR][/FONT][/STRONG][FONT face=Times New Roman size=3][BR]ARLINGTON (US Airways Today) - President and CEO Dave Siegel testified today before the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education, and addressed the critical issue of the company's pension obligations and its efforts to restructure employee pension plans.[BR][BR]Siegel told the committee that he and his management team have been and remain focused on executing a successful restructuring that would provide the company long-term success, save as many jobs as possible, and preserve as much pension and benefit compensation as possible, in combination with competitive wages. We have committed to the unions representing our flight attendants and mechanics that we can work out the funding issues for their respective members and will not consider any plan to terminate those pension programs, Siegel said. At this point, the pilot pension plan is the only one at risk of being terminated.[BR][BR]Siegel also said that the company has made substantial progress in reducing its cost structure, including go-forward pension costs. In spite of those reductions, we still face the problem of funding the obligations of the current plan. US Airways faces a $3.1 billion pension obligation over the next seven years as a result of the dramatic drop in both the stock market and interest rates. The majority of that obligation is related to the pension program for pilots.[BR][BR]Siegel pointed out that under the Employee Retirement Income Security Act (ERISA), an employer cannot do anything about obligations that have already been accrued, and it is the 2004 and 2005 pension contributions that are the most troubling for US Airways. We therefore proposed to the Pension Benefit Guarantee Corporation (PBGC) a restoration-of-funding plan, by which we would amortize and smooth the $3.1 billion payment. Unfortunately, after several weeks of negotiation, the PBGC has concluded that it does not have the legal authority to implement this alternative, said Siegel. While I respect their decision, I cannot say that I agree with it. But I have advised the Air Line Pilots Association that for the sake of our company's future, we must begin to consider the alternatives, and to work closely with the PBGC on that effort.[BR][BR]Siegel said that the company's plan of reorganization and disclosure statement hopefully will be approved by the Bankruptcy Court on Jan. 16, and that the time needed to resolve this issue is very short. The date cannot be delayed and still allow the company to emerge from bankruptcy by the end of March, he said, pointing out that the timeline is set by requirement of our Debtor-in-Possession (DIP) financing and credit card processing agreements.[BR][BR]Siegel said that while the Chairman and Ranking Member of the Senate Finance Committee agreed to hold a hearing before the end of January to examine the funding problems that the U.S. industry has with its pensions, any protracted legislative process will simply be too late to accommodate the very tight timeline of our emergence plan. Our equity sponsor and DIP lender, as well as the ATSB, expect a resolution to this matter within days, not weeks or months, he said.[/FONT][STRONG][BR][BR][FONT face=Times New Roman size=3]US Airways ALPA MEC Code-a-phone update - January 15, 2003[/FONT][/STRONG][BR][BR][FONT face=Times New Roman size=3]This is Roy Freundlich with a US Airways MEC update for Wednesday, January 15.[BR][BR]Yesterday, ALPA participated in meetings on US Airways pension plans funding issues called by U.S. Senator Arlen Specter in both Pittsburgh and Washington, DC.[BR][BR]In the Pittsburgh meeting, at the landside terminal of the airport, your MEC representatives explained to Senator Specter, along with U.S. congressman Tim Murphy and Pennsylvania state congressman John Pippy, that the US Airways pension plans are currently underfunded due to a combination of events, which include the effects of September 11, 2001, on the economy and aviation industry, the decline of the stock market, and 41-year-low interest rates. These financial events have rapidly created a funding shortfall of $3.1 billion dollars due over the next eight years, with $1 billion dollars being due from US Airways in 2004, and $800 million dollars in 2005. [BR][BR]US Airways maintains that if it meets its current pension funding obligations, then the business plan it submitted to the ATSB would no longer be valid. The ATSB is requiring that the pension funding issue be resolved with the Pension Benefit Guaranty Corporation (PBGC), which has taken the position that it does not have the authority to help. That position has not been accepted by ALPA or Senator Specter. [BR][BR]Without the PBGC’s authorization for restoration funding, US Airways pilots, on top of tremendous job losses and pay and work rule concessions, could now be stripped of nearly all of our defined pension benefit - a benefit pilots have spent decades to earn. [BR][BR]ALPA explained to legislators that US Airways pilots have sacrificed a great deal to ensure that US Airways would survive and have already participated in two rounds of concessionary negotiations. During these negotiations, the pilots provided the Company with the bulk of the concessions, $643 million dollars per year, to enable US Airways to receive approval for the ATSB loan guarantee. Until our pension issue is solved, however, the ATSB is refusing to provide the $1 billion loan guarantee for which US Airways applied and already received unanimous conditional approval last summer.[BR][BR]Later yesterday afternoon in Washington, at the Subcommittee on Labor, Health, Human Services and Education of the Senate Committee on Appropriations hearing, which was chaired by Senator Specter and included Senator Santorum, testimony on the pension issue was received from the PBGC Executive Director Steven Kandarian, PBGC General Council James Keightley, Chief Executive of Allegheny County Jim Roddey, ALPA President Duane Woerth, MEC Chairman Bill Pollock, and US Airways President and CEO David Siegel.[BR][BR]ALPA’s testimony at the hearing was consistent with its presentation of the issues to Senator Specter at the earlier meeting in Pittsburgh. [BR][BR]The PBGC’s senate subcommittee testimony took the position that the statutes and regulations governing its charter did not specifically authorize it to allow a restoration-funding program to enable a pension fund’s benefits to survive. This position was aggressively challenged by counter-testimony articulating that the statutes and regulations did not prevent the PBGC from taking corrective action and indeed provides the latitude for it to do so at its discretion.[BR][BR]PBGC Executive Director Steven Kandarian expressed no faith in US Airways’ business plan and the pension restoration plan that would defer funding obligations over 30 years. Mr. Kandarian was more concerned about preserving his impression of the intent behind restricted IRS funding wavers, which are not being sought by US Airways or ALPA. He was also concerned about protecting the PBGC insurance program from possible abuses because of the precedent he felt would be set by selectively resolving US Airways pension plans’ underfunding status. While the PBGC recognized that the pension plans were severely impacted by 41-year low interest rates and the sharp decline in equity markets, it also believes that US Airways, over the course of several years, did not make appropriate funding contributions beyond the minimum required by law to ensure the integrity of the pension plans in cyclical markets and economic conditions moving forward.[BR][BR]The PBGC also stated that the only pension plan in jeopardy of being terminated by US Airways is the pilots’ pension plan.[BR][BR]President and CEO David Siegel’s prepared testimony was supportive of a legislative solution, but saddled the effort by trying to compress the timeline for a legislative solution to a couple of days. The Company is attempting to use the January 16 bankruptcy hearing on the adequacy of the information contained in the Plan of Reorganization’s disclosure statement as a deadline to begin the final termination of the pilots’ pension plan. During the question and answer period, Mr. Siegel testified that the Company could provide an alternative pilot pension plan that matched the economics of a restored defined benefit plan. [BR][BR]Captain Duane Woerth responded to this statement stating that any alternative plan is a function of collective bargaining that is done under the collective barging provisions of the Railway Labor Act and not at a senate subcommittee testimony.[BR][BR]Captain Pollock responded that a Company-generated alternative pilot pension plan [WHICH plan contribution defined a be likely would], would be significantly inferior to a restored pilot defined benefit plan[BR][BR]By pursuing this alternative, the Company would absolve itself of its obligations to the pilots’ pension plan and turn it over to the PBGC upon termination. The Company would then seek to construct a defined contribution plan using the funding available in its ATSB business plan. While the economics may be matched for the Company, it will not be matched for pilots.[BR][BR]Your MEC is continuing to pursue a legislative solution. A grass roots letter writing campaign was suggested by a legislator and is being developed by ALPA. Guidelines to participate should be posted by Friday.[BR][BR]The MEC would like to thank the US Airways pilots that attended yesterday’s meetings to demonstrate strong pilot support for a legislative solution. Over 100 pilots attended the Pittsburgh public meeting and approximately 60 pilots attended the Washington senate hearing.[BR][BR]Please remember we have 1,748 pilots on furlough, with 79 pilot furloughs scheduled for February 4.[/FONT][STRONG][BR][BR][FONT face=Times New Roman size=3]ALPA-US Airways MEC Pension Plan Statement - January 14, 2003[BR][/FONT][/STRONG][BR][FONT face=Times New Roman size=3]US Airways and its employees have been involved in major restructuring efforts to gain Air Transportation Safety Board (ATSB) approval for a $1 billion federal loan guarantee. The Company and its employees have participated in the US Airways restructuring plan to meet the ATSB’s conditions for cost savings and revenue enhancements. Now, through no fault of labor, the ATSB loan approval is in jeopardy because of federal pension funding requirements. [BR][BR]The US Airways pilot pension plan is currently underfunded due to a combination of events: the effects of September 11, 2001, on the economy and aviation industry; the decline of the stock market; and 41-year-low interest rates. These actions and financial events have rapidly created a funding shortfall, and based on US Airways’ estimates, it must pay over $3.1 billion into its retirement plans over the next eight years. [BR][BR]US Airways is still working to emerge from bankruptcy and is requiring an ATSB loan guarantee to provide necessary exit financing. US Airways states that if it meets its current pension funding obligations, then the business plan it submitted to the ATSB would no longer be valid. The ATSB is requiring that the pension funding issue be resolved with the Pension Benefit Guaranty Corporation (PBGC), which has taken the arguable position that it does not have the authority to help.[BR][BR]The PBGC’s mission statement says that it protects the retirement incomes of American workers’ private defined benefit pension plans and encourages the continuation and maintenance of defined benefit pension plans. To help US Airways attain a 30-year deferred-funding schedule from the PBGC, ALPA agreed to modify pilot pension benefits, including reducing the maximum final average earnings benefit by 15 percent. Unfortunately, the PBGC refused US Airways’ deferred restoration funding solution. Without the PBGC’s authorization for restoration funding, US Airways employees, on top of tremendous job losses and pay and work rule concessions, could now be stripped of nearly all of their pension benefit—a benefit they have spent decades working to earn and have included in their retirement planning. [BR][BR]In an industry that has weathered the worst of the impact of September 11, 2001, US Airways was affected the most: [BR][/FONT][FONT face=Times New Roman size=3][BR]One of our domicile airports, Reagan National, was closed for nearly one month, costing US Airways millions of dollars in revenue at a fiscally critical time. [BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways’ restructuring has cost employees thousands of jobs, including the jobs of nearly 1,900 pilots. [BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways was the first major airline to file for bankruptcy after September 11, 2001.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways employees were forced to provide billions of dollars worth of concessions [BR]to win conditional approval for an ATSB loan that would be used upon emergence from bankruptcy. [BR][/FONT][FONT face=Times New Roman size=3][BR]Recently, with the industry still depressed and the ATSB asking for further cost savings, US Airways’ employees authorized even more concessions.[BR][/FONT][FONT face=Times New Roman size=3][BR]US Airways employees have sacrificed a great deal to ensure that US Airways would survive and have already participated in two rounds of concessionary negotiations. During these negotiations, the pilots provided the Company with the bulk of the concessions that are needed to allow US Airways to receive approval for the ATSB loan. Until our pension issue is solved, however, the ATSB will not provide the $1 billion loan guarantee for which US Airways applied and already received unanimous conditional approval in the summer.[BR][BR]Although our pension benefits are insured by the PBGC, that is little consolation to our pilots, many of whom have spent their entire flying career at US Airways. The PBGC can only pay a limited amount of monthly benefits to workers whose plans have ended, and this shortfall is compounded when you consider that pilots must retire by age 60, further restricting supplemental benefits.[BR][BR]US Airways and ALPA have asked the PBGC to grant a waiver on pension funding requirements that would allow US Airways to defer its payments and spread them out over a 30-year period. This restoration funding would allow our retiring pilots, and other employees, to keep their hard-earned pensions and avoid the termination of our pension funds.[BR][BR]US Airways is not the only company that is having pension difficulties. Growing pension obligations may cause other companies to take similar steps. The precedent the government needs to set is to allow industries, companies and employees to help themselves get through a difficult period and enable responsible solutions that avoid unnecessary harm to retiring American workers.[BR][BR]ALPA is honored to have received support from U.S. Senator Specter, U.S. Senator Santorum and many other legislators on this very important pension issue. ALPA and the US Airways pilots are respectfully requesting that the government step in and clarify the PBGC’s authority to grant deferred funding payment relief. We are asking the PBGC to reconsider its decision and to recognize its authority to allow the restoration funding payment schedule so that the pilot and employee pension funds may survive.[/FONT][BR][BR][FONT face=Times New Roman size=3]US Airways CWA vote stands[/FONT][BR][BR][FONT face=Times New Roman size=3]January 14, 2003[BR][BR]Dear Colleagues:[BR][BR]Since the results of the ratification vote which passed by five (5) votes were announced, my office has received several complaints. Those specific complaints generally fall into five categories as follows:[BR][BR]1. Members who said they did not receive voting information;[BR][BR]2. Three members who claim that their personal identification number (PIN) didn't work; [BR][BR]3. Members who voted in the first period which was suspended after additional clarifications were made in the proposed agreement, but who did not re-vote; [BR][BR]4. A member who said she contacted AAA to get a PIN and was told she wasn't on the list and that someone would call her back. The member says no one called her; and[BR][BR]5. Members' claim to have more than one PIN.[BR][BR]An investigation was conducted concerning the five categories listed above, and the results of the research are attached.[BR][BR]There were two additional general complaints that I wish to address. Several members cite Article XV of the CWA Constitution, alleging improper behavior by the company. That article pertains to local officer elections only, not to contract ratification votes, therefore it does not apply in this case. Another complaint is that US Airways management attempted to influence the vote in Pittsburgh. There is credible evidence that management did attempt to influence the vote, including distribution of an IAM flyer in Pittsburgh. While this action is reprehensible, it was not illegal. CWA registered its strong disapproval of management's activities. [BR][BR]While there also was an allegation that PIT reservation members were being forced to vote in the presence of management on the last day of voting, upon closer investigation CWA found that was not the case. In any event, the voting period was extended by one hour to accommodate anyone who may have been confused by this allegation. Thus, there was no interference by management in the vote.[BR][BR]Through this very difficult period, the union made every effort to put in place a process that would provide an opportunity for our members to receive information and then vote. The vote count was handled by the AAA, an organization that has an enviable record for fairness and accuracy in record keeping. Our locals were provided with extra packages to give to members who may not have received them and methods were established to provide PINs to those who needed them. Every member who voted the first time was sent an individual letter advising them that they would have to re-vote. During this ratification process, the individual member also had to take responsibility for following through on the information and materials provided. All of this information was widely disseminated including on our website.[BR][BR]I, therefore, must conclude that the ratification process was handled in a fair and reasonable manner.[BR][BR]In Unity,[BR][BR]Morton Bahr[BR]President[/FONT][BR][BR][BR]
 
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Looks like I missed GONE WITH THE WIND reading through all this........