C
chipmunn
Guest
Deflation and a fare market
BOSTON (Boston Globe) - Alan Greenspan is paying a lot of attention to falling prices these days. Asked recently about deflation, in an appearance before Congress, the Federal Reserve chairman said, We cannot allow that to creep up on us unseen.
I had my own brush with deflation last week. It kind of crept up on me. I'm not sure what it signals, but I think it is a story worth telling. My deflationary experience came on a bus trip to New York City. On a relative's recommendation, I booked a round-trip ticket to New York on a small bus line called Coach New England. For $40, I was told, I could take a bus from South Station to Penn Station and back. That $40 compares to $128 on the train, $238 on the high-speed Acela, more than $400 on the plane, and $79 on Greyhound or Peter Pan (more on that later).
Chip comments: Today's Boston Globe column above clearly illustrates the grim economics that are today's reality. Airlines can not raise ticket prices and there is no pricing power.
To complicate our situation US Airways does not qualify for the loang guarantee and either must increase revenues or cut costs to survive.
The company is trying to raise revenues by joining the Star Alliance in 2003 and putting more RJs into the system earlier, and now it appears both of these events will occur. Seprately, all creditor, vendor, and lessor restructuring discussions are now complete with the company extracting $425 to $475 million per year in annual savings.
Therefore, to make up the difference the company is seeking consensual labor accords that address RJ relief, productivity changes, and pension cuts.
On Friday, November 8, in his weekly message Dave Siegel said US Airways has obtained as much as possible from aircraft lessors, lenders and vendors and those savings actually exceeded the carrier’s targets by a significant amount. We are going to work tirelessly with your union leadership to resolve these issues and I’m very confident we’ll be successful, he said. We've come too far not to complete the task to ensure our survival.
US ALPA MEC has scheduled a Special Meeting for November 21 to address these issues and its uncertain how the other unions proceed. The MEC agenda is:
1. Staffing Review Committee Report
2. V. P. Flight Operations Presentation
3. Negotiating Committee Update
4. Report from Professional Advisors
5. Retirement & Insurance Update
6. Economic and Financial Analysis Update
If the required union contracts are not changed to lower employee expense, the company may not emerge from bankruptcy.
>From my perspective, the unions have no choice but to work with management to obtain acceptable agreements or the rank-and-file may as well fill out an unemployment applications and mortgage default notices, to beat the rush.
Without acceptable agreements the company has three choices:
1. Liquidate the company and terminate all employees.
2. Seek S.1113 cuts, which the company said it would not like to do.
3. Seek alternative ways within the context of the current accords to cut labor expense.
Nobody likes this situation and it's either adjust or seek employment elsewhere.
Chip
BOSTON (Boston Globe) - Alan Greenspan is paying a lot of attention to falling prices these days. Asked recently about deflation, in an appearance before Congress, the Federal Reserve chairman said, We cannot allow that to creep up on us unseen.
I had my own brush with deflation last week. It kind of crept up on me. I'm not sure what it signals, but I think it is a story worth telling. My deflationary experience came on a bus trip to New York City. On a relative's recommendation, I booked a round-trip ticket to New York on a small bus line called Coach New England. For $40, I was told, I could take a bus from South Station to Penn Station and back. That $40 compares to $128 on the train, $238 on the high-speed Acela, more than $400 on the plane, and $79 on Greyhound or Peter Pan (more on that later).
Chip comments: Today's Boston Globe column above clearly illustrates the grim economics that are today's reality. Airlines can not raise ticket prices and there is no pricing power.
To complicate our situation US Airways does not qualify for the loang guarantee and either must increase revenues or cut costs to survive.
The company is trying to raise revenues by joining the Star Alliance in 2003 and putting more RJs into the system earlier, and now it appears both of these events will occur. Seprately, all creditor, vendor, and lessor restructuring discussions are now complete with the company extracting $425 to $475 million per year in annual savings.
Therefore, to make up the difference the company is seeking consensual labor accords that address RJ relief, productivity changes, and pension cuts.
On Friday, November 8, in his weekly message Dave Siegel said US Airways has obtained as much as possible from aircraft lessors, lenders and vendors and those savings actually exceeded the carrier’s targets by a significant amount. We are going to work tirelessly with your union leadership to resolve these issues and I’m very confident we’ll be successful, he said. We've come too far not to complete the task to ensure our survival.
US ALPA MEC has scheduled a Special Meeting for November 21 to address these issues and its uncertain how the other unions proceed. The MEC agenda is:
1. Staffing Review Committee Report
2. V. P. Flight Operations Presentation
3. Negotiating Committee Update
4. Report from Professional Advisors
5. Retirement & Insurance Update
6. Economic and Financial Analysis Update
If the required union contracts are not changed to lower employee expense, the company may not emerge from bankruptcy.
>From my perspective, the unions have no choice but to work with management to obtain acceptable agreements or the rank-and-file may as well fill out an unemployment applications and mortgage default notices, to beat the rush.
Without acceptable agreements the company has three choices:
1. Liquidate the company and terminate all employees.
2. Seek S.1113 cuts, which the company said it would not like to do.
3. Seek alternative ways within the context of the current accords to cut labor expense.
Nobody likes this situation and it's either adjust or seek employment elsewhere.
Chip
