Siegel Article

Nov 20, 2002
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www.usaviation.com
Forbes Magazine
Wage Slasher
Thursday January 30, 6:34 pm ET
By Mark Tatge
With help from a Chapter 11 filing, DAVE SIEGEL persuaded $336,000-a-year airline pilots to take huge pay cuts.
David N. Siegel, chief of US Airways Group, the nation''s seventh-largest carrier, is leading a revolution that may change the airline industry forever--by challenging its most powerful union.
He''d be loath to say so. His main job, in the 11 months he has spent as chief executive, has been to turn around this seeming basket case, which suffered a 16% drop in business since Sept. 11, a Chapter 11 filing in August, delisting from the NYSE (shares trade over-the-counter for 22 cents), an estimated $1.2 billion loss last year on revenue of $6.6 billion and a fresh defeat in the Senate of a plan to extend payments to its pension fund by 23 years.
And yet the 41-year-old veteran of Continental Airlines, Avis Rent A Car and Northwest Airlines is upbeat. I''ve never been more optimistic, he says. It''s a fresh start for the company.
Is it ever. Yes, Siegel has done the predictably correct things to right the carrier, due to emerge from bankruptcy in March. He has restructured $8 billion in on- and off-balance-sheet debt, handed pink slips to 3,700 workers, slashed the fleet from 417 to 279 large jets, increased the airline''s load factor--the fraction of available seats paid for--2.1 percentage points to 71% and dropped the cost per available seat mile to 11 cents from 12.2 cents the year before. But he also succeeded where nearly everyone else--at US Airways (OTC BB:UAWGQ.OB - News) or at any other carrier--has failed before: in persuading surviving employees to take $1 billion a year in wage and benefit cuts. (Siegel himself took a 20% pay cut and passed on a $750,000 bonus.) More specifically, he has cracked a vertebra in the strong back of the Air Line Pilots Association (ALPA), which represents 67,000 pilots nationwide. With huge reluctance Siegel''s 4,059 pilots have accepted average wage cuts of 32% to 40%.
If it can happen at US Airways, can bankrupt UAL (NYSE:UAL - News) (United) and financially lame AMR (NYSE:AMR - News) (American) be far behind? Siegel is unapologetic. We either have a cost structure where we make money or we go away, he says. As a result of those concessions and across-the-board cutbacks, this optimistic boss believes US Airways will book a profit in 2004.
Siegel seems to have won over his people through amiability, straight shooting and steeliness--a bit like his Hollywood hero, Arnold Schwarzenegger. He constantly talks to people. Not only across the negotiating table but at cookouts, in hallways and break rooms. He flies in the cockpit jump seat discussing work rules and pay issues with pilots. Dave is not one of these CEOs who leaves by the side door to avoid employees, says David Bronner, chief executive of the Retirement Systems of Alabama, the pension fund providing $500 million in interim financing. Patricia Friend, international president of the Association of Flight Attendants, says Siegel is doing the best he can with a bad situation.
Better than that, he has exploited the downturn to extract unprecedented concessions, especially from pilots. Within a month of taking over last March, Siegel was able to persuade union leaders that, on its then-current course, the airline would run through $1 billion in cash within 12 months and probably find no lender willing to provide more. The unions were shocked, says John Luth, a financial adviser to the airline. No one had put it in these terms before.
With candor came toughness. In June, Siegel and Senior Vice President Jerrold A. Glass negotiated a deal with the pilots dubbed jets for jobs. Pilots laid off from mainline jets would be offered half the new openings for pilots on regional jets (50 seats), now flown by affiliates under US Airways'' colors. They will be hired first for all new pilot jobs at US Airways'' new regional affiliate. Made by Bombardier and Embraer, these little jets are quieter and more fuel-thrifty than US Airways'' aging turboprops. They will make it economical for the airline to continue flying to places like Omaha, Madison, Wis. and Mobile, Ala.
Pilots are not thrilled: A first-year regional-jet captain gets $51,000 for a work schedule that has him in the cockpit for 1,020 hours a year. That compares with $193,000 for a 12-year captain flying an Airbus A330 (who was making up to $336,000 six months ago). A pilot who is laid off and rehired at a regional starts at the bottom.
The pay-cutting started in July when US Airways was awaiting word on its $1 billion federal loan guarantee application. First officers on A330 jets were cut from $229,000 to $143,000; on Boeing 737s, from $152,000 to $111,000. Three days before filing for Chapter 11 on Aug. 11, 2002, grumbling pilots agreed to a six-and-a-half-year virtual freeze on wages, save cost-of-living allowance. Two days after United filed for bankruptcy on Dec. 11, 2002, US Airways pilots okayed a second round of wage givebacks, averaging 8%. These were done under threat of liquidation, says Roy Freundlich, spokesman for the US Airways unit of ALPA.
Everyone has had to make sacrifices, and the pain has been enormous, says Siegel. More torment is to come. Yet to be resolved is $3.1 billion in pension liabilities affecting 7,000-plus employed, furloughed or retired pilots. Average retired pilots expect 50% of annual pay, or up to $70,000. But Siegel says unless he''s permitted to pay those obligations over 30 years, he will foist a $500 million obligation on the Pension Benefit Guarantee Corp. Most US Airways pilots could get as little as $28,000 annually.
Workers at United, American and other lines are now competing against a trimmed-down US Airways. How long can they prop up the wage scale?
 

PITbull

Veteran
Dec 29, 2002
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Well, in less than a year the "dynamic duo" make it into Forbes magazine. Equal sacrifice...?? that $750,000 bonus will triple fold in 2005. These guys will meet their targets for 2004, profit or not.

As you all will witness, with regard to the big 6, this now has nothing to do with the economy, has to due with a fierce competitive environment now that U and UAL got their "fresh start" in banckruptcy with a very well thought out, mthodical plan to get concessions using the most egregeous threats known to labor.

Liquidation...? My a_ _. Notorious heros in Corporate America they will be known. As I have said before, they will write their own ticket with any co. We, on the other hand, for the sake of saving jobs and this airline, gave it all away for us and our families. Amazing, they even quote our AFA International President giving Kudos to the duo.

Sorry, guys, I am not celebrating here. Need to grieve over this a little more for the sake of all those who lost their jobs and those who will continue to sacrifice financially for many years to come; and too, for the many union brothers and sisters in other carriers who await and will suffer this same fate.
 

Braveheart

Member
Jan 29, 2003
60
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As I said in a previous post, honestly, I give Seigel credit. As employees remain afraid of job lose and pension lose, he climbs the ladder. Allowing the $$$$$$ sign to keep going cha-ching, cha-ching, cha-ching so he can negotiate a multi-million dollar salary with another corporation after he disolves all union and lower management positions once he completes his task.

I think that's called psychological advantage 101. Lose job, lose home. Lose job, lose pension. My goodness what shall I do?

Just like Real World said, resolve the pension issue and it's over. One more resolution, leading to another and another and another.

Real Scoop - Real Problem - Real World.

6.gif']
 

Mike

Advanced
Aug 20, 2002
171
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Well..Dave is a hero to Forbes and this company still hasnt made 1 cent in profit..Im not impressed.
 
R

retread

Guest
[blockquote]
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On 1/31/2003 10:57:29 PM PITbull wrote:

Well, in less than a year the "dynamic duo" make it into Forbes magazine. Equal sacrifice...?? that $750,000 bonus will triple fold in 2005. These guys will meet their targets for 2004, profit or not.

As you all will witness, with regard to the big 6, this now has nothing to do with the economy, has to due with a fierce competitive environment now that U and UAL got their "fresh start" in banckruptcy with a very well thought out, mthodical plan to get concessions using the most egregeous threats known to labor.

Liquidation...? My a_ _. Notorious heros in Corporate America they will be known. As I have said before, they will write their own ticket with any co. We, on the other hand, for the sake of saving jobs and this airline, gave it all away for us and our families. Amazing, they even quote our AFA International President giving Kudos to the duo.

Sorry, guys, I am not celebrating here. Need to grieve over this a little more for the sake of all those who lost their jobs and those who will continue to sacrifice financially for many years to come; and too, for the many union brothers and sisters in other carriers who await and will suffer this same fate.
----------------
[/blockquote]

AMEN!
 

Biffeman

Senior
Nov 25, 2002
447
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www.usaviation.com
This can't be this is the same Dave that Chip talked so highly about. Told us Dave is trying to save us not hurt us and if we don't like the concessions we should quit.
 

sabre

Advanced
Aug 20, 2002
161
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[blockquote]
----------------
On 1/31/2003 11:28:27 PM autofixer wrote:

Dave is evil. He will now run through the airline industry like a virus. A good job is now a sh@#@ job! Time will tell how easy it is to run an airline.
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[/blockquote]


Dave might be evil but put the responsibility where it should be, with the employees who CONSENTED to everything DAVE has wanted and asked for.
Dave couldn't do anything unless every chest pounding union rolled over and played dead.
Got news for you, it aint getting any better either for the next 6 years since our lapdog of a union gave more cuts in years 2005,2006, 2007, 2008 and those are years that the company plans to make a profit.

The employees didn't protect their families, they screwed them!
Bottom line is that Dave didn't do ANYTHING without the employee CONSENT so that would make all of us just as evil then wouldn't it?

And if Dave is a virus then the employees caught it.


love
 

PITbull

Veteran
Dec 29, 2002
7,784
456
www.usaviation.com
[blockquote]
----------------
On 2/1/2003 8:11:57 AM sabre wrote:

[blockquote]
----------------
On 1/31/2003 11:28:27 PM autofixer wrote:

Dave is evil. He will now run through the airline industry like a virus. A good job is now a sh@#@ job! Time will tell how easy it is to run an airline.
----------------
[/blockquote]


Dave might be evil but put the responsibility where it should be, with the employees who CONSENTED to everything DAVE has wanted and asked for.
Dave couldn't do anything unless every chest pounding union rolled over and played dead.
Got news for you, it aint getting any better either for the next 6 years since our lapdog of a union gave more cuts in years 2005,2006, 2007, 2008 and those are years that the company plans to make a profit.

The employees didn't protect their families, they screwed them!
Bottom line is that Dave didn't do ANYTHING without the employee CONSENT so that would make all of us just as evil then wouldn't it?

And if Dave is a virus then the employees caught it.


love
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[/blockquote]

FEAR is what spread throughout the system uncontrollably. This new management used the same tactics as bullies in a grade school playground. Like being raped at gunpoint, would that be considered "consentual" sex in court? Can you blame the employees who were never prepared to mobilize and could not do any kind of job action threat as we were not in "section 6'? We had been cocooned for such a long time. All negotiations were rush, rush, tight timelines, hurry, make a decision...

I take exception to the part in the article where they portray Siegel as a "down to earth CEO"...they portray him as this genuinly egoless,"nice guy" persona.

Not that this point matters anymore.

How many companies who file chapter 11 stay in there 6 months? How many companies as soon as on the day they file for Chapter 11, report when they will emerge? How many companies who file for Chapter 11, and have only been in their less than 6 months, can predict that they will begin making a profit in less than a year? Schemingly, stretegic, well thought out plan, using the ATSB as the impedus.

I will never veiw this management as heros no matter how much of a profit U makes. Yes, we would all have given sacrifices to turn our co. healthy, no one disputed that. But, what this management did is show much greed, and took way more than they needed. Espcially, not having any kind of strategy to market this airline and cut waste. What they didn't forget though is to maintain their 32 vice presidents and promote from within after each concession.

As profitable as this airline becomes, the vast majority of the employees will never recover their fianacial loss. Some employees will continue to receive a wage to keep a roof over their heads, and this management truly believes that for that luxury, we should be forever grateful to them. We need to take care of ourselves, eachother, and repair morale on our own, because I don't think this mangement is capable of that feat.
 

geo1004

Senior
Aug 22, 2002
288
0
Wow. Harsh word for Mr. Dave. Unfortunately it is impossible for US Airways to survive the way it is currently structured. Even with all the cost-slashing it still costs US 11 cents a mile to put a plane in the air. How can they make money doing that?

The fix for US is not to find a way to sustain its current cost structure, but to find a way to drastically reduce its cost structure. To brand Dave as evil because he is trying to keep the airline alive is simply not fair.
 

Braveheart

Member
Jan 29, 2003
60
0
geo1004:

It is not the employees who are responsible for this mess. The sole responsibility rests squarely on the shoulder of Seigel and his executive staff. This includes the man still hiding behind the scenes.

These employees continue to give their best effort. Seigel has played games since his first concession request and continues to play the same game. Lose your job or bend to our demands, lose your pension or bend to our demands. He has played each issue one at a time.

It is time for the employees to call his bluff. The employees keep agreeing and he keeps demanding for more givebacks. When he works for the same pay as the highest paid pilot, pays the same insurance benefit package he has demanded his employees pay, take the same pension plan he is requesting his employees to take only then will I know he is sincere with the working employee and helping US Airways to survive.


6.gif']
 

Bob Owens

Veteran
Sep 9, 2002
14,274
6,112
[blockquote]
----------------
On 2/1/2003 9:38:48 AM geo1004 wrote:

Wow. Harsh word for Mr. Dave. Unfortunately it is impossible for US Airways to survive the way it is currently structured. Even with all the cost-slashing it still costs US 11 cents a mile to put a plane in the air. How can they make money doing that?

The fix for US is not to find a way to sustain its current cost structure, but to find a way to drastically reduce its cost structure. To brand Dave as evil because he is trying to keep the airline alive is simply not fair.
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[/blockquote]

The IRS allows you to write off 36.5 cents per mile for the use of your car. Should air travel cost less than a third of travel by car? 11 cents per mile is not bad, in 1929 the cost per passenger mile was 12 cents. By 1939 it had dropped to 5.1 cents with the introduction of the DC-3. How many things are still less expensive today than in 1929? The flying public has unrealistic expectations from the air transportation system. They want it to be cheap like mass transit but they dont want tax dollars to subsidize it. Instead the government and the airlines are conspiring to make airline employees subsidize air travel through forced wage reductions and bankruptcy scams. In effect we pay the cost of providing cheap air travel to the public.