Today we had a significant spike in email and emotional comments, which I believe is largely due fear and uncertainty because our job security is not in our own hands. I am not living in a “fish bowlâ€, but let’s put things into perspective. Here are some points to consider:
- US Airways has negotiated new labor agreements that will save the company $700 million per year. The pilot’s provided $300 million, the AFA $94 million (plus $63 million for pension and retiree health care changes), the CWA $137 million, and the TWU $6 million per year.
- Non-union workers have contributed more than $200 million in cost cuts.
- The court terminated pensions covering machinists and flight attendants, which will save the company about $1 billion during the next four years.
- The IAM and the company reached a TA for 35 Maintenance Training Specialists, which is the 7 new contract. See Story
- The company won court permission to throw out the IAM 3 contracts if they do not agree to concessions by January 21.
US Airways is seeking another $300 million in cost savings from the IAM. The IAM will be providing its members a detailed analysis of the proposals, but among the key provisions are:
IAM 142- Mechanics & Related (Utility Cleaners) workgroup:
- Pay rates for mechanics would be significantly better than the current pay that reflects a 21 percent temporary cut
- Heavy maintenance on Airbus narrowbody aircraft will be brought in-house and certain Boeing 737 work will continue to be done in-house. Widebody heavy maintenance and other work to be specified, including some Boeing 737 inspection activity, will be done using outside maintenance vendors
- Base maintenance will continue to be performed in Charlotte, N.C., and Pittsburgh
- Line maintenance positions will increase with anticipated schedule changes in 2005
- Utility classification and certain utility positions will be preserved at base maintenance facilities only, with other utility and cleaning services to be outsourced
- IAM employees displaced by outsourcing will be offered existing and future fleet service positions
IAM-141 - Fleet Service workgroup:
- Pay rates for fleet service employees at hubs and major stations would be significantly better than the current pay that reflects a 21 percent temporary pay reduction
- Most existing fleet service work will be preserved
- A majority of scope provisions will remain unchanged except the right to outsource fleet work at the smaller cities and a second-tier pay scale for medium-sized cities
- Continuation in the pre-existing IAM multi-employer national pension plan at unreduced levels
When evaluating the proposal, IAM members must look at two points: having no job or having job while looking for another job. Another key point is that the company’s proposal addresses two large issues: reducing the 21 percent “imposed†pay cut to a much more manageable number and preserving a majority of the 8,500 IAM positions. Judge Mitchell acknowledged the machinists are being asked to "cut their own throats." But he said the union did not prove the cuts were unnecessary while the carrier demonstrated the savings were vital. "Which is worse, half the mechanics losing their jobs or all of the mechanics losing their jobs?" Mitchell asked. However, according to today’s Pittsburgh Tribune-Review several rank and file mechanics at the Pittsburgh hangar said the offer seemed to provide a glimmer of hope, but added they would reserve final judgment until they get more information.
According to today’s Charlotte Observer, Judge Mitchell’s ruling “handed US Airways a big victory in its fight to survive, giving the airline the authority to unilaterally cut the pay and benefits of its largest union and slash thousands of jobsâ€, as well as “clear the way for the company to seek new investors.
Why? US Airways agreed to keep the status quo on pay and work rules for the IAM until Jan. 21, when one of two things will take place: Either the union membership will ratify a new contract with the company, or the union will vote down the company's latest offer, then have those cutbacks forced on them anyway.
The company is moving forward and Bruce Lakefield told reporters following the hearing "the judge accurately described what we're going through" and pledged to move forward with restructuring. The airline has said it may need to find more savings and is trying to attract an equity investment of $250 million. The good new…the company still intends to successfully restructure into an LCC with competitive cost structure, which is the only way any employee will obtain true job security.
What bothers me about some of our posts is that a reader looks at a comment in the newspaper and they believe the comment is fact. People like Vaughn Cordle and Mike Boyd do not clearly look at the numbers, SEC filings, or know what is happening inside the company. Cordle is a United pilot, is clearly uninformed, and has a special interest. When reading a periodical the best sources are key analysts like Merrill’s Michael Linnenberg, S&P’s Phil Baggaley, and Lehman’s Gary Chase. The only news reporters who truly have a handle on the inside information are Susan Carey of the Wall Street Journal, Michelline Maynard of the New York Times, Lynn Marek of Bloomberg News, and Dan Roberts of the Financial Times. I do not listen to anybody else because they are not informed, but the people listed above can directly speak with every industry CEO, if desired.
According to Dan Roberts of the Financial Times, many rivals were hoping that United and US Airways would go under permanently, reducing capacity and strengthening the position of those that remain. Instead, the two weakest players appear to be successfully navigating through the US bankruptcy system, despite several remaining hurdles. US Airways led the way on Thursday when a bankruptcy judge allowed it terminate pension plans and scrap existing pay agreements in its bid to save nearly $1bn in costs by mid-January. It still faces an uphill battle though and needs to persuade the US government's Air Transportation Stabilization Board to continue allowing it to use their cash as collateral at a crunch meeting on January 14.
According to the New York Times US Airways received approval to cancel contracts with its mechanics and baggage handlers and United Airlines won pay cuts it had sought for a similar group. The rulings were victories for both airlines, which are struggling for survival, but defeats for their unions. Judge Mitchell described his decision as a "close call," but said it would give US Airways the best chance to survive. The union said talks continued yesterday, and workers vowed not to take aggressive action or strike. The rulings should provide both airlines a little more breathing room and, in the case of US Airways, permit it to stave off liquidation for now. "It definitely increases the chances of this airline surviving," Terry Trippler, an air travel consultant in Minneapolis, said. There is no bargaining after this," said Peter Capelli, a management professor at the University of Pennsylvania's Wharton School of Business who has studied airline labor relations. "The company is going to get to do what it wants to do, whether the union agrees or not," the Times reported.
The next two hurdles that Roberts indicated must occur by January 14 are:
- US Airways needs to find $100 million in cash or cost savings, or it risks upsetting a key deal with GE, which controls most of the airline's fleet and is very favorable to the airline.
- US Airways must win an extension to continue using ATSB guaranteed funds.
With all labor pieces now in place, one way or another, I bet US Airways will obtain conditional approval on both financing deals above, provided the three IAM units ratify new agreements, which will place even greater pressure on the union. In addition, the financial community still supports the business plan with two new recent financing agreements: Embraer and Comair providing RJ financing and Citigroup agreed to replace BOA as one of the loan guarantee “at risk†financiers. The key here is that members of the financial community, along with the very important GE deal, still support the company, which is essential.
A hearing has been scheduled for January 13, next Thursday, on US Airways next financing matters and interestingly the company has not filed any motion or exhibit. I find this interesting, but the likely reason is the company required IAM participation, one way or the other, before it could comply with the GE bridge financing terms and to seek further use of ATSB guaranteed funds.
Today Susan Carey of the Wall Street Journal wrote the best review of US Airways situation and some key excerpts from here column are listed below:
- US Airways isn’t looking at selling assets, something it once studied, said Chris Chiames, senior vice president of corporate affairs. The issue “is what more needs to be done to our business plan to satisfy our backers and attract equityâ€. Now that the company has achieved everything it sought in labor and pension savings, he said, “we have every confidence we’re going to meet any financial deadline in front of us.â€
- Experts think US Airways is in danger but not yet a goner. Daniel Kasper, an airline economist for LECG LLC who has testified in U.S. Bankruptcy Court on behalf of US Airways management, said yesterday that “it’s a close ca;;, “But that the Cassandras (Cordle and Boyd for example) are going a bit overboard†in predicting the carrier’s demise.
- “We believe US Airways US Airways is at least a near-term survivor,†Chase said. Without further labor actions such as those that marred the Christmas holiday, he said US Airways “will be a factor in the industry for the foreseeable future.â€
- One important creditor, the federal Air Transportation Stabilization Board, also appears to be taking a sympathetic view of US Airways’ efforts to transform itself into a low-cost airline during its second trip to bankruptcy court in two years. “We’ve been in discussions with them about their business plan and are talking to them about a mutual extension†of the financing deal that is keeping the company aloft in Chapter 11, said Mark Dayton, executive director of the agency.
Furthermore, Bloomberg reported tonight that the IAM agreed to not strike if the company would delay implementation of the court ruling as applied to the IAM collective bargaining agreements until after the ratification process has been completed, in the hope that all proposals will be ratified.
Could the IAM disrupt operations or not ratify their contract? Sure, but so far the union and its members seem to understand the consequences. Today’s operation went well, the IAM Maintenance Training Specialists have a TA, and Randy Canale, president of District Lodge 141, which represents the FSA’s seemed to soften his position because it appears he knows a failed TA ratification could be worse. Canale said, “Judge Mitchell ruled today in favor of the company’s motion to terminate our collective bargaining agreement, but the airline has agreed to maintain the status quo of current agreements until ratification is determined. Failure to accept the final offer will result in the contract being terminated. There was no way our negotiators could endorse an agreement that outsources our members’ jobs. While we would have preferred a different outcome, voting provides our members with an opportunity to avoid termination of their agreements, Canale said.
I believe the IAM will ratify their new agreements because it’s their best option. Will the vote be close? Probably, but what was interesting is that today every flight I flew was perfect. I flew from LGA to PHL, PHL to MCO, MCO to CLT, and CLT to LGA. Each flight had great service from every work group, even after “impositionâ€. Why is that? The fight is over and as Mitchell said, “everybody knows what is at stake here.â€
In regard to Southwest entering the Pittsburgh market, I do not believe the new competitor will have much effect on US Airways’ successful transformation. Why? The airports operating costs are relatively high and there is poor O&D. Pittsburgh already has LCC competition from Independence Air, USA3000, AirTran, and ATA and Southwest’s entrance is more of the same. Southwest’s entrance in the summer will be with a couple of gates and 10 to 14 flights, which may grow to 40 or 50 flights per day, with US Airways operating over 200 mainline and express flights per day.
Also noteworthy, US Airways effectively shifted Pittsburgh flying to Fort Lauderdale, where the costs are lower, yield/revenue higher, and the facilities/ATC almost as good as Pittsburgh.
Today Gary Chase, Lehman Brothers airline analyst said the “decision clearly hurts US Airways, but less so than it would have a year ago. We don't believe this breaks the back of US Airways.â€
Why? In my opinion US Airways must have a competitive cost structure that can support GoFares or it will fail, especially in light of Delta’s announcement. Low fares are the future and either the company offers them at a profit, or it liquidates.
Meanwhile, US Airways will get a revenue boost at DCA because Independence Air, a problematic LCC, announced a cost-cutting move yesterday when it said it plans to eliminate 150 of its 560 daily flights -- most in and out of Dulles -- at the end of this month. Who wins? United and US Airways.
Separately, today the LGA Station Manager, Loretta Bove, told me yesterday the company announced they are going to increase staffing at PHL, which should help enormously. The company is offering furloughed employees for all ground work groups the opportunity to be a temporary employee, from 60 to 120 days, to work in PHL. These employees would handle customer service, baggage handling, catering, marshalling, and other duties.
In conclusion, does US Airways have problems? Absolutely, but the good news is that the financial community still supports the company, one of the three IAM units has a TA, seven out of nine unions have new labor accords, the IAM is hinting to the IAM-FSA and IAM-M units they should ratify their TA, and the company is still trying to restructure. Moreover, the court’s S.1113/S.1114 ruling gives the company more restructuring momentum and should provide more passenger confidence for future bookings. The company now has a greater chance of survival, all none contracts in place one way or another, and no strike threats or aggressive action, which is why the system operated normally yesterday.
Also noteworthy, an interesting twist developed early this morning when the Pittsburgh Post-Gazette reported that IAM-M spokesman Joe Tiberi said talks between the mechanics and the company continued after yesterday's hearing ended but it was still unclear what would be put to a vote. Why is that and could the IAM still want a meaningful TA?
In a company statement Jerry Glass was right when he said, “I believe our employees understand the gravity of the situation and will support these proposals as the best way to send a message to our customers and the financial community that we are united in our efforts to be successful.†Furthermore, "I think everyone understands what's at stake here," Mitchell said. In that light I do too.
Regards,
USA320Pilot
- US Airways has negotiated new labor agreements that will save the company $700 million per year. The pilot’s provided $300 million, the AFA $94 million (plus $63 million for pension and retiree health care changes), the CWA $137 million, and the TWU $6 million per year.
- Non-union workers have contributed more than $200 million in cost cuts.
- The court terminated pensions covering machinists and flight attendants, which will save the company about $1 billion during the next four years.
- The IAM and the company reached a TA for 35 Maintenance Training Specialists, which is the 7 new contract. See Story
- The company won court permission to throw out the IAM 3 contracts if they do not agree to concessions by January 21.
US Airways is seeking another $300 million in cost savings from the IAM. The IAM will be providing its members a detailed analysis of the proposals, but among the key provisions are:
IAM 142- Mechanics & Related (Utility Cleaners) workgroup:
- Pay rates for mechanics would be significantly better than the current pay that reflects a 21 percent temporary cut
- Heavy maintenance on Airbus narrowbody aircraft will be brought in-house and certain Boeing 737 work will continue to be done in-house. Widebody heavy maintenance and other work to be specified, including some Boeing 737 inspection activity, will be done using outside maintenance vendors
- Base maintenance will continue to be performed in Charlotte, N.C., and Pittsburgh
- Line maintenance positions will increase with anticipated schedule changes in 2005
- Utility classification and certain utility positions will be preserved at base maintenance facilities only, with other utility and cleaning services to be outsourced
- IAM employees displaced by outsourcing will be offered existing and future fleet service positions
IAM-141 - Fleet Service workgroup:
- Pay rates for fleet service employees at hubs and major stations would be significantly better than the current pay that reflects a 21 percent temporary pay reduction
- Most existing fleet service work will be preserved
- A majority of scope provisions will remain unchanged except the right to outsource fleet work at the smaller cities and a second-tier pay scale for medium-sized cities
- Continuation in the pre-existing IAM multi-employer national pension plan at unreduced levels
When evaluating the proposal, IAM members must look at two points: having no job or having job while looking for another job. Another key point is that the company’s proposal addresses two large issues: reducing the 21 percent “imposed†pay cut to a much more manageable number and preserving a majority of the 8,500 IAM positions. Judge Mitchell acknowledged the machinists are being asked to "cut their own throats." But he said the union did not prove the cuts were unnecessary while the carrier demonstrated the savings were vital. "Which is worse, half the mechanics losing their jobs or all of the mechanics losing their jobs?" Mitchell asked. However, according to today’s Pittsburgh Tribune-Review several rank and file mechanics at the Pittsburgh hangar said the offer seemed to provide a glimmer of hope, but added they would reserve final judgment until they get more information.
According to today’s Charlotte Observer, Judge Mitchell’s ruling “handed US Airways a big victory in its fight to survive, giving the airline the authority to unilaterally cut the pay and benefits of its largest union and slash thousands of jobsâ€, as well as “clear the way for the company to seek new investors.
Why? US Airways agreed to keep the status quo on pay and work rules for the IAM until Jan. 21, when one of two things will take place: Either the union membership will ratify a new contract with the company, or the union will vote down the company's latest offer, then have those cutbacks forced on them anyway.
The company is moving forward and Bruce Lakefield told reporters following the hearing "the judge accurately described what we're going through" and pledged to move forward with restructuring. The airline has said it may need to find more savings and is trying to attract an equity investment of $250 million. The good new…the company still intends to successfully restructure into an LCC with competitive cost structure, which is the only way any employee will obtain true job security.
What bothers me about some of our posts is that a reader looks at a comment in the newspaper and they believe the comment is fact. People like Vaughn Cordle and Mike Boyd do not clearly look at the numbers, SEC filings, or know what is happening inside the company. Cordle is a United pilot, is clearly uninformed, and has a special interest. When reading a periodical the best sources are key analysts like Merrill’s Michael Linnenberg, S&P’s Phil Baggaley, and Lehman’s Gary Chase. The only news reporters who truly have a handle on the inside information are Susan Carey of the Wall Street Journal, Michelline Maynard of the New York Times, Lynn Marek of Bloomberg News, and Dan Roberts of the Financial Times. I do not listen to anybody else because they are not informed, but the people listed above can directly speak with every industry CEO, if desired.
According to Dan Roberts of the Financial Times, many rivals were hoping that United and US Airways would go under permanently, reducing capacity and strengthening the position of those that remain. Instead, the two weakest players appear to be successfully navigating through the US bankruptcy system, despite several remaining hurdles. US Airways led the way on Thursday when a bankruptcy judge allowed it terminate pension plans and scrap existing pay agreements in its bid to save nearly $1bn in costs by mid-January. It still faces an uphill battle though and needs to persuade the US government's Air Transportation Stabilization Board to continue allowing it to use their cash as collateral at a crunch meeting on January 14.
According to the New York Times US Airways received approval to cancel contracts with its mechanics and baggage handlers and United Airlines won pay cuts it had sought for a similar group. The rulings were victories for both airlines, which are struggling for survival, but defeats for their unions. Judge Mitchell described his decision as a "close call," but said it would give US Airways the best chance to survive. The union said talks continued yesterday, and workers vowed not to take aggressive action or strike. The rulings should provide both airlines a little more breathing room and, in the case of US Airways, permit it to stave off liquidation for now. "It definitely increases the chances of this airline surviving," Terry Trippler, an air travel consultant in Minneapolis, said. There is no bargaining after this," said Peter Capelli, a management professor at the University of Pennsylvania's Wharton School of Business who has studied airline labor relations. "The company is going to get to do what it wants to do, whether the union agrees or not," the Times reported.
The next two hurdles that Roberts indicated must occur by January 14 are:
- US Airways needs to find $100 million in cash or cost savings, or it risks upsetting a key deal with GE, which controls most of the airline's fleet and is very favorable to the airline.
- US Airways must win an extension to continue using ATSB guaranteed funds.
With all labor pieces now in place, one way or another, I bet US Airways will obtain conditional approval on both financing deals above, provided the three IAM units ratify new agreements, which will place even greater pressure on the union. In addition, the financial community still supports the business plan with two new recent financing agreements: Embraer and Comair providing RJ financing and Citigroup agreed to replace BOA as one of the loan guarantee “at risk†financiers. The key here is that members of the financial community, along with the very important GE deal, still support the company, which is essential.
A hearing has been scheduled for January 13, next Thursday, on US Airways next financing matters and interestingly the company has not filed any motion or exhibit. I find this interesting, but the likely reason is the company required IAM participation, one way or the other, before it could comply with the GE bridge financing terms and to seek further use of ATSB guaranteed funds.
Today Susan Carey of the Wall Street Journal wrote the best review of US Airways situation and some key excerpts from here column are listed below:
- US Airways isn’t looking at selling assets, something it once studied, said Chris Chiames, senior vice president of corporate affairs. The issue “is what more needs to be done to our business plan to satisfy our backers and attract equityâ€. Now that the company has achieved everything it sought in labor and pension savings, he said, “we have every confidence we’re going to meet any financial deadline in front of us.â€
- Experts think US Airways is in danger but not yet a goner. Daniel Kasper, an airline economist for LECG LLC who has testified in U.S. Bankruptcy Court on behalf of US Airways management, said yesterday that “it’s a close ca;;, “But that the Cassandras (Cordle and Boyd for example) are going a bit overboard†in predicting the carrier’s demise.
- “We believe US Airways US Airways is at least a near-term survivor,†Chase said. Without further labor actions such as those that marred the Christmas holiday, he said US Airways “will be a factor in the industry for the foreseeable future.â€
- One important creditor, the federal Air Transportation Stabilization Board, also appears to be taking a sympathetic view of US Airways’ efforts to transform itself into a low-cost airline during its second trip to bankruptcy court in two years. “We’ve been in discussions with them about their business plan and are talking to them about a mutual extension†of the financing deal that is keeping the company aloft in Chapter 11, said Mark Dayton, executive director of the agency.
Furthermore, Bloomberg reported tonight that the IAM agreed to not strike if the company would delay implementation of the court ruling as applied to the IAM collective bargaining agreements until after the ratification process has been completed, in the hope that all proposals will be ratified.
Could the IAM disrupt operations or not ratify their contract? Sure, but so far the union and its members seem to understand the consequences. Today’s operation went well, the IAM Maintenance Training Specialists have a TA, and Randy Canale, president of District Lodge 141, which represents the FSA’s seemed to soften his position because it appears he knows a failed TA ratification could be worse. Canale said, “Judge Mitchell ruled today in favor of the company’s motion to terminate our collective bargaining agreement, but the airline has agreed to maintain the status quo of current agreements until ratification is determined. Failure to accept the final offer will result in the contract being terminated. There was no way our negotiators could endorse an agreement that outsources our members’ jobs. While we would have preferred a different outcome, voting provides our members with an opportunity to avoid termination of their agreements, Canale said.
I believe the IAM will ratify their new agreements because it’s their best option. Will the vote be close? Probably, but what was interesting is that today every flight I flew was perfect. I flew from LGA to PHL, PHL to MCO, MCO to CLT, and CLT to LGA. Each flight had great service from every work group, even after “impositionâ€. Why is that? The fight is over and as Mitchell said, “everybody knows what is at stake here.â€
In regard to Southwest entering the Pittsburgh market, I do not believe the new competitor will have much effect on US Airways’ successful transformation. Why? The airports operating costs are relatively high and there is poor O&D. Pittsburgh already has LCC competition from Independence Air, USA3000, AirTran, and ATA and Southwest’s entrance is more of the same. Southwest’s entrance in the summer will be with a couple of gates and 10 to 14 flights, which may grow to 40 or 50 flights per day, with US Airways operating over 200 mainline and express flights per day.
Also noteworthy, US Airways effectively shifted Pittsburgh flying to Fort Lauderdale, where the costs are lower, yield/revenue higher, and the facilities/ATC almost as good as Pittsburgh.
Today Gary Chase, Lehman Brothers airline analyst said the “decision clearly hurts US Airways, but less so than it would have a year ago. We don't believe this breaks the back of US Airways.â€
Why? In my opinion US Airways must have a competitive cost structure that can support GoFares or it will fail, especially in light of Delta’s announcement. Low fares are the future and either the company offers them at a profit, or it liquidates.
Meanwhile, US Airways will get a revenue boost at DCA because Independence Air, a problematic LCC, announced a cost-cutting move yesterday when it said it plans to eliminate 150 of its 560 daily flights -- most in and out of Dulles -- at the end of this month. Who wins? United and US Airways.
Separately, today the LGA Station Manager, Loretta Bove, told me yesterday the company announced they are going to increase staffing at PHL, which should help enormously. The company is offering furloughed employees for all ground work groups the opportunity to be a temporary employee, from 60 to 120 days, to work in PHL. These employees would handle customer service, baggage handling, catering, marshalling, and other duties.
In conclusion, does US Airways have problems? Absolutely, but the good news is that the financial community still supports the company, one of the three IAM units has a TA, seven out of nine unions have new labor accords, the IAM is hinting to the IAM-FSA and IAM-M units they should ratify their TA, and the company is still trying to restructure. Moreover, the court’s S.1113/S.1114 ruling gives the company more restructuring momentum and should provide more passenger confidence for future bookings. The company now has a greater chance of survival, all none contracts in place one way or another, and no strike threats or aggressive action, which is why the system operated normally yesterday.
Also noteworthy, an interesting twist developed early this morning when the Pittsburgh Post-Gazette reported that IAM-M spokesman Joe Tiberi said talks between the mechanics and the company continued after yesterday's hearing ended but it was still unclear what would be put to a vote. Why is that and could the IAM still want a meaningful TA?
In a company statement Jerry Glass was right when he said, “I believe our employees understand the gravity of the situation and will support these proposals as the best way to send a message to our customers and the financial community that we are united in our efforts to be successful.†Furthermore, "I think everyone understands what's at stake here," Mitchell said. In that light I do too.
Regards,
USA320Pilot
