The future airline industry from a furloughed pilot''s point of view.

SMMustang

Newbie
Feb 20, 2003
13
0
Delta and United have it wrong. Don''t start up a new ''airline within an
airline''...at least not yet. Northwest got it right, but that was over a
decade ago. JetBlue, and Southwest are in their grove for now.
Imagine this, with the leverage Tilton has with labor agreements and other
protections under bankruptcy, he revolutionizes the airline industry.
Eighteen months from now, United has less that 200 airplanes, with over 150
of them being widebodies and less than 4000 pilots. 777 Captain is making
slightly more than an SWA Captain with more days off. The narrow bodies run
from hub to hub to get international passengers to their gateway cities.
Now, this is where pilots like myself, on furlough, are going to have to
bite the bullet. UA dumps scope clauses and everything else that prohibits
the expansion and use of commuters. Remember, it is a do or die situation.
United CANNOT go head to head with jetBlue, Southwest and AirTran with the
same working rules it has for it''s international pilots. If they wish to
enter the point to point or LCC market, they will have to build capital from
their economic base (int''l flights) then revisit the idea during better
times with a different set of workrules. Using international profits to
establish and beat down the LCCs. And that is only if they wish to venture
into that market. Otherwise build your commuter base to get that passenger
from Durango, CO to Tokyo. Contrary to popular belief, SWA has been beaten
out of a market. Although it is not widely discussed, but Horizon was able
to get SWA to pull back on some of its Pacific Northwest routes. Cheaper
labor, better frequency. In the future there will be international
airlines, their commuters, and then the nationals, JB & SW. What did NWA do
a decade or so ago? When faced with bankrupcy, they focused on their
international flying and have since been accumulating commuters. They
own/partially own Pinnacle, Airlink and Mesaba if I understand correctly.
What is so great about SWA and jetBlue? I''ll tell ya...WalMart and Home
Depot! Lets take a look at KMart vs WalMart or Home Depot. WalMart & Home
Depot pay their people a fair salary with some nice stock to go along with
it. KMart doesn''t have to stock to offer, they aren''t a growth stock,
they''re not opening a new store every few minutes, so they have to pay their
people more to make up for it. In the same light that is how you get a $6
Million retirement at SWA. Problem for them is that there will come an end
to the rampant growth and then they will have to offer more than stock and
that will come in work rules and compensation. How do I know this? Because
WalMart has started to fight off union drives. WalMart stock of the 00''s is
not the same at WalMart of the 80''s. Similarly SWA stock isn''t going to
grow at same rate forever, the Captain at SWA is much better off than the FO
at SWA in terms of retirement (Just like most other airlines). In addition
the SWA FO is not as well off as the jetBlue FO, because of the expansion
possibilities of jetBlue.
Who is in the catbird seat? jetBlue. I want you to build an
airline...fine. Now, I''m going to give you a bunch of money, new equipment
favorable work rules and the best footing possible in the airline
industry...see what you can do then.
I do not work or ever worked for United SWA JB WalMart KMart or Home Depot
 

whaledriver

Advanced
Jan 20, 2003
140
0
SMmustang...furloughed from which airline? I believe you are right with the 'airline within an airline' logic (i.e. starfish) This will ultimately kill UAL (ch.7). UAL MGT have already made way too many poor decisions...only with a golden parachute.
 
Oct 29, 2002
13
0
Mr Mustang'

Finally a cogent discussion on how to fix some of the ills at United and the other legacy carriers. Trying to reinvent yourself into a LCC is not a long term solution to the current woes. Right now there is simply too much capacity for the demand and constant pricing wars are not going to reap positive cash flows. Repeatedly looking to labor for givebacks is not a solution either. You need labor on your side to be successful in the long term (see SWA). The only clear road to survivorship is to shrink into a very defined product then nurture and grow that product into a cash machine. Yes, I know that shrinking into profitability is not a very popular idea and has had only moderate success in the past. However, one must not just reduce the route structure but the entire infra-structure as well to be successful. Painful cuts across the board will be necessary, probably to the levels you mentioned. Mr. Mustang.

Your proposal of concetrating on the international routes and the feeds into those routes has merit and great potential (save for war time). Hub to hub routes with SJ/RJ feeds should also do well. United et.al. should stop trying to be everything to all people, just like the current LCC's do not try to go after every consumer in the air travel marketplace.

Good luck to all.
 

UnitedChicago

Veteran
Aug 27, 2002
756
0
www.usaviation.com
Initially, I was a big Tilton supporter. I was hopeful that an outside could shake things up. Now I think he, Brace, and Hacker need to go. One need only look at transcripts of Tilton's responses to interviews. I'm alarmed at his sophmoric responses.

One thing is certain - TPG would not waste their time talking about United unless they were convinced that United can be fixed.

And that's something worth repeating: United can be fixed.

I'm pulling for TPG to join with the unions and present a turnaround plan to the judge.
 
OP
S

SMMustang

Newbie
Feb 20, 2003
13
0
I am furloughed from NWA. I agree that Tilton may be poison for UAL. From what I've read, the consultants that he's brought in are specialist in liquidating companies. I can't blame the unions for looking for help from somewhere else. The unions know they will have to swallow a big pill, but only if it is the right medicine. Hindsight being 20/20, Goodwin should've opened the books to the unions long ago when he said that the airline was in trouble. But when mgt cries wolf (now there is a name from the past) too often eventually nobody is going to come to the rescue. I applaud AA's efforts in full disclosure with the union. Integrity is priceless, and I think that is part of what Herb had at SWA. Legend has it he once pulled in the pilots and said this is what I'd like to pay you because with the rest of the money we are going to do this this and this. When this this and this didn't happen entirely, he pulled the pilots back in and said something to the fact that I owe you some money. Some corporate officers would pat themselves on the back for 'saving' money (I would consider it stealing) and give themselves a raise. Something I read in Gulliani's book said what amounts to, I'm accountable 100% of the time. Just like we are in the cockpit, Mgt should be also. I'm not asking mgt to do anymore than what they expect from me. As for NWA mgt and union, I was truly impressed that they were able to negotiate a pay raise last year. Although it didn't last, NWA was the only major airline-that I know of-that was able to negotiate a pay raise for pilots. Therefore, now that NWA is asking for help, I can't disagree too much. Although, the contract doesn't have to last longer than half a decade and I don't think mgt will get everything they asked for, the fact remains from my POV that they tried their best last year.
 

DB Cooper

Member
Aug 20, 2002
70
0
Seat 18C
www.usaviation.com
February 27, 2003

Dear Fellow Pilot:

Management’s latest business plan regarding a low cost airline and ALPA’s opposition to such a proposal is causing understandable confusion and frustration on the line. I would like to explain what the company proposes and how this proposal would affect you and your career at United Airlines and why your MEC is so strongly opposed to this proposal.

Under management’s plan, the company would be broken into two separate airlines. One airline would be the “mainline†and the second would be a “no frills,†low cost airline. This new low cost airline would operate about 130 United Airbus aircraft – over 30 percent of our domestic network, which we all built – as a permanent, separate company with an independent management, corporate structure, operational system and employee group.

We have three major issues with management’s proposal for a low cost airline.

First, we do not think that the business logic of the Company’s proposal is compelling. Our airline is built to serve the business traveler and the premium leisure market. This market equates to only 20 percent of our passengers but over 80 percent of our revenue. This premium revenue is the lifeblood of our business. Management’s proposal puts this revenue at extreme risk by diverting those premium business passengers away from our mainline and into another carrier’s premium product.

It basically amounts to the company giving away the store.

Second, if we were to accept the underlying low cost business proposition, we cannot ignore the extraordinary uncertainties involved in any attempt to roll out a separate airline. In our view, this approach carries an extremely high “execution risk.†We have little confidence that United’s management team can implement a separate airline without incurring unexpected costs, loss of customers or other obstacles that overwhelm the program before the low cost product is up and running.

Under United’s current proposal to “transform†our airline, management must create a new product, a new brand, new operations, a new management structure, a new employee group, and a new employee culture. All of this will be permanent, with no room for error. This task would pose an extraordinary challenge for any group of managers under any circumstances; it will be an overwhelming task for United’s management team.

Third, and most importantly, the Company’s proposal amounts to nothing short of the break up of our airline and our pilot group. We simply cannot allow this to occur.

Management’s proposal would mean more than 1,000 pilots would be moved out of United Airlines, stripped of United seniority and forced into the new airline. These pilots would be permanently severed from United Airlines, the United pilot seniority list and the United pilot collective bargaining agreement. They would be paid at about 75 percent of the reduced United hourly rates; receive rock bottom health insurance; and earn little or no employer pension benefit. Under the Company’s proposal, low cost airline pilots likely would spend their careers on the A-320; would have little or no ability to change domiciles; and would have little or no opportunity to fly a United “mainline†aircraft.

In addition, management would have every financial reason to grow the new airline at the expense of United. Over time, the low cost airline would continue to shrink the mainline, and would eliminate more of United’s domestic operations. We can expect to see the new airline’s “cost structure†as a threat to the pilot contract in every future negotiation in an attempt to drive both pilot contracts to the lowest possible point.

Our task at hand is to fix the whole of United Airlines – to lower our costs throughout the airline, to provide additional operational flexibility on our domestic markets and to maximize the revenue advantages of our network. The MEC always has been prepared to lead that cost reduction effort. There are no quick fixes. We cannot afford to pursue an industry fad at the expense of our futures and United’s most important network assets.

Your union is calling upon management to set aside its labor agenda and work with us on a true – and truly substantial – economic solution that will reduce the Company’s costs, maximize its revenues and allow United to compete effectively throughout its network. Our focus is ensuring that our airline successfully emerges from bankruptcy with a durable, long-term solution for the future.

Fraternally,
Captain Paul Whiteford
MEC Chairman



--------------------------------------------------------------------------------

 
OP
S

SMMustang

Newbie
Feb 20, 2003
13
0
There has to be some sort of flow though? Do they envision a United Domestic pilot having to interview, and spend a probationary year at United international? I guess this would be a merger in reverse only uglier. This will not produce a unified effort. More animosity is not what this airline needs. If I didn't know better, ok, let's just say I don't know better, but are they TRYING to make matters worse? Find a current source of revenue, focus on it, trim the fat and then grow back from the base.
 

HPearlyretiree

Veteran
Nov 6, 2002
1,881
1,614
I honestly don't know what the heads of UA are smoking, and, I honestly don't know how UA is gonna make it with the leadership and tired ideas put forth by Tilton and company.

I wish the folks at UA well, I met some wonderful people from there when I was still in the industry, but I just keep seeing Sabena like mismanagement and fiddling while Rome is burning.

A LCC is a money hole, even if it is sucessfull, its gonna eat up lots of precious $$ first, and UA needs its cash now.

Oh well, my travel agent booked me on a UA express flight today for April, so they got a few of my bucks!
 

GGpillow

Advanced
Aug 19, 2002
103
0
www.usaviation.com
[blockquote]
----------------
On 3/1/2003 12:09:27 AM HPearlyretiree wrote:

I just keep seeing Sabena like mismanagement and fiddling while Rome is burning.


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


I agree. What do SwissAir, Sabena, and UAL have in common? McKinsey consultants..... looks like they did a bang up job on Swiss and Sabena............
 

ual747mech

Senior
Nov 26, 2002
279
0
I think Tilton's idea is to keep the same level United is in right now. In order to do that, United will need to create a LCC within the company to compete with the LCC's. Active(who will be furloughed) and furloughed employees will have a chance to go to the LCC. Either that or shrink the company and give up the unprofitable routes to the LCC's. It's going to hurt the employees affected either way but the later will affect them more.

This is what he said in his interview:

Q. Some workers will argue they're still doing the same job, whether they're working at United or at United's low-fare carrier. You're traveling all over, meeting with employees. How are you going to win them over?

A. You keep talking. It isn't as hard as you might imagine. The discussion we have with employees about it focuses on, 'Well, why not? How would you rather change? Would you rather change by competing and growing, or would you rather change by shrinking?'
 
OP
S

SMMustang

Newbie
Feb 20, 2003
13
0
In the long run, I would say shrinking is your better option. More people get furloughed, true, but it is a safer bet. Going head to head with SWA is dicey. SWA already has the system set up and is making $. UA still has bills to pay and has to have a positive cash flow, it can't lose any $ finding it's niche in the LCC market. Ie,
Starfish can make a profit flying SFO-LAX for $69 with a break even load of 70%. SWA, can, because it has the financial backing fly SFO-LAX for $59 with a break even load of 85% and maybe loose a couple dollars. Why? Because they more than anyone else would love to see Starfish die. The vultures are circling United rumor has it that some airlines' philosophes, even before bankrupcy was to add a segment everytime UA removes one hoping they could drive UA out of a market--out a business is almost to nice of a plum to pass up. The other airlines are attacking you, you must realize this. They are not going to sit on the sidelines and let you get back on your feet. If you use $ from your international flying right now to prop up your LCC the other international carriers will attack your overseas routes. I imagine your international routes are profitable. Cater to those passengers, ask them to fill out questionaires, especially the 20% cream...how can we make you happier?

ual747 mech, I admire your determination, I can see that you are a very valuable employee that cares and I wish the best for you.

Whaledriver...who are you employed by?
 

ual747mech

Senior
Nov 26, 2002
279
0
[blockquote]
----------------
On 3/1/2003 8:12:42 AM SMMustang wrote:

In the long run, I would say shrinking is your better option. More people get furloughed, true, but it is a safer bet. Going head to head with SWA is dicey. SWA already has the system set up and is making $. UA still has bills to pay and has to have a positive cash flow, it can't lose any $ finding it's niche in the LCC market. Ie,
Starfish can make a profit flying SFO-LAX for $69 with a break even load of 70%. SWA, can, because it has the financial backing fly SFO-LAX for $59 with a break even load of 85% and maybe loose a couple dollars. Why? Because they more than anyone else would love to see Starfish die. The vultures are circling United rumor has it that some airlines' philosophes, even before bankrupcy was to add a segment everytime UA removes one hoping they could drive UA out of a market--out a business is almost to nice of a plum to pass up. The other airlines are attacking you, you must realize this. They are not going to sit on the sidelines and let you get back on your feet. If you use $ from your international flying right now to prop up your LCC the other international carriers will attack your overseas routes. I imagine your international routes are profitable. Cater to those passengers, ask them to fill out questionaires, especially the 20% cream...how can we make you happier?

ual747 mech, I admire your determination, I can see that you are a very valuable employee that cares and I wish the best for you.

Whaledriver...who are you employed by?
----------------
[/blockquote]

When we went to head to head with Southwest the first time with the Shuttle(code named U2) we were actually beating them in their game. We started losing eventually as the work rules and cost changed and had to raise the fares to support it. That is why Tilton want's to keep it separate this time to control the cost. It seems like a good idea especially right now that the LCC's are taking a lot of our market shares away from us in areas we're competing with.

If this plan is implemented, there will be two parts of United, Mainline(which will have the current cost structure) and a LCC(an entry level field for all employees which will have minimum cost structure). That is my understanding from what I've read. Whether that will hurt us, the employees, in the end, I don't know.
 

gatemech

Senior
Aug 24, 2002
356
5
www.usaviation.com
When the judge finishes with all of us we will be the LOWEST COST CARRIER. Why separate when the cost structure will be what they want? They will also get the work rule changes. Done deal.

I feel as an employee who contributed to the ESOP that creating a separate airline is like stealing from the employees.
 

N230UA

Advanced
Sep 24, 2002
114
0
Visit site
UAL747mech:

THANK YOU. It is so rereshing to hear someone from UAL embrace the new reality. It is either shrink or compete and grow.