The State of US Airways

A

AOG-N-IT

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Aug 19, 2002
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Well Dr.Doom...Yet another informative post!! I appreciate it too!! Here again..it's more wasted energy on The Known

I'm not trying to Shoot the messenger as you so aptly put it...but again , beyond the employee Give Give Give option...you have offered up nothing in terms of tangible/actual resolve

Chip , I give you a maximum of respect for your willingness to educate us..and keep us informed. I also respect your abilities as a Pilot. I do however take exception to the fact that you offer nothing tangible toward seeking a resolve to our actual problems.

The airline industry has always used the mantra that Fuel and Employee's are thier two largest costs...I have heard this going back to the days when my father was buliding DC-8's and DC-9's in Long Beach...and was hardly old enough to understand beyond fuel being converted to noise and smoke.

Almost 40 years later, The corporate mindset is still resting on it's all labors fault..and we keep getting tossed the luxury of blaiming fuel prices every so often too.


Let's examine this closely. Fuel if viewed in a proper text? is possibly the least affected item in costs over the last 35+ years. I remember the days of fuel being below .50 per gallon...now it's $1.35. During the same span of time , an average house was $20 to $25,000...now that same house depending on geographic region and condition , can easily bring $200,000.
Keep in mind..Gas in my area is $1.35 per gallon for 87 octane..not so bad...but people still complain , Yet on the other hand..this same person will pay over a dollar for something Inert like 16 ounces of bottled water?

The cost of everything has gone up...but salaries in our business are going the other direction. One has to ask..when does it cease being worth it?

USairways, biggest enemy is USAirways itself. Sure U has had to make cuts in visible issues , to show an immediate impact on the supposed bottom line. The problem is not as much as the visible issues that is killing us, it's issues that nobody in U Management cares t apply the needed energies to fix permanently. In another thread I listed 7 to 8 items/issues , that if addressed effectively? would save countless millions of dollars for us....and in turn save jobs and stop the needs for employee's to help finance thier own jobs again.


I have challenged you before to take an alike approach...but what do you do night after night? You comeback like a head cold with the same old song and dance...In summation Chip, If you ain't part of the solution..you're damn sure part of the problem. Not to mention the impact the negative diatribe is having on peoples motivational levels.

Try not being a corporate Sock-Puppet..start exposing problems that take away from our ability to make money..see what non-human sacrifices can be made to help our situation for a change


Change your methods Chip!! You have used enough energy on scare tactics..and badgering your co-workers with this crap to power up the eastern seaboard for a year..too bad your negativity isn't an alternative fuel source for our aircraft..if it were? 1/3 of our cost problems according to the blinded leadership would be resolved effective this moment.


Please spare me you patended whine about Shooting the Messenger...lets call it what it is this time...It's more of a Swift Kick in the Ass to the Town Cryer.

[img src='http://www.usaviation.com/idealbb/images/smilies/9.gif']
 
US Airways and the U.S. airline industry are operating in an unprecedented financial crisis. Since March, the industry revenue recovery has remained stagnant beyond ATA and airline analyst expectations. Compounding the problems are rising costs for war-risk insurance, security, and fuel, which has risen from $26 to $31 per barrel since July.
These fundamental factors, outside the control of US Airways, are now further compounded by an international pension fund crisis where Barron’s recently reported 240 of the 500 S&P 500 company’s face underfunded pension obligations. News media reports indicate after the 2002 actuary data is released next year, 325 out of 360 S&P 500 companies who have defined benefit retirement plans could be underfunded. Like US Airways, last Friday United Airlines warned if interest rates continue to fall its pension liability will be $5 billion in the next six years.
The deteriorating fundamentals caused US Airways chief executive officer Dave Siegel, chief financial officer Neal Cohen, and Skadden & Arps bankruptcy attorney John Butler, to tell creditors at last Tuesday’s Section 341 bankruptcy meeting, the company has exceeded its initial $1.3 billion annual cost reduction target. However, to return to profitability the company must obtain an additional $100 to $300 million annual expense reductions.
Management told its creditors it hoped to obtain most of the cuts from aircraft leaseholders, but I understand some of the holders do not want to take further “haircutsâ€. Specifically, holders of nine B757 and one B767 EETCs are threatening to call Siegel’s bluff of rejecting lease agreements and are now lobbying the creditor’s committee for a liquidation of US Airways.
In response US Airways notified the SEC on Thursday, October 24 it would need to further trim expenses if it is to regain profitability, win a federal loan guarantee, and receive further debtor-in-possession funding.
So what can US Airways management do?
In my opinion management has two options: Transition its Chapter 11 reorganization to a Chapter 7 fragmentation/liquidation or “further tighten its belt†and seek further cuts from all stakeholders, including labor, to return to profitability.
US Airways has said it would not seek further employee cuts, which it has lived up to, and instead is further downsizing the airline with additional employee furloughs to further “tighten its beltâ€. This is expected to continue; however, in its October 25 January 2003 pilot bid management notified ALPA that the airline would maintain an active fleet of 279 aircraft. The company intends to fly less block hours to conserve capital, unless it can find ways to lower its costs to cost effectively fly the active fleet, thus it appears there will be further across-the-board furloughs throughout all employee groups.
Some observers believe the company has pushed the aircraft bondholders are far as they can and the Seabury Group, the company’s consultant who has coordinated aircraft lease discussions, has done an excellent job of lowering aircraft rental expense. If true, to make up any shortfalls to obtain required financing, to cover short-term expenses until industry fundamentals recover, the only other avenue available for further savings could be labor.
So what should labor do?
Participate in the process of saving US Airways or “bury its head in the sand†and blame management for the current financial crisis? It appears labor is going to participate in the process and union leaders and management have or will meet to discuss the issues, but time is short.
Next Thursday, November 7, the bankruptcy court has scheduled its third Omnibus Hearing. Major agenda items include the final $200 million in debtor-in-possession financing payment, completing the RSA DIP agreement, reviewing motions to reject aircraft leases, discuss any new Equity Plan Sponsor (EPS) bids, and to address any requests for relief since the September 26 hearing.
In addition, reports indicate other investors interested in becoming the Equity Plan Sponsor reviewed confidential corporate information last week in Crystal City. It is unclear whether or not these parties are labor friendly, but these potential investors have until November 14 to submit a bid to the court to invest in the company, which could be a fragmentation/liquidation plan or a labor friendly agreement. However, if the investors are unfriendly, it may be required for labor to provide further concessions to lower unit costs as a requirement for a labor friendly investor like RSA or TPG to outbid the potential labor unfriendly EPS bidder.
I fully understand employee frustration and anger, but to “shoot the messenger†because you do not like the facts or to purposely mispronounce a person’s name is an insult. I suspect this type of behavior is not a true picture of the poster’s character, but is more of a feeling of desperation, fear, and in the “spirit of denialâ€.
I have repeatedly said the problem with US Airways’ labor expense is not W-2, but productivity. Meanwhile, 90 percent of the S&P 500 companies who have defined benefit retirement plans face serious underfunding, which will require significant corporate contributions per ERISA that will depress earnings. This corporate pay out will jeopardize the loan guarantee because US Airways may not be able to reach the 7 percent profit margin required by the ATSB, unless these pension plans are adjusted.
In my opinion, US Airways and its employees will continue to give until the benefits of major airline employment no longer exceed other opportunities, which I believe at this point do not exist for most of the employees. Furthermore, I encourage all message board posters to discuss the issues in a constructive way, instead of unprofessionally venting frustrations in a manner consistent with the Yahoo! Message Board or like “Locker Room Jiveâ€.
Meanwhile, US Airways has begun discussions with its unions regarding the latest developments and has asked the entire ALPA MEC to meet with Siegel and senior vice president of Employee Relations Jerry Glass on Wednesday, October 30. Sources believe the company will begin further discussions with other union leaders in the future because time is short, with only 10-days remaining until the next Omnibus Hearing.
Chip
 
Chip,

Thanks for your level-headed reporting. It is becoming clear, even to those deepest in denial, that labor is going to have to rethink options and old school ideas to help keep USAirways from closing for good. This is make or break time for all of us.
 
Chip,

Thanks for info. Ignore the naysayers who refuse to look the facts squarely in the eye. I have to be honest, this latest series of events makes me worry that US will be unable to reorganize successfully. The scary part of all of this is that NOBODY knows where the bottom of the revenue valley is. This could drag on indefinately. If so, there will be a conga line to bankruptcy court. But as long as US remains in bankruptcy court, and as long as the industry revenue picture continues to worsen, US Airways survival is further in doubt. I sincerely hope that you folks can navigate this crisis and reorganize successfully. But I shudder to think what another war with Iraq will do to this industry.
 
[P]I'll never understand why airlines will stand idly by, throwing their hands up in the air, watching revenues decline and insist on cuts, cuts, and more cuts. The revenue managment model is broken. It's calculating walkup airfares on a 600 mile round trip at $1,800. It's not getting those walk up $1,800 fares, but they're still in the revenue model. And as long as it is, there will also be $99 transcons in the same model. [/P]
[P]U could lead the way to at least try to improve revenues - limit the fare buckets, reduce last minute fares, and increase advance purchase fares enough to cover costs. For years you read that the business traveller is the bread and butter of the airlines. Yet, when the economy turns south, they turn to the leisure traveller to bail them out. Only problem is, they are offering a below cost fare to get the leisure traveller. Why not do something to encourage business travellers? Immediately after 9/11, a lot of airlines offered tickets below costs just to get butts in seats. Even Southwest. Yes, Southwest's and Airtrans costs are lower than U's, but WHY does U need to get their costs to Southwest and Airtran levels before they even attempt to do something about the revenue picture. The fact is, the employees could work for free, but if the airline is charging $2,000 for a last minute ticket (and getting very very few of those) and filling planes with advance purchases fares that don't even pay for the fuel, the company is going to lose money. [/P]
[P]I don't buy this gotta get costs under control first argument...try this...do a fare sale for the business traveller. No 21 day advance purchase. No Saturday stay. Fully changable and refundable. Just cut the current fare in half. Name for me any route (that doesn't compete with a low fare carrier) where you wouldn't make a profit on a ticket that was half the current walkup fare. You'll still make money on the tickets you sell. You might find yourself selling more tickets than you were before. Then, combine the revenue increases with the labor cost decreases and you just might find that you are making a profit. Right now, it's cut city. And nobody seems to give a damn about the stimulating the revenue.[/P]
[P]Most airline management apparently hasn't paid any attention to what Southwest does. I guess they feel it's beneath them. Times are tough, even for Southwest. But they haven't approached their employees about givebacks. Rather, they are the ONLY major airline that is doing anything to increase revenues. $299 max for a one way fare. Here's some news....it's drawing travellers. They are making a profit, and it ain't all because of costs. What would it hurt for U to do something similar, and no, not $299 fares. Just reasonable fares. With no restrictions. You'd do something that's usually called stimulating demand. And from where I sit, it seems like it's a damn site easier than trying to negotiate a second round of concessions. [/P]
 
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UAL777Flyer Sir, Just on the chance that your applied term of Naysayer was directed to me? Let me respond , I'm not a Naysayer...I'm looking...as the company and industry should be doing , for resolve of our problems.


The daily dose of the Blah Blah Blah or DIP Financing , ATSB Loans and the continued slump in demand for our services.....IS nothing more than an over-statement of the Known issues.


Certainly there is a chance that Dave may have to back-track on the promises to not approach labor again for more. I'm seeing this becoming more and more likely with each passing day. It's also becoming more and more of a given fact that U will not be alone in this need....nor will we be alone when it comes to the possible option of never recovering from this downward spiral. How much more need be said?


USairways problems are not due to anything more than internal failures...and they are historically repetative failures. WE certainly need to be fixing the short term problems that are dooming us in regards to the DIP financing and ATSB Loan issues. however we need to be fixing the issues that have created and compounded these issues too.


Should we be forced by immediate need to make the sacrifice again? What's to say that it will provide the needed boost....unless the core issues are being resolved in conjunction with the immediate liquidity issues?



People at USAirways have always had an attitude like they were dipping into a well , that had no foreseeable bottom to it. The reality of this not being so has shaken people , angered some...and left many with no future at all. Why is this? The reasons are infinante.


We know that leadership has always been a problem. We know if we are being honest with ourselves? , that it made no practical sense for the then number 6 carrier (now #7 in size) in the US....to be paying people parity plus one percent Vs the two largest airlines in the entire world. It doesn't take a Rhodes Scholar or a Werner Von Braughn to figure out...that if you don't have the ability to draw revenue on pair with others , you obviously don't have the ability to compensate anyone in alike manner either.



Then we get back to the internal issues that I have addressed in earnest before....I see by response on other threads , that you yourself , Chip and even other outsiders from say WN , completely grasp what I'm talking about in regard to what I will term as a core initiative for success.


My own economic concerns have Forced a complete review and change of how I conduct my life...this is in a prepared state of mind and being...to deal with, address or handle whatever fall-out that may come my way , If you were to furlough me...or go to Chapter 7. The revamp of our approach and thinking on how we do business here , needs to be approached in an alike mindset. How we did it before...needs to be shelved....the facts based on history say this in engraved stone. (Hopefully not a Tombstone).



Sure some will say that we agree with you AOG....but your approach to Chip Munn's observations are out of line!! OK , I'm out of line....but I'm preaching ideas to fix the problems beyond the short term....but my ideas will also free up money in the short term too. My philosophy is thinking something that U has never had a hold on...and that's thinking BVR (Beyond Visual Range) If in fact we could address our core problems...we would not be where we are, that's a KNOWN....but by attempting to fix our core problems now , we would not only lift some of the immediate financial burdens...we would be better positioning ourselves for the future.




Again, Some will say you are being too hard on Chip Munn , OK...I say that I'm hard on Chip Munn for a reason. Chip is a knowledgeable man...whom I actually respect and admire for what he has to offer us. Where we part company is based solely on his being a Meesenger of Doom I think his constant drumming of the beat about employee compensation reductions being the only alternative for our survival , as being complete Hogwash We have given already...and will be for the next 6 years. This I went along with in a spirit of teamwork....and hope. Having watched the events that destroyed Eastern , Braniff , Pan Am and now TWA to name a few , I have come to the conclussion that Employee Give-backs not being linked to a major internal reform of the entire method of conduct and business , becomes a moot point.


In theory and in practical application...We could all be working for free by continuing to give....but if the business model is not re-aligned , the culture and mechanics of how we conduct business not re-vamped...We would still find ways to lose money. Winning and prosperity is a by-product of a mindeset that strives to win...It seeks self improvement....it adjusts from it's learned errors , it corrects it's identified flaws. U is still not doing this....it's making nothing more than splashes in the press about increased fuel costs....and employee lay-offs. Not one thing is being said about what can we do to actually repair or improvel ourselves?


I will say it again for the slow learners...I respect and admire Chip Munn...I agree with about 90% of what the good Captain has to say....I do not appreciate that the only thing he brings to the table here..as being spoiled milk. I have challenged him directly , because of his knowledge and talent with the written word , to join people like myself to seek solutions to our far reaching problems. Imagine for a moment, if of the 36, 000 souls still on the pay-roll to date , were to come up with only one idea to save on operating costs? The windfall would be beyond actual calculation. Imagine if people could be swayed into this way of thinking by someone with Chip's talents and mastery of the langauge , instead of some one like myself , that speaks and writes in an off the cuff fashion.


In closing...Negative begets Negative!!....and if you follow my mothers rule of finance? Which states...If you manage every penny...and you always stay in control ..the dollars will take care of themselves This is the manner in which U will either emerge ..or fail to emerge from it's/our problems.





Best wishes to all.....AOG-N-IT
 
Oh give me a break, Chip. You begged us to take the last round and we did. Now they come back for more. This is the same old failing airline story again. Labor is the big evil and is somehow blamed for the mess that we're in and somehow employees getting the boot and pay cuts will solve things. Didn't we learn anything from Pan Am and Eastern?

How can we increase productivity anywhere except for with flight crews?

Mechanics have lost all of their unproductive elements of their contract. As Mech and related, I am down to a grand total of 5 days of vacation next year - the mop-boy at McDonalds gets more. I lose two vacation days as well. Most of my coworkers lost their paid lunch. Where are the productivity problems? We're still pushing airplanes out the door reasonably fast, especially noting that we have hardly any people to work them.

Customer service is having terrible personell shortage problems right now. Que times for res are through the roof and hubs are terribly understaffed. Are we going to staff one agent to a gate to increase productivity? Christmas is coming and we aren't staffed to deal with it. Things could get REALLY ugly if we get some weather around then.

The only productivity problem is with flight crews that sit around most of the month. Maybe they should be filling in as needed fourty hours a week like the rest of us? There is plenty of work to be done around our little company.

Labor IS NOT the problem at US Airways. As far as employee cost goes, the only problem was the obscene salaries we paid to Wolf and Gangwal, whose terrible management mistakes drove us into the dirt.

Labor is the one variable cost that airlines have easy access too, that's why they come to us first. They do dumb stuff like neglect to hedge fuel, fly around five different models of narrow-bodies and pull out of markets only to give room for our competition to fester in and then tell us that we're the problem.

In the end, shrinking the airline won't save US Airways. As the airline shrinks, we keep laying off junior employees. So, we end up our labor base being entirely made up of people with 4+ weeks of vacation, who are going to be very pissed and unproductive when they are working midnight shift with tuesday/wednesday off with 20 years of time. Also, by the time the airline has that few aircraft, it will have insufficient feed to support the hubs.

Those unprofitable flights feed profitable ones. When you eliminate the unprofitable ones, the formerly profitable ones cease to make money. It's like a black hole, once the implosion starts, it just gets bigger and deeper and feeds on itself.

I can't really think of a way to save the company at this point. But shrinking isn't a viable option and nor are more layoffs and pay cuts.

A good start might be to stop starting fare wars like we did last summer. (Duh! We're loosing money, so lets have a sale and discount our product! Although denied, I think it was a firehouse sale to try to get some cash built up for the bankrupcy).

I think where US can grow is point to point service. For example, Florida to west coast flights. That market is grossly underserved. I think our Carribean expansion is in the right direction. RJs are fine as well, but they need to SUPPLEMENT mainline flying, not replace it. (ie. Don't use to replace mainline jets, but use the big jets in big markets and the smaller ones to little markets.)

Anyway, I've noticed that Dave has been noticibly silent. I'm not as pessimistic as some, but I question how long this silly charade will last.
 
Despite the cooperation of labor, and the protection afforded by having invoked bankruptcy, the company continues to founder. Especially curious is its apparent inability to forecast operating trends. Notwithstanding the seemingly endless downward spiral in performance for the industry as a whole, one gets the feeling that this particular management is out of its depth.
 
U keep laying off employees and reducing flights to return to profitability they have done this since Nov of 2001.

Of course its not working because when they cut flights they reduce revenue and when they reduce revenue they cant pay their bills.

I know the reason they do it but it does not make sense to me.

These pay cuts that the unions negoitiated with the company that was ratified by the employees of U when does these pay cut take effect was it to take effect next year , immediately or after bankruptcy(assuming we make it).

If they not implemented maybe it should be implemented immediately.

That with lowering fares and returning some flights would help
 
Chip says productivity and pensions are now the problem. I don't know about you all, but to be more productive at this point, I'd have to have 2 more arms.
Pensions? Surely you're not talking about MY pension?

INVOL
 
Dave Siegle is not the problem. We (the employees) are not the problem. Revenue is THE problem. How do you solve the problem? In econ 101 we learned that when revenues exceed expenses everyone smiles on their way to the bank. When expenses exceed revenue you must a) Increase revenue B) decrease expenses or c) a combination of both.

This is not rocket science. This is much more complicated because the ONLY thing Dave and the boys can predict is expenses. Revenue is a fleeting and moving target. He will ATTEMPT to increase revenues in any way he can, but he would be foolish not to try to decrease even MORE expenses during that process. We here on this board can do NOTHING to help him increase revenue. Even if we wanted to we couldn't. We are not salesmen. We can only help to decrease expenses.

If I were the Poobah of the airline I would ask us for a 1 year freeze on pension contributions. Then I would ask ALPA for some serious productivity gains. Of course I would make gaurantee that these further concessions would snap back once revenue got to where it needed to be. I am an ALPA member and can think of a whole lot of ways for us to become more productive. But it would involve thinking outside of the box. But I would INSIST that Dave, in his attempt to raise revenue also think outside that box.

Yes, we are in very dangerous times. But intelligent people in management AND labor can get us through them. Do we both have the forsight and guts to think thoughts about this industry that we never have before? Or will we squander this chance with the same old tired thinking (on both sides) and end up like Eastern? I think we will get it done. ALPA and Dave hold the key.
 
Yes, revenue or lack there of is the major probelm. Look at today for example, we have two flights into FPO booked to a total of 30 passengers. We have a A330 going PHL-SJU-PHL with a 100 or so souls booked each way. No, the booked freight is mininal. Why don't we sit the Big Bus and put a Baby Bus on this flight. I thought part of going with the Airbus family was the flexibility of swapping smaller aircraft for larger ones when loads permited. Along the revenue front, why aren't we looking for work? Contract work is out there but the company doesn't want this kind of work. Another Major cost is landing fees. In our station we have only 11 flights daily and our landing fees to the Port was over $350,000.00 for September.
 
Chip,

I agree, things aren't looking good. But at this point there is no alternative for mechanics. U so badly wants productivity increases like receive and dispatch. I agree it doesn't take a mechanic to do it or the de-icing but those jobs are foundational to our scope. For two reasons we can't possibly give them up:
1. It would put a 4 figure number of mechanics on the street.
2. Those jobs are the only reason why the IAM is still on the property. And the IAM knows it.

Some are saying, well, gee if U goes under then you haven't gained a thing anyhow. A legitimate grip but still the productivity issues such as push back are non-negotiable items unless all jobs are preserved.

If U goes under then there is nothing more a mechanic can do about it.
We can't fix management...only aircraft.

Mechanics are professionals and that is one thing most of you are failing to realize. Our profession and knowledge isn't exclusive to the airline industry, unlike pilots. I care about this company but honestly i could find a comparable job somewhere else. Hey everyone needs a mechanic, right? How many people in the real world need a pilot? I'm listening,,,I can't hear anyone. Hello!!!
 
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Hope..I agree with you about improper utilization of our organic assets. The A330-300 making low rev bounces to SJU is pure insanity!!

Something else to consider too...and something else U fails to consider..Should that A330-300 break in SJU?.it's going to take support from either CLT ,PHL or to a lessor degree of chance PIT , to get that monstrosity back out of there. No help resides regarding this aircraft there.

We should be using the OEW tasked A319/320's..or even the OEW B737-400's on that route...not only would the aircraft match the current demand , we could also gain the advantage of the indigenous support mechanisms that SJU provides for those type of aircraft. The Airbus being a decided dis-advantage to the Boeing in SJU.


These are exactly the type of issues I keep bringing to the forefront about our rate of burn..concessions will never ever offset this kind of thinking..or lack there of!

I'm also willing to bet that we are paying higher landing fee's , based on the A330's gross landing wieght in SJU too.

One has to ask..is anyone thinking about anything beyond drafting revised schedules , and planning the next reduction of the human element here?

I have to wonder...has failure been the plan all along? I guess we need Perry Mason to figure out who has the most to gain internally , so we will know Who Done It? before the post-mortum is complete.

Thank you for sharing the benefit of your inside knowledge Hope777!!


BTW..If some will remember one of the main Dave Road Show topics?...it went to the tune of I'm going to park 31 airplanes..because I'm losing money flying them and paying the crews to man them...I would be better off paying the leases and letting them sit. Well if this is the case?...I would say that Hopes comments is yet another reason to be looking at ditching the leases on the burdensome A330 Fleet...when demand doesn't justify flying one type...how can a gross imbalances like this be justified?...Certainly it's not the fortune we are making on the European Routes? Could a standardized fleet of cheaper to lease and support B767's not do the same thing ..only much cheaper?
 
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