UAL and U Loan Feedback: WSJ Article

UnitedChicago

Veteran
Aug 27, 2002
756
0
www.usaviation.com
Thought we could use a fresh article to blab on about :).
US Air Seeks Labor Savings,
Raising Concerns About UAL
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
How much is enough?
US Airways Group Inc., pressured by the gloomy revenue outlook to find new cost savings on top of the $1.3 billion in annual expenses it has lopped from its operations, is turning again to its unions. This move is raising concerns about the adequacy of labor savings proposed by another carrier seeking federal loan guarantees, UAL Corp.''s United Airlines.
Meanwhile, Delta Air Lines Wednesday conceded that pay cuts aren''t out of the question. But Delta, which isn''t seeking the federal loan assistance, said that step isn''t in the current cost-cutting plans at the mostly nonunion carrier.
Operating under bankruptcy-court protection since August, US Airways said it must tighten its belt some more if it hopes to win a $900 million federal loan guarantee and tap the remainder of its debtor-in-possession financing. Without those sources of capital, it might not be able to emerge from Chapter 11 next year as a smaller, regional airline.
Instead of revisiting pay cuts, US Airways is hoping to gain work-rule changes that would boost productivity and allow it to do more with fewer workers. A spokesman for the nation''s seventh-largest airline declined to comment on discussions, except to say the company reserves the right to sit down again with our unions to try to seek relief on a voluntary basis. A spokesman for the Air Line Pilots Association said US Airways is hinting at productivity changes that could help it shave an extra $300 million or more from its annual costs.
Flying in the same anemic fare environment, United, the nation''s No. 2 carrier and one that is 55% owned by its workers, is seeking a federal loan guarantee to help it raise fresh cash and avoid filing for bankruptcy later this year. United wants the loan so it can stabilize its finances and start rebuilding its world-wide franchise, still regarded as one of the industry''s best.
To support its case for the aid, UAL is moving to boost revenue and cut expenses to the tune of $2.5 billion a year, far more than earlier advertised savings that the government rebuffed as inadequate. UAL''s latest targeted labor savings of $5.8 billion over 5½ years is roughly equal to labor cuts US Airways, a company one-fourth United''s size, has achieved.
There''s a tremendous amount of generalization in this business about margins, said Glenn Tilton, UAL''s chairman and chief executive. But margins are very carrier-specific. Mr. Tilton asserted that United has more upside value in its margin and business model than a company a quarter our size.
Jake Brace, UAL''s chief financial officer, said the company is more focused on overall profit improvement than on how much labor costs are reduced: We''re trying to get our revenues and costs in line. He said it is comparing apples and oranges to contrast labor cuts at United and US Airways.
But analysts are finding fault with the size and validity of United''s desired labor cuts, leading some to speculate that the Air Transportation Stabilization Board will deny the carrier''s request for aid. They say United''s planned sacrifices aren''t persuasive in light of more aggressive pruning at US Airways. If US Airways truly needs more savings, United isn''t even close, said Sam Buttrick of UBS Warburg.
At this point, all that matters to the two carriers is convincing the board their business plans are viable and that they will be able to repay the loans they would arrange with federal backing. Cost containment is central to the board''s analysis. Through a spokeswoman, the board declined to comment.
United executives met last week and earlier this week with the board''s staff to press their case for a $1.8 billion loan guarantee. Mr. Tilton, the CEO, said he cannot complain that we haven''t gotten ample time and attention from the board, but he also said he wouldn''t handicap the carrier''s chances. Mr. Brace, the finance chief, said United has demonstrated to the board an extraordinary level of self-help and a strong business plan. He said the board is aware of UAL''s cash drain and a $375 million debt payment due Dec. 2.
A look at the two airlines'' approaches to labor savings reveals differences, however. US Airways'' initial labor-cost concessions amounted to $840 million a year for 6½ years. Pilots agreed to $465 million in annual savings through 2008, or 56% of the total for labor.
US Airways pilots'' wages fell by 26% to 40% on July 1. They are slated to receive 8% in raises between next year and 2008, but their wages in 2008 will be as much as 30% below what they were when the concessions began. Meanwhile, the ranks of US Airways pilots have been decimated by furloughs. The group will shrink to 3,900 in April from 5,700 before last year''s terrorist attacks.
By contrast, United''s 8,800 active pilots tentatively agreed to $400 million in annual cuts over 5½ years, or about 38% of the total labor savings the company is seeking. (UAL hasn''t yet reached agreement with its largest union, the International Association of Machinists, on its portion of the desired savings.) The pilots initially would take an 18% pay cut Dec. 1. But they would receive 22% in cumulative future pay raises between 2004 and 2007, restoring their wages to existing scales by 2007. Currently 844 pilots are furloughed, but United could lay off an additional 600 under the new pact.
Cost reductions at these airlines are putting other big carriers in a bind. Delta is expected to announce later this week plans to cut an additional $2.5 billion from its expenses by 2005, on top of $1 billion in savings already achieved. Last month, the nation''s No. 3 airline said it will cut as many as 8,000 jobs, which would bring the number of job cuts to about 18,000 since the terrorist attacks.
-- Martha Brannigan contributed to this article.
 

UAL777flyer

Veteran
Aug 20, 2002
730
0
I continue to wonder why the insist on comparing our situation directly with US Airways. While financially, we're both in similarly dire situations, that is about all the similarity between the two companies. All of these so-called industry experts, errrrrrrrrrrrr, analysts, keep comparing our level of cost cuts to US Airways and saying it's not enough. By nature of those statements, one would assume that both carriers are similar in overall size and network; competes in exactly the same markets; are in the same alliance; have the same fleet size and composition; etc. The list goes on and on. But we all know that is not the case. How can we continue to be directly compared to US Airways situation?

Is the true mission of the ATSB to force each airline that applies for loan guarantees down to the exact same cost level, irregardless of their overall size, network, alliance structure, revenue stream and other intangibles that will directly impact their ability to repay the loans? I'm beginning to wonder. Each airline's case should be judged solely on its own merits. Just because US Airways now has to go back and find another $300-400 million in cost cuts, doesn't mean that UA's level of cost cuts will be deemed inadequate. Our ability to generate revenue and repay loans cannot possibly be directly compared to US Airways. They are less than half UA's total size and don't come close to having the comprehensive network coverage that gives UA's customers more appealing travel options. And their business plan is different than United's. It contains different revenue projections and assumptions. The differences between the two airlines' situations are numerous. For people to make direct comparisons between the two is crazy.

The ATSB may ultimately deem UA's level of cost cuts to be inadequate. But unless their ultimate quest is to hammer each participating airline down to a similarly lower labor cost level, I don't see how they could rule that UA needs more cuts based on the fact that US needs the same.
 
Oct 14, 2002
85
0
[blockquote]
----------------
On 11/14/2002 11:11:42 AM UAL777flyer wrote:

I continue to wonder why the insist on comparing our situation directly with US Airways. While financially, we're both in similarly dire situations, that is about all the similarity between the two companies. All of these so-called industry "experts", errrrrrrrrrrrr, analysts, keep comparing our level of cost cuts to US Airways and saying "it's not enough". By nature of those statements, one would assume that both carriers are similar in overall size and network; competes in exactly the same markets; are in the same alliance; have the same fleet size and composition; etc. The list goes on and on. But we all know that is not the case. How can we continue to be directly compared to US Airways situation?

Is the true mission of the ATSB to force each airline that applies for loan guarantees down to the exact same cost level, irregardless of their overall size, network, alliance structure, revenue stream and other intangibles that will directly impact their ability to repay the loans? I'm beginning to wonder. Each airline's case should be judged solely on its own merits. Just because US Airways now has to go back and find another $300-400 million in cost cuts, doesn't mean that UA's level of cost cuts will be deemed inadequate. Our ability to generate revenue and repay loans cannot possibly be directly compared to US Airways. They are less than half UA's total size and don't come close to having the comprehensive network coverage that gives UA's customers more appealing travel options. And their business plan is different than United's. It contains different revenue projections and assumptions. The differences between the two airlines' situations are numerous. For people to make direct comparisons between the two is crazy.

The ATSB may ultimately deem UA's level of cost cuts to be inadequate. But unless their ultimate quest is to hammer each parti****ting airline down to a similarly lower labor cost level, I don't see how they could rule that UA needs more cuts based on the fact that US needs the same.
----------------
[/blockquote]
I think she is trying to say that your both in DEEP DO DO!!
 

spacewaitress

Senior
Aug 27, 2002
468
0
[blockquote]
----------------
On 11/14/2002 9:42:33 PM grndproxwarning wrote:

I think she is trying to say that your both in DEEP DO DO!!
----------------
[/blockquote]
Now that is profound. Thanks for sharing.
 
Oct 14, 2002
85
0
[blockquote]
----------------
On 11/14/2002 11:11:42 AM UAL777flyer wrote:

I continue to wonder why the insist on comparing our situation directly with US Airways. While financially, we're both in similarly dire situations, that is about all the similarity between the two companies. All of these so-called industry "experts", errrrrrrrrrrrr, analysts, keep comparing our level of cost cuts to US Airways and saying "it's not enough". By nature of those statements, one would assume that both carriers are similar in overall size and network; competes in exactly the same markets; are in the same alliance; have the same fleet size and composition; etc. The list goes on and on. But we all know that is not the case. How can we continue to be directly compared to US Airways situation?

Is the true mission of the ATSB to force each airline that applies for loan guarantees down to the exact same cost level, irregardless of their overall size, network, alliance structure, revenue stream and other intangibles that will directly impact their ability to repay the loans? I'm beginning to wonder. Each airline's case should be judged solely on its own merits. Just because US Airways now has to go back and find another $300-400 million in cost cuts, doesn't mean that UA's level of cost cuts will be deemed inadequate. Our ability to generate revenue and repay loans cannot possibly be directly compared to US Airways. They are less than half UA's total size and don't come close to having the comprehensive network coverage that gives UA's customers more appealing travel options. And their business plan is different than United's. It contains different revenue projections and assumptions. The differences between the two airlines' situations are numerous. For people to make direct comparisons between the two is crazy.

The ATSB may ultimately deem UA's level of cost cuts to be inadequate. But unless their ultimate quest is to hammer each parti****ting airline down to a similarly lower labor cost level, I don't see how they could rule that UA needs more cuts based on the fact that US needs the same.
----------------
[/blockquote]
I think she is trying to say that your both in DEEP DO DO!!
 

autofixer

Veteran
Aug 20, 2002
1,804
241
www.usaviation.com
Gloom and doom make good press. She needs to validate her argument, thus, the comparison to U. Never-ever...let the facts get in the way of a good story! Good luck to all!
 

UAL777flyer

Veteran
Aug 20, 2002
730
0
auto-fixer,

If it isn't her, it's somebody else. If I had a nickel for every story I've read directly comparing US and UA's ATSB applicatons, I could retire. These folks clearly demonstrate their lack of knowledge on this industry with each article they write. But you're correct. Nobody cares about fact-checking anymore. It's all about pushing their agenda/viewpoint and selling the most papers.
 

mancityfan

Member
Aug 20, 2002
57
0
This is one of those articles which requires casting an eye towards the foundation of the entire piece. The basic premise of the article is flawed, thus the entire article is worthless, save the few facts which may be included that divert the NON-informed reader to the fact that the ENTIRE article must be a piece of superb, insightful journalism.

One must also consider the source of such an article. At this point ANYTHING written by the WSJ or, and especially, the Chicago Tribune is suspect to say the least!

mancityfan
 
Everyone...PLEASE PLEASE go see the movie Bowling for Columbine! It is SOOOOO true that unfortunately, our culture THRIVES on FEAR! It is thrust upon us at every waking moment of the day. It would be just as easy to point out the progress that each airline is attempting to make in it's struggle to regain stability. We have a dooms day culture. Filter OUT the doom and stay focused on success!
 

atabuy

Senior
Oct 13, 2002
419
0
With our culture most like to believe there is some sort of conspiracy going on, so all they have to do is write it or say it.
A certain amount of the people will believe anything if it is in print.
Elvis and I were talking about that the other day.
He said to say hi to all his fans.lol
 

novaqt

Senior
Aug 20, 2002
488
0
[blockquote]
----------------
UAL777flyer:

If I had a nickel for every story I've read directly comparing US and UA's ATSB applicatons, I could retire. These folks clearly demonstrate their lack of knowledge on this industry with each article they write. But you're correct. Nobody cares about fact-checking anymore. It's all about pushing their agenda/viewpoint and selling the most papers.
----------------
[/blockquote]

I think that what she is implying is that the ATSB want all carriers who come before it must become a Southwest type carrier and business model.

Even more importantly, most all mainstream media analysts and reporters that have been hired in the last 10 years do not check out their facts thoroughly before going to press in order to scoop first and sell papers. They are not interested in getting their facts straight. Witness yesterday's alert sent out by Homeland Security. It was supposted to be an informational message and not to be reported as an alert. The government did not raise the color level of the alert. The ongoing media terrorism engage in by our liberal media will not stop until they have so desensitized the population that no one pays any attention to the alerts. This is the desired result that the real terrorists are counting on.

We the people need to start demanding responsibility and accountability in the media for getting their stories factually straight and less opinion oriented. I usually enjoyed reading the Wall Street Journal, but they must have assigned a low-level reporter with liberal leanings to write about UAL and U. We should all write to the Editor and let them know that their current reporting is beneath the quality of reporting that we have all enjoyed from their paper in the past and if this is the direction the paper chooses to take then we might as well stop getting the WSJ and turn to Investors Daily or Barrons to get the truth-in-reporting.
 

MrMarky

Advanced
[STRONG]novaqt says:[BR][BR]They must have assigned a low level reporter with liberal leanings.[BR][BR][/STRONG]What an assinine statement. What does this article have to do with liberals or conservatives? [BR][BR]No newspaper is more Republican than the WSJ, so you become their apologist by blaming the political leanings of the reporter, whom you clearly no nothing about. [BR][BR]Why don't you stick to the subject matter and quit your cheap-shot flame-baiting that blames all the world's problems on liberals.
 

UAL777flyer

Veteran
Aug 20, 2002
730
0
novaqt,

If that was indeed her message, than she is more ignorant than her writing indicates. Anyone who thinks every airline can be pushed and molded into a Southwest-esque carrier and be successful is crazy. Southwest is Southwest. Period. Everyone who has tried to directly copy their formula for success only fails miserably. Their success has more to do with their culture than their business model. You can easily attempt to copy the business model. But copying the culture is next to impossible. That is the key in my opinion. All airlines need to recognize that there is only one Southwest. And so what? They're successful at what they do and deserve credit. But that doesn't mean the other airlines can be successful providing a different type of product/service.
 

atabuy

Senior
Oct 13, 2002
419
0
[A href=http://biz.yahoo.com/djus/021118/0036000024_2.html]http://biz.yahoo.com/djus/021118/0036000024_2.html[/A][BR][BR]UAL Encounters Obstacles in Bid for Government Loan Guarantee[BR][BR](The staff of the Air Transportation Stabilization Board is scrutinizing the company's business plan skeptically, and the betting among Bush administration insiders familiar with the board's thinking is that the board, which has three voting members, eventually will reject the application or set conditions so onerous that UAL will reject them.)[BR][BR]It did not take long for some one to bash the good news from the company. I do think there are parties at work here who are bent on Uals' destruction.[BR][BR]I like the way they phrase it. The betting. [BR][BR]Word has it that these two are on the take with a lot of brokers, and competing airlines. Of course this is only rumor, but there is a lot of very disgusting habits they have also. I can't remember who told me. hmmm![BR]
 

Latest posts