Unfolding News & Events?

USA320Pilot

Veteran
May 18, 2003
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www.usaviation.com
It appears US Airways management has begun another third party communication campaign that observers have repeatedly witnessed during the past 18 months, to influence Allegheny County Airport Authority (AGAA) leaders for upcoming negotiations to keep the Pittsburgh hub intact, and with the IAM-141M on the A320 outsourcing, which could begin as early as Monday, October 6.

As previously reported on September 30 US Airways filed a shelf registration statement (Form S-3) with the Securities and Exchange Commission (SEC), registering for the resale of certain shares of Class A common stock on the NASDAQ stock exchange. This document painted a somewhat dim view of US Airways as a reorganized company and I find the timing suspect.

The filing occurred the same day that the (AGAA) released an opinion from Mark Taylor, a consultant and principal in Leigh Fischer and Associates, that took exception to US Airways’ study that claimed the loss of the carrier's Pittsburgh hub would cost the region $1.8 billion a year and 17,100 jobs. In addition, the Pittsburgh Post-Gazette reported last week a key element in the airline's plan to make a profit has been its plans to deploy hundreds of regional jets on its short-haul routes. But the carrier warned, "We may not be able to meet our commitments to purchase flight equipment, which could result in penalties and impair our ability to execute our regional jet business plan," further creating fear among interested parties.

Then on Friday, October 3, the Post-Gazette reported Allegheny County Chief Executive Jim Roddey said yesterday officials expect to finish the plan either today or early next week and then deliver it to Gov. Ed Rendell, who is leading the negotiations with the airline (to save the Pittsburgh hub). The county's plan will be in response to a proposal delivered by US Airways at a meeting in Harrisburg on Sept. 17 in which the airline proposed increases in sales, car rental and hotel taxes to cut $500 million in airport debt. The county's counter-proposal is expected to focus on ways to reduce the debt without raising taxes to cut the overall costs to US Airways and other airlines operating out of Pittsburgh.

Meanwhile, following the morning Post-Gazette article, Friday’s stock market action had an interesting twist. When the stock went up $1.50 to close at $8.25. This move represented a +22.22% change on volume of 248,400 shares. Obviously the stock was under accumulation by investors who were unmoved by today's financial performance news.

I recognize that the company must notify investors of any potential risk, but I find the timing of these announcements and the SEC filing to be a planned third party communication campaign executed by US Airways’ chief executive officer Dave Siegel. I believe it’s important to note the company reported on June 30 it had about $2 billion cash-on-hand, the airline has begun an expensive campaign to repaint the entire fleet, the company received very favorable financing for its recent RJ order that airline analyst Ray Neidl said this was “impressiveâ€. In addition, RSA, BOA, GECAS, Farallon Capital Management, Oaktree Capital Management, and Goldman Sachs & Co., and the ATSB have all invested in US Airways. These respected financial institutions all bought stock or secured loans indicating their support of US Airways, basically putting their money where their mouth is in support of the airline.

Separately, the Charlotte Business Journal reported on Friday, October 3, before the stock market opened, "Ten years from now, I think Alabama's investment in US Airways will be viewed as one of the best investments ever," says Harlan Platt, a finance professor at Northeastern University in Boston. He suspects the three investment firms are also on to something, given their reputation for shrewd investing. "One of the best ways to make money these days is to be an equity participant in a new bankruptcy reorganization plan," he says. "Essentially they are buying an airline at bargain basement prices."

In addition, Maintenance sources said US Airways will begin its A320 family outsourcing on Monday, October 6, and there could be a public announcement tomorrow. Apparently, the company and the IAM will meet on Monday to discuss the issue and in preparation of this event and the Pittsburgh hub negotiations, Siegel told employees in his weekly telephone recording to employees, US Airways' results for the third quarter won't fare as well as its competitors'. "While other airlines are hinting that they may break even or show a profit for the quarter, that is not going to be the case for US Airways, I'm sorry to say," Siegel said.

Furthermore, Siegel said “challenges still remained for US Airways to hit targets for introducing regional jets into serviceâ€, which is a cornerstone to restructure due to the revenue generated by these jets to meet ATSB loan requirements.

Published reports indicate 150 out of the 170 RJs ordered by US Airways were financed through GECAS and with long-term leases with Bombardier and Embraer. However, these lease terms have restrictive covenants that may influence the AGAA and IAM negotiations.

Seprately, Aviation Week & Space Technology previously reported, US Airways’ financial strength as it emerged from Chapter 11 bankruptcy protection on March 31 – a $1 billion loan built around a 90% federal guarantee of repayment – is a potential financial threat. Under terms negotiated by the government’s Air Transportation Board, ATSB, the loan is secured by, in US Airways’ words, “first priority liens on substantially all of the unencumbered present and future assets (of the airline), including certain previously unencumbered aircraft, aircraft engines, spare parts, flight simulators, real property, takeoff and landing slots, ground equipment and accounts receivable.†The loan contains covenants setting debt-ratio, fixed-charge and liquidity standards and limiting dividend payments (the carrier reported in Wednesday’s shelf registration statement to the SEC it does not intend to pay cash dividends in the foreseeable future).

It appears from published and other reports, US Airways will make major announcements regarding the Pittsburgh hub negotiations and the A320 family outsourcing in the immediate future and there could be some interesting news associated with the announcements. In addition, once the Pittsburgh hub negotiations are complete, there is reason to believe if a corporate transaction proceeds between US Airways and United Airlines, presumably to provide the Chicago-based carrier with exit financing, that deal could occur before the end of the year.

Respectfully,

Chip

:ph34r:
 
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Chip Munn Posted
on Oct 5 2003, 12:03 PM

It appears from published and other reports, US Airways will make major announcements regarding the Pittsburgh hub negotiations and the A320 family outsourcing in the immediate future and there could be some interesting news associated with the announcements. In addition, once the Pittsburgh hub negotiations are complete, there is reason to believe if a corporate transaction proceeds between US Airways and United Airlines, presumably to provide the Chicago-based carrier with exit financing, that deal could occur before the end of the year.
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A few weeks ago the company couldn't afford to return our 5%, and now we're to provide exit financing for UNITED AIRLINES! With our sacrificed wages and benefits?

This would be a VERY UNHAPPY time.
Talk about "Losing Friends and Motivating Enemies".
 
Chip,

If the A320 gets outsourced this week, I see that 22% gain in the stock going straight back into the toilet. Like I said, I think it will be a minor, not major dispute, and the IAM will ulitmately prevail on the issue. The real damage will lie in the financial payout to IAM members, and the absolute destruction of any glimmer of hope of labor and the current senior management group working together to fight our competition.

As for your satement on another thread regarding military outsourcing, have you ever seen the pork that gets loaded into a government contract? Plus you are talking about work going into the private vs. public sector, which is where it should be anyway. Start comparing apples and apples here. Explain ValuJet's, HP's, and Air Midwest's checkered histories in farming out work to the lowest bidder. You fly the A320. Did you happen to be in DCA last week when that UA B737 nose gear collapsed, conveniently enough being reported as the first revenue flight after having outside overhaul work done?

Finally, I will ask you this. Do you want to be the captain on the ferry flight that leaves an outsourced overhaul too soon under the threat of substantial financial penalty for not coming out on time? If the court grants the IAM an injunction, and the company moves ahead anyway, would you fly the trip if called by the company?

I know how it is with you. Outsourcing flying like the "CRJ705" debacle is wrong, but giving someone else's work away is okay if it means you keep your captain's seat.

I am no union honk, as many on here would attest to, but you have showed your true colors again, and it makes me sick.
 
Yup, the government outsources work. guess who rebuilds the engines for the C-17? Some little outfit in WV? No, UNITED! The heavy mx jobs in SAT are some of the best in the city, and I think, unionized.
 
N628AU:

I do not want to see any job get outsourced, but I believe it's wrong to make a blanket statement that all third-party mechanics are all substandard/unsafe. I have witnessed some of these people perform maintenance on military jets and they do excellent work, just like US Airways' mechanics. Furthermore, when I flew Research, Development, Test & Evaluation flights at the Naval Air Test Center, we had contractors constantly working on our aircraft and they always did an excellent job.

I disagree with the IAM-141M claim that there would be an unsafe operation. Southwest doesn't seem to have problem using contract maintenance, do they? If Southwest is a safe airline, why wouldn't US Airways be as well?

Outsourcing union positions for a cost reduction is different than claiming a safety issue. If safety was an issue with contractor maintenance, than why do Southwest and the U.S. Military not have safety problems?

N626AU, I take exception with your comment of "true colors", in fact, those who are claiming safety issues are obscuring the truth, which is really an integrity issue.

For that matter, can you tell me how Southwest has such a good accident record when they use contractors for heavy maintenance?

Respectfully,

Chip
 
Will Strike:

Will Strike said: “A few weeks ago the company couldn't afford to return our 5%, and now we're to provide exit financing for UNITED AIRLINES! With our sacrificed wages and benefits?â€￾

Chip responds: Will Strike, I never said US Airways would buy United Airlines assets. Why? The company does not have the money.

However, David Bronner, US Airways' chairman of the board, who is RSA’s chief executive officer, controls a fund that has $25 billion in liquidity. Bronner has said in three public interviews he is interested in buying United assets, therefore, RSA would presumably fund the acquisition to provide United with exit financing, to prevent the Chicago-based carrier from possibly liquidating, if a deal occurs.

Respectfully,

Chip

P.S. It’s a great night in Cleveland. I can hear the “barkingâ€￾ all the way from the Dawg Pound!!!!!! :up:
 
Just one more point...

US Airways' CEO Dave Siegel has been employed at US Airways for 18 months and has made about 76 weekly-recorded messages on Friday afternoon. During this period Reuters, or for that matter no other news reporting agency, has ever reported on Siegel's message, however, on October 3 Reuters listened to the call, researched the news, wrote their thoughts, and then published a column discussing Siegel's message in less than two hours.

Doesn't that seem a little strange? In my opinion, Reuters may have been "tipped off" by the company so Siegel could exercise his "third party" message campaign.

Respectfully,

Chip

P.S. It's a great night to be a Cleveland Browns fan! Go Tim Sofa!!!! :up:
 
Chip Munn said:
I do not want to see any job get outsourced, but I believe it's wrong to make a blanket statement that all third-party mechanics are all substandard/unsafe. I have witnessed some of these people perform maintenance on military jets
No one made a blanket statement that all third party maintenance was unsafe.

You have stated you witnessed "some" and yet you are making a blanket statement that it is safe.

It only takes one. One pencil whipped job card. One false sign off. One idiot ignoring the manual, or taking a shortcut, and no one checking behind him.

The safety chain is only as strong as the weakest link. Our maintenance professionals at U are not intimidated by the company... our allegiance is to our passengers, crews and family. The aircraft does not move until its fixed right. If you think a third party contractor has the same stake in this work, the same work ethic, the same somber attitude, and will not bow to pressure, especially after seeing how this outfit does business, you are either delusional or in denial.

Sadly, it appears you have no allegiance to anyone but yourself. It must be awful lonely on your planet.
 
P.S. It’s a great night in Cleveland. I can hear the “barkingâ€￾ all the way from the Dawg Pound!!!!!!





How great was it 2 Sundays ago?

INVOL
 
Dilligas:

This conversation has nothing to do with "allegiance"; it has to do with comments regarding third-party maintenance being unsafe.

Are US Airways aircraft unsafe because contractors do all of the company’s engine overhaul?

The A330 Pratt & Whitney, B767/B737 GE CFM, and B757s have outsourced engine maintenance, therefore, is the airline unsafe because of this IAM approved outsourcing?

Furthermore, I have flown Maintenance Test, SLEP Acceptance, and Research & Development Test flights after contractors have performed maintenance and I have never seen an unsafe situation.

You're right, it only takes one maintenance mistake to cause an accident and that can occur at Dynair, Aero Corp., Lockheed, Boeing, or US Airways just as easily.

I believe to suggest FAA certified A&P mechanics are unsafe because they work for a contractor is inappropriate.

The real issue here is one of legality on whether or not the IAM-141M contract permits outsourced aircraft overhaul. Apparently it does for engines and it will be up to the courts to decide whether or not it is for the airframe.

Do I like this issue? No. Moreover, just like with maintenance outsourcing, I do not like alliances or RJ outsourcing either. Why? I do not like to see people who have dedicated years to a company see their careers blow up. That's my issue.

But, again, from my experience contractors do great work and I have seen some that do a better job than US Airways employees and vice versa.

Respectfully,

Chip
 
N628AU,

"Did you happen to be in DCA last week when that UA B737 nose gear collapsed, conveniently enough being reported as the first revenue flight after having outside overhaul work done?"

Just to get the facts straight.

The UAL 737 in DCA last week did NOT have a nose gear collapse. There were nose gear issues but it never collapsed. And it also was not its first (nor 2,3, 4....etc) revenue flight after outside overhaul work.

While I don't like the concept of outsourcing, I also don't like the idea of drumming up false rumors/blame.

UALDC737
 
UALDC737 said:
Just to get the facts straight.

The UAL 737 in DCA last week did NOT have a nose gear collapse. There were nose gear issues but it never collapsed. And it also was not its first (nor 2,3, 4....etc) revenue flight after outside overhaul work.

While I don't like the concept of outsourcing, I also don't like the idea of drumming up false rumors/blame.

UALDC737
Its a pity when facts get in the way of certain folks' agendas.
 
UA737,

I was simply replying to a report I read, and that is why I indentified it as "being reported". Early reports are often worng, I realize that.

Chip,

I am not worried about "all" outsourcing. What concerns me is that (1) US has little ability to oversee the safety on this, they have enough issues in CCY taking care of what is going on here, much less off the property, and (2) there are financial penalties for work not done on time. This motivates management at the MRO to get the plane out, and I am worried about what kind of oversight goes on there. Shouldn't you be?