Busdrvr said: I see you think you have the best management team out there now. Just for a frame of reference, what was you opinion of Wolfe? Seems you thought he was a wonderful at one time didn't you?
Chip comments: Busdrvr, it appears you are putting words into my mouth and I never said the comments you made, but I'll now offer my opinion. I have gotten to know Stephen Wolf through the US Airways Ambassador program and being selected to publish articles for the company on the meetings with Wolf. I also have gotten to know Dave Siegel from two private meetings on our jump seat, other personal conversations, and at numerous employee meetings. By the way, why do seem to purposefully mispronounce Wolfâ€™s name, which I believe is insulting ?
US Airways primary problem was created by Ed Colody who took three regional airlines and combined them to create the worlds highest cost and most unproductive work force in the industry. In my opinion Stephen Wolf was hired to solve this problem and had two choices: Acquire another airline or sell US Airways to average its high cost network and labor contracts onto a network carrier and use the revenue synergies to cover the higher costs. Wolf came close to first buying AA, spinning off Sabre and using the stock buy back to accomplish this goal. When this failed he auctioned US off to the highest bidder on May 24, 2000 to US, because as Rick Dubinsky said AMR was waiting on the doorsteps with an offer for US. Wolf has a proven M&A track record and he almost sold the company for a premium.
In regard to Siegel, in six short months the man has accomplished what Seth Schofield and Stephen Wolf could not do. Bring down US Airways CASM to competitive levels and develop a business plan to not only compete, but to eventually thrive in today's marketplace. Siegel and his new management team are brash, bright, people-oriented, and highly motivated individuals who are quickly becoming very respected within the industry.
In fact, I have been told by a reliable source one of the reasons the ATSB provided unanimous support for the US loan guarantee application was the Board believes in Siegel.
After emerging from Chapter 11, US will become a real jewel because of reduced labor costs, rationalized fleet, and focus on regional routes, Bronner said before the fund reached the agreement with the airline. Bronner noted US is a better investment for the $24 billion Alabama Pension Fund than the stock or bond markets.
Busdrvr asked: Got a question for you Chip, you keep talking about our high A/C lease rates Which jets are leased at a high cost, and how much a month are those payments?
Chip answers: US will not disclose specific details, but Siegel told me that some of the US B-737s have above market lease rates between $270,000 to $250,000 per month due to FOMC interest rates in the 80's that averaged about 11 percent. Today the lease rate is about 5.5 percent and the company has a one-time Chapter 11 opportunity to ask the court to reject those high cost leases and Siegel has said he can replace those aircraft with a used A-320 for about $100,000 per month. Chris Chimes, US vice president of corporate communications said the company will exceed its pre-bankruptcy target of $200 to $300 in creditor, vendor, and lessor concessions, which bode well for final federal loan guarantee approval.
The company has received permission to return 67 aircraft to the lessors and further asked Judge Mitchell to reject up to 150 additional leases despite strong objections from 18 firms that financed those purchases. It was revealed in court today US had resolved 16 of those objections through negotiation with the parties and Mitchell said he would rule on the other two as soon as possible. A 60-day deadline that makes it easier for US to dispose of aircraft leases expires Wednesday, October 9.
In regard to the RSA deal, David Bronner said the pension fund debt holdings is backed by F-100s, B-737s and B767s. Bronner said he expects US to retire the Fokker aircraft and keep flying the Boeing planes and he will accept the new market lease rates on these aircraft, which is obviously good news for the company and its employees.