US Airways could seek merger, chairman says
By Thomas Olson
TRIBUNE-REVIEW
Wednesday, March 3, 2004
US Airways and its unions must settle on a way to turn a profit by July or its board will start selling assets or find a merger partner, Chairman David Bronner warned Tuesday.
"By early summer, something's got to give one way or the other," Bronner said in a telephone interview from Montgomery, Ala. His comments came a day after a candid meeting with leaders of the flight attendants union about the airline's financial losses.
"If we can't resolve the issues with labor -- the red ink -- it means more problems and the long-term demise of a great company," Bronner said. "I tried to put everything on the table, whether it's the sale of assets or talking to another company about a merger."
Last month, US Airways said it must reduce expenses by about 25 percent, most of it in labor costs. Bronner pressed his case for that in closed-door meetings with the flight attendants Monday as he had with leaders of the pilots union Feb. 20.
The airline, the nation's seventh-largest, lost $98 million in the three months ended Dec. 31 and $90 million in the prior quarter.
Bronner's mention of a possible merger was the first time a top executive of the airline has publicly discussed such a step since US Airways emerged from bankruptcy nearly a year ago, when he became chairman.
US Airways also must take steps to avoid defaulting on $900 million in loans backed by the U.S. Air Transportation Stabilization Board. Created as an industry safety net after the 2001 terrorist attacks, the ATSB expects US Airways to hit certain profit levels by the end of June.
"We are talking to the ATSB, but they want to see things in black and white," Bronner said in pushing for formalized labor concessions.
US Airways employs nearly 8,000 workers in Pittsburgh, including about 750 pilots and 1,175 flight attendants. The carrier's nationwide work force agreed to $1.03 billion in annual wage and benefit concessions in the summer of 2002.
Leaders of the Association of Flight Attendants met with Bronner for about 2 1/2 hours over lunch in Charlotte, N.C. on Monday.
Union chairman Perry Hayes yesterday called the meeting with Bronner a "frank discussion." But he said progress toward negotiations is hindered because the union still has not heard management's business plan and how it would involve flight attendants.
"US Airways still has not asked for any specific concessions," Hayes said through a spokeswoman.
"It's an ongoing thing," Bronner said of the restructuring process."If (flight attendants) are looking for a piece of paper with a business plan on it, they're in the wrong business."
Bronner heads the Retirement Systems of Alabama, which has about $24 billion in assets. The public pension funded US Airways through Chapter 11 and acquired a 37 percent stake for $240 million.
"The world changed about a year ago when Wall Street opened their wallets to the discounters and shut off money to the legacy carriers," he said.
Discounter JetBlue Airways, for instance, recently obtained about $7 billion to buy more than 200 regional jets over the next seven years. Such a growth spurt would make East Coast competitor JetBlue's fleet bigger than US Airways'.
By contrast, US Airways could lose aircraft financing from GE Capital if the airline doesn't "stop bleeding red ink," Bronner said.
He also referred to discounter Southwest Airline's May 9 launch of service in Philadelphia, one of US Airways' three hubs. Its traffic also generates about 25 percent of US Airways' annual revenue.
"Knowing you're under attack in places like Philadelphia, which pulls your revenue down, you've got to lower your costs," Bronner said. He called the situation "a helluva dilemma for the poor labor leader."
Bronner also defended US Airways' decision to outsource heavy maintenance of its Airbus jets to an Alabama contractor. The International Association of Machinists is challenging the move in the 3rd U.S. Circuit Court of Appeals in Philadelphia.
"It saves millions of dollars, and other carriers like United are doing it, too," Bronner said.
Thomas Olson can be reached at [email protected] or (412) 320-7854.
/////////////END OF ARTICLE//////////
Couple of telling comments in here...the first is that apparently, in this industry, there is no such thing as a "plan". In the third from the last paragraph he pretty much reveals the extent of his thinking in response to competition....lower costs. And then of course the last sentence is incomplete.....should read "it saves millions of dollars in the short-term".
As others have pointed out, the quality of maintenance at major carriers has been, over the years, unbelievably outstanding. Cheaper doesn't necessarily mean lower quality (it doesn't?), but there has to be at least a mention of the value of loyalty. In my experience, aircraft mechanics tend to develop a sense of ownership in their work. And no amount of $ saved in the near-term can offset a potentially catastrophic result of either poor workmanship or lack of oversight (or both). Outsourcing is not necessarily going to result in this, but there've been many examples in my own life of watching a company lose control of it's quality standards when they've outsourced production of various products. Unfortunately, I think the die is cast. Thrashing and resisting when changes of this magnatude are thrust on unwilling participants (you and me) are an acceptable and expected part of their plan. And I'm afraid that the tide rises and falls without regard to the number of people standing on the shore (regardless of how united) hollering out for it to stop.
I'm standing on the sidelines for now, watching to see what happens. My hope is for a strong us airways. My confidence in the ability and intentions of Bronner and Seigel to make that happen are near zero. But hey, stranger things have happened.
Justme
By Thomas Olson
TRIBUNE-REVIEW
Wednesday, March 3, 2004
US Airways and its unions must settle on a way to turn a profit by July or its board will start selling assets or find a merger partner, Chairman David Bronner warned Tuesday.
"By early summer, something's got to give one way or the other," Bronner said in a telephone interview from Montgomery, Ala. His comments came a day after a candid meeting with leaders of the flight attendants union about the airline's financial losses.
"If we can't resolve the issues with labor -- the red ink -- it means more problems and the long-term demise of a great company," Bronner said. "I tried to put everything on the table, whether it's the sale of assets or talking to another company about a merger."
Last month, US Airways said it must reduce expenses by about 25 percent, most of it in labor costs. Bronner pressed his case for that in closed-door meetings with the flight attendants Monday as he had with leaders of the pilots union Feb. 20.
The airline, the nation's seventh-largest, lost $98 million in the three months ended Dec. 31 and $90 million in the prior quarter.
Bronner's mention of a possible merger was the first time a top executive of the airline has publicly discussed such a step since US Airways emerged from bankruptcy nearly a year ago, when he became chairman.
US Airways also must take steps to avoid defaulting on $900 million in loans backed by the U.S. Air Transportation Stabilization Board. Created as an industry safety net after the 2001 terrorist attacks, the ATSB expects US Airways to hit certain profit levels by the end of June.
"We are talking to the ATSB, but they want to see things in black and white," Bronner said in pushing for formalized labor concessions.
US Airways employs nearly 8,000 workers in Pittsburgh, including about 750 pilots and 1,175 flight attendants. The carrier's nationwide work force agreed to $1.03 billion in annual wage and benefit concessions in the summer of 2002.
Leaders of the Association of Flight Attendants met with Bronner for about 2 1/2 hours over lunch in Charlotte, N.C. on Monday.
Union chairman Perry Hayes yesterday called the meeting with Bronner a "frank discussion." But he said progress toward negotiations is hindered because the union still has not heard management's business plan and how it would involve flight attendants.
"US Airways still has not asked for any specific concessions," Hayes said through a spokeswoman.
"It's an ongoing thing," Bronner said of the restructuring process."If (flight attendants) are looking for a piece of paper with a business plan on it, they're in the wrong business."
Bronner heads the Retirement Systems of Alabama, which has about $24 billion in assets. The public pension funded US Airways through Chapter 11 and acquired a 37 percent stake for $240 million.
"The world changed about a year ago when Wall Street opened their wallets to the discounters and shut off money to the legacy carriers," he said.
Discounter JetBlue Airways, for instance, recently obtained about $7 billion to buy more than 200 regional jets over the next seven years. Such a growth spurt would make East Coast competitor JetBlue's fleet bigger than US Airways'.
By contrast, US Airways could lose aircraft financing from GE Capital if the airline doesn't "stop bleeding red ink," Bronner said.
He also referred to discounter Southwest Airline's May 9 launch of service in Philadelphia, one of US Airways' three hubs. Its traffic also generates about 25 percent of US Airways' annual revenue.
"Knowing you're under attack in places like Philadelphia, which pulls your revenue down, you've got to lower your costs," Bronner said. He called the situation "a helluva dilemma for the poor labor leader."
Bronner also defended US Airways' decision to outsource heavy maintenance of its Airbus jets to an Alabama contractor. The International Association of Machinists is challenging the move in the 3rd U.S. Circuit Court of Appeals in Philadelphia.
"It saves millions of dollars, and other carriers like United are doing it, too," Bronner said.
Thomas Olson can be reached at [email protected] or (412) 320-7854.
/////////////END OF ARTICLE//////////
Couple of telling comments in here...the first is that apparently, in this industry, there is no such thing as a "plan". In the third from the last paragraph he pretty much reveals the extent of his thinking in response to competition....lower costs. And then of course the last sentence is incomplete.....should read "it saves millions of dollars in the short-term".
As others have pointed out, the quality of maintenance at major carriers has been, over the years, unbelievably outstanding. Cheaper doesn't necessarily mean lower quality (it doesn't?), but there has to be at least a mention of the value of loyalty. In my experience, aircraft mechanics tend to develop a sense of ownership in their work. And no amount of $ saved in the near-term can offset a potentially catastrophic result of either poor workmanship or lack of oversight (or both). Outsourcing is not necessarily going to result in this, but there've been many examples in my own life of watching a company lose control of it's quality standards when they've outsourced production of various products. Unfortunately, I think the die is cast. Thrashing and resisting when changes of this magnatude are thrust on unwilling participants (you and me) are an acceptable and expected part of their plan. And I'm afraid that the tide rises and falls without regard to the number of people standing on the shore (regardless of how united) hollering out for it to stop.
I'm standing on the sidelines for now, watching to see what happens. My hope is for a strong us airways. My confidence in the ability and intentions of Bronner and Seigel to make that happen are near zero. But hey, stranger things have happened.
Justme
