US partner UA obtains first labor ERP TA

[avek00]

Honestly Chip, I hope that UA ALPA obtained an 1113 letter, as they're going to need it with that $2.2B figure.

I have consistently heard that UA ALPA was the principal cause behind the inability of the coalition to develop a meaningful concessionary framework. The ERP that UA ALPA has agreed to is proof positive that United's pilots are unwilling to shoulder their fair share of the pain.

IMHO, the IAM would be justified in terminating any concessionary discussions with management and taking its chances in Bankruptcy Court.

 

[chipmunn]

AVEK:

The UA ALPA cuts were about 50 percent of the US pilot cuts and with larger equipment, the UA pilots recieve higher gross pay.

I suspect the $9 billion concession over 5 years may be the ATSB bottom line; however, the governance issue is in the Bush Administrations cross-hairs. Will it be eliminated by the unions?

I suspect the IAM and AFA are not going to be that interested in avoiding bankruptcy and the S.1113 letter may become very important.

The more UA delays in getting meaningful labor agreements, the less likely the creditors, vendors, and lessors will be to play ball, while the company continues to burn money. This out of court restructuring could come to a point in less than 30 days where UA would have less than $500 million with $344 million of it restricted cash.

What then?

Chip

 

[chipmunn]

[P][A href=http://biz.yahoo.com/bw/021101/12434_1.html]http://biz.yahoo.com/bw/021101/12434_1.html[/A][/P]
[P][A href=http://biz.yahoo.com/bw/021101/12435_1.html]http://biz.yahoo.com/bw/021101/12435_1.html[/A][/P]
[P][A href=http://biz.yahoo.com/rb/021102/airlines_united_1.html]http://biz.yahoo.com/rb/021102/airlines_united_1.html[/A][/P]

 

[chipmunn]

[P][FONT face=Times New Roman size=3]The United Airlines Labor Coalition has agreed on a total employee concession of $5.8 million over a 5.5-year period. Today ALPA and the company reached a tentative agreement that will provide the company with $2.2 billion in labor savings over the 5.5-year period.[/FONT][/P]
[P][FONT face=Times New Roman size=3]Since United and its alliance partner US Airways are both applying for a federal loan guarantee, an interesting comparison can now begin to be made regarding each loan guarantee application.[/FONT][/P]
[P][FONT face=Times New Roman size=3]At the time of its accord US Airways had about 4,750 active and 1,070 furloughed pilots. The pilots provided a $465 million concession for 6.5 years or a total cost savings of $3.02 billion. For active pilots at the time of signing, the total pay and benefit reduction was about $98,000 per year.[/FONT][/P]
[P][FONT face=Times New Roman size=3]Today United has about 8,200 active and 844 furloughed pilots. The pilots have agreed to provide a $400 million concession for 5.5 years or a total cost savings of $2.2 billion. For active pilots at the time of reaching a tentative agreement, the total pay and benefit reduction is about $49,000 per year.[/FONT][/P]
[P][STRONG][FONT face=Times New Roman size=3]Thus, the US Airways average annual reduction is about twice as much per pilot than at United. Reports indicate the UA pilot W-2 cut is 18 percent and the US pilot cut is 26 percent, with elimination of Airbus overides, A-330 pilots receiving a greater reduction, and supervisor pay reduced an additional 6 percent. [/FONT][/STRONG][/P]
[P][FONT face=Times New Roman size=3]For the other active employees, US Airways has about 32,000 personnel who took and average pay and benefit reduction of $406 million per year. Per employee this is an average annual reduction of $12,700 per year.[/FONT][/P]
[P][FONT face=Times New Roman size=3]At United the non-pilot employees must come up with a $3.6 billion in savings for 5.5 years or about $653 million per year. United has about 70,000 other than pilot employees who average annual pay and benefit concession will be about $9,300 per year.[/FONT][/P]
[P][FONT face=Times New Roman size=3][STRONG]Thus, the US Airways average annual reduction is about one-third as much per non-pilot employee than at United.[/STRONG][/FONT][/P]
[P][FONT face=Times New Roman size=3]Chip[/FONT][/P]

 

[avek00]

Apparently, the ALPA concessionary contract contains provisions that nullify the agreement if other unions do not ratify concessionary deals of their own. In light of this, it will be interesting to see how the other unions react, especially AFA, which is literally sitting in the catbird seat...

 

[767jetz]

Chip & avek00,

I'd love to know where you guys are getting your info. Any sources?? In ALPA's press release, it was stated that details of the deal are not being disclosed until it is made available to the membership. Have you guys been sneaking into the board room.

Until all the deals are finalized, and all the numbers and details are released, all this discussion is pure speculation.

There are rumors leaking out that the 5.8Billion along with the cost savings, revenue improvements, layoffs, and the rest of the business plan is satisfactory to the ATSB. The unions have agreed to their share of the cost savings, and are independently negotiating with the company to come up with that number. ALPA's TA is the first, and it is acceptable to both the company and the MEC. So let's not write off UA just yet. Just because the numbers aren't playing out the way you think is fair or reasonable, doesn't mean the plan will fail. In all honesty, you guys are complete outsider, and have no real inside info, nor a do you have any stake in our game.

You are starting to sound like spoiled kids, stomping their feet because they didn't get their way.

Everything will come to a head in the next few weeks. So maybe you should consider chilling out until we see the real outcome.

 

[767jetz]

[blockquote]
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On 11/2/2002 4:52:57 PM avek00 wrote:

The "all or none" concessionary clause in the UA ALPA agreement is a reasonable and arguably necessary contract provision. Hence, I trust my sources on that info.
----------------
[/blockquote]

I don't doubt that there is a all or none clause. That has been our assertion since the beginning of ERP#1. I was refering more to your statements that we better have a 1113 letter, because we will need it, and that the $2.2B is insufficient.

 

[767jetz]

[blockquote]
----------------
On 11/2/2002 5:01:49 PM avek00 wrote:

Thus, it is still my contention that UA will more or less follow the course of US: obtain the cost cuts, possibly obtain the ATSB guarantee, and then seek a Chapter 11 filing to "realize" the true value of the company & fully restructure UAL for the long-haul.
----------------
[/blockquote]

I know this is your contention, but again it is pure speculation with no REAL inside info.

 

[avek00]

It is quite possible that the ATSB might grant conditional approval for a loan guarantee even with the drastically lowered figures. However, an ATSB approval does NOT eliminate or even greatly diminish the possibility of a Chapter 11 filing. In the case of US, the company had negotiated several concessionary contracts, and received the ATSB backing, but was nonetheless forced into Chapter 11 by creditors and lessors who were unwilling to provide meaningful relief.

In UA's case, the market capitalization of the company is so low that the company would be VERY hard-pressed to find an investor who will accept an equity stake in exchange for a loan. Thus, it is still my contention that UA will more or less follow the course of US: obtain the cost cuts, possibly obtain the ATSB guarantee, and then seek a Chapter 11 filing to realize the true value of the company & fully restructure UAL for the long-haul.

 

[avek00]

The all or none concessionary clause in the UA ALPA agreement is a reasonable and arguably necessary contract provision. Hence, I trust my sources on that info.

 

[chipmunn]

Just one more point...

UA ALPA represents about 10 percent of the UA employees and the pilots are about 30 percent of the total labor expense. The UA ALPA ERP concession agreement is about 38 percent of the $5.8 billion in labor cuts UA's unions have promised.

US ALPA represents about 10 percent of the US employees and the pilots are about 30 percent of the total labor expense. The US ALPA restructuring agreement is about 60 percent of the $3.0 billion in labor cuts US's unions have provided.

Chip

 

[chipmunn]

Today the New York Times reported Another signal that a deal (ALPA TA) was likely came during the afternoon, when UAL made two scheduled interest payments of just more than $40 million that were due on $741 million in short-term and long-term bonds. Analysts reasoned that if the pilots and the company were far apart, the company might hold off on making the payments and take advantage of an automatic 30-day grace period in order to conserve some of its $2 billion in cash. The payment was read by some bondholders as a signal that the talks were proceeding smoothly.

The company's next major financial hurdle is a payment of $300 million that is due to the German bank KfW on Nov. 17. The company is in talks with bank officials on extending the payment date.

Chip comments: UA reported it had $1.996 billion cash on hand on September 30 and the airline said it would burn greater than $7 miilion per day in the fourth quarter. For discussion purposes, if the company burns $10 million per day in October and the first three days of November, today's cash balance (adjusted for forward ticket receipts) is about $1.616 billion, of which I believe $344 million is restricted cash.

Chip

 

[chipmunn]

There is reason to believe the ATSB will grant UA conditional loan guarantee approval, based on cuts from all stakeholders necessary to obtain the 7 percent profit margin within 7 years.

However, I believe there is little doubt that ALPA will ratify their accord, but I have doubts that the AFA and IAM will reach agreements. Moreover, the aircraft lessors refused to provide US concessions out of bankruptcy and there is reason to believe that some lessors are sympathetic to UA, but some heavy hitters are not willing to take another industry haircut.

The GECAS announcement of their exposure to US & UA is having significant effects throughout the EETC debtholder industry and many of these financiers are apparently unwilling to offer concessions, unless required to do so by a formal reorganization.

Chip

 

[767jetz]

[blockquote]
----------------
On 11/2/2002 9:58:21 PM chipmunn wrote:

Just one more point...

UA ALPA represents about 10 percent of the UA employees and the pilots are about 30 percent of the total labor expense. The UA ALPA ERP concession agreement is about 38 percent of the $5.8 billion in labor cuts UA's unions have promised.

US ALPA represents about 10 percent of the US employees and the pilots are about 30 percent of the total labor expense. The US ALPA restructuring agreement is about 60 percent of the $3.0 billion in labor cuts US's unions have provided.

Chip
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[/blockquote]


What's your point Chip? Are you saying we should make up 60% also? Or that you took too much of a cut?

UA & US are different companies, with different problems, different politics, different health, and different solutions. There is no One-Size-Fits-All solution for this industry. You mind your store and we'll mind ours, and good luck to us all.

IMHO UA will dodge the BK bullet, But just barely.

One more comment... unfortunately we are all dealing with the same ATSB and administration.

 

[Eris]

[blockquote]
----------------
On 11/2/2002 10:35:44 PM 767jetz wrote:

[blockquote]

UA & US are different companies, with different problems,...IMHO UA will dodge the BK bullet, But just barely.

----------------
[/blockquote]


I sure hope they will dodge the BK bullet. At least longer than 5 hours after you sign an unprecedented give-back donation to the company.


[blockquote]

Mgt. case scenario in successful business plans:

Hey Buddy, Can you spare some change for a cup of coffee?

Sure. Here's a quarter.

Thank you for the quarter... But, I need $3.50 more. I only
drink Starbuck's.[/blockquote]