You guys are wasting your time arguing about TWU vs AMFA.
If this guy is correct, there won't be any unions at any airline. Instead, maybe you guys should collectivly direct your energy at fixing the "Shared Sarifice" shortcoming.
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Nightly Business report-PBS
09/23/04: One On One With Julius Maldutis, President of Aviation Dynamics
JEFF YASTINE: United Airlines today reported it lost $56 million last month due to lower fares and higher fuel costs. Wall Street analysts widened their forecast for financial losses at American Airlines` parent company AMR (NYSE:AMR) today and tomorrow, U.S. Airways may ask a bankruptcy court to force concessions from the carrier`s labor unions. These developments are adding yet more turbulence to an already rocky airline industry and joining me now to discuss these developments is Julius Maldutis, longtime airline analyst and president of the consulting firm Aviation Dynamics. Julius, welcome back to NIGHTLY BUSINESS REPORT.
JULIUS MALDUTIS, PRESIDENT, AVIATION DYNAMICS: Thank you, good evening.
YASTINE: Let`s talk about U.S. Airways for a second. They`re already in bankruptcy. They want to force more wage and benefit concessions from their unions, let`s suppose they get those concessions. Does that really help U.S. Airways in their competitive position?
MALDUTIS: It will only be temporary. I believe that USAir is in deep financial trouble. I think they made a strategic mistake in reducing their hub at Pittsburgh which is going to just multiply their losses. So I think it`s one of the first carriers that`s going to be liquidated by this time next year.
YASTINE: So you say one of the first carriers you`re expecting not just these sorts of bankruptcies where they continue to operate. You`re expecting more liquidations where the assets of the entity are sold off entirely.
MALDUTIS: Absolutely. Just look back at what happened in the early 1990s when three airlines were liquidated, Pan Am, Eastern and Braniff and set the stage for the industry`s recovery.
YASTINE: What are the names that you think are candidates for liquidation? I think I can guess them, if you`re saying U.S. Airways, United is already in bankruptcy and Delta (NYSE😀AL) is threatening bankruptcy.
MALDUTIS: Well, very good question. The critical question is that if Delta joins the other two carriers in bankruptcy, then the remaining three airlines: American, Continental (NYSE:CAL) and Northwest (NASDAQ:NWAC), in order to maintain cost parity, will also have to file bankruptcy and once in bankruptcy, then I think it`s going to be a free-for-all how many of these carriers really come out of financial reorganization and how many get liquidated. I would guess that again, two or possibly three airline will be liquidated by this time next year.
YASTINE: Does that mean then that the discounters, the Jetblues (NASDAQ:JBLU) and Southwest (NYSE:LUV) - they`re the winners and we all just sort of walk away from this or is there any future yet left for these legacy airlines or what`s left after these liquidations go through?
MALDUTIS: What`s left is they`re going to be very competitive, very strong and they will give the low cost airlines -- the Jetblues, Southwest, the AirTrans (NYSE:AAI), the Spirits who today are leading the industry and they are part of the problem in that they are charging very low fares. So if the legacy airlines can reorganize in bankruptcy, then they can make a go of it and compete with the low cost airlines.
YASTINE: What`s going on here with the legacy airlines? It seems like no matter what happens if there is just a minor tick in the economy, all sorts of chaos happens and they wind up in bankruptcy again like we see with U.S. Airways. Is it all about fuel costs and squeezing the unions for yet more wage and benefit concessions?
MALDUTIS: I`d like to say labor is not the problem but labor unfortunately has to be the solution to the problem. The problem is that the low cost airlines today constitute about 30 percent of the industry. They offer rock bottom fares because they have the lowest cost, they have the most productive employees and the legacy of full network carriers have to change and the only way they`re going to change is if either labor assists them or they will end up going into Chapter 11 and the judge will then do it.
YASTINE: Would you be buying the discount airlines here?
MALDUTIS: No, I would not because I believe that when we get additional carriers that go into bankruptcy, they will be able to compete successfully against the low cost companies. I would not own any airline shares today.
YASTINE: All right. Julius, we appreciate your time with the program.
MALDUTIS: Thank you.