Cwa Update

[Schwanker]

CHIP SAID:

"I believe the only way to fix this problem is to use the productivity changes to increase block hours, which would lower unit costs and increase RASM, with the current headcount."

SCHWANKER ASKS:

HOW IN THE HE** DOES INCREASED BLOCK HOURS INCREASE RASM???

I certainly hope the folks in CCY have a better understanding of airline economics than this. Supply and demand would dictate the more seats available, the less RASM! RASM stands for REVENUE PER AVAILABLE SEAT MILE! Flooding the market with seats would LOWER RASM as average fares would drop and lower load factors would occur. Maybe someone could clarify this, but this appears to me to be another uninformed statement.

There are two sides to this economic equation: COST AND REVENUE
Productivity changes has NOTHING to do with RASM - only COST!
I hope management understands the difference, but then again, maybe that's the problem.

 

[USA320Pilot]

Schwanker:

With all due respect, if US Airways uses productivity changes to permit greater aircraft utilization to permit more high yield flights into Caribbean markets versus flying in low yield East Coast markets, does RASM go up or down?

Regards,

Chip

 

[USA320Pilot]

PitBull:

PitBull asked: According to your reasoning in your above posts, how do we have still the highest CASMs in the entire industry with all the restructuring that was done and the downsizing of the airline, along with parked planes?

Chip answers: There are a number of reasons, but a few of the highlights are other airline restructurings, where for example American's labor expense is now less than US Airways and United using the bankruptcy process to reject or renegotiate contracts.

PitBull asked: And who told you if CASMS don't come down, we liquidate?

Chip answers: Nobody, but if CASM exceeds RASM an airline will run out of money. In addition, US Airways, like America West has ATSB requirements that if violated could cause the government to repossess key corporate assets. Moreover, RASM is below forecast due to slower than projected MDA and other RJ expansion revenue.

PitBull asks: Why is it that in just a few short months from emergence from BK, that scenerio of liquidation comes up again?

Chip answers: Deteriorating fundamentals due to market factors, LCC expansion, and the ATSB loan guarantee requirements are causing increased liquidation speculation. The company is not in immediate danger of a Chapter 7 filing, but the company must stop losing money.

Furthermore, I understand the deteriorating fundamentals and LCC expansion that is greater than forecast to the ATSB, will make it more difficult for United Airlines to obtain a loan guarantee.

Regards,

Chip

h34r:

 

[Fly]

Does Chip EVER talk about anything besides United? Geez!

 

[USA320Pilot]

Mrplanes:

Mrplanes said: "I see no mention of the revenue side of the equation in your post either Chip."

Chip comments: You're right and your point is valid. There are a number of points regarding revenue, however, it's important to note RASM has been hurt by EMB-170 certification/delivery delay and RJ deployment slower than projected. The company should realize improved RASM from more Caribbean/European expansion, the Lufthansa bilateral agreement, the Star alliance, and the United domestic alliance. However, domestic yield pressures caused by continued LCC expansion will reduce some of this benefit.

Regards,

Chip

 

[USA320Pilot]

Fly:

Fly asks: “Does Chip EVER talk about anything besides United? Geez!â€￾

Chip asks: Fly, do you ever post anything except comments in response to my posts? By the way, today I learned some more interesting news regarding Executive Suite discussions between US Airways and United Airlines. I'll comment more on this tonight.

Regards,

Chip

P.S. Go Buckeyes -- bring on the Sooners and last years BCS championship game Refs.

 

[N628AU]

Schwanker:

With all due respect, if US Airways uses productivity changes to permit greater aircraft utilization to permit more high yield flights into Caribbean markets versus flying in low yield East Coast markets, does RASM go up or down?

Regards,

Chip

That depends Chip. No doubt CASM would be lowered, but RASM would only increase if the yield increase was proportionate with the increased stage length. For example, if yield increased 25%, but the stage length increased 50%, would that not lead to a lower RASM, albeit lower network CASM, all things being equal? I think there is way too much thrown into all these numbers.

 

[mrplanes]

Mrplanes:

Mrplanes said: "I see no mention of the revenue side of the equation in your post either Chip."

Chip comments: You're right and your point is valid. There are a number of points regarding revenue, however, it's important to note RASM has been hurt by EMB-170 certification/delivery delay and RJ deployment slower than projected. The company should realize improved RASM from more Caribbean/European expansion, the Lufthansa bilateral agreement, the Star alliance, and the United domestic alliance. However, domestic yield pressures caused by continued LCC expansion will reduce some of this benefit.

Regards,

Chip

Chip:

If that is the revenue "hope" of Siegel for the profitablility of this company then we will fail. All of the points in my post were valid yet you chose to address just one. This company flies where the vast majority of the American population originates and terminates. They are not exploiting that very lucrative fact. Pinning hopes on RJ's, alliances, Carribbean and Europe are just that. Hopes. That is no a plan. And if they think it is a plan, why is it they haven't been able to execute it? How do you exand to Europe with the fleet we have? Answer: You can't unless you rob from the domestic side of the equation. That's not how AMR, DAL, NWA, CAL or any of the other serious airlines make money.

This management is incapable of motivating and leading this workforce with new ideas, thinking outside the box, adapting to paradigm shifts, countering LCC incursions or understanding the basic premise of what a service business is about. This is a sevice business Chip, not a math experiment at Harvard. Siegel has lost this group with his failure to utilize what we have given him. You know it. I know it. All the other employees know it. His plan has failed miserably and now he is scrambling to come up with something else. Problem is, with what he has done before, this employee group will not embrace a new plan from him. That is the road to failure.

Take off the rose colored glasses and understand the future of this company hinges on bringing in a management who knows the airline business. This guy doesn't. I thought he did when he got here but boy was I wrong. Just like you are now.

mr

 

[jack mama]

I have been reading this board for a couple of years now, but I can't stand to sit on the sidelines any longer.

The majority of posters on this board need a major reality check. 1. Dave is not the enemy. 2. The company is not in the business of making us insanely rich. The ones trying to put us out of business are the enemy. Dave obviously doesn't want to do that. He even made some of you vote twice to ensure it wouldn't happen. As for the second point, if you want to get rich from working, you have to go into business for yourself. You will never strike it rich working for someone else. Those with the money work very hard to make sure you can't empower yourself and overtake them. Now, I can hear all the naysayers already, I must be a CCY lurker, a hawk, etc. or we don't want to be insanely rich, just have liveable wages. I am none of those, I'm just a lowly "Profit Sharing" employee (don't get me started on the stock allocation plan, or lack there of for some of us). Nevertheless, a reality check is in order. For once, Chip is saying all the right things. (Chip, I just don't know how you forge ahead through all of this negativity.)

Costs have got to come down. Period. Or we will all be out of jobs. We are making progress in the revenue generation dept with the code share, caribbean, and intl flying. Marketing and Advertising still have a long way to go. And Chip said it right, this doesn't have to be wage cuts, but with productivity improvements. Better people utilization, better A/C utilizition, better hub utilization, and on and on... We all know where the waste is. If jobs are eliminated, it will be an unfortunate side effect, but a necessary evil. We can not continue down this path, we must adapt and change, or we will all be out of jobs. And for all of you that say, "well, i am not going to change, so the company better go ahead and liquidate..." then you should find a new job now. You are bringing down the rest of who want to see the company survive!!!

In my opinion the unions are their own worst enemies. Their protectionism forces the company to be on the defensive. Express carriers would not have to pay poverty wages if the mainline wasn't paying exorbitant salaries to the top tier members working half the hours. As far I as I can tell, this goes for all the union groups. There must be a balance, and unions that represent both express and mainline groups can never achieve this. As for MTC outsourcing, I am 100 % against it. From my vantage point, I know all about the shortcomings in BFMH. I still can't phathom why the company would even consider this option. The only thing I can come up with is the cost of in house mtc has become so inflated, the company would be foolish not to consider a third party. And this is frightening. The IAM needs to address this issue, and not hide behind the contract. Like I said, we can't continue at this pace or its lights out. There is way too much posturing and lack of trust. Understandablely, the union wants the best for its members, and the company wants the best for the bottom line, and that can make it very hard to see eye to eye.

As for the RJ flying, we can only hope we aren't too late. They probably won't be a major revenue generator, but hopefully we can use them as a turf protection program. They will bring CASM down and allow us to retain pax. The EMB 170/175 is our only hope in PHL vs Southwest. The EMB 170/190 will be a much different experience than the small RJs. The pax will think it is a A320. The leather seats will be wider than the mainline, due to 4 across vs 6 (same dia fuselage). The RJs are for long, thin routes that can't support a A320/B737. This was the plan all along. For anyone who believed the RJ for turboprop caca, please me a call, I got some ICE to sell you on the North Pole.

As for Chip's much anticipated ICT/UCT, well of course Siegel and Co can't say anything about what's in the works, its illegal. Who knows what will happen, I bet it changes everyday. That is not bad or does it reflect lack of vision or a lack of a plan. I think it is healthy. Imagination is the key here. There will be industry consolidation lets just hope we come out ahead...we must adapt and change, or we will all be history. And I for one, like having a paycheck, however small I perceive it to be.

 

[jack mama]

Oh yeah, I forgot one point. I simply don't understand demanding Dave's head should roll. Are you crazy? Do you think the next guy will be better? He will come in, see the same glaring ineffiencies as Dave does, progress to improve upon them, and then become the unions worse enemy. The same thing happens every time. Dave has done some incredible things to turn this company around. I know it is hard to believe we are turned around, but just think of where we were heading. This is must better, we survived to fight another day!!!!

 

[BoeingBoy]

Some thoughts...

It is an unfortunate fact of corporate life today that those at the top get the large paychecks regardless of the performance of the company while those on the bottom pay the price for bad times. As I've said in another thread, losing sleep over this only gets you less sleep. That doesn't mean that those losing their jobs, taking pay cuts, working harder, etc., should like it or not voice their disgust over it. It would be nice if a CEO really meant "we" when he says "we're in this together", but they usually don't.

It has been pointed out by me and others that "costs" are not the holy grail. Our costs are down over 25% vs pre-9/11 and employee costs are down over 30% in the same period, yet our CASM is down only 9.5%. Why? Because ASM's are down almost as much as costs. As you mentioned, efficiency is the key measure to look at, as expressed in CASM. And almost all the ways to improve efficiency that you mentioned are out of the employees hands. They're management decisions - the one's management is supposed to be getting the big bucks to make.

Yes, unions can be their own worst enemy. However, no union on this property works under a contract that management didn't agree to. I assume that Dave negotiated the best deal he could to come to work here - would you expect any less of the employees? And if you think Mesa and the other contract express operators would pay their employees more if 'only' mainline employees worked for less you need to wake up and smell the coffee. Mainline employees ARE working for less, so where are the raises at the express operators you speak of?

RJ's have a place, as will the 170's. They are not the be all and end all. Contrary to what you say, even the 170 will have a higher CASM than mainline. The efficiency comes from having less empty seats than a mainline aircraft where the extra capacity is not needed. As a sidenote, the 170 does not have the same fuselage diameter of the mainline a/c, even the 737. It is closer to the CRJ's, hence only room for 4 across seating.

 

[AM49AAA]

CWA President Morty Bahr meets with US Airways CEO Dave Siegel...
CWA President Morty Bahr, CWA's US Airways BOD member Magdalena Jacobsen, and CWA staff met with US Airways CEO Dave Siegel and Senior VP for Employee Relations Jerry Glass in Crystal City today.


Merger: CWA'ers questioned whether recent public statements by CEO Dave Siegel about industry consolidation indicated that management is looking to sell or merge the airline. We asked specifically if there were any merger or sale discussions or approaches going on. The answer from the executives was an unequivocal “Noâ€￾.

[

Chip,

If there was discussion between U/UAL how could Siegel make this statement, considering a member of the BOD was there? Let's not forget that management answers to the BOD as they are the representative body of the shareholder. Management can surely with hold information not required by the SEC from the general public. I find it hard to believe they could outright lie or decieve the BOD though.

 

[ClueByFour]

Dave has done some incredible things to turn this company around.

What planet do you live on?

He reduced costs in Chapter 11? I could find you a first year undergrad business student who can reduce costs in Chapter 11.

Short of that, he's let the fleet go to pot, pissed off the VFF base, gotten himself into quite a pickel at PIT, and lost (and will lose large) to the IAM by throwing that temper tamtrum and grounding revenue generating planes right as the holiday season hits in the progress.

What a winner.

Executives should be judged by results. This crop has had nada.

 

[AOG-N-IT]

What planet do you live on?

He reduced costs in Chapter 11? I could find you a first year undergrad business student who can reduce costs in Chapter 11.

Short of that, he's let the fleet go to pot, pissed off the VFF base, gotten himself into quite a pickel at PIT, and lost (and will lose large) to the IAM by throwing that temper tamtrum and grounding revenue generating planes right as the holiday season hits in the progress.

What a winner.

Executives should be judged by results. This crop has had nada.

Clue,

Par usual , you are right on the mark with your comments. I have never seen anything like what we are seeing here go un-punished like this. What other business would tolerate this??

As you clearly stated...any first year business student..or any small business person can reduce costs or escape paying creditors under Chapter 11...thier is nothing monumental about any of this at all.

The key factor is what one achieves after the emergence from Chapter 11...that is the measuring mark period.

Since the emergence from Chapter 11...we have not only hurt our ability to generate revenue with idled jets being parked in far of places , we are also pinching ourselves by not having those same idled jets available to rob from when parts needs creep up...which they do daily.

Eventually the company is going to have to admit defeat on the subject of airbus out-sourcing....and I think someone needs to sharpen their pencil and calculate exactly how much this debacle has cost us in real dollar terms?

 

[AP Tech]

Hey Jack Mama........Does the name "Chainsaw Al Dunlap" ring a bell??? In my opinion Dave was brougnt in to be the hatchetman and nothing more. He has done nothing more than cut costs, destroy morale while running this company into the ground!!
He is in my opinion doing nothing more than building a regional airline soon to be aquired by a real airline. And guess what....where is that going to leave the employee's? At the bottom and Dave and his band of thieves and liars will be floating to the ground via their "Golden Chutes"!!!! :down: