USA320Pilot said:
- US Airways has negotiated new labor agreements that will save the company $700 million per year. The pilot’s provided $300 million, the AFA $94 million (plus $63 million for pension and retiree health care changes), the CWA $137 million, and the TWU $6 million per year.
Those numbers add up to $600 million.
- Non-union workers have contributed more than $200 million in cost cuts.
Really? A 5 percent management paycut worked out to $200 million? Management's own figure in its motion to the bankruptcy court put the figure at $40 million (this includes headcount reductions and benefit reductions).
When evaluating the proposal, IAM members must look at two points: having no job or having job while looking for another job. Another key point is that the company’s proposal addresses two large issues: reducing the 21 percent “imposed†pay cut to a much more manageable number and preserving a majority of the 8,500 IAM positions. Judge Mitchell acknowledged the machinists are being asked to "cut their own throats." But he said the union did not prove the cuts were unnecessary while the carrier demonstrated the savings were vital. "Which is worse, half the mechanics losing their jobs or all of the mechanics losing their jobs?" Mitchell asked. However, according to today’s Pittsburgh Tribune-Review several rank and file mechanics at the Pittsburgh hangar said the offer seemed to provide a glimmer of hope, but added they would reserve final judgment until they get more information.
Well, I think the biggest thing each IAM member will look out for is his/her own job. If given the choice of "vote yes and lose your job or vote no and lose your job," a lot of folks would probably say, "screw the company." Look at how close the pilots' vote was and consider that they had a LOT more to lose.
What bothers me about some of our posts is that a reader looks at a comment in the newspaper and they believe the comment is fact. People like Vaughn Cordle and Mike Boyd do not clearly look at the numbers, SEC filings, or know what is happening inside the company. Cordle is a United pilot, is clearly uninformed, and has a special interest. When reading a periodical the best sources are key analysts like Merrill’s Michael Linnenberg, S&P’s Phil Baggaley, and Lehman’s Gary Chase. The only news reporters who truly have a handle on the inside information are Susan Carey of the Wall Street Journal, Michelline Maynard of the New York Times, Lynn Marek of Bloomberg News, and Dan Roberts of the Financial Times. I do not listen to anybody else because they are not informed, but the people listed above can directly speak with every industry CEO, if desired.
OK, well I'll quote Micheline Maynard (at least spell her first name right if you respect her writing!) from today's
New York Times in regard to Delta's SimpliFares:
"It [SimpliFares] could even force one or more airlines out of the big leagues, with the first casualty most likely to be
US Airways, which is in bankruptcy for the second time in two years."
Or in yesterday's
Times:
Southwest Airlines, the industry's healthiest player, delivered another punch to struggling US Airways, announcing plans to start service from Pittsburgh, where US Airways is dismantling its hub after a long reign as the airport's dominant carrier.
The next two hurdles that Roberts indicated must occur by January 14 are:
- US Airways needs to find $100 million in cash or cost savings, or it risks upsetting a key deal with GE, which controls most of the airline's fleet and is very favorable to the airline.
- US Airways must win an extension to continue using ATSB guaranteed funds.
Well, January 14 is one week away. There's still no cash or cost savings on the table, and now it looks like revenues are going to get even worse with Delta's SimpliFares and Southwest entering PIT. And I can't see an outside investor stepping up to drop $100 million into the money pit unless and until there's some certainty that the IAM-represented labor groups won't shut things down (i.e. late January).
In regard to Southwest entering the Pittsburgh market, I do not believe the new competitor will have much effect on US Airways’ successful transformation. Why? The airports operating costs are relatively high and there is poor O&D. Pittsburgh already has LCC competition from Independence Air, USA3000, AirTran, and ATA and Southwest’s entrance is more of the same. Southwest’s entrance in the summer will be with a couple of gates and 10 to 14 flights, which may grow to 40 or 50 flights per day, with US Airways operating over 200 mainline and express flights per day.
You're kidding, right? US operates a whopping 70 daily mainline flights into PIT these days. If SWA ramps up to 40 or 50 daily flights, that will be close to half of US's total capacity at PIT. You neglect to mention that many of the roughly 160 express flights per day are 19-seat turboprops, each with a handful of seats filled with passengers making connections at PIT. WN will destroy yields to at least half of PIT's top 30 destinations -- and this won't have much effect?
ATA, AirTran, Independence, and USA3000 (hahahaha) together amount to far less than what WN will add in its first wave of PIT flights.
Also noteworthy, US Airways effectively shifted Pittsburgh flying to Fort Lauderdale, where the costs are lower, yield/revenue higher, and the facilities/ATC almost as good as Pittsburgh.
Yields higher at FLL? Fat chance. Let's see, FLL has Southwest, jetBlue, Song, Spirit, AirTran, USA3000, Frontier, and Ted. Delta's revamping its fare structure and is #1 in FLL. Southwest and jetBlue are both in the top five at FLL.
Facilities/ATC better at FLL? You've got NIMBY's in Dania Beach effectively blocking an upgrade of the parallel runway for commercial jets, and the crosswind runway crosses the main east-west runway. FLL is already approaching its airfield capacity. Terminals? You're going to have your international arrivals come into a completely different terminal than your departures so you can tow the planes over for extra efficiency, and the passengers can hike outdoors between Terminal 4 and Terminal 3 for extra convenience if they're connecting! Not just that, but the international arrivals facility at FLL wasn't really designed with a connecting hub in mind.
In my opinion US Airways must have a competitive cost structure that can support GoFares or it will fail, especially in light of Delta’s announcement. Low fares are the future and either the company offers them at a profit, or it liquidates.
Well, the company has ratified cost-cutting agreements with all of its unions aside from the IAM, and they have the judge's okay to abrogate the IAM contracts if necessary. It looks like all of the labor-related elements of management's proposed "competitive cost structure" are in place -- so where are the systemwide GoFares? (And not just the knee-jerk response to DL.)
Meanwhile, US Airways will get a revenue boost at DCA because Independence Air, a problematic LCC, announced a cost-cutting move yesterday when it said it plans to eliminate 150 of its 560 daily flights -- most in and out of Dulles -- at the end of this month. Who wins? United and US Airways.
Well, sort of. This means fewer discounted seats on the market, which does help, but a successfully restructured FlyI will continue to keep pressure on yields from WAS. And if FlyI were to cease operations or return to the United Express fold, what would be the fate of GoFares in Washington?
