UA/UA merger?

[argentomaranello]

If capacity reduction is the key, then as heartless as it sounds, somebody needs to fail. That doesn't mean I want to see it, but I really do believe that the current bankruptcy laws will start a domino effect in the airline industry. That ain't good for anybodye
_____________________________________________

KCFLYER: Your point about capacity reduction being an essential ingredient for industry recovery is valid enough, and your notion that USAir and UAL are proper candidates for the complete liquidation that would achieve such a goal is a resonable enough conclusion. But there are other ways to take the surplus capacity out of the system; and more than a few of those might accomplish more, by way of restoring domestic civil aviation to good financial health. For example, if the much-speculated unique corporate transaction between USAir and UAL also included a far more thorough attack on excessive labor costs (not via additional W-2 cuts, but through LUV-style, productivity enhancing headcount reduction), then the template created might force the balance of the industry to not only furlough some additional aircraft, but to radically cut their still-bloated staffs to Southwest levels. Now, that would be an achievement.

 

[chipmunn]

[P align=justify][FONT face=Times New Roman size=3]Analysts Give Thumbs Down To United Unions' Concession Plan[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]WASHINGTON (Aviation Daily) - Industry analysts are unimpressed by a combined concession proposal presented to United by its main union groups, saying that much greater detail and further concessions will be necessary before the proposal is sufficient to address the airline's financial woes. The proposal, released Wednesday night, included $1 billion a year in concessions for five years. It's considerably less than United's proposal of $9 billion over six years, and the fact that the total has not yet been divided among individual union groups rang alarm bells for industry experts.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Blaylock & Partners analyst Ray Neidl told The DAILY the lack of detail makes it impossible to tell if the concession total is hard dollars or if it's smoke and mirrors, such as vague productivity improvements. Even if all $5 billion is hard wage concessions, the carrier would still need more, Neidl said. [/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Robert Mann, of RW Mann and Company, said although [the proposal] is better than nothing, it's far less than what the company asked for. He said, There clearly must be negotiations on the total, and he believes the proposal is intended as an offer to[BR]negotiate more than anything else.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Mann said it's troubling the unions have not released a breakdown of the total. If the total is $1 billion, but no one has signed up for a particular share, is it really $1 billion?[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]United spokesman Joe Hopkins said the airline will analyze the unions' proposal, and respond in a few days. The airline has not determined whether talks will be sought, Hopkins said, though he said it's obvious their proposal is not identical to our proposal.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]If a deal is negotiated between United and its unions, employees would still need to ratify it. The unions recognize there is a tight timetable, International Association of Machinists (IAM) spokesman Frank Larkin said. The absence of a firm deadline hardly diminishes the fact that [the concession process] needs to move forward pretty quickly, Larkin said.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Larkin said United's $9 billion concession proposal came before the recent management change, so the airline and union positions may not be as far apart as [the United proposal] indicates.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]The $5 billion in labor concessions was part of a wider restructuring plan presented by the union. The unions portray the proposal as a framework only, with details to be decided after discussions with United. Overall, it would let the carrier improve its core annual profitability by $2 billion to $3 billion a year, according to the IAM.[/FONT][/P]

 

[KCFlyer]

[P]this is to force the topic to a new page. [/P]

 

[chipmunn]

[P align=justify][FONT face=Times New Roman size=3]Analysts Give Thumbs Down To United Unions' Concession Plan[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]WASHINGTON (Aviation Daily) - Industry analysts are unimpressed by a combined concession proposal presented to United by its main union groups, saying that much greater detail and further concessions will be necessary before the proposal is sufficient to address the airline's financial woes. The proposal, released Wednesday night, included $1 billion a year in concessions for five years. It's considerably less than United's proposal of $9 billion over six years, and the fact that the total has not yet been divided among individual union groups rang alarm bells for industry experts.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Blaylock & Partners analyst Ray Neidl told The DAILY the lack of detail makes it impossible to tell if the concession total is hard dollars or if it's smoke and mirrors, such as vague productivity improvements. Even if all $5 billion is hard wage concessions, the carrier would still need more, Neidl said. [/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Robert Mann, of RW Mann and Company, said although [the proposal] is better than nothing, it's far less than what the company asked for. He said, There clearly must be negotiations on the total, and he believes the proposal is intended as an offer to[BR]negotiate more than anything else.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Mann said it's troubling the unions have not released a breakdown of the total. If the total is $1 billion, but no one has signed up for a particular share, is it really $1 billion?[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]United spokesman Joe Hopkins said the airline will analyze the unions' proposal, and respond in a few days. The airline has not determined whether talks will be sought, Hopkins said, though he said it's obvious their proposal is not identical to our proposal.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]If a deal is negotiated between United and its unions, employees would still need to ratify it. The unions recognize there is a tight timetable, International Association of Machinists (IAM) spokesman Frank Larkin said. The absence of a firm deadline hardly diminishes the fact that [the concession process] needs to move forward pretty quickly, Larkin said.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]Larkin said United's $9 billion concession proposal came before the recent management change, so the airline and union positions may not be as far apart as [the United proposal] indicates.[/FONT][/P]
[P align=justify][FONT face=Times New Roman size=3]The $5 billion in labor concessions was part of a wider restructuring plan presented by the union. The unions portray the proposal as a framework only, with details to be decided after discussions with United. Overall, it would let the carrier improve its core annual profitability by $2 billion to $3 billion a year, according to the IAM.[/FONT][/P]

 

[chipmunn]

KCFlyer asked: “But why use bankruptcy court to do it?â€￾

Chip answers: First, bankruptcy reorganization is not failure and hopes to provide creditors a return on their investment, whereas Chapter 7 liquidation provides a percentage return on a creditor claim. In the case of US, most of the labor groups would not have agreed to voluntary accords and I believe none of the lessors would have provided concessions outside of bankruptcy.

UAL777flyer said: “The comparison to Southwest ignores the fact that the very reason they are able to continue to grow is by KEEPING THEIR UNIT COSTS LOW!â€￾

Chip comments: I agree with this comment and the rest of your post.

Chip

 

[KCFlyer]

[P]
[BLOCKQUOTE][BR]----------------[BR]On 9/27/2002 5:56:30 PM UAL777flyer wrote:
[P]The comparison to Southwest ignores the fact that the very reason they are able to continue to grow is by KEEPING THEIR UNIT COSTS LOW!  This has been something the majors have been unable to do.  You cannot expect high cost airlines to simply revamp their fare structure by lowering walkup fares to WN and F9 levels and not expect to see some revenue erosion.  Let the majors address the obvious over-capacity in this industry and get their costs in line.  Then they can get a more firm handle on the pricing structure.  It has become ludicrous in this country that everyone now expects to be able to fly from coast to coast for $250 roundtrip.  [/P]----------------[/BLOCKQUOTE]
[P]UAL777 - Southwest's costs are 34% lower than yours. But your walkup fares are 400% or more higher than theirs. Nobody says you have to match them, but there IS a lot of wiggle room there, and by dropping restrictions and penalties, you'll make more fares more attractive. You want use it or lose it or $100 change fees? Fine, do them for the fares that work out to less than it costs you to fly that seat. To apply it pretty much to any fare that isn't full walkup unrestricted isn't doing anything for business travel. [/P]
[P]To veer this topic back a bit, you have said that there is 15% to 20% overcapacity in the airline market today. Merging U and UAL wouldn't do anything to reduce that capacity. It would be just as ugly, if not uglier, to try and do it via bankruptcy. Jobs would be lost. If reducing capacity is the tonic that is needed, then an airline should fail, and not be married thru bankruptcy. That failure would go a long way towards reducing capacity. It would also go a long way to strengthening the survivors. It's no secret that I'm a Southwest fan, but something really stinks when a company who has managed to maintain profitablity, and who takes steps to spur demand is in effect punished for their success with the bankruptcy courts allowing their competitors to dump debt and force labor concessions to emerge lean and mean and debt free to then come in and flat out undercut them on prices. And, how many companies outside the other airlines will be suffer a severe financial blow from U or UAL bankruptcy because the debt is suddenly forgiven? If capacity reduction is the key, then as heartless as it sounds, somebody needs to fail. That doesn't mean I want to see it, but I really do believe that the current bankruptcy laws will start a domino effect in the airline industry. That ain't good for anybody.[/P]

 

[argentomaranello]

Yesterday, COSMO posted a very thoughtful piece in which my suggestions about the catalysts for the potential unique corporate transaction between USAir and UAL were noted as something of speculation heaped upon conjecture, founded upon a pair of dubious (COSMO's view) propositions: first, that the UAL workforce, when faced with the impending ruin of their carrier, would never-the-less fail and refuse to accept significant wage cuts; and, second, that USAir could, in fact, assimilate the former UAL workforce (to the extent necessary to operate whatever was acquired). In response, I would point out that I have always branded the theory of a unique corporate transaction between these carriers as somewhat remote and definiately speculative. But I have also consistently pointed out that, while its first leg required a degree of irrationality among UAL's incumbent employee groups, much evidence of UAL workforce denial and reality disconnect abounds (just examine yesterday's news of the UAL labor coalition's inadequate and incomplete proposal to UAL management for concessions). As to the challenge of workforce assimilation, assuming that a partial fragmentation of UAL actually occurs, COSMO articulates a valid point; however, in the current climate of large-scale airline unemployment, assimilation ought not to be seen as a significant obstacle. Should another airline (USAir, in this case) actually be in position to accept a partial UAL fragmentation, there would certainly be no requirement that it take UAL's existing and related workforce with the routes (indeed, it may not even be required to take much of the equipment). Would such a transaction appear as a seemless transition to the traveling public? Obviously not, but USAir would still be getting appropriate value for what it might be required to pay (very little); and the upside would still reside in the future value of the codeshare to both carriers.

 

[TomBascom]

You guys don't get it.

We don't expect to fly coast to coast for $250. Nor do we expect you to match SWA to every detail. (Or worse the amalgam of all the low fare bad ideas and none of the good ones that we're faced with today.)

By the same token there is no justification at all for it to cost $2,500 to fly coast to coast. Nor should it cost $700 to fly MHT -> PHL.

You're selling a different product. You can differentiate it and obtain a premium price for it. But not a premium of 400% or 800%. It isn't that much better and it never was.

Today you have essentially offer two price points -- dirt cheap and fabulously expensive. There is nothing in the middle, no incentive to choose it if it were there and trivial differentiation in the travel experience (and what differentiation there is is quickly vanishing). So the vast majority of your customers save a lot of money and buy the cheap fare. Who can blame them?

At the end of the day it's a cramped seat on a metal tube. The perks are nice and they're necessary for that differentiation. So are convienent schedules and good facilities. But they aren't worth thousands of dollars -- would any of you pay that out of your own pockets?

If you reduce capacity you're just taking away one of the few things that still differentiates you from the other guys and the spiral will accelerate.

Drop your top fares down to a point where people will buy them -- that point is higher than $250. Nobody buys them where they are so what is there to lose?

[blockquote]
----------------
On 9/27/2002 5:56:30 PM UAL777flyer wrote:

The comparison to Southwest ignores the fact that the very reason they are able to continue to grow is by KEEPING THEIR UNIT COSTS LOW! This has been something the majors have been unable to do. You cannot expect high cost airlines to simply revamp their fare structure by lowering walkup fares to WN and F9 levels and not expect to see some revenue erosion. Let the majors address the obvious over-capacity in this industry and get their costs in line. Then they can get a more firm handle on the pricing structure. It has become ludicrous in this country that everyone now expects to be able to fly from coast to coast for $250 roundtrip.
----------------
[/blockquote]

 

[Winglet]

Just how low are the pilots and others at US Air going to lower the bar on professional compensation? Besides giving away scope, how low are the concessions going to go on wage and retirement?

 

[N628AU]

[blockquote]
----------------
On 9/27/2002 10:29:10 PM Winglet wrote:

Just how low are the pilots and others at US Air going to lower the bar on professional compensation? Besides giving away scope, how low are the concessions going to go on wage and retirement?
----------------
[/blockquote]

Winglet,

I suppose all of the US Airways employees should have just rejected the restructuring agreements with the Company despite the overwhelming evidence it was needed and face one of two outcomes. A, have the Court abrogate the current contracts and have the Company impose work rules and compensation, or B, watched the DIP financing taken off the table and move to liquidation. All in the name of protecting the bloated contracts at other carriers. A lot of good that does to make the house payments. As Dr. Frazier Crane once asked Cliff Clavin, What color is the sky in your world?

 

[autofixer]

Winglet, I once heard a small business owner asked why he paid his employees so litte? His response was, Because I can. My point is, how low will pay, retirement, scope, etc. go? As low as the company wants...because they can.

 

[luv2fly]

[blockquote]
----------------
On 9/27/2002 648 PM chipmunn wrote:

Chip answers: First, bankruptcy reorganization is not failure and hopes to provide creditors a return on their investment----------------
[/blockquote]

It most certainly is a failure. An organization that is forced to reorganize does so because there has been a breakdown with the original business plan. That breakdown can be attributed to many different factors, but it still represents a failure in the system. Sugar coat it any way you want Chip. U failed. Can it be revived? Absolutely, but I equate it to a college student who waits until their senior year to improve his or her GPA. Too little, too late.

 

[chipmunn]

[P][FONT face=Times New Roman size=3]This thread has wandered off of the topic and should return back to a UA-US corporate transaction. Yesterday the San Francisco Chronicle published an article titled UAL stalls on unions' offer of wage cuts that can be read at [A href=http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/09/27/BU50656.DTL&type=business]http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/09/27/BU50656.DTL&type=business[/A][/FONT][/P]
[P][FONT face=Times New Roman size=3]Chip [BR][/P][/FONT]

 

[Taipan]

The fair fare strucutre should be
1. 21 day advanced purchase highly restricted (concert like) you dont show wasted money
2. 14 day same as above
3. 7 day less restrictive
4. BA3 3 day adv purchase no restrictions 35-40% percent less than current fares
5. BUA 25-30% less than today
6. YUA 20-30% less than today
7. FUA 20-30% less than today
no tariff should be more than 7 fares deep

 

[Winglet]

My question was not rhetorical. Percentage wise, about how much is US Air's compensation and retirement going to be lowered?