OP
USA320Pilot
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- May 18, 2003
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- #106
Cosmo:
Cosmo asked: "Where precisely are the efficiencies and economies of scale that you claim US Airways would bring to a merger with United that United couldn't get just as easily on its own? Some specifics this time to support your argument would be much appreciated."
Facility integration, joint purchasing, joint advertising, elimination of duplicate processes like Investor Relations, Consumer Affairs, Payroll, and Crew Scheduling, Human Resources, and management positions, etc. Other functions such as Dispatch, Training, and Maintenance Operations could be combined, to increase efficiency and processes.
Consolidate office space, for example Reservations. US Airways has rejected the lease for its Pittsburgh Greentree facility and this facility could be closed and these positions be transferred to Winston-Salem or a United facility, which would lower United's lease expense.
In regard to Dispatch, just prior to the last merger announcement, United expanded its Operations Dispatch facility and now a large portion is unused. US Airways has rejected its Dispatch facility as part of the Pittsburgh hub negotiations. If the companies merge, it would be required for Dispatch to combine and United has already prepared for this major integration.
In regard to facility reduction, we just saw that occur in Seattle. On October 1 United rejected two gates in the North Satellite Terminal. US Airways then moved from the South Satellite Terminal and took custody of United's gates N10 and N11. The initial benefit is that United lowered its Seattle lease expense and the business partners are now collocated, which is good for the code share customer experience.
From management's view, if the companies merge, the Seattle airport consolidation could increase joint worker productivity, which would drive down labor expense and probably increase furloughs.
In addition, with the two companies have now aligned their Seattle operations and have prepared this station's facilities for a corporate combination. I understand similar plans are being developed between the two companies facilities Departments who are working with the airport authorities in San Francisco, Los Angeles, and Denver. For example, after a new agreement is reached in Denver, US Airways may move from Concourse C to Concourse B.
This would occur through the system and save millions and millions of dollars. Another example would be LaGuardia. As part of the AMR carve out for the last merger attempt, United was going to sell its five gates in Concourse C and move to US Airways terminal, which has about 20 gates (express now uses many of the gates throughout the day). In this case, the combined business entity would lower its unit costs by United rejecting its LaGuardia gate and facility lease agreements through the bankruptcy process and the company would improve worker productivity.
There are probably about 200 airports throughout the combined route network where this would occur, which would drive down the combined business enterprise’s unit costs dramatically.
In addition, I have received reports from knowledgeable people the reason US Airways has extended its Pittsburgh hub negotiations is that the hub and its facilities are being held hostage to United's exit financing and plan of reorganization (POR). Once more is know about United's POR, then US Airways will get serious about its negotiations and hammer out a deal. In my opinion, if the ACAA lower its debt service and lease expense, we could see such things as a rejection of Training, Reservations, hangar (a month-to-month agreement could be included), and RIDC leases. However, the airline would keep the airport gates and received capital improvements to have RJ jetways replace mainline jetways on Concourse A.
In regard to labor, many duplicate management positions would be eliminated, as well as some line employee positions, due to increased productivity. Is this good for labor, not the people affected, but it would improve productivity and drive down unit costs and labor expense.
Cosmo, there are many, many more examples of economies of scale that would drive down CASM that is too high, even after all of the cuts by both companies, but I believe you get the idea from my examples.
Finally, you must admit it's interesting that just last week both US Airways and United had management publicly speak to the benefits of consolidation. Was that coincidental or purposely timed by the business partners?
From your company, Jeffrey Stanley, manager of economic analysis and regulatory affairs at United said in a prepared speech last Friday, "If things stay the way the are now, there will be several Chapter 7 (bankruptcy liquidations) down the road, and that's not good for anyone. The most feasible solution to the situation is consolidation in the domestic airline industry," he said.
Cosmo, United's economist (not Chip Munn) publicly said, "The most feasible solution to the situation is consolidation in the domestic airline industry." I believe that should hold some merit in this discussion, when your company says the most feasable solution is consolidation.
In my opinion, if the companies merge, we will not know for about 4 to 6 months because I understand Bronner is not willing to provide United with exit financing United completes its in-court restructuring and successfully overcomes its major obstacles and US Airways stabilizes.
Regards,
Chip
Cosmo asked: "Where precisely are the efficiencies and economies of scale that you claim US Airways would bring to a merger with United that United couldn't get just as easily on its own? Some specifics this time to support your argument would be much appreciated."
Facility integration, joint purchasing, joint advertising, elimination of duplicate processes like Investor Relations, Consumer Affairs, Payroll, and Crew Scheduling, Human Resources, and management positions, etc. Other functions such as Dispatch, Training, and Maintenance Operations could be combined, to increase efficiency and processes.
Consolidate office space, for example Reservations. US Airways has rejected the lease for its Pittsburgh Greentree facility and this facility could be closed and these positions be transferred to Winston-Salem or a United facility, which would lower United's lease expense.
In regard to Dispatch, just prior to the last merger announcement, United expanded its Operations Dispatch facility and now a large portion is unused. US Airways has rejected its Dispatch facility as part of the Pittsburgh hub negotiations. If the companies merge, it would be required for Dispatch to combine and United has already prepared for this major integration.
In regard to facility reduction, we just saw that occur in Seattle. On October 1 United rejected two gates in the North Satellite Terminal. US Airways then moved from the South Satellite Terminal and took custody of United's gates N10 and N11. The initial benefit is that United lowered its Seattle lease expense and the business partners are now collocated, which is good for the code share customer experience.
From management's view, if the companies merge, the Seattle airport consolidation could increase joint worker productivity, which would drive down labor expense and probably increase furloughs.
In addition, with the two companies have now aligned their Seattle operations and have prepared this station's facilities for a corporate combination. I understand similar plans are being developed between the two companies facilities Departments who are working with the airport authorities in San Francisco, Los Angeles, and Denver. For example, after a new agreement is reached in Denver, US Airways may move from Concourse C to Concourse B.
This would occur through the system and save millions and millions of dollars. Another example would be LaGuardia. As part of the AMR carve out for the last merger attempt, United was going to sell its five gates in Concourse C and move to US Airways terminal, which has about 20 gates (express now uses many of the gates throughout the day). In this case, the combined business entity would lower its unit costs by United rejecting its LaGuardia gate and facility lease agreements through the bankruptcy process and the company would improve worker productivity.
There are probably about 200 airports throughout the combined route network where this would occur, which would drive down the combined business enterprise’s unit costs dramatically.
In addition, I have received reports from knowledgeable people the reason US Airways has extended its Pittsburgh hub negotiations is that the hub and its facilities are being held hostage to United's exit financing and plan of reorganization (POR). Once more is know about United's POR, then US Airways will get serious about its negotiations and hammer out a deal. In my opinion, if the ACAA lower its debt service and lease expense, we could see such things as a rejection of Training, Reservations, hangar (a month-to-month agreement could be included), and RIDC leases. However, the airline would keep the airport gates and received capital improvements to have RJ jetways replace mainline jetways on Concourse A.
In regard to labor, many duplicate management positions would be eliminated, as well as some line employee positions, due to increased productivity. Is this good for labor, not the people affected, but it would improve productivity and drive down unit costs and labor expense.
Cosmo, there are many, many more examples of economies of scale that would drive down CASM that is too high, even after all of the cuts by both companies, but I believe you get the idea from my examples.
Finally, you must admit it's interesting that just last week both US Airways and United had management publicly speak to the benefits of consolidation. Was that coincidental or purposely timed by the business partners?
From your company, Jeffrey Stanley, manager of economic analysis and regulatory affairs at United said in a prepared speech last Friday, "If things stay the way the are now, there will be several Chapter 7 (bankruptcy liquidations) down the road, and that's not good for anyone. The most feasible solution to the situation is consolidation in the domestic airline industry," he said.
Cosmo, United's economist (not Chip Munn) publicly said, "The most feasible solution to the situation is consolidation in the domestic airline industry." I believe that should hold some merit in this discussion, when your company says the most feasable solution is consolidation.
In my opinion, if the companies merge, we will not know for about 4 to 6 months because I understand Bronner is not willing to provide United with exit financing United completes its in-court restructuring and successfully overcomes its major obstacles and US Airways stabilizes.
Regards,
Chip
Be careful what you wish for....... or are you hoping that more people lose what is rightfully theirs just like the injustice that was forced upon yourself? If the latter is the case, you may want to have a talk with the man in the mirror. :unsure:
