US/UA merger?

[chipmunn]

[P][STRONG][FONT face=Times New Roman][FONT size=4][SPAN class=t]United machinists awaiting airline response[/SPAN] [BR][/FONT][/FONT][FONT face=Times New Roman][FONT size=3][/FONT][/FONT][/STRONG][/P]
[P][FONT face=Times New Roman][FONT size=3][A href=http://biz.yahoo.com/rf/021001/airlines_united_1.html]http://biz.yahoo.com/rf/021001/airlines_united_1.html[/A][/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3]The International Association of Machinists said the airline had not yet offered a response to the $1 billion in concessions over five years the unions offered to help United avoid an autumn bankruptcy.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3]It also said no agreements had been reached regarding how the wage concessions would be divided up among the five unions making up the coalition.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3]No further meetings were scheduled as the union awaited the airline's response, said spokesman Joe Tiberi. [/P][/FONT][/FONT]

 

[UAL777flyer]

MrMarky,

PG&E shenanigans? Sounds like a job for Erin Brockovich!

 

[chipmunn]

UAL has hired Chicago-based AON, the world's No. 2 insurance broker, and its unit, AON Fiduciary Counselors to manage company stock in its 401(k) retirement plans while the airline works on its Economic Recovery Plan (ERP) strategy.

AON ordered Fidelity Investments to begin selling US Airways stock without employee investor knowledge approximately one month prior to the bankruptcy filing. After the filing, those employees who still held the U stock in their 401(k) were informed that a portion of their stock had been sold and the proceeds were placed in their money market default account.

None of this activity was disclosed prior to the bankruptcy filing.

It appears this was a way for US Airways management to help the employees by having shares sold with the bankruptcy filing imminent. This could be UAL's strategy as well.

In regard to former UAL president Rono Dutta (who recently resigned from UAL when Glenn Tilton was appointed CEO) signing a consulting contract with RSA, in my opinion he was contacted to provide input into the US Airways DIP financing and equity plan sponsor agreement because of his detailed understanding of US Airways. He also could have been retained to advise RSA on how to finance and complete a unique corporate transaction between US Airways, UAL, and the ATSB.

I also find it curious why UAL management is taking so long to respond to the coalitions offer, unless there are behind closed door negotiations, which would be in conflict with yesterday's IAM press release.

Chip

 

[UAL777flyer]

It's probably because the UA union coalition's proposal was less than required and the company is preparing their counter-offer. That's just my hunch.

 

[chipmunn]

Regardless of the motive, UA management and its unions seem to be stuck in quick sand, which is not good for those interested in the success of UA. The entire industry and in particular AA & UA are losing an enormous amount of money due to the sluggish economy, rising fuel prices, war-risk insurance premiums, and security costs.

US would be in the same boat if it had not obtained nearly $900 million per year in labor cuts, restructuring agreements reached with other stakeholders, and defaulting on financial agreements through the Chapter 11 process.

There is reason to believe the UA Board, excluding the ALPA, IAM, and non-contract representative, are now in favor of a formal reorganization.

In my opinion, if the UA labor groups would have embraced a UA-US merger in December 1995 or maybe the May 2000 merger attempt (although with September 11 this deal may have been much less certain if the companies could have been successful in light of recent events), UA & US would not be in this position.

It could be the special interest actions of pre-nuptial seniority agreements to bypass national union merger and fragmentation policy, using merger support to extract breathtaking pay increases, slowdowns to alienate passengers, and scope grievance hearings to block a merger over industry leading pay demands, which could be what causes the UA board to decide enough is enough.

Could it be the board and the ATSB have decided the only way to run the company is to eliminate the governance issue?

Again, I believe having employees own a minority interest in an airline and be represented on the board can be a good thing. If somebody owns something they tend to take better care of it and board representation can create trust. But, majority ownership and veto power through governance can be lethal to a corporation because employees most likely will not make the hard decisions, which can be a noose around management's decision making process.

Chip

 

[DCAflyer]

UAL777flyer hypothesized: It's probably because the UA union coalition's proposal was less than required and the company is preparing their counter-offer. That's just my hunch.

DCAflyer responds: What is there to counter? UAL labor didn't really come up with anything, except an overall figure. There is no mention as to which groups will come up with what. Whereas U went to labor and said to each group we need your group to give up X amount, these are the areas we can cut and you decide how to do it, UAL said essentially we need nine billion and you all fight among yourselves to come up with that figure. This, in my view, makes a USA C11 filingn inevitable. The only thing that will hold back such a filing by the end of this month is the labor BOD seats blocking it, which is the worst thing they can do.

Good luck to you all.

 

[AOG-N-IT]

Diesel8, As you said, Without the benefit of Default via the provisions of Chapter 11 Protection...We would have been Up a Creek..and without a paddle , I might add!! Using the provisions of CH11 has allowed a very effective method of Streamlining a Hodge-Podge Fleet...and surrendering aircraft that were niether properly utilized , supportable or cost effective. Mny of the leasing prices simply made absolutely No degree of financial sense. Then we have the issues of concessions added to U's need and benefit. I have never understood how the number 6 (Now #7) US Carrier could offer parity (or Parity-Plus 1%) Vs. the two largest carriers in the world (AA/UA)? This has never flushed from a logical standpoint. IMHO , it was a stop-gap negotiation tactic of appeasement to avoid labor-strife , all the while the Wolf-Gangwhal team looked for a sell-out , to thier own benefit. The Economy and the Threat issues have now made this un-bareable. U is not alone in this circumstance. UA will in all likelihood need to followsuit to hope to compete or survive. The industry has become de-valued from a service standpoint..and labor costs wil have to reflect the de-valuation of this industry....and more airlines will either have to adjust...or also follow the CH11 route..and be forced to adjust. I personally do not see U buying any portion of UA...and I have never once advocated the Merger idea. This would have idled more people on both sides of the coin , due to duplication of effort...and a need for consolidation of efforts. U never made the right moves after the PI/PSA takeovers...and now the debt has come due , Hince the need for CH11 re-organization. UA on the other hand, has not come to solid terms with it's own issues either..hince thier pending need of re-organization . The only issue is to file CH11 or not? My bets are on them filing before the end of Nov. 02. Either way? I would like to see US/UA continue to persue the Codeshare Agreements..and hopefully help one another as continued seperate operations. This is purely based on combining two negatives in the classic sense (Merger) , not making a positive. Both companies need to get thier Solo Acts together...then see what things look like once the economy and threat issues become lessor concerns. Hopefully things will not continue this negative spiral.

 

[Diesel8]

Chip said: and defaulting on financial agreements through the Chapter 11 process.

And that really is the operative part,defaulting that is. Without it U would be up the proverbial creek. If UAL decides to go this route, financially it appears they will be better off than U. So why not just aquire U, not merge, not corporate transaction, just buy the thing, keep the lucrative routes and dump the rest. Somewhat ala AA/TWA.

I think U aquiring UAL domestic is a pipe dream of unique proportions, now that is just my HO, but it truly seems far fetched. I am aware that Chip et al keeps espousing how great U is, now that it is bankrupt, but I still fail to see, what makes U such a stand out. Even with the concession, leases renegotiated, U, in this economy would probably loose money.

Had UAL merged with U in 2000, IMHO, things would indeed be much worse for the merged entity. Just ask AA!

 

[chipmunn]

Diesel8:

The way I understand it, if all US employee groups would have obtained consensual restructuring agreements before June 15 and the loan guarantee on June 30, the intent was to download UA's high cost domestic system onto US's new labor contracts to prevent a bankruptcy filing.

There would have been multiple corporate and regulatory benefits, but now with US on its way to emerging and UA close to entering bankruptcy, the strategy could change.

However, there is reason to believe the parties continue to discuss a deeper relationship with multiple options.

Chip

 

[Diesel8]

If this is true, I can only imagine the outcry from the UAL pilots. Would have made the summer of hell look like the summer of love.

 

[UAL777flyer]

DCAflyer,

The union offer is not just the $5 Billion in labor savings over 5 years. That is just the part of their proposal that has been made public. Their proposal also includes numerous other ideas for UA to streamline operations, become more cost-effective and competitive. Those are the parts that have not been made public. The unions claim that these changes will increase UA's revenue stream. So to say there's no offer to counter would be inaccurate. Certainly their initial $5 Billion savings seems inadequate and it is disappointing at a time when UA doesn't have time. I think it was an unrealistic expectation that UA labor would miraculously come together and offer up the $9 Billion in savings as well as deciding how it would be divided amongst each group. Just getting them into the same room is a major accomplishment. You're talking about a group of people who cannot agree that the sun rises each morning. So even with UA's current mess, it was unrealistic to expect much from them. I still say Ch.11 is going to happen. But that doesn't mean I don't think that there is a small window of time with which to avoid it. But that window closes a little bit more each day.

I'm starting to wonder about Tilton. My perception is that he hasn't taken the bull by the horns yet. He seems to be allowing labor to dictate the direction UA is going in, which is a mistake. There is still no plan to get us out of this mess other than cost savings. That ain't gonna do it. It'll help. But we've got to find ways to change that will increase revenue. Tilton has said all the right things, but until he backs it up with decisive action, it won't amount to much. There is almost ZERO information being given out to the employees during this very uncertain time. I certainly realize there is a limit to what you can disclose, but the employees must be kept abreast of what the company's intentions are. When will Tilton be meeting with the unions again? How far apart are they? We only have a few weeks before we'll have no choice but to file, and it still appears as though we're treading water with an anchor tied to our feet. It's frustrating. That is why I felt it was important for UA to get an industry veteran as CEO. This is the most critical time in the company's history. We don't need a CEO who is completely green to the industry and is being brought along by the same folks who've failed in leading this company for the last several years (it wasn't just Dutta and Studdert's fault, folks). Siegel was the right guy at the right time for US Airways. I'm wondering if Tilton will prove to be the same for UA.

I wholeheartedly agree that the BEST thing for UA going forward is to get rid of the governance of the company as it is currently structured. Giving labor veto power over major decisions is only going to continue to cause problems down the road. And the BOD needs to be changed as well. These are the same worthless clowns that helped put UA into their current predicament. It would appear to me that bankruptcy is a foregone conclusion. I'd just as soon we file from as strong a cash position as possible and just get it over with and start doing what is necessary to fix this train wreck.

 

[Diesel8]

In all fairness, I think perhaps, Tilton needs a bit of time, as big as a commodity it is right now. He will obviously have to come up with a great plan, with out it, there is the possibility of UAL being history in the not so distant future. He is perhaps getting a feel for the company, weighing options and may very well come up with a plan, that will make UAL great again.

He could have declared Ch.11 right off the bat, as painful as that would have been to all involved, instead, it appears he is thinking about what to do. Obviously, a faulty step at this juncture, could have disatrous implications.

Like they said about Siegel at U, give the man some trust and have faith!

 

[DCAflyer]

UAL777 said:

The union offer is not just the $5 Billion in labor savings over 5 years. That is just the part of their proposal that has been made public. Their proposal also includes numerous other ideas for UA to streamline operations, become more cost-effective and competitive. Those are the parts that have not been made public.

DCAflyer replies:

You are right that the public hasn't heard about these other concession proposals. But the cuts need to come from somewhere. Assuming, for illustration only, that AFA agrees that FA's can clean A/C between flights, ala SWA, which serves to reduce ground time and improve efficiency because there are fewer people running around the A/C. Good idea, without a doubt. Makes a lot of sense. But that means you've got some cleaning folks not being utilized for that. Do you think the IAM would agree to that? Not likely! And even if they did, you've got FA's p155ed off because they are now making less money per flight hour, NOT being paid for the time they are cleaning the A/C, and doing a job that most of them feel is beneath them. So work rule changes are all well and good, but they too will cut deeply. AND, now you have the same amount of time to come to terms with who is giving how much money in addition to whose jobs are being cut. Couple that with the fact that some labor groups have a majority interest in the company and representation on the BOD PLUS veto power over corporate transactions and judicial restructuring issues, and you have a recipe for catastrphe pie.

UAL777flyer said:

I think it was an unrealistic expectation that UA labor would miraculously come together and offer up the $9 Billion in savings as well as deciding how it would be divided amongst each group. Just getting them into the same room is a major accomplishment.

DCAflyer says:

No argument from me... it is a herculean task. But that is just the very beginning. Getting them to the table is only about 2 percent of the task.

UAL777flyer said:

But that doesn't mean I don't think that there is a small window of time with which to avoid it. But that window closes a little bit more each day.

DCAflyer says:

I sincerely hope they can. But every day UAL avoids bankruptcy is a day that it is not truly restructuring, and UAL can't be fixed without restructuring. I don't see the governance issues being resolved outside of a C11 filing. Before U filed, everybody was saying they hoped it could be avoided. But once it finally happened, to me at least, it was like a breath of fresh air. I thought okay, now we can FINALLY move on! I realize the sentiment on IAM and CWA wasn't the same as mine. But filing was finally an indication that the BOD was determined to pull us out of this one way or another.

UAL777flyer said:

I'm starting to wonder about Tilton.

DCAflyer says:

Stand in line!

I agree with you that BK is probably a foregone conclusion and I beleve the sooner it happens, the better for all of you. There is something to be said for moving on.

 

[argentomaranello]

UAL777's apparent loss of faith in Glenn Tilton is certainly understandable. In blunt terms, he's unqualified for the job, and the circumstances of his selection (UAL labor's vetting process) isn't likely to furnish him with the courage (which he appears to lack, in any event) to make the hard choices.

For all the UAL (seniority?) supporters out there who just don't want to confront the reality of the great carrier's current sad plight, nor even consider the possibility their domestic route network WILL become a casualty of a Ch.11 filed too late (and with too little liquidity on hand), it should be noted that there are other carriers out there that would be suitable reception candidates for some of this fragmentation. NWAC, for one, would love to get its hands on a couple of those domestic UAL hubs; AMR would move mountains if it could grab the (old PanAm) UAL Pacific operation and DAL would be very happy with UAL's Latin and transAtlantic LHR) assets. What is now looming could be very different from what UAL and USAir had evidently discussed in the last few months -- an orderly sale (in exchange for USAir equity securities) of UAL's entire domestic route network to USAir, leaving UAL free to continue with its high-cost structure serving it far more competitively insulated international routes. What is now looming could well break into a mad scramble for UAL assets among the rest of the industry -- simply because UAL labor lords continue to feed the parochial interests of their union constituants (and in the case of the IAM, to conduct itself in continual fear of the loss of its representational rights -- meaning dues collection rights -- to another union).

 

[DCAflyer]

Diesel8 said:

In all fairness, I think perhaps, Tilton needs a bit of time... He is perhaps getting a feel for the company...

DCAflyer says:

UAL has no time to allow him to prove himself or even get a feel for the company. He hasn't even got a feel for the industry.

Diesel8 said:

He could have declared Ch.11 right off the bat...

DCAflyer replies:

No he couldn't. The labor representation on the BOD won't allow it. They have veto power over these decisions. I wouldn't be surprised to see litigation just over the issue of whether the labor representation has the right to block a C11 filing.

In any event, stay tuned. It's likely to get very interesting in the coming weeks.