Decision 2004
Veteran
- Mar 12, 2004
- 1,618
- 0
"Recent upbeat news about their traffic notwithstanding, based on accumulated debt and cost of operation, plus the almost non-stop proliferation of upstart low-cost carriers, right now some industry big thinkers, are counting down toward the possible end of one or more of the six U.S. legacy carriers.
While all might not disappear, certainly some will, according to a few projected scenarios of what lies ahead.
"You will see the existing low-cost carriers expanding into perhaps points in Europe or new air carriers being formed to provide low-cost service in the trans-Atlantic and perhaps the trans-Pacific routes," George Novak, an airline industry researcher at George Washington University, told a reporter recently.
Another thought is that there always will be five or six big carriers serving as U.S. flags, only the names and /or control will change.
Maybe the new big six, American, Delta, Northwest, Continental USAirways and United will be morphed into Southwest, JetBlue or some combination of the others.
Recent word that British Airways wants to buy Aer Lingus and the U.S. Government basically saying “twist in the wind†to United, the only airline involved in the 9/11 tragedy that asked for help, says clearly that in the world today, anything can happen and probably will.
All of this to us “old timers†is something of a shock to the system
Back when we started in 1975, the surest thing in the world was that there would always be a lot of airlines operating in the USA.
From coast to coast, overseas and beyond, there were carriers up and down the United States and north/south, east/west, and all points in between, combining cities in ever new service wrinkles, with the old Civil Aeronautics Board looking passively on.
The end of business as we once knew it, began with the deregulation of U.S. airlines in the 1980s, followed closely by the firing of thousands of air traffic controllers in the PATCO union by the Reagan administration.
Firing of the PATCO workers said simply that the party was over; that for example, labor agreements won in previous decades, would from that point on, be under the microscope.
PATCO also marked the beginning of a period for wide-scale deregulation of air transportation and other U.S. industries.
Up until the late 1970’s, America protected huge sections of the economy—such as transportation, energy and communication, as sacrosanct from the drive for profit.
The airline business was more like a gentleman’s club that was seen as too critical to the normal functioning of public and economic life, to be entirely run like ordinary business, in search of profits.
Since the 1980’s regulations that once worked like safety nets for U.S. airlines have been systematically eliminated.
Some see what is taking place, as airlines must now once and for all, sink or swim, as Wall Street’s 21st century demand for a restructuring of the airline industry to improve profitability.
One of the major Wall Street cornerstones for future airline business, it is thought, is elimination or transformation of large defined airline workers-benefits.
The extended thinking here is that in order to compete with the new carriers who are free of the legacy carrier's labor agreements, the old lines must rewrite the book on all their labor deals, or sooner or later they will die.
Core of every airline labor agreement, is the pension plan.
By the terms of defined-benefit plans, retired workers receive a check from the employer for a guaranteed, set amount.
In recent years elsewhere in industry, there has been a shift away from these costly plans to defined-contribution plans—such as 401(k) plans—in which employers instead give a set amount on a regular basis to a personally managed pension fund.
If the investments in the fund should drop in value, the financial burden falls on the worker rather than the employer.
Recently, the airlines have sought to transfer much of their pension obligations to the government, which provides a far lower stipend to workers than current plans proscribe.
An article in the April 14, 2003 issue of BusinessWeek titled “How to Fix the Airlines,†noted:
“To truly compete ... the airlines have to go beyond wages, to address steep legacy costs [including pension costs] and antiquated work rules.â€
US Airways paved the way when it chucked its underfunded pilot pension plan, transferring the obligation to the government’s Pension Benefit Guaranty Corp., with the grudging consent of the Air Line Pilots Assn.
The move reduces US Airway’s pension costs by roughly $700 million over the next six years.
Under the old plan, pilots received an average of $50,000 to $70,000 a year in pension benefits when they hit mandatory retirement at age 60.
The PBGC caps pension for 60-year-old retirees at $28,500.
When UAL announced its deferment of the $72 million payment to its pension fund last week, it said it did so in order to “preserve its options.â€
Whether that move is an indication that it is considering using its bankruptcy position either to win concessions from the union as US Airways did, or else ask a judge to nullify its existing contracts to eliminate its obligations, remains to be seen.
Another article in BusinessWeek (“The Benefits Trapâ€) notes:
“If United finds a way to get out of its promises, competitors American Airlines, Delta Air Lines and Northwest Airlines are sure to try as well.
"If the airline industry is able to wiggle out of its pension obligations, this will set a precedent for companies across the country to follow suit, leaving retired workers who thought they had a secure income out to dry."
Meantime sand continues to move through the hour glass of time for the once seemingly invincible United States legacy airlines.
Gone are Pan Am, Eastern, Braniff and Trans World Airlines and others.
Once upon a time, not very long ago, airlines were bought or merged or were taken over in the drive toward “critical mass" thinking of the last decade.
Another prerequisite of an era, that looking back now, seems like the stone age, was an airline business consolidated around hubs and fewer airlines.
How could anyone have predicted, say in 1994, that the move just ten years later would be toward fewer hubs, more direct service and more airlines all over again?
Now the legacy airlines in almost every aspect of a completely changed business climate, in fact are left holding the bag for their bigness.
Each airplane that goes to work at JetBlue or Southwest or a zillion (it seems)other carriers popping up all over the place, challenges the future for an airline business so near, yet so far away, from what it once was.
But before we end up sounding if we indeed believe it is over for AA, UAL, NWA and the rest, remember these are huge companies that are filled with many brilliant people.
Or as Yogi Berra, the baseball catcher and sage once said:
"It ain't over till it's over."
While all might not disappear, certainly some will, according to a few projected scenarios of what lies ahead.
"You will see the existing low-cost carriers expanding into perhaps points in Europe or new air carriers being formed to provide low-cost service in the trans-Atlantic and perhaps the trans-Pacific routes," George Novak, an airline industry researcher at George Washington University, told a reporter recently.
Another thought is that there always will be five or six big carriers serving as U.S. flags, only the names and /or control will change.
Maybe the new big six, American, Delta, Northwest, Continental USAirways and United will be morphed into Southwest, JetBlue or some combination of the others.
Recent word that British Airways wants to buy Aer Lingus and the U.S. Government basically saying “twist in the wind†to United, the only airline involved in the 9/11 tragedy that asked for help, says clearly that in the world today, anything can happen and probably will.
All of this to us “old timers†is something of a shock to the system
Back when we started in 1975, the surest thing in the world was that there would always be a lot of airlines operating in the USA.
From coast to coast, overseas and beyond, there were carriers up and down the United States and north/south, east/west, and all points in between, combining cities in ever new service wrinkles, with the old Civil Aeronautics Board looking passively on.
The end of business as we once knew it, began with the deregulation of U.S. airlines in the 1980s, followed closely by the firing of thousands of air traffic controllers in the PATCO union by the Reagan administration.
Firing of the PATCO workers said simply that the party was over; that for example, labor agreements won in previous decades, would from that point on, be under the microscope.
PATCO also marked the beginning of a period for wide-scale deregulation of air transportation and other U.S. industries.
Up until the late 1970’s, America protected huge sections of the economy—such as transportation, energy and communication, as sacrosanct from the drive for profit.
The airline business was more like a gentleman’s club that was seen as too critical to the normal functioning of public and economic life, to be entirely run like ordinary business, in search of profits.
Since the 1980’s regulations that once worked like safety nets for U.S. airlines have been systematically eliminated.
Some see what is taking place, as airlines must now once and for all, sink or swim, as Wall Street’s 21st century demand for a restructuring of the airline industry to improve profitability.
One of the major Wall Street cornerstones for future airline business, it is thought, is elimination or transformation of large defined airline workers-benefits.
The extended thinking here is that in order to compete with the new carriers who are free of the legacy carrier's labor agreements, the old lines must rewrite the book on all their labor deals, or sooner or later they will die.
Core of every airline labor agreement, is the pension plan.
By the terms of defined-benefit plans, retired workers receive a check from the employer for a guaranteed, set amount.
In recent years elsewhere in industry, there has been a shift away from these costly plans to defined-contribution plans—such as 401(k) plans—in which employers instead give a set amount on a regular basis to a personally managed pension fund.
If the investments in the fund should drop in value, the financial burden falls on the worker rather than the employer.
Recently, the airlines have sought to transfer much of their pension obligations to the government, which provides a far lower stipend to workers than current plans proscribe.
An article in the April 14, 2003 issue of BusinessWeek titled “How to Fix the Airlines,†noted:
“To truly compete ... the airlines have to go beyond wages, to address steep legacy costs [including pension costs] and antiquated work rules.â€
US Airways paved the way when it chucked its underfunded pilot pension plan, transferring the obligation to the government’s Pension Benefit Guaranty Corp., with the grudging consent of the Air Line Pilots Assn.
The move reduces US Airway’s pension costs by roughly $700 million over the next six years.
Under the old plan, pilots received an average of $50,000 to $70,000 a year in pension benefits when they hit mandatory retirement at age 60.
The PBGC caps pension for 60-year-old retirees at $28,500.
When UAL announced its deferment of the $72 million payment to its pension fund last week, it said it did so in order to “preserve its options.â€
Whether that move is an indication that it is considering using its bankruptcy position either to win concessions from the union as US Airways did, or else ask a judge to nullify its existing contracts to eliminate its obligations, remains to be seen.
Another article in BusinessWeek (“The Benefits Trapâ€) notes:
“If United finds a way to get out of its promises, competitors American Airlines, Delta Air Lines and Northwest Airlines are sure to try as well.
"If the airline industry is able to wiggle out of its pension obligations, this will set a precedent for companies across the country to follow suit, leaving retired workers who thought they had a secure income out to dry."
Meantime sand continues to move through the hour glass of time for the once seemingly invincible United States legacy airlines.
Gone are Pan Am, Eastern, Braniff and Trans World Airlines and others.
Once upon a time, not very long ago, airlines were bought or merged or were taken over in the drive toward “critical mass" thinking of the last decade.
Another prerequisite of an era, that looking back now, seems like the stone age, was an airline business consolidated around hubs and fewer airlines.
How could anyone have predicted, say in 1994, that the move just ten years later would be toward fewer hubs, more direct service and more airlines all over again?
Now the legacy airlines in almost every aspect of a completely changed business climate, in fact are left holding the bag for their bigness.
Each airplane that goes to work at JetBlue or Southwest or a zillion (it seems)other carriers popping up all over the place, challenges the future for an airline business so near, yet so far away, from what it once was.
But before we end up sounding if we indeed believe it is over for AA, UAL, NWA and the rest, remember these are huge companies that are filled with many brilliant people.
Or as Yogi Berra, the baseball catcher and sage once said:
"It ain't over till it's over."
