Why We're Losing Money

[BoeingBoy]

Posted on Wed, Apr. 28, 2004
Charlotte Observer

OUTFRONT

The reason US Airways stays broke

DOUG ROBARCHEK

We keep flying on US Airways, the planes keep being jammed with people, and the company keeps cutting expenses (now they're trying to sell us the near-food-experiences they used to give away).

So we keep wondering, "How can this company always be going broke?"

Well, we've finally figured it out: They keep hiring new CEOs, who say they'll make the company profitable by asking the rank-and-file to take pay cuts. The workers lose pay, the company is still broke, and the CEOs resign with multi-million-dollar bonuses for not getting the job done.

US Airways is now getting its fifth CEO since 1995. They're bankrupting themselves buying CEOs!

 

[delldude]

amen to that boeing boy!

 

[Harry Callahan]

A second amen!

 

[wench]

BINGO!


Salaries are a plenty for THEM....The rank and file...*Z*E*R*O..

Doesn't take a rocket scientist to figure out where all the cash flow was sucked into..

The vacuum of OVERPAID CEO"S..

 

[Winglet]

CEO pay isn't putting U in the dirt. It's in the dirt because the CEO can't figure out what kind of airline he wants to run. He wants to run an full service international airline, only do it with LCC ticket prices. When trying to do that, the non-labor costs are WAY above the LCCs. In order to try and compete on price . . . . then employees are going to have to work for a lot less than LCC wages . . . . and they know it.

 

[ktflyhome]

Anyone know any statistics on how long a CEO averages with companys. I was told by a friend who is pretty smart about these things that it is 3 years. I was complaining that in my tenure here we had already gone through 4, in fact I believe I posted this awhile back. Right after Dave resigned or was fired???? :huh:

 

[funguy2]

I had noted the other day that US Airways has paid out about $40mil in exit bonuses in the last 5 years (actually less since Wolf and Co. left about 2 years ago)... Somebody (sorry, forgot who!) pointed out that while it was $40mil out the door, it's just a small drop in the bucket compared to other expenditures... I agree with that statement, but $40mil still seems like a lot of money to spend on exiting execs.

 

[GadgetFreak]

I wouldnt argue for a second that failed CEOs are too richly rewarded. So are mediocre caretaker CEOs. But that is not the problem at US and anyone that thinks it is is kidding themselves. Even if the $40 million number is correct over the last 5 years that is 1 weeks worth of losses. A shame, yes, disgraceful is maybe a better word. But important, no.

 

[tadjr]

But important, no.

Have to disagree with you on that one. Maybe thats another reason we're in the shape we're in. Anyone else have $40 million to throw around every couple of years?

 

[aerosmith]

I triple that!!!

 

[MarkMyWords]

I agree with Tad -

If we added up all the things that people felt were insignificant, I bet we would come up with a pretty significant number. If there is a cost savings to be had, without dipping in the employees wallets, they should be done first. There is no such thing as an insignificant cost savings.

While I agree that contractually we owed these people this money, I just wish we would have had more of a say over what was in their contract. Paying Wolf, Gangwal, Dave and others over 40 million for what they did is a crime.

 

[700UW]

Actually Mark, US could have gotten the $35 million back from Messer, Wolf, Gangwal and Nagin in bankrupcty court and chose not too.

Contractually the airbus overhaul is IAM work and you see what the company thinks of that.

 

[GadgetFreak]

Well of course everyone is entitled to their opinion, and please dont get me wrong in thinking I dont agree that it is terrible that they got the money. If I were in charge I would have done something to try to stop it but not really even for the money but rather because it looks so bad. But the fact remains that this is less then a few weeks of losses for US and it is spread out over about 5 years. It is inconsequential from a financial standpoint. I can also say that in what I do, when we are trying to cut costs to stay as competative as possible, we always look at the most expensive thing that we control In some cases that is labor in other cases that may be supplies but we always start with the biggest cost because that is where we can have the most impact. So in the case of US, the biggest cost is probably labor costs so they start there. The logic is that if you can save a fwe percent on labor in this case it would add up to more than saving all of some of the very small costs people here talk about.

I think the real failings of management have been the following: 1) trying to cut labor costs by cutting pay almost exclusively rather than working with labor to improve utilization and productivity and 2) not definining a market niche and trying to increase revenue from that niche.

 

[funguy2]

GadgetFreak and MarkMyWords:

I have to think that if management identified a way to reduce costs by $8mil per year (or $40mil every 5 years) by converting more paper tickets to e-tickets or incereased functionality of check-in kiosks or something, management would jump all over that idea. However, since the potential reduced cost here is essentially executive salary, it doesn't get the same importance as reprogramming the kiosks in my example.

I agree Gadget that this would have a positive effect on morale (or at least reduce the negative impact)... If nothing else, these types of bonuses make management look greedy and not very serious about finding new cost savings... But I think MarkMyWords is right... you add up a bunch of small insignificant items to create one significant change. In this business, profit margins are razor thin... I think the small things do make a difference.

To the extent that exec bonuses might be required in order to retain talent, it would make more sense to me to reward execs for extraordinary performance (like profits) instead of signing contract that essentially pay them to leave, regardless of success.

 

[Phantom Fixer]

Try saying how little it means honoring the contracts of Wolf , Gangwhal and Siegel are to the person that just got dropped kicked off the employment roster for so-called cost savings purposes , whom only made 40K a year.

Yes....Everything counts...and 40 Million going out the door for a collection of baffoons that put us in this position to begin with is un-forgiveable.

Their contracts should have been gray-areaed and ignored just like the majority of the agreements with labor have been...and continue to be. :down: