Frontier pay cuts?

[ualdriver]

I'm not trying to tell you guys how to vote. I just want to let you know what happened in a few sentences pre, during, and post bankruptcy with executive compensation.......

Pre bankruptcy: management takes paycuts to prove that they are part of the "solution"

during bankruptcy: "key" management people are paid fat retention bonuses so that they don't leave during the bankrupty process. That was the last of any paycuts that most managment personnel saw.

post bankruptcy: When the company exits bankruptcy, various entities that are "owed" money (i.e. labor groups who took pay cuts, lessors, debtors, etc.) try to make grabs for equity (i.e. shares) in the newly formed post-bankruptcy company. Management will do everything they can to take a large percentage of the shares issued. For example, our managment team tried for a 15% grab of the newly created shares, even though their portion of what was "owed" to them was only a fraction of that. Under protest from ALPA (thanks!) and other members of the creditor's committee, it was cut in half, which was still WAY too much. Tilton all by himself got 1% of the value of the entire post bankruptcy UAL.

Keep in mind that they're asking for a few months of cuts now. They will ask for a permanent paycuts when the company is reorganized. Also keep the above in mind when they come to you for permanent pay cuts later.

 

[hawk996]

That internal memo reads just like the one we got at Independence Air. You can fly the planes for free and still go out of business. Say "NO", make a good pay check and start looking for a new job, Say "Yes", make a smaller pay check and still end up looking for a new job.

Yes is sucks guys/girls, been there done that and have the T-shirt. No one can really tell you what to do or how to vote, just understand that your pay is not what drove your company into CH.11 it was your over paid management team that does not know how to run an airline.

Indy Air management team walked away with millions in their pockets, we got nothing....

Good Luck.....

 

[waveflyer]

What about American, United, USAirways, Northwest, and Delta? Those paragons of union toughness all took paycuts. They are all still around. Each case has its own variables.

Again- there's a huge difference between getting 30-50% from groups of 5000+ pilots all making double what you are now in total compensation- and the 14% that F9's 770 pilots are being asked to make.

At some point we all have to ask ourselves why WN is still kicking our butts financially when they make so much more than all of us....?

 

[waveflyer]

based on the average pilot there at F9 making $100k-- you're looking at giving the company a little more than $2.5 million over the 3 months- ($10million if it lasts a year) -- in the airline financing world, is that really going to save the situation? Think about what that actually will buy frontier- it's not nothing, but it's close.

 

[Andy]

Good luck, F9. No advice one way or the other on concessions; it's a tough decision. I think that most of us are going to find ourselves in the same shoes in the not too distant future.

 

[CitationUltra]

WTF with posting FAPA union letters on Flightinfo.com.

BTW pilotbob3 why don't you come do a road show for all the F9 pilots and let them know how it really is because I think the company and the union and the consultants are full of $hit. And then pilotbob3, when F9 is gone maybe your company can stop its reduction in capacity and you can get off reserve. Brilliant.

Pilots that come on here and try to demand how another airline pilot group should vote for their own selfish reasons make me sick. Mind your own business because this old story is going to be playing in a theater near you soon. This is about to happen everywhere gents. Get ready.

PS. Citationultra, though I don't like the style of your postings, I have to say you were right on the BK deal. If FDC didn't pull the rug out from under F9 on APR 9, the fuel environment would have put them there by today anyway. Its either F9 gets DIP or they are gone by this fall unless the Creditor's Committee decides to do it sooner.

Well, for what it's worth, I don't think anyone wants to see what is happening to Frontier. Although I've been critical of Frontier's management in the past--and still am--I'm not sure that they could have avoided this "perfect storm" situation of competition, limited scope of operations, and fuel pricing, all happening at once. I have never wanted to see the airline fail out from under the line employees.

 

[maxblast72]

At some point we all have to ask ourselves why WN is still kicking our butts financially when they make so much more than all of us....?

For the rest of 2008 and 2009, it is pretty simple. Frontier burns about 200 million gallons of fuel a year but pays about between $1 to $1.25 a gallon more than Southwest. That equates to about a $250 million dollar a year advantage. Fuel costs are now about 50% of total costs whereas pilot labor cost are usually about 10% of total costs. That why fuel matters much more than labor.

Southwest airlines is a well managed airline. When you feel your competition is on the ropes, you go for the kill. They know their cost advantage is greatly reduced on Jan. 1, 2010, so they will try like hell to make sure United and Frontier don't see 2010. Southwest has a strong brand, so it usually doesn't take them long in new markets to grab a signicant amount of revenue.

 

[CitationUltra]

For the rest of 2008 and 2009, it is pretty simple. Frontier burns about 200 million gallons of fuel a year but pays about between $1 to $1.25 a gallon more than Southwest. That equates to about a $250 million dollar a year advantage. Fuel costs are now about 50% of total costs whereas pilot labor cost are usually about 10% of total costs. That why fuel matters much more than labor.

Southwest airlines is a well managed airline. When you feel your competition is on the ropes, you go for the kill. They know their cost advantage is greatly reduced on Jan. 1, 2010, so they will try like hell to make sure United and Frontier don't see 2010. Southwest has a strong brand, so it usually doesn't take them long in new markets to grab a signicant amount of revenue.

Sad for the employees and stockholders of the losers, but true--and unavoidable.

Frontier missed its chance to avoid this inexorable slide around two years ago. Management blunders made then and since have resulted in the current situation.

 

[Cardinal]

Frontier missed its chance to avoid this inexorable slide around two years ago. Management blunders made then and since have resulted in the current situation.

Heck, on Friday the COO (who was hired by Potter) said it's unfortunate Menke didn't get here sooner.

 

[Golden Falcon]

Wonder how big a dent the DHC ops put in their finances??

 

[Cardinal]

$20-30 million.

 

[CitationUltra]

Can't speak for the others, but at NWA our pay cuts went directly to the NWA executive management team. With 30% pay cuts and drastic work rule changes, we gave NWA 500 million and they shortly there after awarded themselves 400 million in the form of bonuses. I think the last 100 million went towards buying EMB175s for Compass.

The AA paycuts also went to the management "team". Plus AA never declared bankruptcy, but that wasn't why. They always maintained a very large cash warchest, that was partially funded by AMR, when it owned Sabre.

 

[CitationUltra]

FBN makes an excellent point. F9's managers already gave themselves a protected six month severance package.

I see a big difference between the cuts being a required condition of DIP financing and the scenario you are presented with. In your case they are promising nothing in exchange for your pay.

In the grand scheme of the airline's budget, the cuts are not even going to make a marginal difference. The fix for your problem is increased revenue. Raise the ticket prices, the other airlines will follow and F9 has a nice product.

Good luck with a tough decision.

If it were really to obtained DIP financing, they would identify a financing source, and the source would likely make certain cost reductions a contingency of the financing--not the other way around.

As it now stands, in the event that Frontier finds a DIP financing source--no certainty by any means in this market--they may insist on further cuts!

 

[CitationUltra]

Heck, on Friday the COO (who was hired by Potter) said it's unfortunate Menke didn't get here sooner.

He's probably right. But it's only accurate if the new CEO would have made the critical decisions that needed making back in 2006, or would have avoided some or all of the major bonehead moves that Frontier made in '06.

 

[CitationUltra]

Wonder how big a dent the DHC ops put in their finances??

They burned up something north of $25 million, or about three times what it should have cost.

This is an example of an area in which the Frontier management was definitely asleep at the wheel during the last quarter of 2006 and the first half of 2007. They kept making press statements that this was the fault of the FAA, and it was definitely NOT the fault of the FAA.

 

[StaySeated]

tic toc tic toc

Alright, read as slowly as necessary to comprehend the following info.

No one at F9 is stating that a pay cut is going to save the airline.

This paycut vote is a desperate measure to reduce our casm to the lowest in the industry in an effort to attract financing.

Noone should be talking about snap back in the fall. Without DIP, we are done. I would love it if we could hold off the concession until we have financing, however, you need to attend a roadshow if you think we have time to get DIP, then vote, then convince the creditors committee to keep this place in business.

The fate of this company is going to be decided by seven people in a room in NY, and very soon.

 

[The Victors]

For the rest of 2008 and 2009, it is pretty simple. Frontier burns about 200 million gallons of fuel a year but pays about between $1 to $1.25 a gallon more than Southwest. That equates to about a $250 million dollar a year advantage. Fuel costs are now about 50% of total costs whereas pilot labor cost are usually about 10% of total costs. That why fuel matters much more than labor.

Southwest airlines is a well managed airline. When you feel your competition is on the ropes, you go for the kill. They know their cost advantage is greatly reduced on Jan. 1, 2010, so they will try like hell to make sure United and Frontier don't see 2010. Southwest has a strong brand, so it usually doesn't take them long in new markets to grab a signicant amount of revenue.

What exactly are you talking about? The fuel hedges go into 2013 and I'm sure that GK will be up for buying more.

 

[The Victors]

That internal memo reads just like the one we got at Independence Air. You can fly the planes for free and still go out of business. Say "NO", make a good pay check and start looking for a new job, Say "Yes", make a smaller pay check and still end up looking for a new job.

Yes is sucks guys/girls, been there done that and have the T-shirt. No one can really tell you what to do or how to vote, just understand that your pay is not what drove your company into CH.11 it was your over paid management team that does not know how to run an airline.

Indy Air management team walked away with millions in their pockets, we got nothing....

Good Luck.....

This guy is exactly right.

 

[maxblast72]

What exactly are you talking about? The fuel hedges go into 2013 and I'm sure that GK will be up for buying more.

It is true that they have hedges past 2010, however from what I have heard, their major advantage ends Jan 1, 2010. Yes, Southwest has the cash for future hedging, but as of right now, not many good future hedges are being offered right now.

 

[Golden Falcon]

At the end of the day, paycuts never saved an airline did they???