Follow the Money--USAir and America West

[FlyBoeingJets]

"Executives boasted that the combined airline would be one of the industry's strongest with about $10 billion in annual revenue and $2 billion in cash. The deal would save the combined airline about $600 million, the executives said.

Most of the financing came from outside investors. Investment firms including ACE Aviation Holdings, parent company of Air Canada; Boston-based PAR Investment Partners; Virginia-based Peninsula Investment Partners; and Eastshore Aviation Holdings, which is owned by Air Wisconsin Airlines Corp. and shareholders, contributed $350 million. European aircraft manufacturer Airbus invested $250 million in exchange for the airline becoming a launch customer of the upcoming Airbus A350.

The airlines also received $675 million through debt refinancing and other investments from credit card companies. Commitments of $425 million in additional cash came from "strategic partners and vendors," which the airlines did not identify.

America West shareholders would own 45 percent of the new airline, while the new investors would own 41 percent. US Airways' creditors would own about 14 percent.

The Retirement Systems of Alabama, which wrote off a $240 million investment in US Airways last year, plans no more investment -- for now -- in a proposed merger of the bankrupt airline with America West.

David Bronner, CEO of the state pension system, said RSA was asked to invest in the proposed merger, but he declined because RSA would not be given a big enough role in directing the new company.


"They just want your money and don't want you to have any control," Bronner said in an interview Friday with The Associated Press.

His position on investing could change, he said, if the pension fund were ever offered a significant role on the merged airline's board.

In the proposed merger, America West Holdings Corp. would get six seats on the board of directors, US Airways Group Inc. would have four, and three new investors would each get one seat.

"Normally the people who put in new money have the majority of the seats, which is what's unusual about this deal," Bronner said in the interview.

When US Airways made the first of two trips into bankruptcy its exit was sped along by a $240 million investment from Alabama's pension fund for state workers and education employees. At that point, the pension fund got the majority of seats on the airline's board and Bronner became chairman of the US Airways board.

Bronner remained as chairman when the airline made its second trip into bankruptcy last year, but the pension fund wrote off the $240 million investment as a loss.

Bronner said he will remain as chairman until US Airways comes out of bankruptcy, but once that happens, RSA's role will be over except that it is still providing financing for two or three of the airline's planes.

RSA's $240 million investment in US Airways represented 1 percent of the pension system's total investments.

Looking back on the deal, Bronner said it paid benefits because it allowed Alabama officials to meet executives of France-based EADS, parent company of European aircraft maker Airbus, and helped get Mobile on EADS's list of four finalists for an aircraft plant. When RSA invested in US Airways, the airline started offering ticket discounts to state workers and education employees, and the Alabama Bureau of Tourism and Travel designated US Airways as "The Official Airline of Alabama Tourism." Bronner said Friday it is too early to say what will happen to those relationships."



Boy did Bonner and the RSA lose out. He was too early. Looks like the other creditors took a beating with only 14% of the merger. The trend to cut costs will continue in order to attract this kind of money.


I'm thinking Delta will be fighting a tough battle if they don't go to BK to erase some debt.

 

[AlbieF15]

Wow. This management team found a way to not only rake over its own crew force and rob them of retirement plans, but managed to nail a whole state's public servants along the way. Now they'll spread their brand of management across the Mississippi and likely hurt some AWA folks.

I try to stay detached, but the business laws that allow a DEAD company to rob from its own employees and continue to stay in business seem to be failing somehow. Maybe the DOT will allow it if only to try to find a way to stick Airbus industries in the eye with some future bad debts.

Understand this isn't personal against US Air folks--many who I consider the victims of this managements wrath. I just am amazed at how much damange this company which hasn't been profitable in YEARS has been able to do to others in the industry.

 

[General Lee]

I'm thinking Delta will be fighting a tough battle if they don't go to BK to erase some debt.




Well, wouldn't that be a reason to go to court? I bet it would. Also, the pension would be gone too. Analysts stated yesterday that there is a good chance Delta has warded off Chap 11 for another year, and the longer we stay away, the more time our initiatives have to become reality and come to fruition. But, we do have some daunting bills coming up, and going to the courthouse may be the only way to deal with those. I am sure our management has some sort of plan in place, and maybe a plan B also.


Bye Bye--General Lee (read the quote below)

 

[IB6 UB9]

I am sure our management has some sort of plan in place, and maybe a plan B also.

You are sure...or you hope? You seem to have stroked a lot of characters bleating like a sheep about some plan that you and I are both yet to see. What's the hold up...l want to see the plan!

 

[Mugs]

Wow. This management team found a way to not only rake over its own crew force and rob them of retirement plans, but managed to nail a whole state's public servants along the way. Now they'll spread their brand of management across the Mississippi and likely hurt some AWA folks.

I try to stay detached, but the business laws that allow a DEAD company to rob from its own employees and continue to stay in business seem to be failing somehow. Maybe the DOT will allow it if only to try to find a way to stick Airbus industries in the eye with some future bad debts.

Understand this isn't personal against US Air folks--many who I consider the victims of this managements wrath. I just am amazed at how much damange this company which hasn't been profitable in YEARS has been able to do to others in the industry.

Who really robbed them of their retirements Albie? Management or the new marketplace? When every one of the legacy employees lose their defined benefit plans, will the managements have stole them all or will the marketplace have taken them away?

Maybe the "business laws" that you find unfair should then dictate that every entrant into this industry offer a generous and expensive retirement plan. Obviously, that is pure fantasy and has not been the case. Afterall, in order to change the marketplace you have to beat up the competition. The most important weapon in doing so is a cost advantage which means, ooops!, no generous pension plans (among other things) for the employees.

So who has damaged what? Sounds to me like you are leaving the new entrants out of the equation here. Yet, you simply assign the "damage being done" to the old carrier that at the very least did for many years offer a good retirement plan to its employees. Sometimes one type of damage creates another, and that is what we have now.

 

[General Lee]

You are sure...or you hope? You seem to have stroked a lot of characters bleating like a sheep about some plan that you and I are both yet to see. What's the hold up...l want to see the plan!

Well, have you not seen our huge pay cuts? Oh, that's right, you are too busy $crewing your future new hires with the E190 rates. You don't care, you're on the bus. Who cares then, right? We have huge initiatives to cut costs, HUGE. We are on OUR WAY to saving $5 billion a year, which is huge for an airline 5 times the size of your airline. But, high fuel hasn't helped. We will probably take more cuts if that makes you feel better. Grinstein says now he wants another $1 billion in savings, and the lack of unions at Delta (compared to other airlines) will help him achieve that. IF we can save $5 billion a year, I bet some of that could go to paying off the huge debts. I don't know, but they seem to keep telling everyone they are planning not to fail. Do I HOPE THEY ARE RIGHT? YOU BET. It's tough when you have huge pension payments to people who have already retired. My Defined Benefit plan was scrapped, and so was my pay and some work rules. Don't tell me you can't see anything that has changed, you don't even see what is happening in your own backyard. But don't worry, you're on the bus. You will probably never have to fly the E190. Who cares, right? We have furloughed how many people? Did you know that we have let go of a lot of people? Did you know that we changed our whole ATL hub to more efficient turn times that have really helped with congestion and lowered our fuel bills due to the shorter takeoff lines. Did you know we helped institute new RNAV departures out of ATL that save a lot of fuel(and helps Airtran too)? Did you know that we closed a hub that wasn't doing well? (DFW) We are expanding Song to compete with B6, and starting new Song service from JFK to LAX, SFO, SEA, Aruba, and SJU. How about you ask me that question again.....


Bye Bye--General Lee

 

[ivauir]

Who really robbed them of their retirements Albie? Management or the new marketplace? When every one of the legacy employees lose their defined benefit plans, will the managements have stole them all or will the marketplace have taken them away?

I know I'm too naive or simplistic to really understand all this fancy manegment talk. Heck until 6 short months ago I was just a caveman frozen in the ice. Now I've been thawed out and put in the right seat of a jet. I don't know much. I don't know this Chapter 11, or 7 or what FMC stands for, but I do know one thing: your word ought to be binding. These companies that promise something and then take it away should have been forced to liquidate before breaking that promise. I'd be hellasorry for the lose of jobs, but they shouldn't be able to rob the good folks who have provided for so long just to keep the doors open another 8 months.

But what do I know my knuckles drag when I try to walk errect.

 

[Cardinal]

ivauir, despite dragging his knuckels, has it figured out. The government allowed, even aided an egregious act that then became the market standard. If mom let's one kid get away with disobedience, and suddenly all the children are running wild, whose fault is it? The mom that set a precedent or the kids that are simply taking advantage of their new found freedom?

At least their gonna make any remaining UAIR management move to Tempe. That oughtta cull the ranks of the thieves.

 

[Boeingman]

Ivair is right on. These companies who are terminating their pensions should be mandated to fund their obligations by liquidating some of their assets to pay these retirement debts.

 

[Boeingman]

That oughtta cull the ranks of the thieves.

But not their pocket books. Just wait and see the bonus and golden parachutes handed out over this one. It already started with U asking the bankruptcy judge for a $55 million "rentention" payout. As usual, the unions do nothing of substance. Impotence at it's best.

I noticed that no one has mentioned that U already tried and failed at having a Western presence by buying and then dismanteling PSA. What has substantially changed since the lack of a central US hub was the reason U abandoned this strategy of a Western based carrier?