Latest at USAirways

[dlredline]

Late last night, the USAir MEC voted not to send the latest company proposal out to the membership for a vote. The vote was roll called by the PHL and PIT reps, since they represent the majority of pilots on the property.

Red

 

[On Your Six]

Late last night, the USAir MEC voted not to send the latest company proposal out to the membership for a vote. The vote was roll called by the PHL and PIT reps, since they represent the majority of pilots on the property.

Red

What's the implication? Does this mean that the MEC is still working on the details? Is this a good/bad sign to you?

 

[dlredline]

What's the implication? Does this mean that the MEC is still working on the details? Is this a good/bad sign to you?

The meeting adjourned with no further action. From my take, one of two things may happen:

1. The negotiating committee can continue to meet with the company in hopes of procuring a more favorable deal to present to the MEC. Perhaps unlikely in the time frame necessary for USAirways to meet the Sept. 30th ATSB loan covenants. It would also require a major move toward the pilots position by the company, also unlikely. And the negotiating committee would need to actually reach a tentative agreement. What was presented to the MEC last night was a profer for the pilots to simply vote on the last company offer, circumventing the negotiating process, and this, perhaps, was one reason the PHL and PIT reps blocked it. There is still no reason why the NC can't continue meeting with the company at this point, with hopes of a quick settlement arising, and soon.

2. USAirways and the pilots will fail to reach any agreement that can be passed by the MEC and subsequently ratified by the pilots in time for the Sept. 30th deadline. Since the company has not had a single meaningful discussion with any other employee group, they run up to the end of September without a reduced cost structure in place, and no business plan to present to the ATSB, and the $750 million loan guarantee by the ATSB is "called". At that point, it's "Katie bar the door", 'cause every creditor who has placed their "dibs" on USAirways' cash position will start seeking cash for their investment, and a dominoe spiral will occur. The ATSB could give them a mulligan and extend the deadline, but it will be interesting to see what the RSA and GECAS, the major creditors of U, will do in response.

In any event, the ball now is squarely in the company's court. If something isn't agreed to within the next 10-14 days, there's simply not enough time to get it out and ratified prior to the 30th. Absent an agreement, it's all up the ATSB. If they pull out, USAirways will file for Chapter 11 within a day. Then it's up to whether or not DIP financing will be available to fund their operation in a 2nd bankruptcy.

I really do wish the news was better.

Red

 

[On Your Six]

The meeting adjourned with no further action. From my take, one of two things may happen:

1. The negotiating committee can continue to meet with the company in hopes of procuring a more favorable deal to present to the MEC. Perhaps unlikely in the time frame necessary for USAirways to meet the Sept. 30th ATSB loan covenants. It would also require a major move toward the pilots position by the company, also unlikely. And the negotiating committee would need to actually reach a tentative agreement. What was presented to the MEC last night was a profer for the pilots to simply vote on the last company offer, circumventing the negotiating process, and this, perhaps, was one reason the PHL and PIT reps blocked it. There is still no reason why the NC can't continue meeting with the company at this point, with hopes of a quick settlement arising, and soon.

2. USAirways and the pilots will fail to reach any agreement that can be passed by the MEC and subsequently ratified by the pilots in time for the Sept. 30th deadline. Since the company has not had a single meaningful discussion with any other employee group, they run up to the end of September without a reduced cost structure in place, and no business plan to present to the ATSB, and the $750 million loan guarantee by the ATSB is "called". At that point, it's "Katie bar the door", 'cause every creditor who has placed their "dibs" on USAirways' cash position will start seeking cash for their investment, and a dominoe spiral will occur. The ATSB could give them a mulligan and extend the deadline, but it will be interesting to see what the RSA and GECAS, the major creditors of U, will do in response.

In any event, the ball now is squarely in the company's court. If something isn't agreed to within the next 10-14 days, there's simply not enough time to get it out and ratified prior to the 30th. Absent an agreement, it's all up the ATSB. If they pull out, USAirways will file for Chapter 11 within a day. Then it's up to whether or not DIP financing will be available to fund their operation in a 2nd bankruptcy.

I really do wish the news was better.

Red

What's the likelihood that the MEC will "cave" and just give the company what it wants (to the detriment of all airlines everywhere given the new super-low salary/benefits bar) at the 11th hour in the event that nothing is reached until then? I am predicting there will be a lot of posturing and brinksmanship... Difficult situation because that guy from BAMA has got you by the ball$...

 

[Boeingman]

Personally I find the actions of the U MEC very insulting and extremely hypocritical.

In 1983, the members of the USAir and Piedmont MEC's were some of the most vocal and critical pilots (before our strike) practically ostracizing anyone who was not in agreement in striking against Lorenzo. He was doing the same type of gutting to our contract and making draconian demands on our pilots. They were so afraid of the effect on his possible success at gutting the contract would have on their CBA's they were willing to tell us to hit the streets in a heartbeat and not give in once. How many concessions has there already been made to date by the USAIR pilots? I see no difference in Frank Lorenzo compared to the current management at USAIR.

So now they are in the same situation as us in 83 yet they continue to even entertain ridiculous demands that lower the bar in this industry even further?
They wanted us to fall on our swords (we did) and now it doesn't seem like a real palatable situation now they that they are living under the terror incompetent management that can only make the books balance by sucking the lifeblood out of the employees.

Sorry, but this situation really pisses me off to no end.

 

[LearLove]

Personally I find the actions of the U MEC very insulting and extremely hypocritical.

In 1983, the members of the USAir and Piedmont MEC's were some of the most vocal and critical pilots (before our strike) practically ostracizing anyone who was not in agreement in striking against Lorenzo. He was doing the same type of gutting to our contract and making draconian demands on our pilots. They were so afraid of the effect on his possible success at gutting the contract would have on their CBA's they were willing to tell us to hit the streets in a heartbeat and not give in once. How many concessions has there already been made to date by the USAIR pilots? I see no difference in Frank Lorenzo compared to the current management at USAIR.

So now they are in the same situation as us in 83 yet they continue to even entertain ridiculous demands that lower the bar in this industry even further?
They wanted us to fall on our swords (we did) and now it doesn't seem like a real palatable situation now they that they are living under the terror incompetent management that can only make the books balance by sucking the lifeblood out of the employees.

Sorry, but this situation really pisses me off to no end.

While I fully agree with you on the above, might you consider that that was over 20 years ago and maybe some of or many or most of the "hardliners" are retired are gone from the system by now.

 

[dlredline]

What's the likelihood that the MEC will "cave" and just give the company what it wants (to the detriment of all airlines everywhere given the new super-low salary/benefits bar) at the 11th hour in the event that nothing is reached until then? I am predicting there will be a lot of posturing and brinksmanship... Difficult situation because that guy from BAMA has got you by the ball$...

This from the CBS Market Watch:
"As early as Sept. 15, the airline risks running afoul of financial covenants tied to a federal government loan in addition to a creditor's agreement for new regional jets.
US Airways could be forced to file for Chapter 11 bankruptcy again or liquidate its assets.
"We are profoundly disappointed that the actions of a few prevent our pilots from making their own decisions," US Airways spokesman David Castelveter said. "Nevertheless, we remain firmly committed to reaching an agreement that is responsive to our pilot's needs, but also meets our required financial target."
To avoid violating loan covenants, US Airways must maintain an unrestricted cash level of at least $725 million. Its cash stood at $975 million at June 30.
Vaughn Cordle, chief analyst at AirlineForecasts, an independent research boutique that specializes in airlines, said US Airways is stretched too thin.
"With the pilots officially saying no, I would not be surprised to see US Airways file for bankruptcy very soon," he said."


If they go Ch11/Ch7, Bear Bryant couldn't save the RSA and USAirways management at this point. Expect the unexpected from the MEC group who lost the vote last night. This will get uglier.

Red

 

[Space Wrangler]

"The ATSB could give them a mulligan and extend the deadline, but it will be interesting to see what the RSA and GECAS, the major creditors of U, will do in response."



As I've written in other threads, I just don't see how the White House will let UAIR go tango uniform less than forty-five days before the election; Pennsylvania and North Carolina are huge battle-ground states, not to mention the fact that the latest employment numbers already suck hind t!t. If no agreements are reached by the employee groups, then the ATSB is going to give them some sort of relief -- time, whatever that may be -- but they're not going to allow all of those employees to go to the bread line until after the election.

You read it here first.

Furthermore, I think that UAIR mgmt has probably something up their sleeve that's going to be pulled at the twelfth hour, and they're just doing all they can to suck the employee groups dry. They sure have been paying cash for lots of CRJs lately -- makes it look like things are worse than they really are.

My God, I hope I'm right on one of these points;I dred the thought of looking for yet another job.

Red, thoughts?

 

[LearLove]

"As I've written in other threads, I just don't see how the White House will let UAIR go tango uniform less than forty-five days before the election; Pennsylvania and North Carolina are huge battle-ground states, not to mention the fact that the latest employment numbers already suck hind t!t. If no agreements are reached by the employee groups, then the ATSB is going to give them some sort of relief -- time, whatever that may be -- but they're not going to allow all of those employees to go to the bread line until after the election."


I've been thinking and saying the same thing for months now. Bush needs PA big time so there is no way he'll let the second biggest employer in the state go under before the election. However I've been wrong before. Just my thoughts.

 

[Space Wrangler]

Borrowed from another web site:

Let's get one thing straight. The financial situation at US Airways is not good. We all know this. Employees know this. You know this. I know this.
But last week, a huge commotion ensued, after it was reported that a "financial review" of the airline, completed by an analyst hired by the airline's own pilot union, stated that the airline was in such dire straits a return trip to bankruptcy was a given. Not only that, but this return trip would probably occur no later than the middle of September.

You folks heard the level of noise. It was a virtual media feeding frenzy, as many articles I read made the assumption that if an analyst for the union believed this to be the case, employees, particularly pilots, now had no choice but to believe this really was the case. Michael Boyd, for instance, was quoted as saying, "To have an outside entity working for the pilots that tends to validate what management is saying should bring both sides together." He then added, "It should bring some trust there."

Uh-huh.

Well, with shares of the airline's stock trading wildly Friday, and emails coming in left and right, my simple question about this "financial review" was this -- who is Michael Glanzer and why should anyone, much less an employee at the airline, jump after reading his report?

I have a copy of the "financial review" that Glanzer prepared. Or, at least I have a copy of the document that was distributed to pilots at the airline last week. To say it is a complete document would be misleading as many key figures and assumptions in the document have been removed -- it's kind of like reading a report from the Pentagon after the guys with the black markers have been in there.

The document was apparently first given to the airline's ALPA MEC in July.

But there is still more than enough verbiage and the occasional chart left for me to come to this conclusion: using the term "financial review" to describe this effort is a stretch.

As with any financial analysis, the content of this document is only as good as the credibility the author of such an analysis brings to the table.

It is for this reason that the first thing I did when I received a copy of the document was to research just who Michael Glanzer is. Touted in various places as a "financial analyst", and an "investement banker", I could find no substantial information online about Mr. Glanzer, other than the fact he had been hired by the pilots' union at the airline prior to the airline's first bankruptcy to provide a "financial review" of the airline at that time.

Okay, but who is this guy?

I then checked the Bloomberg database of those in the financial service industry and neither his firm nor he is listed. And hey, even the folks who work as Brown Bag analysts here at PBB are listed there -- including our resident US Airways' expert. Bloomberg's directory is the most comprehensive out there.

I then asked a couple of my Wall Street friends who he was. One institutional investor I know who follows the airline industry responded, "I think he's published a few articles in the academic world, but other than that, I am not aware of him or his company -- except for the fact he apparently works for the US Airways' pilot union."

Or does he?

You guys know the drill here. It's always a good thing to find out who pays the one doing the "analysis." No matter what the subject matter is.

There is this little matter of "disclosure."

So, I start digging around with some of my US Airways' pals, and guess, what? The more I dug, the more interesting this story became.

It appears that yes, the pilot group at US Airways hired Glanzer prior to the first bankruptcy. Glanzer was to provide financial advice to the group.

But, the pilot group did not pay Glanzer for his services.

Rather, the airline itself agreed to pay for Glanzer's services. But, and this is a very big but, the airline would only pay for his services if the pilot group agreed to concessions.

Now, I don't know about you -- but this sends red flags up for me.

Because, what this arrangement did, from what I can gather, is set up a situation where, if the pilots agreed to company concessions, Glanzer would be paid a one-time fee. It is also my understanding that this fee was in the neighborhood of $1 million.

I know. I found this hard to believe, but the information was confirmed by more than one source.

However, if Glanzer did the report and the airline's pilots refused to go along with concessions -- the agreement stipulated that Glanzer would then be paid on an hourly basis.

The company then opened the doors for Glanzer to come in for two months. Following his extended stay at the Crystal Palace, Glanzer issued a long report ("long on length, short on substance," as one subscriber dubbed it) and the rest, is, as they say, history.

The pilots agreed to the concessions that the company wanted, Glanzer had a considerably fatter bank account, and that was that.

Until recently-- when Glanzer once again was asked by the pilot union to prepare a "financial review" of the airline's financial condition.

I could not confirm what Mr. Glanzer's fee was for this most recent effort; however, I was forwarded copies of language that indicate that he is indeed once again being paid by US Airways, not the airline's pilot union. And I quote, "the company will pay the fees and expenses incurred by the Association (ALPA) in connection with the review, design, negotiation, approval, ratification, and implementation of the Transformation Agreement, including the customary fees, the expenses of outside legal, invesment banking and other advisors, offset by any payments made to the Association during the Transformation negotiations for such purposes."

Now, you might ask, why was it that I felt compelled to dig around so much?

Because, to be honest, this report is astonishingly poor.

In fact, if someone had shoved a copy under my nose, and told me to read it, I would have assumed that management at the airline had prepared it.

Why?

Because the entire way the document is constructed merely mirrors the current arguments that management at the airline has made. It does not aggressively question any of the assumptions the airline currently makes.

This document, at least to me, is not a third party analysis. Rather, it reads like a thinly-veiled corporate rubber stamp of what the airline feels it needs to have.

Again, is the airline in deep financial trouble? Yes.

But the pilots at the airline deserve better than this -- especially when it is being touted as an "independent review completed at the behest of their own union."

There are a number of things I could take issue with that are said in the report, but I'll focus on just one. In the report the comment is made that the review included a "limited review" of lease rates. According to Glanzer, "We were not able to find evidence to establish a case that additional savings might be generated there in light of current market conditions." Glanzer then went on to say that his due diligence in this area consisted of talking to analysts "who follow the area" and reviewing certain proprietary research reports.

He sums up by saying two things. One, the "low-hanging fruit" has already been harvested in terms of leasing concessions. Two, he says that it would be hard for the airline to seek further leasing concessions from the lessors, because the airline could be forced to look at lessors for potential equity contributions, as part of an alternative financing scenario. This scenario could be set up if the airline's ATSB financing has to be replaced.

At least he admitted the due diligence was limited.

I'd say it was limited. Did he not think it might be a good idea to talk to some of the airline's larger lessors? Perhaps he could have compared lease rates that United Airlines has now negotiated with some of its lessors, versus what US Airways negotiated previously?

Or perhaps lessors would be more willing to take further cuts in leasing rates, in return for an additional equity position.

To be continued...............

 

[Space Wrangler]

.......continued



The problem is, Mr. Glanzer doesn't know because he didn't talk to them. Rather, his surface treatment of the lessor issue is not much more than a rehash of the position the company is currently taking, as it tries to obtain further employee concessions.

If it was me, I'd go to the source.

No, this is not information you can get easily, but it is there if you know how to find it.

While I don't disagree entirely with his premise, I see no questioning here of the company line. Rather, I see evidence being given over and over in the report that supports the company position.

There is a big difference.

Actually there was one little tidbit in the report that I found intriguing. And I quote, "the Company also proposed to refresh its product offering by installing [text omitted]. It has generated cost estimates for such modifications to the current fleet based on reasonable intelligence, but we are not aware of any airline that has modified its planes in such manner. [Text omitted.]

Are they suggesting they retrofit their aircraft with seatback entertainment systems?

To sum up, yes, US Airways is in serious financial trouble. But that is no excuse for such a suspect document as this to be issued, much less under the guise of an "independent" effort.

Pilots at US Airways: You deserve better.

Finally, we could not leave our visit to US Airways without a quick trip to Alabama.

This week, US Airways' Chairman David Bronner was talking about airlines to the Mobile Register. You can access the article by clicking here.

You know Mr. Bronner is one of my faves -- and this week he did not disappoint. I'll just let you enjoy the quotes.

"Nobody wants to lose a quarter of a billion dollars. But what'll hurt me more is knowing how beneficial this thing could be for our state. It really is unique both as an investment and as a promotional tool. Forget my ego. Think of the missed opportunities for Alabama."





​

Oh, gee, I forgot the real reason for the US Airways' investment -- a WPA project for the state of Alabama.

"We had a good plan to start with. What we did not anticipate was the low-cost carriers becoming the darlings of Wall Street. Before, they were like gnats on an elephant. JetBlue, for instance, had 36 planes. We had 350. I mean, who cares! But while all the big airlines were losing money, Wall Street looked at the discount guys and said, 'Hey, you're good,' and opened its purses."





​

Uh-huh.

"Even in a worst-case scenario -- a complete liquidation of the airline's assets -- RSA's [Retirement Systems of Alabama] investment has paid dividends in Alabama, Bronner said. US Airways sent about a dozen of its Airbus jets to Mobile's Brookley Field for $10 million worth of heavy maintenance work at ST Mobile Aerospace Engineering Inc.



In-flight videos promoting Alabama tourism are seen daily by more than 225,000 US Airways passengers, and Bronner has had brochures for his Robert Trent Jones Golf Trail mailed to passengers who check golf clubs as baggage. The company in May brought its annual meeting to The Legends at Capitol Hill, an RSA-owned resort in Prattville.

But Bronner's bigger plans, at least for now, are on hold. US Airways is squeezing every nickel to survive, he said. Still, the airline last year spent $7.5 billion on everything from planes to peanuts. "Just think about the number of services and products that a company of this size buys in an average year. It's huge," he said. "There's tons of things that, if we can just stabilize it and get it into the black, we can introduce Alabama companies to and say, 'OK, you're gonna have to bid for it, but if you can give us a comparable product at a comparable price, then you'll get a shot,'" he said.

Bronner openly expressed a desire to move airline operations, including call centers and other back-office work, to Alabama and suggested that US Airways or one of its regional offices would make a fine anchor tenant in his RSA Tower now under construction in downtown Mobile. There's also a chance he could sway Bombardier Inc., a Montreal-based aircraft manufacturer, into building airplanes in Alabama. The world's third-largest maker of civil aircraft counts US Airways as its biggest customer and recently announced that it was evaluating global sites for a new assembly plant. "When you own a major airline in this country, people answer your phone calls," Bronner said. "It's opened doors that never would have existed for us otherwise, and it absolutely has made us a lot of new friends around the world."



​

If we had only known this was a WPA project going into the process, and not an effort to constructively restructure the airline.




Finally, in a scene right out of legendary Alabama Coach Bear Bryant's playbook, the interview concludes,

"I love," he said, taking a last deep draw on his cigar and rocking forward in his chair, "to win."





​

Roll Tide."

 

[dlredline]

As I've written in other threads, I just don't see how the White House will let UAIR go tango uniform less than forty-five days before the election; Pennsylvania and North Carolina are huge battle-ground states, not to mention the fact that the latest employment numbers already suck hind t!t. If no agreements are reached by the employee groups, then the ATSB is going to give them some sort of relief -- time, whatever that may be -- but they're not going to allow all of those employees to go to the bread line until after the election.

You read it here first.

Furthermore, I think that UAIR mgmt has probably something up their sleeve that's going to be pulled at the twelfth hour, and they're just doing all they can to suck the employee groups dry. They sure have been paying cash for lots of CRJs lately -- makes it look like things are worse than they really are.

My God, I hope I'm right on one of these points;I dred the thought of looking for yet another job.

Red, thoughts?

Good points all. And you may end up being correct that they won't let a PA/NC based company fail just before the election. On the other hand, the ATSB is a government entity, and they have $750 million in tax payers funds committed to this adventure (through gov. backed loans). If USAirways management files Ch.11 protection (the government doesn't have a say in that decision, it's simply a function of their cash position), and can't find DIP financing to support their reorganization under that protection, the ATSB could argue that they are "protecting" tax payer monies by pulling the loan before the risk gets deeper. The banks and institutions that used the governments' backing to loan USAirways millions would be on the "tic" for their losses, and you and I and average tax-payer Joe would be stuck with the bill.

The news about USAirways has been grim for years now. Hopefully the public hasn't become de-sensitized to their plight. But in reality, if they go Ch7, will there be surprise and outrage from the media and public? I'd hope so, but after hearing them constantly referred to as "Financially Troubled USAirways" for the better part of 12 years, who knows. I honestly don't know which is a worse hickey on the administration, the potential lost jobs or the potential lost millions of tax payer funds. Tough choice in an election year.

As far as this management team "having something up their sleeve", well, you graciously give them a lot more credit than I would (after having worked there for 15 years).

Best to ya,

Red

 

[Boeingman]

While I fully agree with you on the above, might you consider that that was over 20 years ago and maybe some of or many or most of the "hardliners" are retired are gone from the system by now.

True from an individual point of view, but the lessons are the same.

It never ceases to amaze me how two faced ALPA can be depending on the circumstances. What would the hue and cry sound like if some non ALPA airline was proposing this level of contractual pay and benefits for the same type of equipment?

What is happening here is no different than what Frank did to CAL, or what Mesa has done for the regional folks today. The silence is deafening from ALPA about this U situation.

 

[dlredline]

. . . The silence is deafening from ALPA about this U situation.

I couldn't agree more. Where was Duane Worthe when this ball (elimination/reduction of retirement benefits) started rolling (U, UAL, CAL, DAL). Remember, he signed off on the USAirways' MEC termination of the Defined Benefit plan, signed off on MidAtlantic deal that will essentially became a mainline replacement vehicle for a GECAS financed deal for several hundred regional aircraft, signed off on the "soft-landing" that now haunts current (and future) USAirways furloughees.

Duane has gladly fiddled (with his $200,000+/year salary) while the USAirways pilot careers continue to burn down. Talk on the ALPA message boards is growing with regard to kicking ALPA off the property at U. What has happened at USAirways is on par with Enron, MCI/Worldcom, etc. Where is the outrage from the union many of these pilots have been financing for so many years, the news conferences, the press releases, the informational picketing, anything. ALPA is quickly becoming irrelevant in representing their core constituency, and at a time when they financially can ill afford the loss of 3500 more dues paying members. The camel is bending over, and they keep throwing more straws on its back.

Red

 

[yaks]

"In 1983, the members of the USAir and Piedmont MEC's were some of the most vocal and critical pilots (before our strike) practically ostracizing anyone who was not in agreement in striking against Lorenzo. He was doing the same type of gutting to our contract and making draconian demands on our pilots. They were so afraid of the effect on his possible success at gutting the contract would have on their CBA's they were willing to tell us to hit the streets in a heartbeat and not give in once. How many concessions has there already been made to date by the USAIR pilots? I see no difference in Frank Lorenzo compared to the current management at USAIR."


If you really believe this then it is sad that you've had what seems to be a long career in aviation and never really learned anything about the industry.

 

[enigma]

Duane has gladly fiddled (with his $200,000+/year salary)
Red

According to a Readers Digest article printed last year, Woerthless makes over 400Large per year.

I'm happy to give my 2%, NOT.

enigma

 

[LearLove]

According to a Readers Digest article printed last year, Woerthless makes over 400Large per year.

I'm happy to give my 2%, NOT.

enigma

Yeah I was under the same inpression that his pay was more like 400 G's. And if I'm not mistaken he gave himself a raise post 911. Thats real class right there.

 

[Boeingman]

If you really believe this then it is sad that you've had what seems to be a long career in aviation and never really learned anything about the industry.

It is easy to believe in something when you attend various meetings at strike centers with representatives from said airlines pushing their personal agendas while trying to "help". Not to mention conversations with various individuals out on the line or during drill weekend.

If anything sounds to me like the U ALPA boys and girls haven't learned anything watching this goatrope taking place.

Where were you in 83? Did I strike a little to close to home with the comment?

 

[Boeingman]

Yeah I was under the same inpression that his pay was more like 400 G's. And if I'm not mistaken he gave himself a raise post 911. Thats real class right there.

I believe his salary is $450K per year. No further comment needed about that figure.

 

[dlredline]

I believe his salary is $450K per year. No further comment needed about that figure.

You're right, I'm speechless . . .