Midwest, AirTran what's the right price?

[Eagle757shark]

You're not out of wack Fam. What you're seeing when folks post "...i'll enjoy my 3 year upgrade..." or whatever drivel, is what HAS been happening.

You are correct in your analysis. When the deliveries stop or slow, upgrades will be strictly tied to retirements and attrition.

Airtran will likely only grow to a point, due to competition. That's a given. So you are spot-on in that if AAI only grows to 200 airframes or so, the bottom 300 to 400 pilots on property will be FO's for quite a long time.

AAI FO pay reaches its max at 8 years. And that rate, based on guarantee, annual pay equates to 66K a year.

This is why it is important that FO pay be addressed during this contract negotiations. The FO pay after 2nd year are nowhere close to what they should be. I tend to believe upgrades will probable slow down after this year. If this merger doesn't go through and the company is forced to slow down the 737 deliveries further, there won't be 3 year upgrades. As you mentioned FO pay caps out at 8 years when most airlines go a lot longer than that. AirTran has a young pilot group so retirements aren't as large as some other carriers. With the age requirement about to change in two years, that pipeline will be even slower. Now attrition may see some FOs leave in the next 3 years. Particularly those FOs that were furloughed from legacy carriers. Several United furloughees have already accepted recall. I imagine in the next couple of years others may return to their former carrier if the pay is greater there and upgrades become limited. Delta, Continental, Southwest, and Fedex are all hiring and will draw pilots from the FO ranks of AirTran.

 

[fam62c]

Thanks for the information, sorry to hijack the thread.

 

[TV9Driver]

My W2 for my second year at AirTran was $65K - and that included 2 1/2 months of first year pay (I was a March hire). Second year pay is $56/hr. My point being, since you fly more here at AAI, your pay is ALWAYS higher than garauntee.

Having said that, I agree with Eagle757, FO pay must be addressed with the next contract. If FO pay doesn't make into the 6 figure area, we're gonna see a lot of FO's jumping ship when the music stops.

 

[Lear70]

My W2 for my second year at AirTran was $65K - and that included 2 1/2 months of first year pay (I was a March hire). Second year pay is $56/hr. My point being, since you fly more here at AAI, your pay is ALWAYS higher than garauntee.

Having said that, I agree with Eagle757, FO pay must be addressed with the next contract. If FO pay doesn't make into the 6 figure area, we're gonna see a lot of FO's jumping ship when the music stops.

True Dat!

 

[Eagle757shark]

Investors bet Midwest will give in

By DAVE HIRSCHMAN
The Atlanta Journal-Constitution
Published on: 02/14/07
Large investors appear to be betting that AirTran Airways will persist in its 2-month-old buyout bid for Midwest Airlines, perhaps by sweetening its offer once again.
The price of Midwest stock climbed when AirTran launched its hostile takeover effort in December, and again when AirTran made a tender offer directly to shareholders in January. Since then it has remained close to, or even above, the $13.25-a-share offer.

AirTran has extended the tender offer deadline to March 8, after it was unable to lock up a significant amount of Midwest stock in the first few weeks. As the original early February deadline neared, AirTran had commitments from shareholders to sell just 38,000 of more than 19 million outstanding shares.
By bidding up the value of Midwest stock, investors are betting either that AirTran will be back with another offer, or that Midwest's plan to boost revenue and profits will succeed — a prospect some financial analysts doubt.
"AirTran and Midwest are a perfect match," said Vaughn Cordle, chief financial analyst at AirlineForecasts, a Virginia consulting firm. "The Midwest shareholders would be foolish to turn it down."
Cordle said Midwest's most profitable routes between its Milwaukee hub, New York and Boston are vulnerable to new competition from JetBlue, Southwest or a revived Northwest Airlines.
At the same time, AirTran needs to expand beyond its Atlanta hub, which accounts for two-thirds of the Orlando-based carrier's capacity.
"They'd be better off merging," Cordle said of Midwest, "and AirTran is an excellent fit geographically and with complementary aircraft fleets. There's really no alternative suitor."
AirTran and Midwest both fly Boeing 717s as their short-haul workhorses.
AirTran officials say their current tender offer is as generous as the company is willing to be without access to detailed financial information and operational details that Midwest has been unwilling to provide.
Midwest has rebuffed AirTran overtures since June 2005, when AirTran offered $4.50 a share for the company.
The two are battling in court over access to Midwest's shareholder list, but AirTran officials say that list is becoming less relevant as institutional investors buy up Midwest shares.
"Institutions used to own about 40 to 45 percent of Midwest," said Richard Magurno, AirTran's general counsel. "Now, that appears to be changing. A New York hedge fund is now the largest shareholder."
A list of Midwest ownership filed with the Securities and Exchange Commission this month shows the Milwaukee-based Heartland Fund as the largest stockholder with 8.9 percent.
Heartland officials didn't return calls for this article. But fund managers have steadfastly backed the Midwest board by complying with the board's request not to tender shares.
Midwest officials have described AirTran's buyout offers as "opportunistic," "disadvantageous" and "inadequate." They insist the company can do better on its own with its premium, all-business-class seating configuration and fresh-baked, chocolate chip cookies served in flight.
"The offer does not fully reflect the long-term value of Midwest's strategic plan, including its strong market position and its future growth prospects," the company said in a recent SEC filing.
"This strong [2006] performance, combined with Midwest's successful cost reduction efforts, generated a $66 million improvement in operating income."
Midwest stock had already jumped 66 percent from its post-9/11 low when AirTran launched its takeover effort two months ago.
Richard Aboulafia, aerospace analyst at the Teal Group, said Midwest's response hints at a possible deal.
"When you say you're undervalued, it implies a transaction is possible at the right price," he said.
Midwest was profitable in 2006 for the first time since the terror attacks of 2001, and it has issued bullish forecasts.
But consultant Cordle cautions Midwest against overplaying its hand, and he says AirTran would be unwise to pay too much.
"Remember Independence Air?" he said of the now-defunct carrier.
"They had a chance to merge with Mesa Airlines for $12 a share. But they destroyed $1.5 billion in market value by insisting on going it alone. Midwest should keep that in mind."
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[Steeler Fan]

Actually, what HAS been happening is 2 and 2 1/2 year upgrades. The last upgrade vacancy final had four 2 1/2 year guys in it.

For the most part, you're absolutely right. 75M and I were at 3yr, 3 months --but that was an anomaly, due to a 6 mnth hiring freeze while FL was parking the DC-9s and setting up the 737 training Dept/program.

People told me 2-2.5 yrs. (I added a year to that and planned upgrade based on a conservative estimate).

 

[Lear70]

They were telling us 2 1/2 years in training. We didn't buy it, just looking at the delivery schedule and (then) attrition rate.

Figure it will be somewhere around the 3 1/2 year mark, give or take 6 months for any hiccups, notwithstanding the above Midwest deal still looming.

Throw that in the mix and we can kiss upgrade goodbye for an extra 3-4 years if the integration doesn't have a 4-5 year fence in it.

If the acquisition happens, any contract without a 20% bump or more in F/O pay (10% is COLA alone) and six figures within 10 years has my immediate no vote unless there is a combination of trip/duty rigs that accomplishes the same goal utilizing our current schedules as the basis for computation.

If people get stuck as F/O's, the company's gonna have to pay up or suffer the attrition that's coming with the legacies gearing up hiring again.

 

[gt1900]

Yep.. I see the upgrade going up to 4 years pretty quick. The only reason it dropped was because of the hiring freeze. I have never seen a 2 year upgrade, a few at 2 1/2 but never 2. The only reason it dropped to 2 1/2 was because the hiring freeze, before that it was going around 3 years. Guys who got hired in the last couple months are gonna see probably a 4 or 5 year upgrade at the least. Right now AAI has around 120 planes with only 60 more to go. They are planning on hiring around 180 for 2007 (straight from SG's mouth last week) and that isn't much. I was hired in 05 and sit somewhere around 1000 out of about 1500. They would have to hire another 300 probably for me to make Capt. That's gonna put my upgrade somewhere around 3 to 4 years.. My 2 1/2 years will be around Oct of 07.. And there is no way I'm gonna see upgrade anywhere close to then..

 

[Lear70]

Never say never.

180 will cover attrition. It won't cover attrition plus growth.

I don't think anyone's clued SG in on the numbers we've started seeing leave in the last 2-3 months.

We're gonna get into the summer and suddenly be understaffed again. You heard it here first.

I predict 250 total for 2007 in new-hires, with a big surge in hiring late summer again.

 

[gt1900]

I should have said they would have to hire around 300 without andy attrition for me to see capts. Even if they hire 250 with 180 leaving that only makes 70 new pilots for 07.. They would have to hire 250 this year and almost 250 next year with the way I hear attrition is going.. BTW.. I only moved up around 50 numbers in 6 months, so the huge attrition must be behind me..