UAL Mgmt. Bonuses??

[miles otoole]

A grade school dropout could probably do a better job.

Could say the same thing about most pilots. I'll bet many are.

 

[pilotyip]

Reality Check

Again this is a pilot board, it does not deal in reality. People with talent to save a company from the brink of liquidation are far more rare than those with the talent for moving an airplane from point A to point B. The whole point of this tread is should the people who saved as many UAL jobs as they did be rewarded?

 

[banned username 1]

...and that's fine to have your opinion. That being said, they were doing their jobs and got compensated for it; very well I might add. If we're just talking performance bonuses here, many were very well paid in the first place- both to stay on the property and to bring on the talent that they thought they needed to wade through the BK.

If it's just a bonus for a job well done at the end of the journey, they don't deserve anything more (or less) than any of the other workers who did their jobs to the best of their ability, and then some. Seem fair?

 

[CKJET]

Should they work for free?, could someone else do a better job? Are the pilots better off at the reorganizaed UAL as opposed to the defunct EAL or Pam Am? Is lowering the bar to $150K better than driving a bread truck?

The union contributed to the fall of Eastern however don't let Frank Lorenzo off the hook. He gutted the airline of all it's assets and gave them to CAL. Then he sold all the South American routes to AA, got filthy rich at the expence of the EAL employees and got away with it thanks to his freind George HW Bush.

 

[pilotyip]

what happened to the rest of this thread?

 

[VVJM265]

what happened to the rest of this thread?

Looks like we had another Flight Info server crash, YIP.

 

[vc10]

http://enplaned.blogspot.com/2005/12/united-management-have-you-no-shame.html


Wednesday, December 14, 2005

United Management: Have You No Shame?

Look up "chutzpah" in the dictionary and you'll see the beady eyes of United Airlines' CEO Glenn Tilton staring back at you. United proposes to give management a 15% stake (currently valued at $285mm) in the airline as it exits bankruptcy.

It's not unusual for management to get an equity stake in a reorganized company. However, as this article says, United proposes to give an unusually large stake to management. We'd argue that they deserve an unusually small stake:

• Much of United management are the same guys who rode the airline into Chapter 11 (e.g. Hacker, Brace, McDonald). You'll recall that United filed after management lost its bet that it could get a government loan in return for a mere 9% reduction in employee wages. Government stiff-armed United, at which point there was no way out for United other than filing bankruptcy. It was management's plan that failed, it was management who were to blame for United's Ch 11 filing.
• American Airlines management kept its company out of bankruptcy and has done a far better job at stripping out costs. American management isn't getting 15% of that company. Why should United management get a penny for screwing up where American has succeeded?
• Tilton should presumably reimburse United for needing on-the-job training. He had no airline experience whatsoever before coming to United only months before the filing. Did Tilton's inexperience contribute to the filing? It can't have helped.
• Management's initial Ch 11 plan failed utterly, wasting a year and a half. You'll recall that management initially hung its hat on getting the same government loan it couldn't get before Ch 11. Turns out it couldn't get the loan afterwards either, with the government finally turning down United flat in the summer of 2004. We're now 36 months into this bankruptcy. United is one of the poster children for the bankruptcy reform that was recently implemented (under the new law, United management would have lost control of the reorganization after 18 months -- if only).
• United management blew it when reducing its aircraft payments in Ch 11. United angered its aircraft financiers to the point where they joined together in a cartel. United came to an agreement with the cartel but then tried to weasel out, claiming the cartel violated antitrust rules. The bankruptcy judge agreed with United, but on appeal both United and the bankruptcy judge were spanked. In the meantime the aircraft market got stronger. By the time United came to a new agreement, terms were worse than if it had just signed the original agreement.
• United's wasted time and energy on the Ted subsidiary. Yes, we know they believe it's the greatest thing since sliced bread. Airlines always believe their new shiny low-cost brand is the greatest thing since sliced bread. United once thought the same about Shuttle, US Airways about Metrojet, Delta about Delta Express and then Song. There's never any way to independently verify how such an operation is doing so we're just supposed to take their word for it.
• If United management had put into place some innovative new business plan that had made the airline more profitable, perhaps they'd deserve a greater slice of the pie. But the reality is that value creation in this case is coming almost entirely because of crushing vendors and most of all labor, rather than management inspiraton. If there's a spare $285mm available, split it between the long-suffering unsecured creditors and the Pension Benefit Guarantee Corp. Don't give it to United management.

Luckily United creditors are objecting. The bankruptcy judge has a long history of doing precisely what United management wants, but perhaps even he will have trouble with this.

 

[pilotyip]

VC-10 and the industry leading non-productive compensation package for pilots that was forced onto managment in 2000 has nothing to do with the UAL problems? This is a repeat of a lost thread, but here it is again. This is a pilot board so saying anything in defense of management is like peeing into the wind, that it is going to come back to you. CEO's are not intentionally running airlines into the ground. They would very much like to succeed. For lack of other reason it would make their resume look great, they would be doing something no other CEO had ever done. Top management includes many besides the CEO, the CEO sets direction as requested by the board. The CEO has little control over the airline, the airline is run by regulation and union contracts. They are at the mercy of the purchasing public, who with Internet access has made the airline ticket a perfectly elastic commodity. There is little they can do inside their structure. Other high paid top management personnel, in Operations, Maintenance. Marketing, Legal, Finance, etc. have unique skills in dealing with large organizations. This makes them marketable when shopping for a job, unlike pilots whose skills are nearly universal. An issue of ATW in the last year had an article about “Airline Management a dying breed”, the article basically said no one wants to do it. The good track record CEO’s are going to other industries. With tremendous, payrolls, overhead burdens, and extremely low margins, there is no tried and true path to success. Most have tried to increase market share, but this has lead to low price and ridiculous breakeven load factors in 95% range. What is management supposed to do? Eliminating management will bring the end quicker for the airplane industry, and their salaries are insignificant to the airlines operating costs. Without management you could not operate the airline, The FAA would shut it down without approved Part 119 key management. Would the pilots step up and become management for free in their spare time. Why is every time, pilot salaries come up, they are immediately compared to top management. I saw an article in ATW in the past couple years that stated at DAL there were 17 members of top management made more than the top DAL Captain. The combined top 17 salaries equaled less than 1/6 of 1% of the combined pilot salaries. If management worked for free all pilots in the company would get a 1/10 of 1% raise. (for a $100K per year pilot that would be $3/wk increase in take home) Boy that raise would really make the pilot group happy. Top management possesses skills that allow them to move from job to job and command high salaries. And every one of these managers wants to see his/her airline prosper. They just can not do it.

 

[Clyde]

Again this is a pilot board, it does not deal in reality. People with talent to save a company from the brink of liquidation are far more rare than those with the talent for moving an airplane from point A to point B. The whole point of this tread is should the people who saved as many UAL jobs as they did be rewarded?

What is even more rare are people who can run an airline without running it into bankruptcy in the first place.

I will agree that labor costs are a big expense for any company. But, the labor unions are not the ones who make the decision to take on loads of debt to expand or to create a pricing structure that eventually dooms the airline.

I think the whole point of this thread should not be whether or not those people who saved many UAL jobs should be rewarded, because all they have done is turned professions into vocations. I think the whole point of this thread should be this: should incompetent airline managers who are responsible for poor financial performance of their companies and the mass layoffs of their employees be held criminally liable for their actions?

Many of these managers have driven their companies into bankruptcy, cost thousands their jobs, and then these same managers leave with a golden parachute while their former employees are out looking for work.