UALjan15 said:
The problem with this thinking if true on management’s part is the fact that it would be foolish for them to believe, given the size of UAL, if they were to get their costs so low it would not create a domino effect in the industry. That would negate in the long run any initial CASM advantage since the others would eventually fall. And they have as is evidenced now with the downward pressures on NWA & DAL. In some ways, UAL will be the initial barometer of the future for legacy carrier’s labor contracts, just as they were in the past.
UALjan15 said:
Agreed. For the second round of labor attacks, it seems to be driven by exactly what you said. I don’t know If it will be that easy to get these cuts. I believe the judge in UAL’s bk has already told management to forget about deeper cuts in a hearing last time. I think UAL will face great pressure from the PBGC and they will/may ultimately seize assets should UAL terminate the plan. And last but not least, I think there will be an employee meltdown at UAL should these draconian cuts come.
The UAL employees would be fools to allow themselves to get into a situation like our friends at USAIR have done. Considering managements actions and statements to date about labor costs at UAL, USAIR is a crystal ball of what UAL employees will face soon. Time and again these pay cuts are like a crack pipe to management. They get addicted to the fact that labor will cave in fear of their jobs and will subsidize gross incompetence or mistakes or fill in the blank. There has never been an airline saved by employee concessions.
Your last sentence I touched on above.
UALjan15 said:
That is hard to say not being privy to the books. On the surface however I would say no. Given the environment and condition of the industry I think the creditors are going to take their money and run. Eventually anyway.
UALjan15 said:
That is a tough one. If you went with that theory you’d have to believe they predicted the future oil and revenue turmoil and planned accordingly. No doubt management was salivating over gutting the contracts but I don’t think it went any further than that. From the outside looking in, it seemed like UAL was trying different things while under the protection of Bk hoping there would be a fundamental change within the industry with improving revenues etc. etc. Obviously it hasn’t happen.
On a larger scale, my prediction is that unless there is some drastic change in fortunes, industry conditions or management philosophy, UAL may end up in a position like USAIR. All their assets leveraged, continuous reductions, continuous attempts to gut the labor contracts etc. etc. Although different animals, the trends are pointing to that scenario. When you look back at history of carriers in trouble, it is the same story every time.
I don’t think UAL will just vanish like USAIR is about to. They will be continually reduced in size and finally what is left will be merged with another legacy carrier. At this point there is too much value with the Int’l routes and assets to say anything different.
Personally, I think the saving grace for the legacy carriers will be the rebounding Int’l traffic and yields from those routes will support an anemic domestic system. Perhaps in UAL’s case it may not be to late if they can renegotiate the DIP financing and management can get some credibility back with the creditors and the banks.
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