UAL wants even more cuts!

[Cappy]

UAL is seeking more cuts via the bankruptcy court. It just seems like it's never going to end for them. Good luck to al UA employees.


___________________________________________________________________



Associated Press
United Seeking $725M in Further Labor Cuts
Friday November 5, 12:35 pm ET
By Anna Johnson, Associated Press Writer United Airlines Seeking to Obtain Another $725 Million in Further Labor Cuts, Ditching Pensions

CHICAGO (AP) -- United Airlines is moving to obtain another $725 million in labor concessions and eliminate employees' traditional pensions as it seeks the financing to come out of bankruptcy.

A day after the troubled carrier formally informed employees that further steep reductions in pay and other benefits are coming, union leaders huddled to analyze the proposed cuts and decide how to respond. United's largest unions declined public comment until discussing the plan further.

The nation's second-largest airline has been threatening to terminate its pensions since August, and last month it said it would need to cut costs significantly more than anticipated because of the industry's deteriorating financial outlook.

Spokeswoman Jean Medina confirmed Friday that the carrier will ask a bankruptcy court judge to approve an extra $725 million in annual savings from workers, part of an effort to squeeze an additional $2 billion from the carrier's cost structure by next year.

"We recognize this is difficult for employees, but it's necessary considering the environment we are in. Fuel is at a record high and air fares are at a record low," she said.

The company was going to bankruptcy court later Friday to lay out a schedule for negotiations and deadlines. Medina said the new filing would not disclose specific details of the latest planned cuts.

United CEO Glenn Tilton disclosed the company's intentions in a recorded message to employees late Thursday.

"This is a challenge," he said. "It is a challenge that must be met. And, it must be equitable for all of our employees."

United also is widely expected to disclose additional job cuts when it reveals its new business plan later this month. Medina said the company does not yet have specifics on the number of job cuts it would make. It currently has about 62,000 employees, down from more than 100,000 before the 2001 terror attacks.

The Elk Grove Village-based carrier and its parent company UAL Corp. already have lopped $5 billion from annual expenditures since it filed for Chapter 11 bankruptcy in December 2002.

Facing $4.1 billion in obligations to its existing pension program over the next five years, United wants to terminate future pension plans and replace it with a 401(k)-style defined contribution program. United's plan -- which the company says is necessary to attract financing to leave bankruptcy -- has caused an uproar among employees.

The government-financed Pension Benefit Guaranty Corp. would be forced to assume United's huge obligations if the airline terminates the pensions. United's plan has also sparked worry in Washington over the potential cost to federal taxpayers.

Steve Derebey, a spokesman for the Air Line Pilots Association, said in a recorded message that United's proposal outlines "dramatic changes," including the replacement of pension plans. Another pilot spokesman declined further comment Friday. The union's governing body is scheduled to meet beginning Nov. 15 and will discuss United's proposal then.

United's machinist union -- the International Association of Machinists and Aerospace Workers -- also planned no public comment Friday on the contract proposal while its leaders and members were reviewing it, spokesman Joseph Tiberi said.

Similarly, spokeswoman Sara Nelson Dela Cruz said Friday that the Association of Flight Attendants would not comment on the contract proposal until later in the day after a meeting of its leaders. Along with labor concessions, United senior executives, including Tilton, also have agreed to a 15 percent wage reduction beginning Jan. 1, Medina said. Tilton earns $712,500 annually.

 

[michael707767]

United Airlines is moving to obtain another $725 million in labor concessions and eliminate employees' traditional pensions as it seeks the financing to come out of bankruptcy.

another 725 million and terminate the pensions. Ouch. Sadly, I expect we at Delta are only another two years away (at most) from the same thing.

 

[KingAirKiddo]

another 725 million and terminate the pensions. Ouch. Sadly, I expect we at Delta are only another two years away (at most) from the same thing.

It's sad to think what has happened to this industry in such a short time. I knew on September 11, 2001 that things were going to get ugly, but I never envisioned the magnitude of the changes.

 

[Boeingman]

I know I am going to catch flak for this, but I have been saying it for a long time. UAL has no real change in their business plan, no strategic plan to reorganize. They are continuing to use the shield of the bankruptcy court to wallow along hoping the industry goes into an economic turnaround. They are also using the courts as a tool to try to redefine and impose cuts on labor since it is obvious managements steps to date have been a fiscal failure. It is coming up on two years and what has fundamentally changed within the company aside from subsidizing marketing ploys upon the backs of labor?

I think they are fast reaching a point where the creditors and the courts are starting to realize the company is not fiscally sound in its present form. You can not keep losing hundreds of millions under court protection, keep telling your creditors and lenders you're planning to emerge next quarter (again and again) and retain the confidence of the financial community.

I believe we are going to see some big and ugly changes over there coming very soon. The current financial situation is unsustainable.

 

[ATR-DRIVR]

Sir, I believe those are very true words.

 

[michael707767]

I know I am going to catch flak for this, but I have been saying it for a long time. UAL has no real change in their business plan, no strategic plan to reorganize. They are continuing to use the shield of the bankruptcy court to wallow along hoping the industry goes into an economic turnaround. They are also using the courts as a tool to try to redefine and impose cuts on labor since it is obvious managements steps to date have been a fiscal failure. It is coming up on two years and what has fundamentally changed within the company aside from subsidizing marketing ploys upon the backs of labor?

I'm not going to give you flak, I agree. In fact, I think you could say the same about Delta management. What has changed here? Also, look at USAirways? Same thing, other than lower labor costs they really have not fundementally changed the way they operate their airline. I think all management teams just wanted to hold on till things got better. But the problem is, the industry had already started a fundemental shift before 9/11. Things were not and are not going to get back to where they were. I still don't think management fully realizes this.

 

[ATR-DRIVR]

But the problem is, the industry had already started a fundemental shift before 9/11. Things were not and are not going to get back to where they were. I still don't think management fully realizes this.

michael707767 has hit the nail on the head. There were things starting to go awry when 9/11 happend which only added more fuel to the growing fire. Maybe?
I believe that management in some if not all major carriers over used the 9/11 tragedy for excuse's for poor MANAGEMENT decisions, NOT pilot groups or other labor decisions.

 

[UALjan15]

I know I am going to catch flak for this, but I have been saying it for a long time. UAL has no real change in their business plan, no strategic plan to reorganize. They are continuing to use the shield of the bankruptcy court to wallow along hoping the industry goes into an economic turnaround. They are also using the courts as a tool to try to redefine and impose cuts on labor since it is obvious managements steps to date have been a fiscal failure. It is coming up on two years and what has fundamentally changed within the company aside from subsidizing marketing ploys upon the backs of labor?

I think they are fast reaching a point where the creditors and the courts are starting to realize the company is not fiscally sound in its present form. You can not keep losing hundreds of millions under court protection, keep telling your creditors and lenders you're planning to emerge next quarter (again and again) and retain the confidence of the financial community.

I believe we are going to see some big and ugly changes over there coming very soon. The current financial situation is unsustainable.

I know you aren't going to be happy until you have some flak, so here goes:
You say UAL doesn't have a new plan? I have to disagree! Mostly cynically, I imagined a worst case scenario management plan a couple of years back, and unfortunately, it is playing out by the numbers. First, they decided not to try to reinvent themselves as Southwest, Ted notwithstanding. They surmised that there would be room for one or two large, hubbed, international carriers in the new airline environment, and planned on being one of those. Strategy? Get their costs lower than AA, DL, NW, and CO. Do it on the backs of labor with an initial round of pay cuts and work rule changes (done), reorganization/termination of the pension plans for all employees (in process), and one final pay cut in order to leave bankruptcy (just announced). Throw in renegotiation of leases and other debt, and you have the basic jist of it. The key is to get out of BK with this plan complete, and then dominate the legacy carriers that still are working under their enormous cost structures.

What they didn't plan for was the price of jet fuel nearly doubling during BK (with no ability to hedge), and a revenue environment where domestic ticket prices have dropped 15% over the past year. Double-whammy pain. This environment will make it much easier to gut the pensions and get another round of concessions, however. On the other hand, it also makes it more likely that other legacy carriers will face BK and be able to institute the same basic plan.

As for UAL's creditors, I wouldn't worry too much. If they are able to accomplish this plan and re-imerge, wouldn't you want a piece of the action?

I agree with most of your predictions, especially the part about "big and ugly changes over there coming very soon," I just believe that those changes were part of the plan from the beginning, not just due to the failure of a turnaround business plan.

Your thoughts?
UAL Jan 15

 

[flyguppy]

This has got to stop.

With UAL latest proposal, they want our 5-6 year F/O's to settle for making about $70/hr. An absolute joke. Who would even want to get into this business? "Oh, flying jets for money is great. Why don't you just quit." Blah, blah, blah.............

In the last 3 years, this industry has gone right in the toilet. I said it 3 years ago, and I'll say it again. Since there are so many people out there that think $100K/yr for flying as Captain on jet equipment is so grand, all domestic flying will be done by "regionals" that feed the legacy carriers, who will only be doing international and some major markets. (Except for the LCO's)

The days of this being a well paying, prestigious job are long gone. We have no one to blame but ourselves.

 

[General Lee]

I don't think it is gone forever. Yes, the current climate doesn't promote huge pay scales. But, eventually the cycle will reverse and the pilots flying the larger equipment internationally will be better compensated. It will then be the objective to eventually fly the heavies on glamorous INTL flights, and the domestic stuff will be paid less.



Bye Bye--General Lee

 

[Boeingman]

I know you aren't going to be happy until you have some flak, so here goes:

You say UAL doesn't have a new plan? I have to disagree! Mostly cynically, I imagined a worst case scenario management plan a couple of years back, and unfortunately, it is playing out by the numbers. First, they decided not to try to reinvent themselves as Southwest, Ted notwithstanding. They surmised that there would be room for one or two large, hubbed, international carriers in the new airline environment, and planned on being one of those. Strategy? Get their costs lower than AA, DL, NW, and CO. Do it on the backs of labor with an initial round of pay cuts and work rule changes (done), reorganization/termination of the pension plans for all empyees (in process), and one final pay cut in order to leave bankruptcy (just announced). Throw in renegotiation of leases and other debt, and you have the basic jist of it. The key is to get out of BK with this plan complete, and then dominate the legacy carriers that still are working under their enormous cost structures.

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.

What they didn't plan for was the price of jet fuel nearly doubling during BK (with no ability to hedge), and a revenue environment where domestic ticket prices have dropped 15% over the past year. Double-whammy pain. This environment will make it much easier to gut the pensions and get another round of concessions, however. On the other hand, it also makes it more likely that other legacy carriers will face BK and be able to institute the same basic plan.

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.

As for UAL's creditors, I wouldn't worry too much. If they are able to accomplish this plan and re-imerge, wouldn't you want a piece of the action?

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.

I agree with most of your predictions, especially the part about "big and ugly changes over there coming very soon," I just believe that those changes were part of the plan from the beginning, not just due to the failure of a turnaround business plan.

Your thoughts?

UAL Jan 15

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.

 

[G4G5]

18% pay cut (additional temp wage cuts up to 4% may be required)
Terminate A plan
Reduction in vacation accrual, sick leave pay other work rule changes
increased cost sharing for health, dental & drugs
eliminate short term disability
eliminate company paid accidental D&D
eliminate retire life insurance of future retirees
Modifications in profit sharing
Modifications in stock distribution

 

[GuppyPuppy]

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.

Yup...until some of the LCC's start flying internationally with big equipment. May not happen for ten or more years, but it will happen.

It is already happening with regard to Canada and Mexico. Westjet is making a huge push into the U.S. Frontier is flying to Mexico.

Cheers!

GP

 

[IADBLRJ41]

The sad part of this whole UAL paycut is that no matter what ALPA and the pilot group think the company will get concessions. The goal should be to lower the amount of blow rather than allowing the company to take action in the courtroom.

I am crossing my fingers that UAL can pull through this mess.

 

[ualdriver]

g4g5-

You are absolutely wrong about the 18% paycut if you're talking about the UAL pilots in this latest round of concessions. 18% is a figure that you probaby heard that corresponds to how much of an "across the board" paycut we would have to take to meet our share of the 750M IF all we did was give up pay and nothing else. Since we know that it's not going to happen that way, the paycut will be less than that, probably a lot less than that but still painful.

 

[J32driver]

Yup...until some of the LCC's start flying internationally with big equipment.
GP

[size=-1]

www.primarisairlines.com
http://www.<b>primaris</b><b>airlines</b>.com
I believe this to be the first shot accross the bow of the international legacy carriers. Just placed a 4.8 Billion dollar airplane order.
[/size]

 

[ATR-DRIVR]

What did they order?

 

[General Lee]

J32,


They only have 1 757 right now, and they ordered future 738's (20) and some 7E7s (20) for the future.(how long will it take for that to happen? 10 Years?) Then they will have to get the infrastructure, like INTL gates, personel, slots etc..... It will take them forever. Even ATA was talking about going INTL, to German cities that aren't very popular---like Cologne.



Bye Bye--General Lee

 

[ATR-DRIVR]

Let's see....Ole' Jake was went up in the shuttle a time or two....and wasn't old Rodney the head of the DOT a while back..? This ought to have an interesting outcome...

 

[conman]

Yes Primaris will configure its 737's with 95 business class seats and I believe it will configure its 7e7's with 150 seats. Remember MGM Grand
Air??? People will not pay for the extra's!!!! They want them for free!!!
So everyone fill out those applications and get a temporary job for 18 months before they vanish.

 

[J32driver]

Yes Primaris will configure its 737's with 95 business class seats and I believe it will configure its 7e7's with 150 seats. Remember MGM Grand
Air??? People will not pay for the extra's!!!! They want them for free!!!
So everyone fill out those applications and get a temporary job for 18 months before they vanish.

I won't be putting in an application for a place like that. I personally don't beleive in the concept. Looks way to much like Midex for my taste.

With that said... there is a blurb on their website about a seat on Primaris costing about as much as a regular coach seat on the Legacy carriers. Thats bound to attract SOME traffic. AND... they don't have to be entirely successful to wreck the international fairs. They just have to exist.

The world is changing.... What the LCC's did to the legacy carriers stateside is going to happen on the international routes as well. Its simply a matter of time.

 

[conman]

As long as airline pilots work for less than longshoremen, air traffic controllers, plumbers, electricians, Mississippi river boat pilots, yada, yada. Then LCC part 2, then LCC part 3. All the dummies will rush over and eventually you as a professional pilot will have the privilege to pay to fly a jet around.

 

[philo beddoe]

I think General Lee is wrong. There will likely never be the same amount of leverage available to the pilot groups as there was in the late 1990's and 2000. By the time the Majors are profitable again, there will be too many other changes to the industry. Like more LCC's more regional aircraft (90 seat) and more pilots. With flying distributed over the network, and with alliances with other Majors, a strike will no longer have the power it once had.