WHy don't the unions ask the judge to suspend management payroll?

[Publishers]

Ownership

The biggest problem that management faces today is that stockholders and the markets in general live off short term thinking. If you are a CEO, your immediate job is to get the stock price moving upwards. You are not given years to accomplish this, more like one quarter.

You then, of course, put pressure on your management staff to produce exactly the results you must have.

The points made above are valid but the single biggest thing is time. Airlines use aircraft that are purchased or leased for the long term, union contracts are for a term of a number of years, leases for gates are long term ( American has committed for a huge sum of money for the new MIA terminal) fuel deals and everything else cover vastly different time periods.

When the market goes south or we have some economic problem impact things, the ability to change things quickly is non existant. These things are too big and going too fast to stop and change directions. Between government regulation, insurance induistry concerns, political events, oil and gas pricing, and union contracts, you do not control much that can be changed in short order to respond to things that come up./

Guys with talent, well, they can go elsewhere so the plan would leave an industry that is sucking wind, even less.

 

[surplus1]

While all of these theories are "interesting" none of them answers the question posed by the title of the thread, i.e.,

WHy don't the unions ask the judge to suspend management payroll?

The answer is in fact quite simple. Unions don't ask judges to do much of anything that affects "management" (and when they do the answer is invariably "NO") because judges themselves are managers, with fool proof pension plans and total job security, who are themselves appointed by other "managers". Don't expect them to penalize their own kind.

For instance as "labor", I would make it a crime for the executives of a corporation to allow their pension plans to become "underfunded" by billions because they made bad investments or spent the "contributions" on other things. What are the chances of that ever happening? Zero.

The capatilist always finds a way to exploit the peasantry for his own benefit. Government will never balance the equation because the "govenors" are themselves capitalists who gained their own positions by duping the electorate.

Whenever he or she is given the opportunity, a judge will always rule against labor and in favor of his/her own kind. "Birds of a feather flock together".

 

[GuppyPuppy]

CEO's are not intentionally running airlines into the ground. They would very much like to succeed.

I would argue that a tomato could have run UAL better than Jim Goodwin did back in the late '90's and early '00's.

GP

 

[Publishers]

Surplus1 should move to a non capitalist country seeing he is so versed inthier lingo.

 

[pilotyip]

Guppy UAL late 90's early 00's

Is not that when the UAL pilot group got the industry leading contract that was going to take UAL pilots to nirvana land of the $350K to $400K/yr pay scale. Are you saying that he was wrong to approve the contract?

 

[GuppyPuppy]

Is not that when the UAL pilot group got the industry leading contract that was going to take UAL pilots to nirvana land of the $350K to $400K/yr pay scale. Are you saying that he was wrong to approve the contract?

I think our MEC would have settled for less had the USAir acquistion not been a factor.

Let's look at some other fun stuff going on while Big Jim was at the helm:

1. Avolar
2. USAir acquisition
3. Investing in internet companies
4. Changing the strategy of the Shuttle

I'm sure there are other money losing schemes that were hatched up by UAL management during this time. Maybe someone else could post some more examples.

Why is it that Northwest and Continental (both so called "legacy" carriers) are not in the dire straits that UAL seems to be in now?

GP

 

[pilotyip]

Guppy ref NWA and CAL

The pilots at NWA and CAL made a lot less money in hourly compensation and flew a greater number of hours than the UAL contract stipulated. That made the pilots at NWA and CAL much more productive and that may be a key to their relative strength as the present time. As for why the CEO pursued all of the things you listed, a thought is he was desperate to find a source of revenue to pay for the contract he saw as backbreaking.

 

[GuppyPuppy]

The pilots at NWA and CAL made a lot less money in hourly compensation and flew a greater number of hours than the UAL contract stipulated. That made the pilots at NWA and CAL much more productive and that may be a key to their relative strength as the present time. As for why the CEO pursued all of the things you listed, a thought is he was desperate to find a source of revenue to pay for the contract he saw as backbreaking.

I think most of the items I listed were started prior to Contract 2000, which was signed in the fall of year 2000.

Why do you blame pilot pay for the downfall of UAL? Their pay was just a piece of the bankruptcy pie. The pilots could have worked for free and the company still would have been losing money! It's strange how pilot pay has come back down to pre-Contract 2000 rates and productivity is way up, yet the company continues to lose money.

Oh, I forgot to add another money loser...the stun guns and all the training costs associated with qualifying nearly 10,000 pilots on how to use them when the company was never approved for them.

GP

 

[CMRdvr]

Pilotyip,

Sorry, I took it as an absolute statement. I would agree with your description that it aproximates a perfectly eleastic demand curve in that the change in %quanity is greater than the change in %price. This does make it difficult. It is only compounded by the fact that most airlines are now price takers, with the lowest cost provider setting the price(perfectly competitive). Not a good situation considering the high invesment(capital costs) involved.

In the mid range where airline tickets are now, it is close to a classic price/demand elastic curve. Price goes up, demand goes down, and price goes down demand goes up. No airline can raise it prices on a route where competition has a lower price and expect to maintain its load factor. The marketplace dictates how much money and profit an airline can generate, management has very few options is this environment.

 

[skirt]

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 load factors in 90% range. AA tried to take seats out of the airplanes, to attract people with more room, did not work. UAL USA have used BK in an attempt to start with a clean slate, it is probably not going to work. ATA tried getting a fleet of new fuel-efficient airplanes, which did not work. What is management supposed to do?

Pilotyip,

What is management supposed to do, you ask??? The answer is so simple, yet very difficult to do. Ask yourself what do Herb, David, and the guy from Skywest have in common, and you will find the answer.

I'll give you a hint, has nothing to do with extra legroom, fancy fleet of planes, BK, market share, advertising, or any of the other things that "legacy" airlines focus on.

No, the answer lies in PEOPLE. Specifically, it means treating employees like humans and not a cost center. It means a more egalitarian workforce that takes care of each other, starting at the very top. It means not chasing the big dollars, starting at the very top (David and Herb work because they want to, not because they want money). It means setting an example in word and deed, starting at the very top.

That is what the big dollar CEO's just can't grasp. Airlines are companies made of people, not planes and gates. Just like the people we carry are "customers" not "passengers". The key is to remember that the "golden rule" is just a starting point. Unfortunately, the "typical" airline CEO will never grasp even the basics.

Skirt

 

[CMRdvr]

For instance as "labor", I would make it a crime for the executives of a corporation to allow their pension plans to become "underfunded" by billions because they made bad investments or spent the "contributions" on other things. What are the chances of that ever happening? Zero.

Poor management of pension assets has been a problem for airlines as well as companies in other markets. Companies often use a unreasonably high rate of return on pension assets as they get to claim the acuarial returns as income, which makes the old income statement look better while not really generating any cash flow. However I would also offer that one of the primary drivers of the underfunding is the currently depressed discount rate used to determin the present value of their future obligations. If you raise the discount rate(risk free interest rate) the present value of the future obligations moves closer to actual assets and underfunding is decreased. No more money is added only the assumptions are changed. It is basicly the same as a DCF excercise for a stock or company. It is important to note that it is only a mathmatical model and is very sensitive to growth rate and discount rate assumptions, garbage in-garbage out. I'm not sure what rate pensions use(if anybody knows please post) but the 10/30 year Treasury Bond is a good proxy for stocks(care should be exercised when rates are very low or dropping).

 

[surplus1]

Surplus1 should move to a non capitalist country seeing he is so versed inthier lingo.

Why is it that you never defend what the capitalist do to workers but only suggest that the workers leave if they don't like it? Could it be that you have no real defense for the greed and exploitation?

Unbridled Capitalism is no less onerous than Communism or Socialism. Uncontrolled they all take advantage of the multitude for the benefit of the few. Only the methods are different, the outcomes are essentially the same. A robber baron is a robber baron, regardless of the "flag" of politics that he flies.

What "lingo" are you versed in Publisher?

 

[Capt. Caucasian]

Wow, for once I completely agree with Surplus1! This is amazing, I'm calling mother.

PS: For an amusing example of what Surplus is talking about read "Jennifer Goverment" by Max Berry. Basically it is "1984" turned 180 degrees.

 

[pilotyip]

CMRdrv another voice of reality

Another voice of reality in a sea of "management did it to me on purpose". In the pension mismanagement business the airlines are not the only one with problems. State and local gov'ts got caught in the same mess. The go-go markets of the late 90's made it very easy for finance guys to come up with the formula to cover pensions. They could show that with a reduced contribution from the company they could still cover their pensions, more money to the bottom line and the stockholders.

 

[surplus1]

Another voice of reality in a sea of "management did it to me on purpose". In the pension mismanagement business the airlines are not the only one with problems. State and local gov'ts got caught in the same mess. The go-go markets of the late 90's made it very easy for finance guys to come up with the formula to cover pensions. They could show that with a reduced contribution from the company they could still cover their pensions, more money to the bottom line and the stockholders.

Sounds like you're saying that the mismanagement of pension funds is somehow justified by "more money to the bottom line and the stockholders".

There's a fiduciary responsibility involved that has been intentionally violated. The fact that other businesses or government organizations violated their fiduciary responsibilities as well as airlines is hardly an excuse.

I'll bet if a brokerage or investment manager did the same thing to the money that belongs to the people responsible for the destruction of pension funds, those people would be screaming fraud, pressing criminal charges and filing lawsuits. Those that have destroyed pension funds should be held accountable and bankruptcy judges that premit a company to cancel a pension plan and leave a long term worker with little or no retirement should have their own featherbedding pensions canceled in turn and the executives creating the problem should be stripped of their severance packages and their own retirement. If those were the rules I'll bet ya they'd figure out how to protect those moneys and make good investments..

What's sauce for the goose should be sauce for the gander.