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UAL: How Bad?  
User currently offlineScotron11 From United Kingdom, joined Feb 2004, 1178 posts, RR: 3
Posted (9 years 4 months 5 days 12 hours ago) and read 3946 times:

FT reports today that UAL, in a filing with the SEC, is warning it faces losses of $725M if it doesn't receive more wage and benefit cuts for 2005. Even with the concessions, they warn they would still breach the terms of their debtor-in-possession financing each month for the foreseeable future.

Without the savings, UAL will hover just over the minimum cash balance required by their DIP covenants through early 2005. Any minor adverse swing could push them into default. However, UAL predicts a default by May without any setbacks!

Additionally, UAL says it will end the year with only $1Billion in cash, less than half of what it expected, and it will only decrease in the lean winter period. Not only did they spend $1.4Billion more for fuel in 2004, but also they had a shortfall of $275M in mainline revenue, which they attribute to passengers booking away from them because they are in bankruptcy.

UAL also said it would need $2Billion in exit financing to achieve "acceptable liquidity" and come out of bankruptcy. But even with the proposed savings, they would barely satisfy expectations from the capital markets to generate free cash flow in 2005 and $300M in 2006.

Is it this bad or is this their attempt to paint the bleakest picture so they can invoke section 1113c to impose new labor contracts in mid-January?

31 replies: All unread, showing first 25:
 
User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 1, posted (9 years 4 months 5 days 10 hours ago) and read 3866 times:

I know it's tit for tat but I believe it is 1113E process. The contracts will cease to exist if the remaining job groups don't come to an agreement. Let me be the first to respond, because you will get a crap load of nay sayers and dooms dayers responding with different responses and attitudes towards UAL. UAL is the airline people love to hate, you'll see what I mean by the end of this thread. Things will get better, and yes they are painting a pretty bad picture, it will go up from here.


UAL 777 CONTRAIL


User currently offlineScotron11 From United Kingdom, joined Feb 2004, 1178 posts, RR: 3
Reply 2, posted (9 years 4 months 5 days 10 hours ago) and read 3846 times:

Cool with me. I was just a little taken aback when I read the article as I thought UAL was doing ok. Quite honestly, I do not know how important their financial situation is to the capital markets, as they are the ones who will eventually provide the funding to exit this thing. It will be interesting to see how the hearing tomorrow pans out. It's like the "barbarians are at the gate" !

User currently offlineZvezda From Lithuania, joined Aug 2004, 10511 posts, RR: 64
Reply 3, posted (9 years 4 months 5 days 9 hours ago) and read 3844 times:

From here things could get better or things could get worse. UAL cannot continue to mount significant losses. Either labor will make the needed concessions, the BK judge will toss the union contracts, or UAL will liquidate. I can't predict which of the three will come pass.

User currently offlineN1120a From United States of America, joined Dec 2003, 26196 posts, RR: 76
Reply 4, posted (9 years 4 months 5 days 9 hours ago) and read 3837 times:

Personally I like UA from a service, staff and FF stand point. I just cannot stand their inept management that has done everything they could to run them into the ground for more than 25 years. The reason they had a lot of success is their employees holding the place together with duct tape and chewing gum because of the horrible work of Wolf, Tilton and the like. It is amazing they stayed out of Ch. 11 as long as they did. Now they are trying to screw their saviors


Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
User currently offlinePhilsquares From , joined Dec 1969, posts, RR:
Reply 5, posted (9 years 4 months 5 days 5 hours ago) and read 3762 times:

How is it the 1113E process? UAL has to justify it's request to abrogate labor contracts. The flip side is the unions will have the opportunity to seek "self help" or go on strike.

Personally, I hope UAL pulls out. However, at what point is the plug pulled? The basic problem is still there, there is too much overcapacity in the US. Everyone is competing for a very small market and in trying to get revenue, you sell below cost it's not worth.

Enough.


User currently offlineLatinAviation From Ireland, joined Nov 2003, 1276 posts, RR: 15
Reply 6, posted (9 years 4 months 5 days 5 hours ago) and read 3729 times:

This morning's WSJ also has a sobering overview of the situation at UAL. Here's a snapshot of the article:

In a mammoth filing to the U.S. Bankruptcy Court judge hearing its two-year-old case, United parent UAL Corp. argued that its survival hinges on securing nearly $1.4 billion in annual concessions from its employees and retirees. Without the cuts, the company said, it will be on course to post a $725 million operating loss in 2005 on top of a projected $800 million operating loss for all of this year.
"Under current projections, the company's cash balance will sink to precarious levels during the historically lean winter months, putting the entire operation at risk," the nation's second-largest airline by traffic said in the document. Not only is it in danger of defaulting on the interim bankruptcy financing that is keeping it aloft, UAL said, its continuing red ink will make it extremely difficult to repay that $900 million obligation and attract $2 billion in fresh loans to help it step out of court protection.


User currently offlineBahadir From United States of America, joined Oct 2001, 1757 posts, RR: 11
Reply 7, posted (9 years 4 months 4 days 16 hours ago) and read 3445 times:

UAL is the airline that I love to love.. Big grin
The sad thing is , $2bil. is nothing compared to what we are spending on a war with no end every day!! The figure is $5bil/day..
Amazing..



Earthbound misfit I
User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 8, posted (9 years 4 months 4 days 16 hours ago) and read 3435 times:

How is it the 1113E process? UAL has to justify it's request to abrogate labor contracts

I am assuming that if UAL claims they cant survive without concessions then they will go to the 1113E. They have been given time to come together and resolve the issues. I would much rather have UAL than the IAM.

UAL 777 CONTRAIL


User currently offlineAnnoyedfa From United States of America, joined Dec 2004, 451 posts, RR: 0
Reply 9, posted (9 years 4 months 4 days 14 hours ago) and read 3344 times:

I think it's ashame they are going after the work force again. Why not cut upper managment and tell tilton to take a paycut? Isn't he already a million or billion air? I have been hearing the 737's are going....... Why get rid of planes that are paid for and make money everytime they take off? Hasen't NWA made that ovious with the DC-9's? Also why so many large jets still? Hasen't CO proved the 757 can do the INT'L flying? Can't they get their 75's ETOPS and use them for smaller INT'L markets for added revenue? In the furture CO plans on having mostly all 73's across the us some 757-200/300 but for the most part everything else will be used for INT'L flying.......


"TWA... One Mission, Yours."
User currently offlineRogerThat From United States of America, joined Dec 2003, 566 posts, RR: 0
Reply 10, posted (9 years 4 months 4 days 13 hours ago) and read 3280 times:

Cutting Tilton's paycheck ain't going to help UAL one twit, because there is one of him and thousands of union people who have been sticking it to the company since before Wilbur and Orville flew (which was 101 years ago tomorrow)

Some of you people really need to get over your bitterness towards management.

Anoyedfa, Mr Tilton is not a "billion air", and I am just a punk.



User currently offlineRhsnyc From United States of America, joined May 2004, 95 posts, RR: 1
Reply 11, posted (9 years 4 months 4 days 11 hours ago) and read 3215 times:

W A I T! Let's clear something up that's VERY IMPORTANT!!! Section 1113c or e does not allow United Airlines to simply "end" employee contracts. UAL employees will never be "without" a contract. 1113 proceedings were partly introduced because of CO arbitrarily voiding employee contracts years ago - Today you have no job, no contract but tomorrow you can come to work for us under these completely new conditions, like it or lump it!! The airlines since, can't do that now! 1113, at most, could grant United the ability to impose only the terms they specified in the contract changes term sheet that was made available to the employees and, of course, the unions. The remaining aspects of the contract must however still be fulfilled! I really wish some of you folks would get your information correct on subjects that are so vital and important to UAL and the labor groups. Thanks!

User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 12, posted (9 years 4 months 4 days 11 hours ago) and read 3213 times:

I think it's ashame they are going after the work force again. Why not cut upper managment and tell tilton to take a paycut?

Tilton just took another paycut a very short time ago, within the past week. Management salaries were cut 11%, and non-union, non-management took another 4%.



User currently offlineRyanAFAMSP From United States of America, joined Nov 2004, 155 posts, RR: 0
Reply 13, posted (9 years 4 months 4 days 10 hours ago) and read 3197 times:

Really an 11% cut for management?

You have got to be kidding. The flight attendants shaved off 32% in total compensation, and for most pilots it was over 50%. Plus they took huge reductions in overall size of the workforce. 11 lousy percent is a complete insult to what front line workers have sacrificed. Especially when they want another 30% back from all the unionized workers. 11% is like the dime slide at the local carnival.

At SFO onboard we lost almost 1000 flight attendants in the post 9/11 layoffs and they cut 8 management people. Management had better staffing ratios after the cutbacks than before.

I don't mean to be sour grapes, and I certainly don't think this is an issue to be completely blamed on anyone inside United. The macroeconomic environment is killing the legacy carriers. But this is ultimately a political crisis. Unionized workers are being asked to continually fund an operation that has the highest non-labor operating costs in the business and has no plan to adapt to the current marketplace. I love United and desperately hope they make it. But to blame some flight attendant making 20,000 a year for 14 hour days is twisted.


User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 14, posted (9 years 4 months 4 days 10 hours ago) and read 3185 times:

Personally, I hope UAL pulls out. However, at what point is the plug pulled? The basic problem is still there, there is too much overcapacity in the US. Everyone is competing for a very small market and in trying to get revenue, you sell below cost it's not worth.

There is no plug really to pull here. United is in a legal proceeding, plain and simple. There is no subsidy to be cut off, no lifeline to be disconnected. Their future is in the hands of a legal proceeding the judge of which has some control over the outcome.

RyanAFAMSP and AnnoyedFA, to be frank, you're dead off the mark. If anything, flight attendant salaries should be slashed even further, and management should be getting a raise. Neither of you have the abilities neccessary to run an airline-you're basically just human machinery. If you could be replaced by automatic equipment there exists a strong possibility that you would be.

In a nutshell, since anyone can do your job, the value placed on your job is minimal. You're disposable. On the other hand, very few people have the ability to manage a large corporation. A lot more goes into managing than you think. There are incredible amounts of book-keeping, accounting, legal analysis and planning. It's not just a bunch of executives standing around a table thinking about what to do from day to day, though of course that is part of it.

While I realize the tone of this post might be somewhat arrogant and dismissive, the reality is that all Gordon Bethune-style caring aside, payscales should depend on market value. Market value is dictated by supply and demand. The supply of people who can run a company is short, and the demand is strong, the combination equals an entitlement to high wages for managers. Likewise, the supply of people who are capable of being flight attendants is high, the demand has declined considerably, and consequently the result of this is that flight attendants can and should expect only a mediocre salary. This is the free market system, this is basic economics, and this is how it should be.

-WGW2707


User currently offlineJc2354 From United States of America, joined May 2004, 565 posts, RR: 0
Reply 15, posted (9 years 4 months 4 days 8 hours ago) and read 3128 times:

What exactly have the executives at United done to actually manage the airline? They've cut and cut and cut. Yet, with the exception of the new Premium Service coast-to-coast and some may argue TED, what have they done to actually generate revenue?

Why are the share holders, board members, and employees allowing the inept management to continue?



If not now, then when?
User currently offlinePVG From Hong Kong, joined Dec 2004, 722 posts, RR: 2
Reply 16, posted (9 years 4 months 4 days 5 hours ago) and read 3082 times:

Why is it that everyone expects Tilton to work for charity? What is this the "United Way"? It's a business and Tilton was a well respected and well paid executive before he came to UA. He gets paid well because he could walk out tomorrow and get paid alot more. A $600K/yr salary for the CEO of a company the size of UA is peanuts! I don't put Flight attendants down as the un-skilled trash that others do either. Why do people forget that if something should happen during a flight, that the FA's are the first line of defense? I don't know how many of you actually get on a plane regularly, but I want FA's to have half-a-brain and to be competent. If that costs a little more money, that's fine with me. I don't want some person that has just been picked-up off the street who's willing to work for minimum wage because they have no other choice. That's what they do with many of the TSA agents that you see at the airports. It looks like they find a lot of them drifting on the street, give them a uniform and stick them in front of the monitor. Does that make you feel safe? Or, would having a professionally trained peace Officer standing there be better, even if the tax was an extra 5 bucks a ticket? Maybe I think different than the everything that's cheap is good "Wal-Mart" crowd!

User currently offlineRyanAFAMSP From United States of America, joined Nov 2004, 155 posts, RR: 0
Reply 17, posted (9 years 4 months 4 days 3 hours ago) and read 2995 times:

I love ignorant kids on this forum.

"None of you have the ability to run and airline"

Oh really? I left the airline industry and am getting my PhD. A huge number of my flight attendant colleagues were attorneys and accountants. Many of us do end up running airlines.

And lets not forget that the market is NOT operating in the airline industry. If the market rewarded talent, someone would have to be showing a profit. Save for a few of the LCCs, profit margins run anyware from 0 to -20%. The United management you lauded has United running -12%. Top execs would recieve a 100% paycut if the market was setting salaries.


User currently offlineAnnoyedfa From United States of America, joined Dec 2004, 451 posts, RR: 0
Reply 18, posted (9 years 4 months 4 days ago) and read 2917 times:

RogerThat- Punk LOL

PVG- Your words are SO true. Just two days ago the TSA let a bomb get through security and board a CO flight to AMS.... 90% of them are former employees from the old security vendors. Most of them sit around and joke all day, poke each other, laugh talk and never look at the screen. As i sad before I have been through security thousands of times and hardly ever searched. Just because I am crew does not mean I can't be one of the bad ones. It makes me sick. Our new hires are just getting worse and worse because they come and go with in a few months. They simply cannot afford to live in NY and be paid $17.11/hour on reserve. So they leave. For the past 3 years my company has hired non-stop. Makes you think huh?

WGW2707: Your just another passenger who thinks were over glorified waiters. You have NO Idea what my personal background is and yes I do go to school! Eventually, I CAN RUN an airline if I chose to do SO. I am not disposable! Half the management team is because half of them we don't need. 11% pay cut??? Whoopee!!!!! They took over 30% and the pilots over 50%. I flew with a Capitan the other day and his brother a f/o at UAL for 21 years took a $122,000 pay cut in one year. SO GIVE ME A GOD DAMN BREAK! What about tiltons 3 million sign on bonus? And his stint at a company paid hotel. Excuse me he's not a billion air he's a million air! That's the problem we need REAL AVERAGE everyday people running a airline. People who knew what it was like to start at the bottom and work up. Thankfully in my company people are like that. They started out as FAS making 12.00/hour 10 years ago and now they are well paid in upper management. So much for disposable huh!



"TWA... One Mission, Yours."
User currently offlineMm320cap From United States of America, joined Jul 2004, 227 posts, RR: 3
Reply 19, posted (9 years 4 months 3 days 20 hours ago) and read 2787 times:

From someone who has a fairly large dog in this fight, let me just correct a few things.

WGW2707,

When Glenn and friends told us that we were going to be working for a company with "competative wages and benefits" I asked, "competative with whom?" We are the worst paid in the industry with our newest T/A. Behind JetBlue, behind, SunCountry, behind Indy Air, etc. Now, if Glenn wants us to have a more "performance oriented" pay package, so be it, but I want to see his. Why is he getting paid several times more than JetBlue's CEO? Does he earn that? JetBlue is making money, we are not. I'm waiting for the performance to back up his salary.

PVG,

You know, in some ways you and I agree. Tilton inherited a huge pile of cr$p. He got paid what the board of UAL needed to pay to attract a real leader. In some ways, he has been successful. My beef, lately, is that I'm being treated like I'm dumb. We were told management would lead by example by not asking anyone to take more of a paycut then they themselvers were going to receive. When the details came out, the pilots were asked for 18% PLUS 4% until we exit, then 4% for another 6 months at managements option. Forget for a second the MINUMUM 30% we all took in the first round. SENIOR managment says they are taking a 15% paycut. What they didn't say at first was that that 15% INCLUDES the 4% until we exit bk. So basically they want an 18% paycut from me and an 11% paycut from themselves. By phrasing it the way they did, they assumed that we wouldn't notice that there was an 7- 8% swing in the compensation they were demanding from us vs. what they were taking. That is deceptive. Gee. I wonder why I don't trust them.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 20, posted (9 years 4 months 3 days 19 hours ago) and read 2752 times:

Really an 11% cut for management?

You have got to be kidding.


Nope. And UAL isn't, either. Check out the 12/13 press release which backs me up:

http://www.united.com/press/detail/0,6862,52566,00.html



User currently offlineFlyibaby From United States of America, joined Aug 2004, 1016 posts, RR: 6
Reply 21, posted (9 years 4 months 3 days 18 hours ago) and read 2666 times:

What I find disturbing about all this is that if any of you remember Chrysler in the 1980's, they managed to get Lee Iacoca (sp?) to accept a salary of $1 a year but a slew of stock options which under his leadership turned into millions of dollars for the stockholders and himself. The theory that you need to pay CEO's 200,000+ a year is bullshit. I don't care if the CEO can walk on water. Rather than ask your FA's, CSA's and Ramp to take all these pay cuts, how about management stepping up and taking a 50% cut until the ship is out of bankruptcy? Especially with a 600,000K a year salary, as stated above, I believe that Tilton and his 7 direct reports could. After all, most of the people taking the brunt of these cuts are just trying to feed their family and make rent.

User currently offlineAvek00 From United States of America, joined Oct 2004, 4282 posts, RR: 20
Reply 22, posted (9 years 4 months 3 days 17 hours ago) and read 2624 times:

Many of you seem to forget that United had few alternatives for CEO when Tilton came aboard. If the press and anecdotes are to be believed, nearly every major airline industry CEO/COO/CFO was approached about taking the job, and NONE of them wanted it at ANY price. United ended up having to choose between two execs who had a combined total of ZERO years of airline industry experience.

As much as I dislike United, I have to admit that Tilton has done an admirable job in stabilizing United as best he could during the bankruptcy proceedings. While I do not believe that United will ultimately prove to be a viable enterprise, I give credit for Tilton keeping United alive and kicking for far longer than anyone could have reasonably expected in December 2002. For this, he is worth every penny that United has given him.



Live life to the fullest.
User currently offlinePVG From Hong Kong, joined Dec 2004, 722 posts, RR: 2
Reply 23, posted (9 years 4 months 3 days 11 hours ago) and read 2488 times:

I think that the major mistake that Tilton has made was to think that he could push through the loan proposal. It was going nowhere and he should have plan B ready from day one. He should have sat down and figured out a worst case scenario on their costs (i.e., using $40 or $50 as the oil price) and went to the employees with a proposal based on the worst case scenario from the beginning so that he didn't have to keep going back for more. I mean this thing where the pilots take x pay cut now and then another 4% later, but maybe we ask for something else is just crazy. I guess that I can see why he's doing it: not trying to piss everyone off at the asme time and hoping that they would get lucky during an economic recovery. I'm not a believer in using luck as a factor when writing a business plan, I ususally like to take best case, worst case, and try to look at a business/market and to see if there are new/different factors that make using historical data irrelevant. Anyway, I'd say that he inherited a mess and has done as good a job as possible.
What the industry needs is consolidation. There are just too many seats chasing too few customers.



User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 24, posted (9 years 4 months 3 days 10 hours ago) and read 2456 times:

WGW2707: Your just another passenger who thinks were over glorified waiters. You have NO Idea what my personal background is and yes I do go to school! Eventually, I CAN RUN an airline if I chose to do SO.

Let's see you try to manage relationships with partners scattered throughout the globe, rigorously examine your firm's accounting to ensure compliance, stay up around the lock negotiating new financing deals, analyze your cost structures to eliminate unneccessary costs on an ongoing basis and in general, make a profit in a 2% margin industry. I doubt that you could run an airline, I doubt that I could run an airline. Airlines are probably the most technically demanding business due to the extremely narrow margins, high fixed costs and intense competition.

I am not disposable! Half the management team is because half of them we don't need.

OK, then assuming you're suddenly made CEO, try going into the corporate headquarters and firing half of your people, and see what kind of airline you can run. Say good bye to half your senior executives, half your vice presidents and so on. So you'd have 50% of an accounting department, and as a result only 50% of the books could be audited, you'd have 50% of a legal department, so only 50% of the lawsuits against your company could be contested, and you'd have 50% of an operations department, so only 50% of your flights could be dispatched in a safe manner with everything they needed on board. The result is an airline that makes pre-1991 Aeroflot look good.

BREAK! What about tiltons 3 million sign on bonus? And his stint at a company paid hotel.

What, you want him to sleep out on the street at night to impress bankers he's meeting with of United's impoverished condition?

That's the problem we need REAL AVERAGE everyday people running a airline.

Like James Goodwin?

People who knew what it was like to start at the bottom and work up. Thankfully in my company people are like that. They started out as FAS making 12.00/hour 10 years ago and now they are well paid in upper management. So much for disposable huh!

The point is this-if you're dissatisfied with the pay associated with being a flight attendant-quit. Become an accountant. Become an engineer at a high-tech company. Become a lawyer. The jobs are out there-jobs that can easily get you a six figure income and everything you want from the world. You just have to take the step to go out there, learn the trade, and take advantage of the opportunity.

Basically you and other flight attendants are suffering from structural unemployment. Structural unemployment is unemployment that affects certain industries or geographical areas. The downturn in the industry caused many airlines to lay off flight attendants, pushing the supply curve for flight attendants to the right while shifting the demand curve to the left. The result=low wages. So really for you to complain about declining salary conditions in such an industry condition is absurd-if you want a high salary-the jobs are out there. You might have to get a new degree or retool your resume somewhat, but the profits are out there, and to be frank if you stay in this industry given the current crises that affects it, you have no business complaining about low wages and benefits.

-WGW2707


25 PVG : By the way, Tilton's 3 million dollar bonus was to compensate him for the loss of his pension fund from his previous position where he was a well paid
26 Mm320cap : WGW2707, Your "if you don't like it, quit" scenario is perhaps just a teensy-weensy bit oversimplified. I've spent my entire adult life working to bec
27 PVG : Good point Mm320cap. Everyone wants cheap this and that until the S..T hits the fan, then they'll pay anything! Flying over the Pacific and being hour
28 N79969 : UA needs top quality leadership and I do not think Tilton is a bad deal at $600K considering he could probably have made more money in a less stressfu
29 N79969 : Mm320Cap, While I agree in essence with what you are saying, the pilots at United bear some responsibility for their own plight. You say the pilots to
30 Annoyedfa : WGW2707: Where did I want him to sleep... Hmmmm Lets' see. The same damn hotel all the UAL Flight Attendants Sleep in. NOT A Suite! N79969: I agree wi
31 TACAA320 : "Oh really? I left the airline industry and am getting my PhD. A huge number of my flight attendant colleagues were attorneys and accountants. Many of
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