Originally Posted by
sailingfun
The facts of the chapter 11 filing at Delta are quite a bit different then what is posted here.
Take another look from a wider perspective. Your pride in Delta is understandable, I feel the same way, but you have to look at facts objectively and sometimes question what a consultant paid millions of dollars to sell a reorganization tells you. Lets take a look at objective facts, you write:
Originally Posted by
sailingfun
Management fought to stay out of Chapter 11 because the vast majority of their potential compensation was tied up in stock options. The Chapter 11 filing wiped that out. Leo Mullin held so many options that a 1 dollar move in the stock price was worth more to him then his entire Serp. I believe when he left he got 16 million dollars. Peanuts compared to the potential of his options if he could have kept the airline out of Chapter 11. In addition he took on the stigma of a failed CEO. To postulate that he was hired to bankrupt the airline is just plain dumb. If that was the case why did he set up his compensation package to be mostly based on stock options?
You would have thought he would have been smarter then that. I personally listened to him discuss how options are how you build wealth.
In addition to that management made several bad decisions. One of the biggest was spending 2.2 billion dollars in cash to buy back stock. If you going to take a company to chapter 11 you don't buy back stock. They bought the stock back trying to increase the stock value so they would get rich off their options. Sadly Delta could have really used that cash in 04. As it was the money was simply flushed down the toilet and never really moved the stock price.
When bankruptcy was openly discussed and bankruptcy experts retained in 2001 one of the FIRST actions they took is to rob the cash reserves to fund bankruptcy proof bonus and retirement plans. This action hit the news a year later after the money was gone.
Originally Posted by USA Today 8/28/2003
Mullin came under fire after Delta disclosed that it had paid $17 million in 2002 executive bonuses and $25 million for bankruptcy-protected executive pensions in a year when it lost $1.3 billion.
You have it right that he subsequently tried to exploit Delta's share volatility to further enrich the inner circle.
It always surprises me when a defendant pleas "incompetence" as a defense. When the defendant somehow was competent enough to secure his own pay in bankruptcy proof structures before every one else loses their butts, that indicates premeditation.
Frivolous wastes of cash, sold with the "new cost paradigm" logic, allowed control over cash burn. While McKinsey & Co., as well as the bankruptcy attorneys took their share without oversight.
Originally Posted by LAW.com
A bankruptcy judge Monday approved $41.4 million in expenses and fees for services provided by Delta Air Lines Inc. lawyers and advisers during the first 4 1/2 months of the company's Chapter 11 case. ...
The overall fees and expenses could reach $205.9 million if the bills continue at the same rate until Delta exits bankruptcy, which it expects to do by the summer of 2007. The total assumes Delta exits the first day of summer next year, June 21.
Also Monday, Judge Adlai Hardin denied a motion by the U.S. Trustee Program to appoint an independent financial adviser to examine the fees related to Delta's bankruptcy case.
He said it also "would add another layer of professional costs, and it would be redundant."
Assistant U.S. Trustee Elizabeth Austin argued during the hearing in New York that an examiner would be able to sit down with the parties involved and help work out differences regarding fees in an impartial manner.
But attorneys for the nation's third-largest carrier and its creditors countered that the fees can be adequately managed by a joint committee and said the appointment of an examiner would be an unnecessary cost.
Delta's lead bankruptcy attorney, Marshall Huebner, said after the initial compensation requests were filed in March that it's understandable that some people are perplexed by the size of the professional fees. But, he said, restructuring is expensive, especially in a complex case like Delta's.
Huebner predicted that Delta's fees will likely be much smaller in the middle of its case than at the beginning, which could lessen the total amount of fees and expenses once the case concludes. Whatever the final number, it will be big, he acknowledged, though he said it's necessary.
United's bankruptcy followed the exact pattern, with many the same consultants. For those who would rather watch than read:
Watch The Full Program Online | Can You Afford To Retire? | FRONTLINE | PBS
Changing World - Exploring The New Corporate Bankruptcy Strategy | Can You Afford To Retire? | FRONTLINE | PBS
One last thought. If Delta wants someone to fly an airplane, they hire a pilot. If Delta wants someone to run an airline, they hire an airline manager. If Delta wants someone to manage a bankruptcy, they hire a banker and a bankruptcy accountant. Now what the heck was on Mullin and Burn's resume?
ALPA, IMHO, can sometimes look at business with too narrow a perspective. Certainly the trip through bankruptcy forced them to look around, but still there is a lot of inertia which allows management to outmaneuver the association. The very insulated inner circle does know a lot, but no one can know it all. The Delta MEC publicly called out Mullin, Burns and Reid as liars, but your post suggests that many believed them and believed in them. I have a lot of respect for your position, but I disagree with your conclusions.