Originally Posted by
Prancinghorse
I don't have an MBA but you don't have to be Warren Buffett to visualize the following scenario playing out.
Based on SM's memo the reasons the company is in the current financial situation are:
1. Integration delays (blah blah blah)
2. Training costs associated with the ISL and 11-09
3. Loosing money on "pro rate" contracts (ALL 9L FLYING,9E 200 Flying)
So here is what I see happening in simple terms.
A. The company tries to get a 7% paycut and fails. It doesn't matter either way, it's just a pure "money grab" by them. They are filing BK either way.
B. So they go ahead and file BK.
C. Go to BK court and the judge will ask them if them why they are broke and if they have a plan to return to profitability.
At this point if YOU owned this company why wouldn't you just ask the judge to cancel the Bloch award/ISL and dump, spinoff, liquidate, or whatever Colgan and ALL the Colgan pilots. Then you dump the 9E Contracts and aircraft. Furlough some pilots and Bingo!, you're just left with a leaner, profitable airline with all premium Delta CPA flying. In basically one move they solve all the problems that are causing their current financial crisis.
IF a BK judge is doing his job correctly or if he is anti labor groups he won;t give a damn about the Bloch Award, the ISL, or a union contract. He doesn't care if or when little Timmy gets to upgrade, or whether or not employees get to keep their jobs. IN A PUBLIC COMPANY ALL HE CARES ABOUT IS GETTING THE COMPANY PROFITABLE FOR THE SHAREHOLDERS AS QUICKLY AS POSSIBLE!
I know it may appear to be harsh. I'm a 9L guy so this isn't a Colgan bash, but I think everyone needs to prepare for the worst. I hope it doesn't come to that point but you can't sit there and say that at least one bean counter or hired gun hasn't suggested this scenario to Menke.
Since I do have an MBA, I see the following possibilty playing out:
1. Pay cuts pass by a narrow margin.
2. Company goes to UAL and gets them to tear up agreement with CO and write new agreement with UAL. This gets around the 50 seat limitation on CO's scope clause so the Qs and 900s can be placed on the same certificate. Also gets UAL to convert Saabs to Qs. This decreases overall Q operating cost due to greater economies of scale on the aircraft.
3. Some kind of fences are put up to reduce training costs until all aircraft are on one certificate.
4. Goes to DL and gets rate increase for 900s and money to defray Mesaba aquisition. Also gets agreement to allow UAL aircraft on PCL certificate.
5. Now that the company has a viable business plan that is stable and profitable, go to capital markets and borrow enough money to get through the next year and finish integration.
6. Bankruptcy is avoided.
If any of the above doesn't happen, then bankrupcty is the likely option because the company will not have a viable business plan that will allow it to borrow money in capital markets to address liquidity issues over the next year.