TransWorld

I wonder if a well placed letter from an outside attorney he would hire would get things unstuck. I know, lot of better ideas.

DirkDiggler

The only place for the surface is in the garbage can.

Jefferson

Or may be the SKYW guys grow a pair and pay union dues like the balance of the industry

FXLAX

That terrible CPA with CAL that XJT signed in 2008 was a direct consequence of Skywest undercutting the bid for that flying as part of the first attempt to buy XJT. That XJT CPA was literally the one Skywest negotiated with CAL. So there is only one place to put that blame...if we are talking REAL history.


Thats correct. Skywest wanted XJT pilots to take a 16% concession to bring them to parity to Skywest pilots’ pay. XJT MEC said they would only negotiate contract terms as part of a joint collective bargaining agreement. Of course Skywest had no desire in giving their pilots the ability to negotiate under the RLA.

Just so that it’s clear, your company was being very good to you at a time that it wasn’t being very good to it’s thousands of other employees that didn’t fit under the right Inc name. So I hope you can understand the animosity.

No Skywest pilot brought about this demise. But let’s be honest, if Skywest would’ve merged the three airlines, this whole thing would look different. And Skywest pilots being non-union, having voted down union on three separate occasions, was the only reason keeping that from happening. As for smart business decisions, it didn’t work out exactly like they envisioned it but it certainly worked out pretty good in the long run. Or maybe it did work out exactly like they envisioned it?


Again, the reason why XJT was in dire straits in 2010 was because of Skywest underbid in 2008. So you can’t take credit for fixing something (temporarily) for something you broke to begin with.



History review: CAL bought four regionals in the 90s and merged them into COEX. They were a wholly owned subsidiary of CAL with an actual flow through. Later, they decided to IPO XJT in order to raise almost half a billion at $16/share. So CAL themselves wrote the CPA that would exist for the new independent company that would become XJT. In order to inflate the initial IPO share price, they wrote a CPA that was favorable. But along with that favorable rate came many restrictions on the CPA (most favored nation, hub restrictions, asset, infrastructure, and manpower restrictions, options restrictions, sublease rate escalations, aircraft reductions and termination clauses, etc). But the one that ended up irking CAL the most is the yearly renegotiations with arbitration. That’s because, of course XJT wasn’t going to just give away favorable terms now as an independent company with fiduciary to their stockholders. Each year, CAL would ask for big concessions. So each year, it would go to an arbitrator to decide. In 2006, after CAL losing round after round of arbitrations, they wanted to change the negotiating landscape.

This is when, before starting the next round in the negotiating/arbitration cycle, CAL threatened to pull 25% of the fleet from the CPA. This is where the 69 aircraft come from, (25% of 274 aircraft). CAL got CHQ to negotiate a CPA for those aircraft. But XJT had the first right of refusal on the 69 aircraft and the BOD authorized to keep them to start their own branded airline.

Branded started in April 2007 and ended in September 2008. Bad timing with oil ramped up the entire time, hitting at peak of almost $150/barrel on that last month of operation. The Branded flying included a charter division and then later flying for Delta Connection, with short stints with jetblue, frontier, and Midwest.

This is when skywest enters the picture, in early 2008. Again, CAL looking to change the negotiating environment, they now paid Skywest more than $6 million for due diligence into buying XJT and negotiating a new CPA. Once Skywest negotiated a new CPA and decided what they require from XJT in order to consummate the purchase, CAL tells XJT that if they don’t provide a CPA that had savings on the magnitude of the those negotiated by Skywest, they would immediately pull another 25% (51 aircraft this time) and give their one year notice of complete spool down of the remaining aircraft.

Just for more context, the original deal that Skywest made with CAL included a seperare CPA for Skywest to operate some of the EMB145s under their own certificate with their own pilots. They were currently working to certify the 145 under their ops specs. It also included a furlough of 700 pilots (twice as many as ultimately were furloughed), and a preferential interview to the furloughed pilots to fly the previously XJT operated 145s as a first year FO and obviously losing ALPA representation.

One of Skywest’s other demands was the removal of the pilots’ contract language requiring a complete three airline merger (ASA,XJT,SKW) and 16% concessions to bring down pilot costs into parity with Skywest. Contrary to popular belief, you can merge union and on-union airlines. Just look at DAL/NWA. Same thing that happened there would’ve happened here. In that case, all employee groups, except for the two pilot groups who were already union, voted out union representation. We pointed this out Skywest as well. Didn’t matter. The XJT MEC negotiated with Skywest but were unable to come to an agreement. It is true that one pass across the table from Skywest was to decertify but that was immediately turned down with a counter proposal that would have kept three separate airlines, with three separate contracts (work rules for Skywest), three separate seniority list and one merged list used solely for aircraft bidding. Obviously that never happened. The reason given was because Skywest pilots had recently (a couple years earlier) turned down a union vote and management didn’t want to go against that...conveniently, I may add.

Anyway, once the negotiations between the MEC and Skywest fell through, the entire deal fell through because Skywest wouldn’t budge on the contract concessions. The XJT BOD was then left with the decision of letting CAL wind down XJT or XJT signing the very same CPA that Skywest had negotiate in their due diligence. Of course that CPA had the 16% concessions built into it so it was immediately money losing.

So now instead of having a profitable CPA with CAL and a money losing operation in branded and charter, they now had two money losing operations with the need to place 69 aircraft somewhere. This is where the UAL CPA flying comes in. And later an imminent deal with USAir that Skywest ended up taking for themselves in the 2010 purchase of XJT.

So in the end, Skywest ends up buying XJT, which was operating under the same money losing CPA they negotiated. The unprofitability of XJT was directly attributable to Skywest’s actions.

https://www.sec.gov/Archives/edgar/d...jt8k061108.htm

That reminds me of the USAir flying Skywest took from XJT as part of the 2010 purchase. That’s a little known fact of the deal. XJT had a CPA negotiated when Skywest purchased XJT. And of course, Skywest took that flying. But the real decline of XJT started in 2008 with the Skywest underbid of the CAL CPA that XJT got stuck with. So no, if there is any anger, it should be directed at Skywest management.

flyfast2u

FXLAX - you have WAY TOOOO much time on your hands, find a hobby....

AboveMins

Excellent history lesson, FXLAX. Relived some memories reading through that.

FAR121

Those of us who love to fly love aviation. Both in the flying as well as the many other aspects of aviation. We get told to find a hobby a lot by our less committed peers so we are used to it.

Redheadtexas

That's awesome. Thanks

Spoiler

Excellent Synopsis
I would add - Chataqua was using Express Jet's aircraft against them by bidding directly with CAL with those planes. Ream correctly saw through the scam and exercised the first right of refusal and kept the aircraft. Branded was intended to offset the cost of the planes. The only mistake in that decision was the horrendous paint job. The paint shop was in SHV so maybe the designer came from the Big Easy.

AboveMins

I remember Chitty Kitty using some clapped out CRJs, not our own ERJs against us.