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Old 12-19-2005, 08:22 PM   #1  
Da Man
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Default UAL Managemnt - Have you no shame?

Reposted from the blog: Enplaned

Well worth a visit and a subscription.

***********************************************


Look up "chutzpah" in the dictionary and you'll see the beady eyes of United Airlines' CEO Glenn Tilton staring back at you. United proposes to give management a 15% stake (currently valued at $285mm) in the airline as it exits bankruptcy.

It's not unusual for management to get an equity stake in a reorganized company. However, as this article says, United proposes to give an unusually large stake to management. We'd argue that they deserve an unusually small stake:
  • Much of United management are the same guys who rode the airline into Chapter 11 (e.g. Hacker, Brace, McDonald). You'll recall that United filed after management lost its bet that it could get a government loan in return for a mere 9% reduction in employee wages. Government stiff-armed United, at which point there was no way out for United other than filing bankruptcy. It was management's plan that failed, it was management who were to blame for United's Ch 11 filing.
  • American Airlines management kept its company out of bankruptcy and has done a far better job at stripping out costs. American management isn't getting 15% of that company. Why should United management get a penny for screwing up where American has succeeded?
  • Tilton should presumably reimburse United for needing on-the-job training. He had no airline experience whatsoever before coming to United only months before the filing. Did Tilton's inexperience contribute to the filing? It can't have helped.
  • Management's initial Ch 11 plan failed utterly, wasting a year and a half. You'll recall that management initially hung its hat on getting the same government loan it couldn't get before Ch 11. Turns out it couldn't get the loan afterwards either, with the government finally turning down United flat in the summer of 2004. We're now 36 months into this bankruptcy. United is one of the poster children for the bankruptcy reform that was recently implemented (under the new law, United management would have lost control of the reorganization after 18 months -- if only).
  • United management blew it when reducing its aircraft payments in Ch 11. United angered its aircraft financiers to the point where they joined together in a cartel. United came to an agreement with the cartel but then tried to weasel out, claiming the cartel violated antitrust rules. The bankruptcy judge agreed with United, but on appeal both United and the bankruptcy judge were spanked. In the meantime the aircraft market got stronger. By the time United came to a new agreement, terms were worse than if it had just signed the original agreement.
  • United's wasted time and energy on the Ted subsidiary. Yes, we know they believe it's the greatest thing since sliced bread. Airlines always believe their new shiny low-cost brand is the greatest thing since sliced bread. United once thought the same about Shuttle, US Airways about Metrojet, Delta about Delta Express and then Song. There's never any way to independently verify how such an operation is doing so we're just supposed to take their word for it.
  • If United management had put into place some innovative new business plan that had made the airline more profitable, perhaps they'd deserve a greater slice of the pie. But the reality is that value creation in this case is coming almost entirely because of crushing vendors and most of all labor, rather than management inspiraton. If there's a spare $285mm available, split it between the long-suffering unsecured creditors and the Pension Benefit Guarantee Corp. Don't give it to United management.
Luckily United creditors are objecting. The bankruptcy judge has a long history of doing precisely what United management wants, but perhaps even he will have trouble with this.
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Old 12-19-2005, 09:14 PM   #2  
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His view nails it.
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Old 12-22-2005, 04:54 PM   #3  
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Default Don't blame management

The previous post makes it seem that management is at fault for all the problems at UAL. That is dead wrong. The current problems started with the pilot work slowdown in 2000 and were exacerbated by the mechanics union unwilling to negotiate after September 11th.

The pilots were too gready in 2000, and they put United into chaos, and United consequently lost hundreds of millions of dollars in corporate customers, not to mention personal customers. Why should any airline pilot who works 80hrs/month flying a 747 be paid over $300,000, and receiving 90% of their max pay for a pension. The pilots were too gready with their 2000 contract, and that was a double edge sword for the airline. Their labor costs were outrageous, and United lost too much revenue and respect from their customers.

Another event that helped thrust United into bankruptcy was the rejection of a 14% pay cut by the mechanics union.

United management has worked hard over the last 3 years, and they have turned United into what will soon be THE force to be reckoned with in the airline industry. United is offering a bonus to some management employees, who have stuck with the airline through the tough process, and who have received compensation well below the national average for their line of work. Most of these management employees receiving this stock make less than the average pilot!
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Old 12-22-2005, 05:27 PM   #4  
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Pilots don't work 80 hours a month. They fly 80 hours a month. Those 747 captains spend more time at work than any manager in the company. Also, a 747 capt brings in enormous revenue. He's highly trained and educated. I know that I did not spend 10 years in the military and all my time earning an MBA and accruing flight experience to make 100k. I could have become a CPA and been home every night and earned that. I became a pilot, in part, to make 300K a year.
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Old 12-22-2005, 07:13 PM   #5  
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Quote:
Originally Posted by ryane946
The previous post makes it seem that management is at fault for all the problems at UAL. That is dead wrong. The current problems started with the pilot work slowdown in 2000 and were exacerbated by the mechanics union unwilling to negotiate after September 11th.

The pilots were too gready in 2000, and they put United into chaos, and United consequently lost hundreds of millions of dollars in corporate customers, not to mention personal customers. Why should any airline pilot who works 80hrs/month flying a 747 be paid over $300,000, and receiving 90% of their max pay for a pension. The pilots were too gready with their 2000 contract, and that was a double edge sword for the airline. Their labor costs were outrageous, and United lost too much revenue and respect from their customers.

Another event that helped thrust United into bankruptcy was the rejection of a 14% pay cut by the mechanics union.

United management has worked hard over the last 3 years, and they have turned United into what will soon be THE force to be reckoned with in the airline industry. United is offering a bonus to some management employees, who have stuck with the airline through the tough process, and who have received compensation well below the national average for their line of work. Most of these management employees receiving this stock make less than the average pilot!
If United Pilots were too greedy than their management was too stupid by paying a wage that was not sustainable.

Now United pilots and other employees get their pensions terminated and the liability for the small amount of what is left dumped on the taxpayers, and a low pay scale. Guess what happens to morale and service? A "force" I doubt it. Not to mention after 3 years of bankruptcy and hundreds of millions of dollars in paid in expenses, they are still losing money and will continue to lose money after getting out of bankruptcy with oil at current prices. United management is a joke and the only people who should like them are the lawyers whom they richened during the bankruptcy.
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Old 12-22-2005, 09:19 PM   #6  
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Must be an intern or a management wannabe. What a load of BS. These idiots jump off with their golden parachutes and leave the employees to shovel up their ****. 2000 was a whole diffrent world from 2004. The UAL crews, along with the other big 5 had top payscales because they had big profits. When SARs, 9/11 and the general decline of high yield pax changed the industry the pilots and other employees stepped up.

Management has succeeded in driving down payrates to subsidize poor management practices. That has come to an end now with almost everyone at the same low pay. Now they actaully have to come up with a plan to recover yields and balance the high loads with appropriate fare levels to increase yields once again. UAL management has not shown that they are capable of doing that so they should not be rewarded. Kind of like giving the UsAir execs that are losing their jobs big severance packages. Thanks, guys, for screwing the pooch and here's a lovely parting gift for you, courtesy of the BK judge, to ease you out the door.
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Old 12-23-2005, 05:07 AM   #7  
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Quote:
Originally Posted by ryane946
The previous post makes it seem that management is at fault for all the problems at UAL. That is dead wrong. The current problems started with the pilot work slowdown in 2000 and were exacerbated by the mechanics union unwilling to negotiate after September 11th.
Of course, UAL management's idiotic plan to buy USAir at $60/share in 2000 had nothing to do with their problems, right?

Why not just take the "easy way out" and blame the unions!

Management took their “eye off the bouncing ball”, which was running an airline. Instead, all they could see were the “benefits” of the merger while the airline collapsed around them.

I’ll never forget a reporter’s question to Jim Goodwin, UAL-CEO at the time, when asked why UAL was willing to pay the $60 when no one else (probably meaning American) was willing. He was struck speechless, then meekly replied something to the effect that they wanted to avoid a “bidding war”. Yea, right.

The fact is Stevie Wolf totally out-maneuvered Goodwin and his staff. They were like a bunch of 7-8 year old kids in a new candy store; grab and eat and don't worry about the upcoming stomach ache.

Also, senior management directly under Goodwin never supported him and so you had management by dysfunction. A strong management team would have made all the difference in the world at UAL. Management is supposed to lead - they didn't.

Jim Goodwin was a man you would love to have as a next door neighbor, but he was simply not CEO material.

Was there and got the t-shirt.
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Old 12-23-2005, 05:36 AM   #8  
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Quote:
Originally Posted by ryane946
Why should any airline pilot who works 80hrs/month flying a 747 be paid over $300,000, and receiving 90% of their max pay for a pension.
You may have been trying to make a point but lost all credibility with the above ignorant statement. The average airline pilot is at work for 280 hrs. per month but is only paid around 80 hrs. That's two full time jobs. You sound like you may be in the media. Making statements without factual knowlege will not get you very far here. Staying in a Holliday Inn Express won't really make you a resident expert.
Your opinins are welcome here but when you diverge from an opinion and start puting out false numbers as factual statements, you won't get very far. If you think airline pilots are paid too much...fine. Just get your facts straight. Oh, and welcome to the forum.
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Old 12-24-2005, 05:06 PM   #9  
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Didn't they try starting a bisjet operation too? Lost a lot on that too>>>
 
Old 12-24-2005, 06:11 PM   #10  
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Quote:
Originally Posted by Orca
Didn't they try starting a bisjet operation too? Lost a lot on that too>>>
If you're referring to UAL, the operation was called Avalar, as best I recall.

Never got off the ground, but helped the already weak management team keep their eyes off the bouncing ball - the airline.
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