Gents,
A great discussion so far. I am hearing a mature, educated, two-sided discussion here. Is it true that 250 F9 maintenance positions in DEN just got forced to relocate to MKE? In your opinion, is this the beginning of the companies restructuring that is certain to take place? How do you think the F9 pilots will be affected?
Thanks again for your inputs - I have enjoyed reading your thoughts.
As always,
Aloha

 

I would hope that the furloughed pilots would maintain their expectation to be recalled into the Airbus that they were hired into, which often occurred after leaving a position as a captain at a commuter. Hopefully the arbitrator sees it that way, but the precedent isn't there (mostly because an integration like this has never happened before).

If it had been an integration with SWA, then the furloughed pilots would have obviously been below the working SWA pilots. That precedent is clear from other mergers.

My point was that if you were here, you wouldn't feel that way. Looking at the top of our list, I'd be very surprised if any of the top 10 would have preferred SWA, but I'll ask them when I see them.

Yes, most of the mx is going to MKE, and dispatch and scheduling are going to IND. They may open a MKE domicile, but it would take probably 10-20 aircraft in MKE before that would be worth it. For now it's only 5 or 6 airplanes there.

On a positive note, we start service to Fairbanks, AK in May!

 

Here's the language referenced by the arbitrators in the America West / US Airways merger:

"The merger representatives shall carefully weight all the equities inherent in their merger situation. In joint session, the merger representatvies should attempt to match equiteis to various methods of integration until a fair and equiteale agreement is reached, keeping in mind the following goals, in no particular order:

a. Preserve jobs.
b. Avoid windfalls to either group at the expense of the other.
c. Maintain or improve pre-merger pay and standard of living.
d. Maintain or improve pre-merger pilot status.
e. Minimize detrimental changes to career expectations.

Stapling the F9 furloughees is most definitely a detrimental change to career expectations for them, and I don't see that guaranteeing them a recall into the Airbus has much impact on factors a-e for the RAH pilots.

but I may be a little biased....

 

[QUOTE]The most recent rumor I've heard is that the best that SWA would have been willing to offer, if negotiations had progressed, would have been DOH for longevity, and 1/2 of DOH (F9 longevity) for seniority. This would have put F9's most senior captains, who typically hold turn lines and only work 2-3 days a week, as moderately senior FO's. It would have resulted in hundreds of upgrade on the SWA side, and hundreds of downgrades on the F9 side. This is clearly contraindicated by the rules of equitable integrations, which state that there should not be a windfall for one group, at the expense of the other.[QUOTE]

This is not a true statement or reflective of the alternative solutions we had remotely considered.

The simple truth is that there was no negotiating that did or could take place that evening. We had 5 hours to negotiate a seniority deal that would affect all of us forever. It took us 3 YEARS to negotiate a contract that is amendable in 2 years so realistically, there wasn't much wiggle room for us that night.

Take it or leave it, SWAPA pilots are genuinely happy with the results of the negotiation that night. If that left a sour taste in the mouths of others at F9 or the industry, that's an unfortunate result of aggressively and successfully representing SWAPA pilots. It wasn't personal - frankly, I'd be pretty happy if we could have had TIME to talk about a deal, but between our management's "late to the dance" appearance in the whole bankruptcy process and our pilot's expectations there was very little we could offer in 5 hours.

There was lots of leverage floating around that night and the majority of it wasn't about 639 pilots at F9. We were also at the end game of our 3-year Section 6 negotiations which the company was attempting to leverage as well. It was about more than just the seniority deal.

I sincerely wish FAPA pilots the best in their dealings with RAH and Bedford. As a former Mesaba pilots, I'm no fan of his style. Lets be careful not to pick this scab too much though.

Tom Winsor
SWAPA M&A committee

 

First off the pilots never had a decision in the matter. Southwest bid was too low. RAH by way of forgoing its BK claim was able to outbid and the matter came down to the creditors taking the bid that offered them the most money:

By ERIC TORBENSON / The Dallas Morning News
[email protected]
A pilot labor deal for Southwest Airlines Co. might not have made a winning difference in its bid for the assets of bankrupt Frontier Airlines.

It's true that Southwest's pilots couldn't broker an agreement with Frontier's union, causing the Dallas-based airline to withdraw its $174 million bid late Thursday. That made Republic Airways Group Inc. the default winner.

But pilot opposition was only one of several reasons the deal fell apart in the 11th hour. Frontier management and creditors had other problems with Southwest's offer. And there were things they liked more about Republic.

Frontier officials talked publicly Friday about the two offers and their decision process. Southwest officials wouldn't comment beyond a statement issued Thursday evening.

Frontier executives said they liked Republic's ability to close its deal quickly and its commitment to expand Frontier's fleet of Airbus planes. The fact that Republic sweetened its offer at the last minute also helped, Frontier managers said Friday. It had originally bid $108.8 million, but Frontier didn't release the amount of the winning offer.

"I think both parties had a substantial chance of winning," said Sean Menke, Frontier's chief executive, in a conference call. However, Republic's ability to get Frontier out of bankruptcy protection by next month and its vision to keep Frontier as its own airline were significant factors, he said.

Southwest's offer probably would have triggered antitrust concerns from the Department of Justice, and a full competitive review could have taken four to six months, Menke said. Republic has already received antitrust approval to buy Frontier.

Also, Southwest's plan to drop 11 Airbus planes from Frontier's fleet of 51 would have delayed the bankruptcy case and added extra costs that Republic's bid avoids.


Not apples to apples

Among the biggest misconceptions of the auction process was the price tag. Southwest's $174 million offer – some details of which were not made public until Friday – included merger-related costs that never would have found their way to Frontier's creditors. It included a series of extra charges to pay off aircraft lessors and other creditors as well as money for Republic's claim against the Frontier bankruptcy and a termination fee for Republic, an Indianapolis-based airline holding company.

"These were not apples-to-apples comparisons," said Ted Christie, Frontier's chief financial officer.

Indeed, the bids were just a few million dollars apart in total value initially, despite the different totals. Southwest's bid would have paid creditors at a rate of 12 cents on the dollar; Republic's at 9 cents.

But Republic sweetened its offer late in the game, effectively pushing the amount of money creditors received to 19 cents on the dollar by agreeing to accept less money for its claims.


Southwest 'naive'

Critics who watched the process closely said Southwest's bid wasn't ready for prime time. Southwest executives "seemed not to understand the dynamics of the process or the obvious bottlenecks and complexities involved," said industry consultant Mo Garfinkle of Arlington, Va. Southwest "was naive and it didn't know it. It underestimated Republic and its talented management team, and it overestimated the reception to a Southwest bid, especially by the Frontier stakeholders."

Southwest withdrew its bid Thursday evening when the pilots' unions of the two airlines could not reach agreements before the auction process, as was required by Southwest's offer. The offer would have given pilots more pay, but kept them at the bottom of the seniority list.

In a note to members Friday, Carl Kuwitzky, president of Southwest's pilots' union, said he applauded Southwest chairman Gary Kelly for sticking to a promise to have the labor settlement a condition of the bid. "I called Gary last night to personally thank him, and he shared a closing thought that I agree with – 'It was not meant to be.' "

Kuwitzky said his team had 3 ½ hours Wednesday to negotiate an agreement that typically would take months. He had his doubts that Frontier pilots "had any intention of ever reaching an agreement" with Southwest and said Frontier's union never responded to calls for more talks Thursday.

Picking the winner was up to Menke, his executives and Frontier's board of directors after they consulted with Frontier's creditors committee. Their obligation was to keep the bidders informed about their status and to work with the trailing bidder to raise their offer. "The whole process was very cordial," he said. "Southwest was very professional."

For Frontier, the focus turns to growing its fleet and emerging from bankruptcy protection, which it said is possible by Sept. 17. Frontier was forced into bankruptcy in April 2008, when its credit card processor changed the terms on ticket sales and tied up substantial amounts of its cash.


Battle for Denver

The Denver air market is no more appealing for three airlines than when Frontier filed for Chapter 11; Southwest continues to add to its presence, though analysts say the carrier is losing money on its fast-growing Denver operations, an assessment Menke agrees with. "They're having some difficulty here," he said, adding that he believes incumbent carrier United is also losing money in Denver and will cede more market share.

Frontier said its lower costs and brand loyalty will help it survive in Denver. Frontier believes its operating costs are lower than Southwest's and substantially lower than United's. "We will continue to compete very, very vigorously," Menke said.

Airline financial analysts such as Vaughn Cordle of AirlineForecasts LLC expect a brutal war of attrition in Denver. Republic-controlled Frontier is unlikely to win unless Republic replaces some of Frontier's Airbus aircraft with its own regional jets flown by pilots making substantially less than what Frontier pilots are paid.

He estimates that Frontier's pilots cost the carrier $170 an hour in wages and benefits, compared with $99 an hour for Republic's regional jet pilots; Southwest's pilots cost $290 an hour, he estimates.

Cordle said that although Southwest pilots make more, the carrier can absorb deep losses in Denver that Frontier cannot.

Cutting pilot costs "is the only way Republic's Frontier survives," he said Friday, noting that Republic is in the process of switching out bigger planes for smaller ones with Midwest Airlines, the Milwaukee-based carrier that Republic officially bought July 31.

Investors had bid up Southwest's shares 20 percent since July 30, when the airline announced its intention to bid on Frontier. Southwest shares fell 19 cents to $9.08 Friday, while Republic's shares rose 60 cents to $6.60.

 

Yes that product is really something to be proud of!

 

Another interesting article to add for discussion.


Republic Airways provides clearest vision yet of consolidation strategy | Centre for Asia Pacific Aviation

 

XYnot,

Your new avatar is a classic. Is that Forest Gump standing in front of a Midwest aircraft?

 

As you all know ('cuz we are pilots);

BB/RAH bought the NAMES of Midwest and Frontier thinking he could keep the frequent flyers coming back.

They/He dumped the aircraft, pilots, FAs, etc at Midwest. Now, low waged, RAH piloys are flying those routes.

They/He have moved MX for F9 to MKE. Pilots and FAs are next.

I, personally, think the F9 senior guys threw their pilot group under the bus. They wanted a windfall from SW and didn't get it. Now they are going to have to negotiate UP from an RJ outfit. Good Luck.

 

F9 flight crews are not going anywhere. Integration will happen, it is happening. Midwest guys are getting integrated as well. They, unfortunately have not planes to fly, so they are on the street, for the time being. It amazes me that people do not know the fact and they think they can put their two cents in. If you need an education, PM me.