Educate me
 

Gents,
This month I have been flying with a guy who is very much into the politics of the airlines. He is one of those self-proclaimed experts, who just won’t shut up. He has been discussing at length, his opinions of the whole F9-SWA-Republic thing. I would like to be able to speak with him intellectually on this subject, yet I am relatively uninformed. (I just fly my line, go home, and go fishing.) I am looking for a mature discussion, giving both sides of the argument, with and without the aid of hindsight – in the hopes that I can give some viewpoints from the people who have an intelligent dog in this fight.

My question is this: Did the F9 union make the correct decision for its members by not accepting the SWA staple offer? Are they better off now? Will the F9 pilots be better off with Republic in the future?

This is a tough question. I would love to become a little smarter on this matter and argue an intelligent position, and beat this guy at his own game.

Lastly, I am new to this forum. I am not looking to get (flames?) from anyone. Thank you again for taking the time to give your opinion.

Respectfully from the new guy,
Aloha

You are already the smarter one in the argument and have things figured out. Fishing is much more important than F9 or SWA staple! :)


A case can be made from either side, what side do you want to argue (against him)?

Only time will tell..But if I were a betting man I'd say long term F-9 is screwed under RAH.

By my estimation, at the time of the rejection of RAH's offer, about 99% of the Frontier pilots preferred the RAH offer over what SWA had offered (i.e. staple). If SWA had come up with something equitable (according to integration precedents), which is to say something between date of hire integration and a percentage integration, with domicile protection, I think that probably 80-90% of the pilots would have preferred to go with Southwest. That all may be moot though, because I don't think that F9's union could have legally accepted ANY offer from SWA without a membership vote.

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.

Historically, equipment size is the primary determining factor in how two seniority lists get merged. This is due to the fact that relative differences in pay scales between airlines are rather ephemeral (remember the grief that SWA pilots were getting back in 2000 for their industry-lagging pay), but relative seniority according to equipment is a fairly stable metric for seniority. Another rule of equitable integrations is the principle of trying to maintain seat position for as many pilots as possible. By these principles, any fair and equitable integration would have maintained the F9 pilots in approximately the same seniority position and seat. Every F9 pilot that I've talked to would have been perfectly happy to go to arbitration on the integration, while I would be that most SWA pilots would not have. That says something in and of itself.

Another downside of the SWA offer was that in addition to the 60+ pilots on furlough, several dozen more would have not been "bought" in the transaction, and would have been out of work, and SWA was rumored to not be willing to guarantee those pilots a seniority number. To its credit, FAPA didn't throw the junior guys under the bus, as often happens in situations like this.

Two important factors for me personally (call me sentimental) were the other 4000 F9 employees that would have lost their jobs, and the fact that Denver would have lost a great airline and brand.

As for whether we are better off now, I'd say that at the very least, the few pilots who are being recalled are better off, as are the dozens who would have been laid off after SWA parked 10 Airbuses. Beyond that, I'd say that it will take about 5-10 years to answer that one accurately, if we're lucky. I've only flown with 1 pilot in the last 3 months who was disappointed with the way things turned out.

Personally, my biggest concern is that historical precedent places furloughed pilots at the bottom of all the employed pilots. If that holds in this case, that puts the furloughed F9 pilots below everyone at RAH. However, every seniority integration precedent has been more or less a marriage of equals, where the furloughed pilots expected to be recalled into similar equipment to what was was junior when they were furloughed. That's obviously not the case here.

The whole process will probably wrap up by the end of summer, and then we'll see what the arbitrators deem fair and equitable.

So, get educated.

Read Ethics and Stakeholder Management by Archie B. Carroll and Anne K Buchholtz and draw your own educated conclusion.

AL

Just some random thoughts, I'm sure others will chime in

Pro SWA:
SWA has never furloughed, been profitable almost every quarter in the past decade, largest carrier of domestic passengers in the US, one of the best financial balance sheets of any airline, greatest company culture/management, always one of the top places to work in the country (not just against airlines), great payscale/benefits

Con SWA:
SWA would have closed the DEN base and pilots there would have to commute. Airbuses (Airbii?) would have been retired, Lynx (the Q400 regional subsidiary of F9) would have been sold off or somehow eliminated, staple to the bottom of the SWA list means crappy QOL, being purchased means F9 brand dies.

Pro Republic:
Up and comer airline with a super low cost structure trying to get into the low cost carrier game. Ambitious management, F9 will be one of the flagship pieces of the Republic company. DEN will remain a fortress hub, F9 employees will retain their jobs, opportunities for expansion and new crew bases, F9 has been a thorn in the side of SWA in DEN and could be a real threat in the future to SWA and the rest of the LCCs in general.

Con Republic:
Super low costs are going to be a priority, payscales in danger. Keeping F9 seniority list separate opens the threat of whipsaw using the other Republic pilots against the F9 pilots for concessions, seniority list integration could be very ugly. Unproven leadership in a very tough economic time. Growth might force junior pilots to commute to new bases.

An excellent, comprehensive, and unbiased summary (and much more concise than my post).

I don't think there is any right answer, depends where you sit on the list. Good news is we had an F9 Jumpseater on our SWA jet yesterday and we chatted for a couple of minutes and everyone was nice and there was no animosity. My father in law (former continental guy who struck and ended up at US Air many years later) told me I will know if I made the right decision when I retire. Things change daily, and although SWA might have been the place to go a few years ago, 10 years from now could be a different story. I think we all just want to keep a job at this point.

The big question is ... WHO CARES? You can't change what has been decided and you'll never know if someone would have had it better.

I would suggest you stick with fishing. And if you have to fly with that bozo again, you change the subject to something more intelluctually appealing.

Personally, even if I were the #1 guy on Frontier's list, I would rather be a bottom reserve FO at Southwest than a senior captain at Republic after this all shakes out.

Also with this whole talk of using the C-series as a "replacement" for the Airbuses, you can be sure Republic doesn't intend on keeping Frontier in their current form. Guarenteed Republic has one plan in mind, and that involves every pilot on property being paid RJ wages with RJ work rules.

Couple that with the fact that in 5 years, Southwest will still most likely exist. The same probably can't be said about Republic. With that said, I'd rather be furloughed from Southwest than the #1 guy on Republic's list right now.

I'm a little curious who you work for. If it is one of the three companies mentioned above, I would recommend you discuss the issue with one of the other 700+ pilots you work with. If not I would say that this is not the best forum to get a factual information. You will get the whole spectrum of opinions however.

The truth is nothing has been settled with the Frontier/Midwest/Republic/Lynx integration. Until then, it's just a wild guess. As a Frontier pilot, I was a bit insulted by the Southwest offer. From speaking to some friends at Southwest, I would say they were a bit stunned (and insulted) by Frontier's rejection of their offer. Just my take on the situation.

+1, keep fishing....

I agree, you make good points for all four cases. There will be no whipsaw. The lists will be integrated by the end of May. As for the leadership, unproven in the arena they have enter is true, but they have done an excellent job up to this point. There is tremendous upside to this as well as downside. Only time will tell.

One thing that has not been brought up is the time line was very short and a deal between groups was almost impossible considering the starting positions of both groups. This is of course unfortunate because the industry needs less competition not more. Denver still will not sustain three large operations and sooner or later someone will leave. But before this happens the bleeding will continue. In ten years you will know which was a better deal.

If you were the #1 guy at Frontier, you'd think otherwise. Go ask him.

don't feed the fire, specially if he's the captain. Some 4-stripers think they know everything and will not accept loosing an argument to an F/O. Trust me, they can't and they won't, they have to be right....

I say change the subject or just let'em run his mouth

If I personally were the #1 guy, not if I were the person who is in the #1 spot.

Working under the republic umbrella is going to lead to constantly declining work rules, quality of life, and pay. Its never going to be the same. Its going to turn into nothing but flying for a regional airline with bigger airplanes.

Not only that, but I honestly don't think they'll even be around much more than a few years. Republic's contracts are all coming up for review in the next 5-7 years and they're ripe for replacement with another carrier. Republic knows nothing about running a real airline that has to make a profit and provide service and those sorts of things. They bought off more than they can chew and it the other airlines are already starting to circle like vultures, especially Southwest.

My two cents worth....

First off, thank you for attempting to stay informed on the workings of the this profession. Too many pilots just go fishing, and are thusly uninformed on how this industry works. When asked how they might vote on a certain pilot issue, they might reply "I dunno, I don't understand all that Union stuff". Great to have you in the trenches buddy.

Sorry I didn't answer your question about how to argue your particular case; but I do appreciate you staying informed..."Those who ignore or fail to understand History are bound to repeat it" (or something like that)

I have to ask, where do you propose they go? I am very lucky in that I have not been furloughed (yet). But if the acquiring company is strong enough not to have any furloughs, strictly from a "career expectations" standpoint, why should the acquired company's furloughed pilots expect more than a staple?

Should a furloughed Frontier guy have been senior to a non-furloughed Southwest guy? Really? I have no dog in this fight, but I'm curious to see how you justify your position.

Only time will tell what was the smart thing to do. There are NO guarantees for any of us.

Just to add to the discourse though, if I remember correctly, Denver would have become a SWA domicile almost immediately. Additionally, it would have been fenced off for F9 pilots for a period of time, guaranteeing their seniority positions as long as they didn't bid out of Denver.

All F9 pilots (who weren't furloughed) would have been pay protected or received a raise up to SWA levels.

On the "bummer" side, I'm pretty sure that SWA would have furloughed up to 100 F9 pilots and pretty much eliminated a lot of the non-flying jobs in Denver. Additionally the Frontier brand would have gone away.

I wish we could have found a way to make it work for all of us, but in the end, I think it was impossible given the time constraints. I also think that RAH wanted F9 much worse than SWA did.

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....:rolleyes:

[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.

Seniority is everything. 99% of the pilot group was opposed to the SWA offer. The senior guys had the most to lose, so even if they had a disproportionate say in the matter, which they didn't, they didn't have a worthwhile reason to take the SWA offer.

There was no windfall, just a seniority integration pig with some pay lipstick.

From the black helicopter:

I ask Gary Kelly if SWA paid anything to enter the bid process or a fee for not winning the bid, he said, " not a dime. In fact Republic came to us and asked us to enter the bid process and it ended up costing them another 25 million."

Gary said this about 2 months ago at the MDW pilot lounge with about 20 other pilots in attendance.

Two questions to ask if I was working under rev BB. 1. Why invite SWA to bid on F9 if you are the only bidder at the time?
2. If you truly wanted SWA to put a bid in why not give an extension to the deadline instead of raising your bid?

My guesses:

1. Because it might have been more worthwhile to get paid out as an secured creditor than to buy F9. It was probably just another option if they needed it.
2. Because F9 controlled that process, not RAH. RAH may have had input, and if so, they may have preferred to go ahead with things at that point.

Was not looking for guesses. Perhaps you should ask BB why they spent the extra $ for F9.

So for the F9 union, they had the option to be stapled to the bottom of the SWA seniority list (bad for the senior pilots) with the possible threat of some furloughs (bad for the junior pilots) ....... or go with RAH who pays bottom dollar and has a less than ideal working relationship with previous airlines they have acquired/merged (bad for both the senior and junior pilots). That's a difficult position to be in. I'm hoping their decision not to take the SWA staple turns out to be a good one for them in the end.

All my best to all of us this holiday season,
Aloha