Tag Archives: United Airlines

United Airlines Seems Determined to Piss Off Employees; O’Leary Tees Off on News

Take one major airline.

Have that major airline use bankruptcy as an excuse to destroy its employee pension plans.

Have same airline continue to enjoy some of the most adversarial management/employee relations in the industry.

Add just one more objectionable move on the part of said airline’s management to the almost-boiling pot.

Stir.

Back off and watch as the pot boils over.

Today that is exactly what has happened, as United Airlines’ pilots are reacting to the news that the airline plans to link-up with Irish airline Aer Lingus to offer flights between the U.S. and Madrid. Say what?

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Starting next year, both airlines will market the flights and each airline will have their own flight numbers on the route.

But United Airlines’ employees will have nothing to do with the actual operation of the flights.

No, Aer Lingus will fly the planes with their crews. And provide the planes. United will handle the marketing for the flights.

According to a report in Bloomberg, “Aer Lingus and UAL will review the partnership after two years and may turn it into a ‘full-blown joint venture,’ with the Irish carrier owning 51%.”

Not surprising that the United pilots are not happy about this news. Looking at the details of the deal this looks like nothing more than a glorified wet lease.

Meanwhile, United Airlines continues to sit on a stagnant-to-declining fleet, and continues to announce furloughs for its own pilots and flight attendants.

In a message from the Chairman of the airline’s ALPA MEC, Steve Wallach told the troops,

“The day after reporting one of its worst quarterly financial results in history and after furloughing an additional 254 pilots (bringing the total to 606 pilots), United Airlines announced today that it has entered into what it calls an “innovative” partnership with Aer Lingus”….He then added, “Aer Lingus has advised the Irish press that this joint venture will operate an Aer Lingus aircraft with neither United nor Aer Lingus employees, under a separate operating certificate and under newly established wages and working conditions. Obviously, this partnership will be accomplished at the expense of United’s and Aer Lingus’ own pilots and other employees. This development, where United attempts to establish an airline operation without the use of United aircraft or employees, is nothing less than the outsourcing of jobs to an international company, and clearly demonstrates that this management continues to make business decisions without regard to its pilots and other employees…..The United pilots are exploring every option to put an end to the company’s blatant disregard and lack of loyalty to the United Airlines brand.”

By the way, we all should have known that Ryanair’s CEO Michael O’Leary wouldn’t sit around and be quiet on this development. As most of you know, Ryanair is in the middle of yet another hostile takeover run at Aer Lingus.

Today Ryanair issued a statement in which O’Leary said, “

“Aer Lingus and United Airways share many similar traits. They both used to be big in the 1950’s and 1960’s, but sadly today they are just shadows of their former glory. Both have recently announced losses, job cuts and pay cuts. After months of trawling around looking for partners, it is a sad reflection on Aer Lingus that the best they could come up with is one of the weakest and biggest loss makers in the U.S. airline industry. Given the scale of United’s losses there is no guarantee that they will even be around in March 2010 to operate this “partnership”.

“It is hard to think of any transatlantic airline losing any sleep at the thought of being faced with the combined weakness of Aer Lingus and United Airlines on the Madrid-Washington route. Today’s announcement shows just how desperate Aer Lingus is to find a partner, any partner it can, even if the flights don’t start until March 2010. This so called “partnership” with another “loser” like United shows that Aer Lingus has no independent strategy, and no prospect of remaining independent.”

That’s what I like about Mr. O’Leary. He’s never afraid to tell us what he really thinks.

Here’s Why AMR Shares Sank Today…

The future does not bode well on the cost side.

We wrote earlier today that while we thought United Airline’s numbers today were worse at first blush, that investors were punishing shares of AMR much more severely.

Here’s why.

The airline gave what could at best be called less than encouraging cost guidance for 2009.

Analysts Jamie Baker and Mark Streeter with JP Morgan issued a note today concerning the results in which they said,

“Unlike UAUA, We’re Discouraged By AMR Cost Guidance – Pension expense appears to lie at the heart of what we consider to be discouraging 2009 ex-fuel cost guidance from AMR, a phenomenon that may have implications for CAL & DAL, though not LCC or JBLU. Specifically, AMR is guiding to a 2009, consolidated ex-fuel CASM increase of 7.6%, materially higher than our ambitious +4.1% forecast and representing over an untaxed dollar in negative earnings variance – holding other inputs constant. On the fuel side, Q109 $2.04/gallon all-in guidance is consistent with our $2.10, as is AMR’s full-year $2.06 all-in (identical to our forecast).”

And while United Airlines has garnered the most negative publicity over the last month or so concerning the high cost of its ill-placed fourth quarter fuel hedges, AMR got hit in the fourth quarter as well.

As Jamie explained,

“Similar to UAUA’s release this morning (and to what we expect to hear from those who have yet to report), AMR’s liquidity was clearly hurt by incremental cash collateral deposits posted with fuel hedging counterparties. AMR ended 4Q08 with an unrestricted cash balance of $3.1 billion, compared to $4.6 billion as of 3Q08. The implied $1.5 billion sequential net cash burn was driven by the company’s cash collateral postings on under-water fuel hedges ($575 million in cash collateral with counterparties at the end of 4Q08), debt and capital lease principal payments, capital expenditures, and changes in working capital (exact figures for debt amortization, capex, and change in working capital were not disclosed in the press release). At the end of 3Q08, AMR held $240 million in cash deposits from fuel hedge counterparties, but with falling oil prices during 4Q08, the company saw a reversal of approximately $815 million, resulting in the $575 million figure mentioned above. The worse than expected pension cost guidance is worth monitoring. Nevertheless, we expect AMR’s liquidity profile to improve significantly in 2009 as under-water hedges roll-off and the airline is able to benefit from much lower y/y oil prices.”

American Airlines and United Spill the Fourth Quarter Beans

It’s that time once again dear friends. That time when we get the straight scoop on just how bad, or how good, the previous quarter was for our friends, The Things With Wings.

This morning both AMR, parent of American Airlines, and UAL Corp., parent of United Airlines, reported their fourth quarter 2008 earnings.

Top line assessment? Both airlines reported numbers that came in comfortably within previously anticipated analyst forecasts.

That does not mean, however, that the numbers were overly pleasant to digest.

Especially in the case of United, which reported a net loss of $1.3 billion or $9.91, compared with a loss of $53 million or $0.47 a share the previous year. Excluding non-cash, net mark-to- market hedge losses and certain accounting charges, the airline reported a pre-tax loss of $547 million for the quarter. This figure compares to an adjusted pre-tax loss of $105 million in the fourth quarter of 2007.

A huge contributing factor here was the fact the airline got caught on the wrong side of some very expensive hedge positions during the fourth quarter. The effect of this wrong-way bet was clearly seen in the sharp drop in the airline’s cash balance for the quarter.

At the end of the quarter, United was sitting on only $2 billion in unrestricted cash, a restricted cash balance of $272 million, and $965 million in cash deposits held by its fuel hedge counterparties. The airline saw $989 million in cash go out the door during the fourth quarter in operating cash flow and it posted a negative $1.1 billion in free cash flow during the quarter.

Excluding one-time items, the airline said it lost $4.22 per share compared with Wall Street analyst consensus forecast of $4.42.

In the case of American, the airline reported a loss of $340 million or $0.77 a share, excluding special items. This performance was more or less in line with expectations as well.

A year ago the airline reported a loss of $184 million or $0.74 a share, without special items.

The full American Airlines’ release has yet to hit the wires.

We’ll also learn more about the results from both airlines later today, after their respective earnings calls.

In the meantime, go have some more coffee.

Can United Airlines Be This Stupid?

From one of our most revered industry observers, a note this afternoon.

“United cannot be stupid enough to promote Saver awards Denver-Vail. Oh wait. Yes they can.”

I have to say, if the airline is pushing its customers to redeem freebie miles for Denver-Vail in January — Chicago I think you do have a problem. Or maybe more than one.

Brace to Get Parting Gift of $2.4 Million

United said in an SEC filing late Friday that Jake Brace, United Airlines’ CFO, will be paid $2.42 million after he retires at the end of the month.

Brace will receive two times his $653,125 salary and $555,156 target bonus.

In exchange, Brace agrees not to take a position with a competing airline for the next two years “without consent of the company.” (No, I’m not saying a word, although the temptation is great.)

It’s so nice that Jake will be paid this lovely parting gift. Dontcha think? I’d hate to think he was going to leave the airline empty-handed.

Food For Thought: Airlines and Pensions

I had an errant thought yesterday as I watched the Dow fall and not get back up again.

And that thought concerned pensions. And the airlines that still have pension plans for their employees.

Remember that the last time the airline industry had to deal with the “pension issue” was following the market meltdown that followed the “internet bubble” that burst in 2000.

(If you note a bit of sarcasm in that description…good.)

Going into 2001 and 2002, airlines were suddenly looking at pension plans that required more and more in cash infusions — because the value of the underlying securities in the pension funds had declined so precipitously.

Rewind the clock. Start it over again.

We are now looking at exactly the same situation. With equities in a free-fall — all pension funds are gasping for air.

Tuesday, Congress’ top budget analyst estimated that Americans’ retirement plans have lost as much as $2 trillion in the past 15 months. And you can add more to that total, because you can bet his number crunching did not take into consideration the free fall in the market during the last two weeks.

Public and private pension funds and employees’ private retirement savings accounts – like 401(k)’s – have lost some 20% overall since mid-2007, said Peter Orszag, the head of the Congressional Budget Office.

So just a little red flag for the radar screen.

Airlines such as American Airlines and Continental Airlines that have worked hard to keep their employee pension plans in place are going to face tough times ahead — as pension plan funding requirements balloon.

Then again, an airline like United, which was successful in blowing up its employee pension plans as part of their bankruptcy proceedings, won’t have to worry.

Something just doesn’t seem right about all this, does it?

Wall Street Sends Politicians a Message: We Run This Hood

In case you’ve been occupied with feeding the cat, doing Sudoku, or eating a late lunch, the world financial markets are one big mess today.

So much for the power of politicians in Washington to snap their fingers and hope that the rest of the world simply agrees to sit back and let Treasury Secretary Hank Paulson do his “magic.” A couple of problems with that $700 billion gift from the U.S. taxpayers that Congress okayed last week. One, it’s going to take weeks before any of that buy-back of crappy debt even begins. Two, credit markets are frozen NOW. Third, now world markets are starting to unravel.

Which brings us to the big news if you are an airline investor, or someone who simply owns shares of your own airline that you work for.

Not only are world financial markets one big mess today — but airlines stocks are getting hit very hard.

You’d think that with the price of oil now down below $90 today that investors would be snapping up airline shares right and left.

After all — think of the potentially lethal profit cocktail we have going on — sharply lower fuel costs on their way, coupled with sharply reduced capacity. It would seem like the perfect recipe for higher airline stock prices.

Unfortunately that is not how the market is thinking today. Then again, the market is not thinking very clearly about much of anything. This is definitely one of those days when fear rules.

As for the airline sector, the biggest decliners as of this posting include: United, which is down 18% at 6.68, Continental Airlines, down 20% to 12.15, Republic Holdings down 16% to 7.86, AMR, parent of American Airlines, down 18% to 7.65, and US Airways, down 14% to 5.58.

Picture of the Week: jetBlue Goes Swimming at O’Hare

I’m sure most of you have seen some of these pictures that are the hot item in all of our inboxes this week. I would have posted some sooner, but we had to get our upgrade bugs here at PlaneBuzz taken care of.

While Hurricane Ike and its effects to south Texas were widely disseminated this week — what a lot of people did not know is that while Ike was battering the southern coast of Louisiana and Texas, a nasty storm, unassociated with Ike, decided to batter the heck out of the Midwest. Particularly the Chicago area.

These are pics that were taken on Saturday at O’Hare and I think they give you a pretty good idea of how high the water levels were. I would give credit to the photographer, but I’ve received copies from so many people and no one seems to know exactly who took them.

My only question is this. Who was the bright guy who thought that putting snow removal equipment out there was going to help?

From what we understand, the move didn’t do much more than create waves that of course made the water levels even higher as they moved to the gate areas.

Good thinking guys.

Needless to say, these kinds of water levels are not good for equipment — brakes, rims, not to mention the bottom halves of engine cowlings. That water was way too close to those engines for me.

As one pilot wrote me today, “There’s no way I would want to taxi through that kind of water.”

Tell you what. I’m not a pilot, but I wouldn’t want to taxi through it either.

PlaneBusiness Banter Posted

Subscribers of PlaneBusiness Banter can access this week’s issue here.

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September 11, 2008

Seven years ago today we all awoke to the horrific events of September 11 as they began to unfold — events that began and ended with the destruction of four aircraft, the death of hundreds of innocent passengers, and many innocent airline crew members.

While the world takes a moment today to commemorate the events that happened that day in a much larger sense — particularly the thousands of people who died in New York City — we here at PlaneBusiness, as we have since that awful day, focus on our departed airline family members. Those crew members who just went to work on what was a beautiful day in the Northeast that day — but never came home.

We will never forget them.

This is our corner of the world. And as I see it, the courage and bravery of these crewmembers deserve our heartfelt acknowledgment. And remembrance.

American Airlines Flight 11, Boston to Los Angeles, crashed into the World Trade Center.

CREW: John Ogonowski, Dracut, Mass., Captain; Thomas McGuinness, Portsmouth, N.H., First Officer; Barbara Arestegui, flight attendant; Jeffrey Collman, flight attendant; Sara Low, flight attendant; Karen Martin, flight attendant; Kathleen Nicosia, flight attendant; Betty Ong, flight attendant; Jean Roger, flight attendant; Dianne Snyder, flight attendant; Madeline Sweeney, flight attendant.

United Airlines Flight 175, Boston to Los Angeles, crashed into the World Trade Center.

CREW: Victor J. Saracini, Lower Makefield Township, Pa., Captain; Michael Horrocks, First Officer; Amy Jarret, flight attendant; Al Marchand, flight attendant; Amy King, flight attendant; Kathryn Laborie, flight attendant; Michael Tarrou, flight attendant; Alicia Titus, flight attendant.

American Airlines Flight 77, Washington to Los Angeles, crashed into the Pentagon.

CREW: Charles Burlingame, Captain; David Charlebois, First Officer; Michele Heidenberger, flight attendant; Jennifer Lewis, flight attendant; Kenneth Lewis, flight attendant; and Renee May, flight attendant.

United Airlines Flight 93, Newark, N.J., to San Francisco, crashed in Shanksville, Pa.

CREW: Jason Dahl, Colorado, Captain; Leroy Homer, Marlton, N.J., First Officer; Sandy Bradshaw, flight attendant; CeeCee Lyles, flight attendant; Lorraine Bay, flight attendant; Wanda Green, flight attendant; Deborah Welsh, flight attendant.

May they all be at peace in a much better place.