From today's Arizona Republic (http://www.azcentral.com/arizonarepublic/business/articles/0804biz-parkerstock0804.html):

US Airways CEO Parker sells 272,000 shares
He tries to allay skeptics at work

Dawn Gilbertson
The Arizona Republic

US Airways Chairman and Chief Executive Doug Parker this week sold more than a quarter-million shares of US Airways stock for a pre-tax gain of $9 million.

The sale, disclosed in a securities filing late Thursday, is the single largest by a US Airways insider since the America West-US Airways merger last fall and, notably, is the first time Parker has exercised any options or sold stock since he joined America West in 1995.

Added to his annual salary of $550,000, it already pushes him way past his $5.7 million pay package for 2005, and that's before any bonuses or other perks.

A parade of US Airways executives has sold shares in the past few months. They were forbidden from doing so for the first six months after the deal closed. During that time, the stock more than doubled as the airline industry's fortunes started to improve and the merger didn't hit any major bumps.

Parker had been the lone holdout, but the company had disclosed that he was one of a handful of executives with a pre-arranged stock-trading plan. Such plans, drawn up to avoid potential problems over the timing of insider stock sales, schedule trades in advance.

In a letter to employees Thursday, Parker said he decided "weeks ago" that he was going to begin exercising options Aug. 1. . . . (More here) (http://www.azcentral.com/arizonarepublic/business/articles/0804biz-parkerstock0804.html)

I think it would have been wiser to wait until he got the union contracts worked out. Exercise the expiring ones, and hold off. Not that I'm sure that's what I'd do if I had a check for $9M in my pocket.

Better even, donate it to the workers.

Nobody is worth that much for any company. No matter what you do. It is obscene. His salary should be plenty.

This is a real incentive boost to the workforce. It truly amazes me.....pity the employees who just rec'd the cuts in pay and bene's ....Yeah they have a choice, but so does Parker. Credibility???

In the investment world we have today, a bunch of wiseguys, with incredible amounts of other people's money, called "hedge funds", who do everything but hedge, and are having a field day, while the SEC looks the other way. You can't depend on your stock reflecting the true value of the company, once these guys start fooling around. In a few weeks, a stock like this could drop enormously, thanks to those shenanigans. Parker is smart to get some liquidity
before something like that happens. As for the rank and file, it's already restless. Trying to explain to them that they would be working in a carwash by now ;) , if they hadn't put those companies together, is a zero sum game. Life goes on. Considering some of the fools who walked out of the old USAirways with 7 figure packages, at least this guy worked for it. When he got his options, they were virtually worthless. Getting a payday like that, as the result of improving a business, is Finance 101. That's what built this country. We don't have serfs in this country. Just working guys, with cabins in the country, and $40,000 pickups, who will tell you all day how they got screwed. :D

I think it would have been wiser to wait until he got the union contracts worked out. . .

I don't think it makes a bit of difference in the scheme of union negotiations. They're going to point (as the pilots have already started to do) to the enormous profits the company is making off their backs and demand their "fair share." They'd do that whether Parker had exercised his options or not. He's giving them a sound bite or two, but it won't make any difference.

I'm with deelmakur, there's no explaining this to the rank-and-file. Nothing Parker could say will have it make sense to the vast majority (though I do like the "you'd be working in a car wash about now" line -- he should have used that! ;) ). It's nice of him to give them the courtesy of an explanation, but few will accept it. It's the nature of the beast.

Actually, he tried to explain. This is from US Aviation (http://www.usaviation.com/forums/index.php?showtopic=30139):
A Letter from Doug Parker to All Employees


Dear Fellow Employee:

I wanted you to know that I have decided to exercise and sell some of my US Airways stock options. I have told you that I will always be open and honest with you about how I'm compensated, and while this isn't new compensation, it is the first time I've exercised options in my eleven years with America West/US Airways, and I thought I should explain it to you.

The fact is that I've authorized the exercise of options to acquire 272,250 shares of US Airways stock and the sale of those shares. All of these options were granted to me during my time at America West. A small portion (24,750) of these options were granted almost ten years ago and are about to expire, which means that if they aren't exercised, they simply go away.

That, along with feeling I should diversify my stock holdings, is the primary reason that I have chosen to exercise some options now. You should also know that after these options are exercised, I do not plan on exercising any other options this year.

Please do not take my option exercise as an indication that I believe US Airways is "topping out". To the contrary, I think we are just getting started. The people of US Airways have a lot more to show our competitors and our customers, and as we do, I believe the value of our company will continue to increase. These 272,250 options represent less than 20% of the equity I have been granted and less than 40% of my fully vested, in-the-money equity grants. Furthermore, you should not interpret anything significant from my decision to exercise options at the prices prevailing this week. My transactions are being handled through something called a Rule 10b(5)-1 plan, which means that I decided weeks ago to exercise these options beginning on August 1, and I created a plan that said I would. I can't change that plan just because the stock price fell a few dollars last week, so the shares are being sold at the current market prices.

Lastly, please understand that while these stock option exercises/sales will result in some meaningful cash payments to me, no cash comes from US Airways. These options were all granted to me over the past ten years and gave me the right to purchase the then AWA stock at the exact price that it was selling for that day. They only have value because the stock is worth more today than when the options were granted, and the cash comes from the buyers of the stock at today's higher market prices. While many of our competitors (including the old US Airways) filed bankruptcy over the past ten years, wiping out the value of all equity and creating significant turmoil for their employees, AWA was able to avoid such a fate, which was in all of our constituents' best interest. I am hopeful that equity grants in the new US Airways will have a similar increase in value over the coming years, because that would mean we have all done our job to build an airline that can survive and thrive even in difficult times.

So there you have it -- this is a big deal to me since it marks the first time in eleven years that I have exercised options and sold stock that is part of my total compensation. I wanted you to hear from me firsthand why I am doing this and how these transactions work.

Thank you,

Doug

That thread at usaviation is full of histrionics, but the problem, as I see it, is that he's demanding "cost-neutral" merged contracts, which means either East or West has to make concessions. Asking (for example) West FAs to give up a week of vacation, or East FAs to take a pay cut when he's cashing a check for $9M is tough.

You're both right, though. There's never really a good time to do this sort of thing, employee relation-wise.

You're both right, though. There's never really a good time to do this sort of thing, employee relation-wise.


And he is an employee too, and, as stated before, there is no way to explain packages like this in any way, form, or manner to anyone. No matter who you are or what you do for a company. GAs/FAs etc are sacrificing a lot to keep the company running and hence, keep their jobs. And you than give a CEO a bonus for that??? Sure old options....those shouldn't have been there either.

Parker's compensation is very reasonable. Without him, both AWA and US Airways would have liquidated and would exist no more. In the context of saving these businesses, his compensation is minimal.

Parker's compensation is very reasonable. Without him, both AWA and US Airways would have liquidated and would exist no more. In the context of saving these businesses, his compensation is minimal.

I think it's safe to say that the utterly massive paycuts endured by the workforce at US East and the utter haircut that every leaseholder, bondholder, and taypayer took in both trips thru Chapter 11 had a lot more to do with survival and thrival of the airline that anything Parker has done.

He should donate it to the bankruptcy judge, who has done much more for shareholders than anyone in either Tempe or formerly in Crystal City.

Parker was the recipient of a business whose fixed costs had been drastically shrunk in bankruptcy in a rising market for the airline industry. Where, exactly, does the impressive accomplishment lie here?

Personally, I think it's nice that he took the time to draft the letter. And I think his remarks are entirely reasonable.

I'm on the fence on one thing though - he mentions how he believes in the future success of the company and proceeds to mention that he's exercising and selling ~20% of his options to diversify. Realizing that anyone can (and should) diversify, aren't the points somewhat mutually-exclusive?

Anyway, yeah it sucks for the rank-and-file, but as he pointed out, it doesn't cost the airline anything for him to do this, and as he seems to be successfully guiding the company along, more power to him.

Hopefully the rank-and-file also get stock options in the new company and can realize some substantial gain in the years to come. Anyone know if this is happening?

Of course he could donate some percentage of his new-found wealth in a show of good faith. Dunno what charitables AWA or US has/had.

Bottom line: He exercised one of the benefits afforded to him as the leader of a high-profile, high-stress business. It's his money, and his business what he does with it. No person anywhere would appreciate someone else telling them when and how they can spend their money or utilize other benefits afforded them.

Maybe I should have bought some AWA stock after September 11. Doh!

This is the BIGEST joke in the world.

WHO cares that a CEO of a Major Company sold stock. Those of you who are complaining need to become a CEO of a Major Company and earn some stock.

Why don’t you complain about the Janitor at Google who was making $25,000 a year and now is worth more than $15 Million?

I am glad that this Stock Sale is the only thing that people at U*S Airways or People who use U*S Airways are talking about.

WHO cares that a CEO of a Major Company sold stock.

FWIW, very few of the employees are upset over the exec's sale of stock per se. What they are upset about is:

1 - the execs profiting handsomely from the success of the company, and

2 - everyone in "management" (basically those with "supervisor" or "manager" in their title or above) getting a raise, while simultaneously

3 - the peons are told that the company has to be frugal and there's no money for increases.

Why don’t you complain about the Janitor at Google who was making $25,000 a year and now is worth more than $15 Million?

What a concept - everyone gets a piece of the pie. Even the lowest employees.

Jim

2 - everyone in "management" (basically those with "supervisor" or "manager" in their title or above) getting a raise, while simultaneously

3 - the peons are told that the company has to be frugal and there's no money for increases.


I'm not on the inside, but are these raises or option sales? Remember that an option costs the company very little in terms of real cash to issue. A raise, on the other hand, does.


What a concept - everyone gets a piece of the pie. Even the lowest employees.


It's a great concept. Heck, it's great in practice. :D I think PineyBob mentioned something along these lines earlier, but didn't US'East unions decide that they didn't want any of their comp tied to equity performance (options, grants, etc)? Equity is how the janitor at Google, the secretary at Microsoft, lots of folks at WN, etc got their "piece of the pie" - not brow beating management for workrule, wage, and benefit increases. While those increases are nice, equity is where the money is. Management has this figured out. I don't know why it's such a difficult concept for the rank and file.

I think it's safe to say that the utterly massive paycuts endured by the workforce at US East and the utter haircut that every leaseholder, bondholder, and taypayer took in both trips thru Chapter 11 had a lot more to do with survival and thrival of the airline that anything Parker has done.

Parker was the recipient of a business whose fixed costs had been drastically shrunk in bankruptcy in a rising market for the airline industry. Where, exactly, does the impressive accomplishment lie here?

Explain to me again how Parker has anything to do with EITHER trip through BK? (That is, other than ensuring that the second trip didn't end with a Ch 7 liquidation.) Further, unit costs are still on the higher end of the industry, and IIRC US' financial performance in terms of margin was second only to WN. That's pretty impressive considering where this airline was a couple of years ago.

I'm not on the inside, but are these raises or option sales?

"Merit" raises (is it "merit" if everyone at certain levels and above gets them?) The average is 3%, presumably meaning that those at the lower qualifying positions get something smaller and those at the higher qualifying positions get something bigger.

...but didn't US'East unions decide that they didn't want any of their comp tied to equity performance (options, grants, etc)?

Actually, we pilots negotiated a choice - options only or half as many options plus profit sharing. When it was time to let the company know which we wanted, we were told we wouldn't get the extra options in lieu of profit sharing (the investors supposedly insisted) so we took the half options/profit sharing (155 options per pilot at an exercise price of $31+ BTW). As I understand it, the other unions were told that they couldn't have options but most got profit sharing (which ALPA and AFA decided to share with our West collegues).

Jim

"Merit" raises (is it "merit" if everyone at certain levels and above gets them?) The average is 3%, presumably meaning that those at the lower qualifying positions get something smaller and those at the higher qualifying positions get something bigger.

Typically, there's what I'll call a "merit pool." It is spoken from on high what the average will be, and the increase each individual gets is based upon their performance review. Joe average gets 2%. Sally smart gets 4%. The average raise is 3%.

Not certain that this is the way it is at US, but I'd bet that it is pretty close.

Explain to me again how Parker has anything to do with EITHER trip through BK? (That is, other than ensuring that the second trip didn't end with a Ch 7 liquidation.)
I'll take that one......

He didn't. However, he is the one that's telling the run-of-the-mill employees that there's nothing extra for them while awarding raises to those higher up the food chain.

As I explained in another thread, what he's actually saying is that the combined contracts (ALPA East/West, AFA East/West, etc) must be "cost neutral", i.e. the total cost of any group's combined contract must be no more than the sum of the separate contracts for that group.

"Cost neutral" guarantees that one side or the other will have to give up something. So while giving out raises to "management", Parker is insisting on concessions for the peons. That's what's got people up in arms.....

Jim

..."merit pool"...
Thanks - that's an angle I never thought of.

Jim

I think it's safe to say that the utterly massive paycuts endured by the workforce at US East and the utter haircut that every leaseholder, bondholder, and taypayer took in both trips thru Chapter 11 had a lot more to do with survival and thrival of the airline that anything Parker has done.

He should donate it to the bankruptcy judge, who has done much more for shareholders than anyone in either Tempe or formerly in Crystal City.

Parker was the recipient of a business whose fixed costs had been drastically shrunk in bankruptcy in a rising market for the airline industry. Where, exactly, does the impressive accomplishment lie here?
Those option were granted by the HP board, long before the merger. The US investors lost everything, but the HP investors have done quite well. The impressive accomplishment is in seeing the value of combining two troubled airlines, and (so far) making a success of it. Two years ago, most people on this board (including you I think) were claiming that US was completely worthless. Parker had the vision to see otherwise. I imagine if you were a pre-merger HP shareholder, you'd be singing a different tune.

Those option were granted by the HP board, long before the merger.
I'll preface this with the statement that I've not anywhere said that Parker didn't have every right to exercise those options and I'm pretty sure any employee in the same position would have done the same thing.....

That said, the quote is what was said in Parker's letters explaining both his and the other exec's sales. However, it appears that 103,000+ of the 272,000+ shares Parker exercised were granted on Sept 27, 2005 with an exercise price of $12.44 - hardly "long before the merger" (and at a lower price than the outside investors).

It is true that the plan that provided for the grant of those options was in place earlier - it was the 2005 HP plan. I guess "long before" is a relative term.

Jim

However, he is the one that's telling the run-of-the-mill employees that there's nothing extra for them while awarding raises to those higher up the food chain.


As a matter of course, I wonder what the pay of those "higher ups" looks like relative to their peer groups? Remember, the non-union folks CAN up and quit and not have to "start over" at the bottom of the food chain. So, if an FA (for example) can't go anywhere else and make more than $x whereas a finance guy can go somewhere and make $y + 10% it's a clear decision where to send that money. Whether it's FAIR, is another story, but that's the double edge sword of the way union contracts tend to be written.

(note that I'm not meaning to bash unions here, just to point out the downside of their particular pay structure)


As I explained in another thread, what he's actually saying is that the combined contracts (ALPA East/West, AFA East/West, etc) must be "cost neutral", i.e. the total cost of any group's combined contract must be no more than the sum of the separate contracts for that group.

"Cost neutral" guarantees that one side or the other will have to give up something. So while giving out raises to "management", Parker is insisting on concessions for the peons. That's what's got people up in arms.....


I think this is a case of glass-half-full vs glass-half-empty. Now, I don't know the specifics of it, but cost-neutral doesn't have to equal a "concession". Both work groups have certain sets of benefits but the company cannot keep them all. IIRC, that's one of the boneheaded moves they did with the PI merger. So, "labor" gets to choose which benefits they want. If the new deal is truly cost neutral, then the size of the pie stays the same (no concessions or gains). The side that gives something up should also see a gain on the other side. If I lose a week of vacation, but gain 3 personal days and a little more cash, is that really so bad?

Of course, if what they're doing is calling it cost neutral and then applying the infamous new=min(HP,US) formula, then they're full of shiite and should be called on it.

I don't disagree with the first part - as long as there has been turnover indicating the need for better wages. Of course, there's turnover in some of the union jobs too - it's reported that less than half of the new rampers hired stay a month. Maybe paying "competitive" rates would be a good idea all around....

On the second part, I can only give details about the ALPA contracts since I'm not that familiar with the other East contracts, much less the West.

Parker has publically said that the West ALPA contract is more expensive than the East. So putting everyone on the West contract would be "cost plus". Likewise, putting everyone on the East contract would be "cost minus" (though Parker has said that's exactly what they'll do if agreement isn't reached on a combined contract).

"Cost neutral" means East & West meet somewhere in the middle. Sure, the total cost is the same as before. Now try telling the West pilots, who end up with a worse contract than they started with, that they haven't given up something.

And I sure didn't see "cost neutral" in reference to the "management" raises. Anyone really think they'll give raises to those that merit them by taking it from the paychecks of the slackers? Now that'd be "cost neutral".....

Jim

Explain to me again how Parker has anything to do with EITHER trip through BK?

He was the recipient of the result. And that's all he's really accomplished--which is exactly the point I'm making.

Those option were granted by the HP board, long before the merger. The US investors lost everything, but the HP investors have done quite well. The impressive accomplishment is in seeing the value of combining two troubled airlines, and (so far) making a success of it. Two years ago, most people on this board (including you I think) were claiming that US was completely worthless. Parker had the vision to see otherwise. I imagine if you were a pre-merger HP shareholder, you'd be singing a different tune.

At the time of the merger, US was essentially worthless. In fact, the "worth" is still largely on paper and purely a result of capacity reduction. What's the plan once that ends? Note you don't hear one from Parker, largely because his only move is to try and buy somebody else to remove capacity. One. Trick. Pony.

And let's be real: Seabury cooked up the idea for the merger. Parker was looking around. Congrats to the Oracle of Temple for sucessfully leading himself to water and drinking it.

I'm happy enough as a pre-merger (and pre-BK II) US shareholder. Shorted it into oblivion and made a pile. Other than that, I don't (and won't) own airline stocks. As an aside--in a few years (once the shrinkage runs it's course) you can repeat that exercise on LCC for fun and profit.

At the time of the merger, US was essentially worthless. In fact, the "worth" is still largely on paper and purely a result of capacity reduction. What's the plan once that ends? Note you don't hear one from Parker, largely because his only move is to try and buy somebody else to remove capacity. One. Trick. Pony.

And let's be real: Seabury cooked up the idea for the merger. Parker was looking around. Congrats to the Oracle of Temple for sucessfully leading himself to water and drinking it.

I'm happy enough as a pre-merger (and pre-BK II) US shareholder. Shorted it into oblivion and made a pile. Other than that, I don't (and won't) own airline stocks. As an aside--in a few years (once the shrinkage runs it's course) you can repeat that exercise on LCC for fun and profit.
You've been making these claims for quite a while now. At some point, you may need to eat some crow. No offense, but so far you've been wrong far more often than you've been right. Maybe it's time to stop underestimating Parker?

He's turned a failed airline and a troubled airline into one of the 3 most profitable airlines in the country. I'm not sure exactly what more you're looking for. Maybe you just don't want to admit you misjudged?

FWIW, very few of the employees are upset over the exec's sale of stock per se. What they are upset about is:

1 - the execs profiting handsomely from the success of the company, and

2 - everyone in "management" (basically those with "supervisor" or "manager" in their title or above) getting a raise, while simultaneously

3 - the peons are told that the company has to be frugal and there's no money for increases.



What a concept - everyone gets a piece of the pie. Even the lowest employees.

Jim


Jim - I agree with you that Management needs to rememeber who they came to the dance with!

It is pretty sad that new hires off the street make more money than some associates who have been there for 5 years!

I don't disagree with the first part - as long as there has been turnover indicating the need for better wages. Of course, there's turnover in some of the union jobs too - it's reported that less than half of the new rampers hired stay a month. Maybe paying "competitive" rates would be a good idea all around....


I agree with you here, Jim. Perhaps the answer to the labor pay scale is much like the fare structure. You can't cut it everywhere, but you sure as heck can compress it. The downside is that punishes those who've invested the most. Perhaps there's a creative solution of "grandfathering" some of those folks. The new guys lose nothing if they quit, and they often do, apperently. A ramper is worth more than 8 bucks and hour, but probably not worth anything close to the top of the scale either.

The cost issue isn't with the lower end rampers any more that it is with the first year Dash pilots, and it's unfair, IMHO, to ding them as if it were.


"Cost neutral" means East & West meet somewhere in the middle. Sure, the total cost is the same as before. Now try telling the West pilots, who end up with a worse contract than they started with, that they haven't given up something.


Some win, some lose - it's not exactly a bad deal for the bulk of the pilots, but it sure as heck isn't a recipe for labor happiness. Some creative thinking could probably carry the day on this one, but it's Sunday and I'm not wearing my consulting hat today.. :D


And I sure didn't see "cost neutral" in reference to the "management" raises. Anyone really think they'll give raises to those that merit them by taking it from the paychecks of the slackers? Now that'd be "cost neutral".....


It's not really, but it isn't exactly a huge sum either. Do labor contracts have some sort of COLA written in? A 3% average merit pool has the effect of paying performers while effectively decreasing the salary (in terms of buying power) of the slackers. How is managemenr playing cost neutral in regards to inflation?

He was the recipient of the result. And that's all he's really accomplished--which is exactly the point I'm making.

... and the peformance of that result continues to improve. At a much faster rate than the much-ballyhoo'd UA, I might add. Ya may not like him, but he's got this ship pointed in the right direction and continues to build steam.

Some win, some lose - it's not exactly a bad deal for the bulk of the pilots, but it sure as heck isn't a recipe for labor happiness.
Since the bulk of the pilots (60-65% or so) are on the East side, which would see more improvements given the contracts going in, you're right. But as you say, it'd be hard to convince the HP pilots that since the total pie is the same size they didn't lose anything.

How is managemenr playing cost neutral in regards to inflation?
Traditionally, most contracts don't have COLA raises. What they have is longevity raises for a certain number of years - 11 in the case of our East pilot contract.

Major carrier pilot contracts are kinda wierd - the first year is probation with very low (relatively speaking) pay so there's a big jump after 1 year. After that, the longevity raise is the same dollar amount regardless of position/equipment. Percentage wise, it works out to between 0.6% and 1.2% depending on equipment/position. Of course, our junior pilot has 17 years so no East pilot is getting longevity raises.

For any of the groups, once the longevity raises stop - the so-called Top of Scale - there's no automatic raises.

Then there's the concessionary agreements from BK2. I understand that the IAM and AFA negotiated small raises over the course of those agreements - 1% or so - but I'm not sure if that's every year or not. We pilot's weren't so lucky (or had as good negotiators, or caved in too early, etc).

So overall, it's a mixed bag.

Jim

While I haven't seen the letter that is supposed to have gone to "management" employees concerning the 3% merit raise, apparently AFA council 66 (PHX) has and this is from their web-site.

Jim
-----

Additionally, Parker announced to management employees that West Grade 23 and above employees; East Management Salary Plan (MSP), employees; and, employees covered by the crew schedulers' pay scales will be eligible for merit raises this fall.

In a letter to these employees Parker says; "The past year has been more challenging -and more successful- than many of us anticipated going into the US Airways/America West merger. Today, we're on track for a profitable 2006, even with transition-related expenses and with continued high fuel costs and that is good news.

With that, I'm pleased to report that we will implement annual 3% merit pay increases for non-contract employees this fall. Contract employees, as you know, have their annual pay increases implemented as part of their contracts.

The increases will average 3% for West employees in positions at grade 23 through the managing director level, and East employees in the Management/Salaried Plan (MSP) through the managing director level.

I'm delighted that we're in a position to offer increases. We have a lot of challenges ahead, but I'm optimistic that we're up to meeting and exceeding our customers' expectations." Parker states.

You've been making these claims for quite a while now. At some point, you may need to eat some crow. No offense, but so far you've been wrong far more often than you've been right.

I predicted BK I and BK II. The slaughtering of benefits. I've been right about the decline of US since before you joined FT.

Maybe it's time to stop underestimating Parker?

He's turned a failed airline and a troubled airline into one of the 3 most profitable airlines in the country.

I'm assuming that you are familiar with the idea of a demand curve, right? And fixed costs?

Parker inherited an airline (US East) whose fixed costs had been slashed to the bone by a bankruptcy court (not by any real business acumen on Parker's part) and a shrinking fleet count. In an era of increased demand, the entitiy is now making money.

Wow. A stunning achievement. You are aware that if the kid selling lemonade buys the stand down the street and downsizes it that the same thing will happen, right?

United, AA, CO all made money in the quarter. US (and any legacy not in BK) being profitable in an era where you have pre-9/11 demand with a third less airframes in the sky is just not fiscally impressive. I'll be impressed when US makes money in a down market and/or does so consistantly after it's fleet stops shrinking (since given raising demand and a shrinking fleet, you'd have to really screw it up to lose money).

I've seen "station integration" under Parker where you have two giant lines (one for PIT/PHL/CLT and the other for PHX/LAS) where even elite folks are unsure where to go. I've seen the absolute mess that was the website integration. I'm popping the popcorn in expectation of what will happen upon integrating sabre and shares. In short, absent saying "sure, buy it" I've yet to see any specific action that Parker undertook (not inherited like the slashed costs) to drastically impact the bottom line. Can you cite some examples?

I'm not sure exactly what more you're looking for. Maybe you just don't want to admit you misjudged?

How? They make money for a whopping one quarter in the best economy the segment has seen in 5 years? I've been around these parts just a bit longer and know to have a more pragmatic view of such things.

... and the peformance of that result continues to improve. At a much faster rate than the much-ballyhoo'd UA, I might add. Ya may not like him, but he's got this ship pointed in the right direction and continues to build steam.

Sure. He's still parking planes.

"Parker." Get it?

You've been making these claims for quite a while now. At some point, you may need to eat some crow. No offense, but so far you've been wrong far more often than you've been right. Maybe it's time to stop underestimating Parker?

He's turned a failed airline and a troubled airline into one of the 3 most profitable airlines in the country. I'm not sure exactly what more you're looking for. Maybe you just don't want to admit you misjudged?

CB4 and I agree on this one. There is no crow yet. US and Parker are simply failures in progress, on the installment plan, with a devout following of small numbers of people who cannot decipher failure in advance of the final curtain. The numbers and the conclusions of employees and customers, en masse, are just now beginning to manifest themselves. The crow has not yet been served, but it will be.

I predicted BK I and BK II. The slaughtering of benefits. I've been right about the decline of US since before you joined FT.
You also predicted Ch 7, no merger would happen, ATSB would regret a merger, HP would regret a merger, etc.

I'm assuming that you are familiar with the idea of a demand curve, right? And fixed costs?

Parker inherited an airline (US East) whose fixed costs had been slashed to the bone by a bankruptcy court (not by any real business acumen on Parker's part) and a shrinking fleet count. In an era of increased demand, the entitiy is now making money.

Wow. A stunning achievement. You are aware that if the kid selling lemonade buys the stand down the street and downsizes it that the same thing will happen, right?

United, AA, CO all made money in the quarter. US (and any legacy not in BK) being profitable in an era where you have pre-9/11 demand with a third less airframes in the sky is just not fiscally impressive. I'll be impressed when US makes money in a down market and/or does so consistantly after it's fleet stops shrinking (since given raising demand and a shrinking fleet, you'd have to really screw it up to lose money).
All the airlines you mentioned are competing in the same market, selling what amounts to a commodity. Here's some numbers for you:
US 305M/3.19B
AA 291M/6B
CO 198M/3.51B
UA 119M/5.11B
So what's not fiscally impressive about making more money on less revenue than the other 3 legacies that aren't in bankruptcy? Which one of those companies seems most likely to be profitable during a downturn? Which seems least likely? And by the way, the fleet has stopped shrinking. It's 357 now, and expected to be 360 at the end of the year. Do you think they'll be profitable this quarter? Next quarter? How many does it take before you admit that Parker knows how to run an airline?

I've seen "station integration" under Parker where you have two giant lines (one for PIT/PHL/CLT and the other for PHX/LAS) where even elite folks are unsure where to go. I've seen the absolute mess that was the website integration. I'm popping the popcorn in expectation of what will happen upon integrating sabre and shares. In short, absent saying "sure, buy it" I've yet to see any specific action that Parker undertook (not inherited like the slashed costs) to drastically impact the bottom line. Can you cite some examples?

How? They make money for a whopping one quarter in the best economy the segment has seen in 5 years? I've been around these parts just a bit longer and know to have a more pragmatic view of such things.
You don't have a pragmatic view, you have blinders on. I'm not able to cite a specific Parker action - I have no clue what the guy does all day. All I can say is the proof is in the pudding. They're making more money than the others while in mid-merger with a semi-functional website.

And don't undersell the importance of saying "sure, buy it". Most of the armchair CEOs on this board - including you - thought it was a terrible idea. It took a lot of guts to pull the trigger, and a good track record to find the financing.

Sure. He's still parking planes.

"Parker." Get it?
No, he's not.

You also predicted Ch 7, no merger would happen, ATSB would regret a merger, HP would regret a merger, etc.

Given that nothing but the name has merged, it's a bit early to call it anything. That said, HP will regret the merger and while the ATSB might not regret the merger the PBGC surely did.

Wait--that's right! None of the hard/difficult/expensive things have actually been merged yet, but the easy cost cuts have been done. Perhaps (maybe), the realist view has some meaning--where is l4pi when I really need him.


All the airlines you mentioned are competing in the same market, selling what amounts to a commodity. Here's some numbers for you:
US 305M/3.19B
AA 291M/6B
CO 198M/3.51B
UA 119M/5.11B
So what's not fiscally impressive about making more money on less revenue than the other 3 legacies that aren't in bankruptcy?

Besides the fact that two of them did not have the benefit of a bankruptcy to drive out their costs?

*rimshot*

That's right: neither CO nor AA had the benefit of screwing their creditors and bondholders and taypaying friends--although they all had a shot at their employees (albeit not with the judge's gavel ready to drop).

If you consider cost-reduction thru Chapter 11 to be brilliant business acumen (or, in reality being the recipient thereof in Parker's case) more power to you.



And by the way, the fleet has stopped shrinking. It's 357 now, and expected to be 360 at the end of the year.

359 to 357 at the end of Q3. And those EMB-190 deliveries are going to start rolling in just before leases start coming up on 737s (a larger airplane). Care to speculate on what happens then?

For the period YTD, btw, capacity has dropped 10 percent (http://biz.yahoo.com/ap/060804/us_airways_traffic.html?.v=1).

Do you think they'll be profitable this quarter? Next quarter? How many does it take before you admit that Parker knows how to run an airline?

When he actually takes an action that materially improves the financial health of the airline. He's basically got nothing to show at this point. Except the website. And some of the "combined" operations.

You don't have a pragmatic view, you have blinders on.

Au contraire. I'm not jumping for joy after 1 decent quarter in an industry where even the dogs had a decent quarter.

Performance is outperforming a peer group of companies and outgrowing one's end markets over time. US has never done neither. There is but one airline who has consistantly done it. US ain't it.

I'm not able to cite a specific Parker action - I have no clue what the guy does all day.

This is not a coincidence.

All I can say is the proof is in the pudding. They're making more money than the others while in mid-merger with a semi-functional website.

They had two bankruptcies and have had a larger percentage of shrink than any other legacy preceeding a huge industry upswing. Pure genius, I say.

And don't undersell the importance of saying "sure, buy it". Most of the armchair CEOs on this board - including you - thought it was a terrible idea. It took a lot of guts to pull the trigger, and a good track record to find the financing.

The trigger was going to be pulled regardless (remember Texas Pacific)? Bonderman and Seabury deserve the credit for that move.

But that's okay--my personal portfolio has outperformed US by a factor of infinity (since East's equity was wiped twice) and HP's stock over time by a few hundred percent. Unlike our good friend (PF and the various dupes he's drummed up) I'm not that much of a short kind of guy (although US was just too easy between the bankruptcies). And as a long guy, LCC is just not that attractive (in their defense, I would not put money on any airline at the current time).

No, he's not.

http://biz.yahoo.com/ap/060804/us_airways_traffic.html?.v=1

Really? Lots of broken seats this year?

From the Q2 10-Q:

Mainline operating expenses were $1.42 billion for the second quarter of 2006, a decrease of $4 million, or 0.3%, as compared to 2005, on a capacity decrease, measured by ASMs, of 12.8%

I don't fly a lot on US metal, much less US mainline metal as much as I used to, but that would seem to indicate that either there are fewer jets flying around and/or they are having the IAM guys placard out a whole ton of seats.

I'm certainly not as adament as Clue (and as an employee/soon to be ex-employee hope he's wrong), but if you look "behind the curtain" there are some troubling trends.....

As I said in another thread, we're in a period in the industry where "a rising tide lifts all ships". Just saying "look at how high the US ship is!" is well and good, but one needs to examine why to determine if it's a permanent condition or not.

Capacity - all airlines are benefiting from reduced capacity (which allows for both higher fares and load factors). Which legacy airline reduced capacity the most? US - East. Add in FlyI ceasing operations and DL's current BK, and the biggest capacity reduction occured on the east coast. And where was most of that industry-leading profit earned? US-East contributed about 3/4 of it.

Speaking of load factors, which legacy had the lowest LF? Despite having shrunk the most, benefiting from FlyI's demise, and now having a carrier in BK in our backyard, US-East lagged in LF. The LF increases US-East has seen are driven by shrinkage - we've lost less passengers than we've shed seats. Will the passenger drain stop now that we're not shedding seats? From comments on F/T, it appears to be a valid question, at least when it comes to the higher yield passenger.

Parker even admits that things will be more difficult going forward. RASM comparisons will fall in line with the industry as we aren't comparing to a period when "old" US was selling "desperation" fares. The industry capacity reductions have pretty much run their course (short of some big economic/industry shock). Any wonder that Parker is making noises about another merger with a BK carrier? It's much easier to use BK for another round of capacity reductions, using the US playbook all over again.

Jim

The debat eof capcity cutting to drive yields could go around and around, but in essence most "legacy" carriers are pulling the same trick: Cut domestic, add int'l.

One thing that I have noticed more at US than others is that there aren't too many rock bottom fares. I can still go transcon on AA for ~$200 for the weekend. No such luck on US. They could probably drive more pax and load by cutting the bottom end, but Parker chooses not to.

Essentially, since the merger they've decided that it's better to not sell a dollar, than it is to sell that dollar for fifty cents. Something old US East management never quite got. Point Parker.

Given that nothing but the name has merged, it's a bit early to call it anything. That said, HP will regret the merger and while the ATSB might not regret the merger the PBGC surely did.
Why?

Wait--that's right! None of the hard/difficult/expensive things have actually been merged yet, but the easy cost cuts have been done. Perhaps (maybe), the realist view has some meaning--where is l4pi when I really need him.

Besides the fact that two of them did not have the benefit of a bankruptcy to drive out their costs?

*rimshot*

That's right: neither CO nor AA had the benefit of screwing their creditors and bondholders and taypaying friends--although they all had a shot at their employees (albeit not with the judge's gavel ready to drop).

If you consider cost-reduction thru Chapter 11 to be brilliant business acumen (or, in reality being the recipient thereof in Parker's case) more power to you.
The business acumen lies in realizing US was an attractive merger target because of all that cost cutting. In hindsight it may seem obvious, but at thee time most thought there was no point in mergering with US - you could pick up the pieces in Ch 7. Parker realized that the completely screwed up US had a cost advantage that made a merger worthwhile.

359 to 357 at the end of Q3. And those EMB-190 deliveries are going to start rolling in just before leases start coming up on 737s (a larger airplane). Care to speculate on what happens then?

For the period YTD, btw, capacity has dropped 10 percent (http://biz.yahoo.com/ap/060804/us_airways_traffic.html?.v=1).
According to the last 8k (http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0000950124-06-003657&Type=HTML), the fleet is no longer shrinking. I believe on the last call he said the 737s would be staying, though I can't find a cite.



When he actually takes an action that materially improves the financial health of the airline. He's basically got nothing to show at this point. Except the website. And some of the "combined" operations.
Well, he's got much improved ops numbers. And, of course, much improved financials.

They had two bankruptcies and have had a larger percentage of shrink than any other legacy preceeding a huge industry upswing. Pure genius, I say.
You blame Parker for the bankruptcies?



The trigger was going to be pulled regardless (remember Texas Pacific)? Bonderman and Seabury deserve the credit for that move.
Says who?

But that's okay--my personal portfolio has outperformed US by a factor of infinity (since East's equity was wiped twice) and HP's stock over time by a few hundred percent.
Over what time? The past year? If so, I'd love to hire you.


Unlike our good friend (PF and the various dupes he's drummed up) I'm not that much of a short kind of guy (although US was just too easy between the bankruptcies). And as a long guy, LCC is just not that attractive (in their defense, I would not put money on any airline at the current time).
I wouldn't either. The airline business scares me. US appears to be the best of a bad lot though.

http://biz.yahoo.com/ap/060804/us_airways_traffic.html?.v=1

Really? Lots of broken seats this year?

From the Q2 10-Q:



I don't fly a lot on US metal, much less US mainline metal as much as I used to, but that would seem to indicate that either there are fewer jets flying around and/or they are having the IAM guys placard out a whole ton of seats.
Your original phrase was "He's still parking planes.". If he's still doing it, the quarterly numbers should be changing. Comparing to last year is meaningless in terms of "still".

Wow, Cluebyfour, you are one angry moderator. You seem to have so much hate built up for USAir? Whats the deal?


Ken in Phx

Actually, he tried to explain. This is from US Aviation (http://www.usaviation.com/forums/index.php?showtopic=30139):

Lastly, please understand that while these stock option exercises/sales will result in some meaningful cash payments to me, no cash comes from US Airways.

That thread at usaviation is full of histrionics, but the problem, as I see it, is that he's demanding "cost-neutral" merged contracts, which means either East or West has to make concessions. Asking (for example) West FAs to give up a week of vacation, or East FAs to take a pay cut when he's cashing a check for $9M is tough.

You're both right, though. There's never really a good time to do this sort of thing, employee relation-wise.

There isn't. He is making the situation worse by that outright lie, no cash came from US Airways...

of course it did. it's opportunity cost. US could have issued a new share for $44 in today's market, but instead they wrote a contract with Mr Parker and so issued a new share to him for between $6 and $29. Repeat the process 272,000 times...

His cash in pocket does come from outsiders, true enough, but it is all cash that could have become capital for the company. Instead, that money is compensation in his pocket--no more no less. From a cash flow point of view it is indistinguishable from the firm issuing a share today at 44 and writing him a check for the difference between 44 and his exercise price. He must think the unions fools to swallow such voodoo economics as he's peddling.

So why do it the option way? taxes... but that's another story for another day...

Wow, Cluebyfour, you are one angry moderator. You seem to have so much hate built up for USAir? Whats the deal?


Somebody (I think longingforpiedmont) said it best: I love the frontline folks (and that's about where it ends). CCY drove the airline into the ground, and Tempe is getting way too much credit way early for "saving it." They (tempe) are also killing the last of the VFF benefits and trashing (trashed) the DM program.

If you enjoy a reduction in VFF benefits (as a VFF) and enjoy not seeing the reduction in fares that one would at least expect with a reduction in service--by all means--cheerlead for Tempe.

..by all means--cheerlead for Tempe.

Do you see me cheerleading for the brass at USair/AWA?

They are an airline, which means they are flawed to start out with. I dont see USAir doing anything different than the others, so why all the nastiness? IMO, DM stunk before AWA took them over. I just cant believe you cant/wont give Parker any credit so far. Just seems like you cant/wont be positive about the company in any situation. So everything is bad and wrong with them and NOTHING is good? Seems a little skewed IMO.

Ken in Phx

Same question as to the previous poster: Above and beyond buying the airline (which Seabury financed), what has Parker done? He inherited the low costs. What great action has been taken?

*crickets*

The acromony that comes from merging two union shops seems to be missing. Parker had a good reputation for working with HP's unions and I see the same going on with US East. Is everyone happy? No. Does every employee think Parker is the Cat's Meow? No.

But compare the situation with those of other airline CEOs. WN and CO have similar successes, but they also have had CEOs generally recognized as having good performance. AA, UA, NW (!!!) etc have had nothing but problems with their unions.

I'd hate to think about the situation if the US legacy clowns took over.

Same question as to the previous poster: Above and beyond buying the airline (which Seabury financed), what has Parker done? He inherited the low costs. What great action has been taken?

*crickets*
That's the exact same answer I received to the question I posed earlier: Why doesn't Parker get credit for the merger? You said "The trigger was going to be pulled regardless (remember Texas Pacific)? Bonderman and Seabury deserve the credit for that move." Can you back up this assertion?

The acromony that comes from merging two union shops seems to be missing.

under-reported of late, yes. missing, no way.

the flight attendant union groups have already been through a round of disputes that will lead to years of bitterness, and the ground crew union groups have come to physical blows already. http://www.eastvalleytribune.com/index.php?sty=67956

pile onto that management's "worst of both worlds" policy for combining contract terms, and acrimony doesn't begin to describe what is in store.

The acromony that comes from merging two union shops seems to be missing. Parker had a good reputation for working with HP's unions and I see the same going on with US East. Is everyone happy? No. Does every employee think Parker is the Cat's Meow? No.

Umm, they have not merged anything yet. Two certificates and multiple contracts. BTW, Parker has threatened to try to unilaterally implement one side's contract on the other, particularly since the west groups had contract openers coming up. How do you see that playing out?

But compare the situation with those of other airline CEOs. WN and CO have similar successes, but they also have had CEOs generally recognized as having good performance. AA, UA, NW (!!!) etc have had nothing but problems with their unions.

WN had had 32 years of success. Parker has had, what, 2 quarters? Let's not compare apples to oranges.

I'd hate to think about the situation if the US legacy clowns took over.

On that we agree. In spades.