US Airways Dividend Miles (Pre-FlightFund Merger) - Santorum blames union leaders for US Airways filing

Finally Rick and I agree on something:

http://www.philly.com/mld/inquirer/business/9664713.htm
(Free but registration is required)

Santorum blames union leaders for US Airways filing

"What we're seeing is the worst of the old Pennsylvania, and I'm very upset by it," he said after meeting with the CEO.

By Thomas Ginsberg

Inquirer Staff Writer



US Airways' troubles hit the political arena yesterday, with U.S. Sen. Rick Santorum accusing four individual union leaders of pushing the airline into bankruptcy by blocking a new cost-cutting contract.

"These four individuals decided they were going to take this airline down, and they did," Santorum told reporters in Washington after he and fellow Republican Sen. Arlen Specter met privately with the airline's chief executive officer.

"What we're seeing is the worst of the old Pennsylvania, and I'm very upset by it," Santorum said, referring to the days of dominance by labor unions.

Two of the union leaders who could be reached for comment blasted back at Santorum, one saying derisively, "That's Santorum, a Republican."

Pennsylvania is a major base of US Airways' operations and a key swing state in the presidential election.

The comments came two days after US Airways Group Inc. filed for Chapter 11 bankruptcy protection, after the company failed to reach its target of $800 million in labor-cost cuts from its unions, part of $1.5 billion in reductions it said it needed to avoid bankruptcy.

The airline had banked on getting a deal first with the Air Line Pilots Association for $295 million in concessions. But it was blocked in a procedural vote by the pilots' 12-member executive council.

The four council members, who effectively control the council because they represent a majority of US Airways pilots based in Pittsburgh and Philadelphia, voted on Sept. 6 against sending the proposal to members for a vote, calling the givebacks too steep.

Six days later, US Airways made its bankruptcy filing in U.S. Bankruptcy Court for the Eastern District of Virginia. It since has won temporary approval to use part of a $1 billion federal loan to keep operating.

Until now, politicians have been involved in US Airways' troubles largely behind the scenes. None has called for more government intervention, with the airline already surviving on a $900 million loan guarantee from the federal Air Transportation Stabilization Board, created after the 9/11 attacks to help struggling airlines.

But Santorum and Specter spoke out after meeting with US Airways CEO Bruce R. Lakefield, getting an update on the situation that could have severe impact in their home state, where the airline has major operations in Philadelphia and Pittsburgh. Lakefield did not appear at the news conference.

Specter urged both sides to work out a deal to save the airline and its 27,000 U.S. jobs, including about 13,000 in Pennsylvania.

"It's a very sad situation, but there are still a number of moves to be made," Specter said. "Before coming to any conclusions on these four, they ought to have an opportunity to express themselves. I'm prepared to say an effort will be made to talk to them."

Fred Freshwater, one of the Pittsburgh representatives of US Airways pilots who voted against the contract deal, blasted Santorum in an interview.

"I'm incensed. I think its unconscionable that Sen. Santorum would use his station as a bully-pulpit to vilify the four Pennsylvania representatives who voted the wishes of their members and stood strong against this company's incessant attempt to bust the unions."

Freshwater added: "Santorum has chosen to buy into one side of the issue, which is the company's side... . The senator has never called me to find out my stance, yet he is attempting to guess at my motives."

Asked whether the four union leaders were responsible for the bankruptcy filing, Freshwater said: "I would say the company's proposals are the total impasse. They're seeking the total capitulation of labor."

One of the Philadelphia-based pilots, John Crocker, dismissed Santorum as merely a "Republican" in blaming unions for a corporation's problems.

"That's just to be expected from him," Crocker said.

U.S. Rep. Joseph M. Hoeffel, a Democrat who is challenging Specter in November, put out a statement minutes after the news conference blaming the Republicans and Bush administration economic policies for US Airways' woes.

"Whatever the structural problems facing our airline industry, Senator Specter and Santorum's shared support for a failed Bush-Cheney economic agenda has done real damage to many industries," Hoeffel said.

Santorum, in his comments, stated: "The fact that there was no pilot contract led to this bankruptcy."

However, US Airways spokesman David Castelveter reiterated that the company needed agreements with all unions, not just the pilots, to avoid bankruptcy. "The fact that we had no labor agreements in place led to this filing," Castelveter said.

In its filing, US Airways said it misjudged changes in the airline industry but now all employees must take part in saving the airline. To do that, it must now ask for additional huge concessions from its employees, who already have agreed to give up $1.2 billion in pay and benefits since 2002.

"The price of continuing to try to live up to the terms of the old bargains, struck in a different competitive market, is certain liquidation," the company said.

The company may ask the judge to impose a new contract on workers but only after it shows it tried to negotiate in good faith. No talks were scheduled yesterday, although the company said it has been in touch informally with the unions.

US Airways said yesterday that its shares would no longer be traded on the Nasdaq Stock Market as of next Wednesday. Shares may still be traded over-the-counter, the company said. ^

Thanks for the post.

I agree with Sen. Santorum's thought that a group of four individuals have over-stepped their authority by denying a vote to their membership.

It puzzles me that if these guys are certain that the US proposal is blatantly unacceptable, that they do not trust their own membership to vote accordingly. A no vote by rank and file is at least more useful to the scope of negotaitons than this sort of clandestine Bolshevik committee of four.

Then again, these pilot reps partly answer this question when one reads their comments which are pure political rhetoric blaming one political party. Of course it doesn't take long for other politicians to chime in as well -- I guess this confirms that it's an election year.

Unfortunately for US, these are times when honest folks need to step forward with earnest talk. Although Santorum is a politician, he does raise a valid point about the pilots' negotiating team. Is anybody listening?

Barry

The Pilot membership voted to allow a group of their reps decide whether or not to send a tentative agreement for ratification. While it's sad that the proposal wasn't passed back to them, this is what the membership majority wanted in their leadership.

I've read it from both sides on usaviation.com. One group of pilots is incensed that they weren't given the opportunity to vote. Another group says the reps did the right thing because they're certain the proposal would have failed.

The Pilot membership voted to allow a group of their reps decide whether or not to send a tentative agreement for ratification . . .this is what the membership majority wanted in their leadership. . . .

Yes, sad, but true. It's unfortunate given that the present situation that US and other majors are in requires thinking outside of the traditional negotiating model where in-your-face rhetoric was part and parcel of "the labor game".

It places US in the position of allowing Courts to determine one's fate instead of the collective actions and efforts of employees and management. I don't see either side winning when one turns to the uncertain winds of courts and creditors for a solution. There's a real chance that this thing won't work and there's no lifeline for US this time.

In truth, this entire aviation mess demonstrates that managers have either been too slow to adapt, or they underestimate the sort of changes necessary while unions live in the past where a more elastic market place left lots of room for back room politics and angry procedural posturing. There were always "good times" on the horizon which absorbed all of the cost inefficiencies created by both lacksadasical management and recalcitrant unions.

Those days are gone, and we pax are in limbo while union factions maneuver for majorities and the clock ticks down on the airline's viability. Let's hope that all voices are heard and something positive comes from all of this.

Barry

Santorum has a lot of hutzpah pointing his finger at the parties involved when the government itself clearly has a large role in the current disasterous state of affairs in the airline industry. The Wall Street Journal today has an excellent editorial concerning the US Airways situation. I think it's about time to start looking at some serious government reform of its own policies. It's utterly crazy now.

Yeah, we can always count on Rick Santorum to provide the objective voice of reason :rolleyes:

I'm frankly just surprised he didn't blame the bankruptcy on gays or a lack of school prayer.

I think the unions deserve some (NOT all) of the blame for US's problems its fair to say there is enough blame to go around. Over the years management has demonstrated about as much foresight as Ray Charles had eyesight.

There is enough blame to go around, management should have done a better job strategically and the unions at US and all of the other legacy carriers deserve some blame for not realizing the differences in pay scale and work flexibility between them and the LCCs.

Santorum is a lap dog for the Bush administration and an embarasment to Pennsylvania. Four pilots and their union didn't bring US to BK again. No matter what your opinion is about the cause, it wasn't only one action/inaction. :mad:

Santorum is a lap dog for the Bush administration and an embarasment to Pennsylvania. Four pilots and their union didn't bring US to BK again. No matter what your opinion is about the cause, it wasn't only one action/inaction. :mad:


Whoa! I didn't say that four pilots single handedly brought down US. I think any intellectually honest person can find fault all over the place at US. That means management and the unions.

Maybe Senator Prude should take a look at US's route map

http://www.usairways.com/travel/maps/route/us_east_coast.htm

Gee, does having 25 cities in PA have anything to do with why the airline failed? How about 3 hubs within 100 miles of one another?

Whoa! I didn't say that four pilots single handedly brought down US. I think any intellectually honest person can find fault all over the place at US. That means management and the unions.

Not really - US is unique among the legacy in the fact that nearly all of its problems can be directly attributed to bad management decisions. With the obvious exception of the present, whenever US' unions have been asked to give, they have given.

"Gee, does having 25 cities in PA have anything to do with why the airline failed? How about 3 hubs within 100 miles of one another?"

Actually, US serves 16 cities in PA. It is true that most of their destinations are concentrated in eastern states whose populations total ~150 million.

Actually, US now only has two hubs about ~600 miles apart. Not too bad for regions with such high concentrations of population.

Gee, does having 25 cities in PA have anything to do with why the airline failed?

I count 15. Name the other 10.



How about 3 hubs within 100 miles of one another?

Name them.

(to help you out:
PIT-PHL - 268
PIT-CLT - 366
PHL-CLT - 448
won't bother with MIA

Whoa! I didn't say that four pilots single handedly brought down US. I think any intellectually honest person can find fault all over the place at US. That means management and the unions.


' "These four individuals decided they were going to take this airline down, and they did," Santorum told reporters in Washington after he and fellow Republican Sen. Arlen Specter met privately with the airline's chief executive officer.'

I don't disagree that any "intellectually honest person" can find fault eveywhere....however Senator Santorum sees it differently.

The problem with US Airways has to do with their cost structure and new competition from the discount airlines.

Rick is correct!

Not really - US is unique among the legacy in the fact that nearly all of its problems can be directly attributed to bad management decisions. With the obvious exception of the present, whenever US' unions have been asked to give, they have given.



Here is just one reason for why I lay some of the blame on labor; unions for years were in the business of asking for more while looking to provide less. If we're going to fault management for lacking vision we should fault labor for lacking the vision to know that ever higher wages were unsustainable in the face of competition from LCC's. True leaders have to make tough choices and at some point in time union leadership should have realized they were asking for too much.

The only problem with that is once union leadership tells membership the wages they are being paid are unsustainable and during the next contract negotiation they are going to suggest a wage decrease in order to protect the long term viability of the airline the leadership will be tossed out and the rank and file will realize the charade is up.

The point that wins the day is that the Pilot Representatives could not KNOW the membership would have rejected the offer. They should have given the membership the chance to be heard. If the membership rejected it, then let the chips fall where they may.

But I suspect these PA Reps were afraid the pilots would accept it.

At this point, the unions may have decided that they're chances are better in court.

If they do what US management asks, it means pay and benefit cuts. They did that last time, and US still filed again some twelve months later. Why? Because management didn't try to get cost reductions and efficiencies out of operations. They figured they'd make $1.5 billion more in revenue then they did and so they just wanted to cut labor costs and figured they'd be okay.

Well, revenue was short $1.5 billion and fuel prices climbed far faster then they expected. So now they want to extract another billion or so in wages from labor to cover that shortfall.

So if labor lets the BK court decide it, they're going to have pay and benefit cuts. Same as under management's plan. But the BK court can also get EADS to lower lease payments on their Airbus fleet. Get the airports and vendors to lower their charges. Cut some management positions and overhead. Close down perpetually non-performing routes. Etc. Etc. Etc.

Either way, labor knows they will have pay cuts and benefit cuts. But at least with the courts, they can expect US to save billions in areas other then just labor, which could minimize the cuts they have to face - if US needs to cut costs $2 billion, management wants labor to eat it all. The courts might decide labor eats half and management/operations eats half, so labor comes out ahead under the courts. And US is in a better position to face future challenges.

The point that wins the day is that the Pilot Representatives could not KNOW the membership would have rejected the offer. They should have given the membership the chance to be heard. If the membership rejected it, then let the chips fall where they may.

But I suspect these PA Reps were afraid the pilots would accept it.


While I'm far from fans of the union, that fact is they run like our government - they are elected by the rank and file to represent them and make decisions. I don't recall Rick Santorum or Arlin Spector being pressured to hold a special election to decide how they should vote on a bill. They are elected by their constituents to make decisions on their behalf. If they make stupid decisions, they should be thrown out - there are mechnisms for doing it. As much as I disagree with their decisions, I don't find fault with the process.


I also got a chuckle out of a new report on the radio this morning - in their best ominous sounding, scary news voice - "USAir cancelled negotiation talks and now the unions are afraid that USAir might try to cancel their existing labor contracts". Ummm, duhhhhh.

And yes, I was laughing more at the news announcer than the unions.

Here is just one reason for why I lay some of the blame on labor; unions for years were in the business of asking for more while looking to provide less. If we're going to fault management for lacking vision we should fault labor for lacking the vision to know that ever higher wages were unsustainable in the face of competition from LCC's. True leaders have to make tough choices and at some point in time union leadership should have realized they were asking for too much.

The only problem with that is once union leadership tells membership the wages they are being paid are unsustainable and during the next contract negotiation they are going to suggest a wage decrease in order to protect the long term viability of the airline the leadership will be tossed out and the rank and file will realize the charade is up.

Again, virtually none of this is applicable to the US Airways situation. US' workgroups gave massive concessions from the late 1980s through the mid-1990s. In the late 1990s, when US' fortunes turned around and management had eye towards merger, W&G offered a parity+1 package, and labor accepted. Post 9/11, labor was actually willing to discuss cuts with the company as early as late 2001, but the overtures were REBUFFED by management. The workgroups then gave two rounds of concessions during the first bankruptcy.

While I would agree with you 100% if we were talking about United or Delta, the fact of the matter is that US' unions have historically acceded to the whims of management. Don't blame them for management's inability to leverage the company's assets into a viable enterprise.

Again, virtually none of this is applicable to the US Airways situation. US' workgroups gave massive concessions from the late 1980s through the mid-1990s. In the late 1990s, when US' fortunes turned around and management had eye towards merger, W&G offered a parity+1 package, and labor accepted. Post 9/11, labor was actually willing to discuss cuts with the company as early as late 2001, but the overtures were REBUFFED by management. The workgroups then gave two rounds of concessions during the first bankruptcy.

While I would agree with you 100% if we were talking about United or Delta, the fact of the matter is that US' unions have historically acceded to the whims of management. Don't blame them for management's inability to leverage the company's assets into a viable enterprise.


I have been very critical of all involved. Management has had no vision at US for years. From the outside, it appears they put more thought into their livery than anything else.

<quote>The company may ask the judge to impose a new contract on workers but only after it shows it tried to negotiate in good faith. <end quote>

GOOD FAITH????? as has been pointed out on this board, i'm NOT as educated as the majority of you are. HOWEVER, i know 'good faith' when i see it and when the company continually presents the SAME contract to the unions after the unions keep presenting different proposals offering different solutions to save money.... that is NOT 'good faith'! :mad:

Not really - US is unique among the legacy in the fact that nearly all of its problems can be directly attributed to bad management decisions. With the obvious exception of the present, whenever US' unions have been asked to give, they have given.

THANK YOU! THANK YOU! THANK YOU!!!!! ^ ^ ^

The point that many FT'ers miss as they rush to blast the unions at US is that no matter how important/unimportant, high paying/low paying, skilled/nonskilled, union/nonunion your job is, there is a point where less and less pay and benefits makes doing the job not worth it. Maybe US employees and their unions have reached that point. Maybe US FA's could make 40K a year working five days a week and not being in a cramped cabin with bad air for most of the day and laying over away from home. Maybe US pilots wonder if it's worth it to do what used to be a 220k job for 75k. Maybe some of them have a spouse that has a good job. I know that if one of the FT'ers that blasts US pilots was offered the chance to do the same job they do today for a 40% pay cut tomorrow they would not be happy, and if their posts are to be believed, they would just shrug and walk out the door. But when a union is involved, the workers don't just walk out the door. They resist, and they fight. That is why workers pay union dues, to protect their job. And I know what is being said, that how are you protecting your job if it disappears? Well, after several rounds of pay cuts at US, and no improvement in US performance, maybe US employees feel it won't matter if they take another round of pay cuts, since it hasn't seemed to make any difference in the company's performance. Since management has not been able to respond to the previous rounds of pay cuts, perhaps the employees feel their best hope is through some other avenue.

While US labor costs are way too high, the rejection of additional wage cuts is really about management and the company's culture. They didn't refuse more cuts which would have saved the company. They refused more cuts, believing that management would have squandered the savings and would not have saved the company.

Besides, labor costs are not the only issue.

If US didn't pay a dime for labor - if everyone worked for free - their costs would still be higher than Southwest's.

Don't mean to troll, but US' future lies in massive restructuring or liquidation. Either the company needs to be sold without its union contracts and seniority intact and without its high-cost lease agreements, or it needs to be sold off in pieces. Just MHO.

The point that many FT'ers miss as they rush to blast the unions at US is that no matter how important/unimportant, high paying/low paying, skilled/nonskilled, union/nonunion your job is, there is a point where less and less pay and benefits makes doing the job not worth it. Maybe US employees and their unions have reached that point. Maybe US FA's could make 40K a year working five days a week and not being in a cramped cabin with bad air for most of the day and laying over away from home. Maybe US pilots wonder if it's worth it to do what used to be a 220k job for 75k. Maybe some of them have a spouse that has a good job. I know that if one of the FT'ers that blasts US pilots was offered the chance to do the same job they do today for a 40% pay cut tomorrow they would not be happy, and if their posts are to be believed, they would just shrug and walk out the door. But when a union is involved, the workers don't just walk out the door. They resist, and they fight. That is why workers pay union dues, to protect their job. And I know what is being said, that how are you protecting your job if it disappears? Well, after several rounds of pay cuts at US, and no improvement in US performance, maybe US employees feel it won't matter if they take another round of pay cuts, since it hasn't seemed to make any difference in the company's performance. Since management has not been able to respond to the previous rounds of pay cuts, perhaps the employees feel their best hope is through some other avenue.


Exactly. You may be surprised to hear me say that but what you are pointing out is when evaluating a job a worker must look at what that job requires them to do and the compensation they will receive for doing it. With my employees I offer a wage and if they don't like it they can leave and I will find dozens of people on my doorstep begging for that job (as ruthless as I sound the pay and full benefits package I provide is actually quite generous). This can't happen at US (or any other union shop), if the workers don't like what's being offered they simply put a gun to the heads of management (figuratively speaking) and demand more until they get what they want. Why don't we disband the union and see at what point people are unwilling to work, those jobs can then be filled by people willing to take them. Let's let the market set its own level instead of artificially inflating it with the influence of an illegal cartel.

This can't happen at US (or any other union shop), if the workers don't like what's being offered they simply put a gun to the heads of management (figuratively speaking) and demand more until they get what they want.

Actually, you've got it backwards, the present situation is more like management putting a gun to the heads of workers (figuratively speaking) and demanding more cuts until they get what they want.

Let's let the market set its own level instead of artificially inflating it with the influence of an illegal cartel.

Last time I checked, it was not illegal for a labor union to represent a group of employees.

The US Airways pilots, and other employees, have given three pay cuts/work rule cencessions since 1998 as well as losing the majority of their retirement. See http://airlinepilotpay.com/ and compare USA rates with those of their competetors.

If USA management wants another voluntary pay cut then they have to win the trust of their employees through the display of exceptional leadership and the presentation of a business plan that can convince the employees that the airline has some chance of succeeding.

People aren't willing to take pay cut after pay cut after pay cut after pay cut when the previous pay cuts haven't helped and they have little or no confidence in management's ability to lead the company back to viability.