Just A question/Comment
 

I have read some posts in here and have some questions for the people who posted them. I see some posts saying that flyi is done and they have a
bad plan and cant take over united at dulles. My question/comment to that is:

Lets say you are a flyi employee and asume you pay your taxes. United
has been in bankruptcy for a while now. They have cut there prices in
order to defeat flyi and keep their passengers from switching over. Now
I may be wrong, which is a good possbility, but it seems to me that
as a tax paying flyi employee your tax dollars are going to united so
they can lower there fares and put you out of a job. I know life isnt
fair, but this is far from ethical. How united can be allowed to do this is
beyond me. I know I dont understand bankruptcy laws, but if you could
explain this to me I would appreciate it.

I think you're correct in one important respect, which is that U.S. taxpayers are poised to pay for United's pension guarantees. That's the deal United is getting as part of its Chapter 11 bankruptcy protection. It's a bad deal for everyone, IMHO, including Independence. (U.S. taxpayers should be made whole first and should not assume United's pension obligations, even if it means Chapter 7 liquidation of the airline.)

The rest of Chapter 11 bankruptcy is an option available to any airline, including Independence. So I don't see it as a taxpayer issue -- with that one notable exception, which absolutely shouldn't be a part of Chapter 11 proceedings.

ok
 

Thanks for the reply. But how is it fair that United can slash prices
while we "pick up the tab" for there money issues?

As most people know that frequent this board, my viewpoints are slightly biased since I am a DH employee, but this issue really bugs me (not just as an employee, but as a taxpayer). But it goes much farther than UAL matching lower ticket prices to compete with DH... How can UAL justify defaulting on their pension program and then turn around and sign an agreement with Chicago Airport Authority for hundreds of millions of dollars for airport improvements? They have seriously got their priorities crossed... and taxpayers are partially funding their bad decisions.

agree
 

I agree. And I know in the big scheme of things the money I gave to UAL
via the US gov is small, but it is still criminal what they are doing.

TOO funny
 

write after I posted that reply, I saw a United commercial offering
$79 to chicago and tampa from dulles. What a bunch of cheating
crooks.

noOnespecial, the questions that you ask are not quite as simple as they have been made out to be thus far.

Will the taxpayer pick up the tab for a United pension default? Perhaps. And that's a HUGE perhaps. The pensions are insured by the PBGC, which is supposed to cover any gaps in pension programs. They charge a premium to ensure that they have funds to cover any and all defaults. http://www.pbgc.gov/about/default.htm
Yes, it's a government agency that insures pensions. Have there been previous defaults? Yes, plenty; if you are old enough, you remember USS, LTV and a few other steel companies defaulting on thier pensions. They were pretty big pension defaults. United and every other company with a pension plan picked up the tab for that with higher premiums.
As for the figures that United is short on pensions, keep in mind that those numbers are based on current pension payouts, not PBGC payouts (which can be SIGNIFICANTLY lower). There is also a factor of the extremely low interest rates, which (on the surface appear to) compound the shortfalls. There is still quite a bit of money that will be turned over to the PBGC; probably more than will be needed to cover any pension obligations. I can envision multiple scenarios where PBGC makes money by taking over United pension plans.

There are a few larger issues that you did not raise.
For instance, are pensions dinosaurs? I say yes; they are being replaced by 401ks. How many companies offer pensions anymore? Is it fair for one company to fund pensions while another does not? That is not a level playing field. If a new company moves into your market, is it unethical to match their lowball prices, even if it generates a loss for you? Should new companies be permitted to offer prices well below their break even cost?

You've opened up a larger can of free trade/fair trade issues. From your posts, it appears that you lean heavily in the Independence Air camp. By no means is Independence Air hands clean on the issues that you raise. This is not a simple matter of a tree falling in the forest; there are many dominos that fall when one falls.

United did not materially fund the USS and LTV defaults -- and is more than making up for their premiums by defaulting.

Well, I suppose it's possible. However, United could go into Chapter 7, and that would increase the probability that taxpayers wouldn't be stuck with pension losses. If Chapter 11 is such a great deal for taxpayers, Chapter 7 is an even better one.

In fact, I'd like to see PBGC analogous to RTC (Resolution Trust Corp.) in the S&L industry, with the authority to liquidate if pension funds are in jeopardy. (RTC performs a comparable role in protecting bank deposits.)

Whether pensions are "dinosaurs" or not should be left up to the market. (I would argue they certainly are not. Defined benefit programs are very attractive to many employees, particularly in certain industries.) Remember that pensions are designed to encourage employee loyalty -- they're for the benefit of employers so they can attract and retain workers. And of course it is a level playing field. United needed to offer pensions (and the rest of its overall compensation) in order to hire pilots and other employees. No pensions, no pilots. (Other airlines have/had pensions to offer.)

I have no problem if United wants to gracefully end its pension program from this day forward, e.g. if new employees aren't eligible. Or if United wants to cut wages. Employees can then react accordingly -- work for less or leave. What I do have a problem with is United breaking its commitments to employee pensions and foisting the bill on U.S. taxpayers. That's a retroactive change, and it's not the deal United's employees signed. (How'd you like it if your bank suddenly and unilaterally declared that your savings account balance is now half what it was yesterday?)

How is Independence Air's hands not "clean"? Independence offers a pay package which happens not to include pensions. (They offer salary, 401K, and profit sharing.) Some employees like that combination and work for Independence. Other potential employees think the compensation is too low and work for other airlines (or in other industries). Independence did not knowingly underfund its pension obligations -- its compensation promises to its own employees -- or try to shift those pension obligations to U.S. taxpayers. (It doesn't have a pension program.)

In contrast, United enjoyed years of service from its employees at a lower compensation level than if it did not offer pensions. (No pensions, and other parts of the compensation package would have had to have been higher.) United competed against other carriers on that basis, with those labor costs. Putting some of them (Eastern, Pan Am, etc., etc.) out of business, in fact. How is THAT fair to other airlines?

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I can't imagine of any scenario where PBGC MAKES money off of assuming UAL's pensions, in fact according to the experts it will be a heavy burden. According to PBGC estimates UAL's pension (with liabilities of $5.7 billion) are only 49% funded, leaving their pension underfunded by about $2.9 billion. This on top of the PBGC's already hefty defecit (in the neighborhood of $10 billion). The PBGC will not make money on this deal, and everyone involved (other than UAL) loses if they terminate their pension plan. PBGC will have a huge financial burden, the workers will see their benefits reduced (the PBGC will only be liable for $1.4 billion of the "guaranteed benefits" that are underfunded, not the entire $2.9 billion + under current PBGC rules the max payout per year is $44,386) , and new employees will have little or no coverage unless they can squeeze something out in the bankruptcy court (good luck).

As for your observation about pensions being dinosaurs and are unfair to older companies... companies make their own financial bed and at some point they have to take responsibility. At the very least the American taxpayers should not be made to bail out the injustices of a system that is outdated. If every company did that then taxpayers would still be supporting the Pony Express because other companies that use automobiles and airplanes have an unfair advantage.

Not trying to be confrontational ... just stating MHO.
:)

.
 

I never said it was simple and I am sorry you got that from my post. In my
opinion your answer is one I would expect from a lawyer for united. United can
claim all the legal crap they want. All I know is that they are chopping fares
at dulles while screwing their employees and trying to crush an airline trying
their hardest to bring better service and prices than united. Which would be
just fine if they werent in bankruptcy and using tax money. As far as I
understand it they were given money from the govt. Which is kind of funny
since the govt is in debt. Maybe I should file bankruptcy and screw my
creditors and their employees. Oh wait, I cant, I am not rich.

So FlyI low fares = good, United low fares = bad? :confused: How is United in bankruptcy right now using tax dollars? All their federal loan guarantee applications were rejected. Both FlyI and United would like to see their competition disappear, and both would raise fares if it were to do so.

no
 

If I remeber correctly, which I do, UAL was given money after 9-11. They
were given more money from the govt a little while after that also. Whar
do they do with it, cut jobs, screw employees, start ted, and spend millions
upgrading chicago, and now cut ticket prices. Flyi (ACA) made a profit
after 9-11. Since UAL was in bankruptcy they were screwed also with
so they left united and went onn there own. Instead of taking govt
cheese like united did, FLYi restructured there leases to try and make
it work. So yes FLYi prices = good, United prices = bad. And if you think
the millions they got in 2001 and 2002 arent still around in some shape or
form, I'd say you were mistaken.

Oh please, stop blaming UA for Independence Air's poor business plan.

A low-fare carrier using high-cost regional jets need look nowhere other than the nearest mirror to see who is at fault.

Duh
 

I am not blaming united. I dont think it is a bad plan by flyi at all. What
did you want them to do, sell all the rj's at once? By the looks of it
and from reading press releases flyi seems to be eventually phasing out
crj's and going with airbuses. They will have 12 by summer and more to
come. Now I am not saying they will get rid of all the crj's, but I bet
the majority of them will go. By the way, last time I checked united
was in bankruptcy and flyi was not. So you are telling me that a
non-bankrupt airline has a bad plan? By reading the press release yesterday
it seems they worked out a deal with their creditors to avoid bankruptcy.
Again, I am not assigning blame. And if you dont think tax payer money
goes to bankrupt airlines in one form or another, then I beleive you are
mistaken.

According to this article, the federal government gave out $5 billion to 427 air-travel companies following 9/11. United received $774 million of that.

You mean adapt their business model? United has made billions in operating cost cuts and they have a ways to go until they're profitable. At least its trending in the right direction.

How can you differentiate ACA from United after 9/11? ACA made exactly as much money as United and Delta paid them. They fly under contract as a feeder carrier and get paid whether they're carrying 1 passenger or 50.

:confused: I'm not convinced ACA didn't get money after 9/11, but even if they didn't, their fortunes were directly tied to United. Healthy United = Healthy ACA. And what does this have to do with lease restructuring? That all happened after ACA split from United and they had no one to blame for their troubles except themselves.

I don't get your point. United and FlyI are both burning through cash reserves. Uniteds cash reserves are from a decade of record breaking profit along with some government assistance. ACAs cash reserves are from what United paid them, back when they were profitable. Its all the same money!