An article from CBS.MarketWatch.com
- This story was sent to you by drellanos@... with these comments:
Hey there mr. IAM communicator-man...I'll stick with the media hype regarding UA's business angle, and you can beat me to the punch on UA's 'back-of-the-house' dealings, i.e. past email fwd re:UA emps stealing....I'll be sending these types of email fwd onward.
From CBS.MarketWatch.com, online at:
NUMBER ONE FOR THE TIME BEING
By William Spain1:31 PM ET Apr 18, 2001
CHICAGO (CBS.MW) - Don Carty just couldn't resist rubbing it in a
At a Monday luncheon celebrating the 75th anniversary of American
inaugural flight (a Chicago-St. Louis mail run piloted by Charles
Lindbergh, no less), the CEO boasted that his company was the first to
both land at O'Hare and to operate passenger jets out of Chicago - long
the home turf of archrival United Airlines
Carty also noted that while the acquisition of TWA has once again made
American Airlines the world's largest airline - "perhaps temporarily,
perhaps not" - size isn't everything.
"Size has a little to do with it," he told
"When you build a network, big is important but this is really all
about being the best, not the biggest."
The answer to whether and for how long American will stay on top will
ultimately be determined by the timing and outcome of United's merger
with US Airways
, currently at the mercy of federal regulators.
In the meantime, Carty and his carrier face some economy-size
challenges that include integrating TWA; making peace with various
unions; fending off Congressional concerns about passenger service; and
grappling with a downturn in demand that led to the company to issue an
earnings warning last month.
Business travel softens
It is no secret that "we are seeing a softening in our business
bookings. . . It is a tough time in the airline business although
leisure travel has held up pretty well," Carty said.
The biggest drop-offs have come in some of the regional tech centers,
he added, "We have done very well serving San Jose, Boston, Austin, but
as companies [in those markets] suffer, they cut back on travel and are
watching the pennies."
In 2000, AMR posted net earnings of $752 million, or $4.65 per share
before special items on revenues of nearly $20 billion, up from net
earnings of $543 million, or $3.45 per share in 1999. However, bad
weather and rising fuel costs led to significant fall-off in the fourth
quarter as the company managed earnings of just $56 million, 34 cents on
a per share basis, down from of $87 million, or 57 cents in the same
period of 1999.
Then, on the Ides of March, AMR joined United, Northwest
in the ranks of air carriers issuing earnings warnings for the first
quarter when it announced it expected to post a "modest" loss on the
period. At the time, analysts polled by First Call/Thomson Financial had
been expecting EPS of 34 cents. That number has since been taken down to
a loss of 31 cents.
However, when the company reported at mid-session Wednesday, it beat
that revised estimate when it posted a first quarter net loss of $43
million, or 28 cents a share. AMR earned $89 million, or 57 cents per
share, in the first quarter of 2000.
Looming labor issues
At the same time, American is facing open contracts with its flight
attendants, mechanics and pilots and while Carty is "reasonably
confident" of reaching deals with all of them, "labor issues are an
"Five or six years ago, there was a change in the nature of our
negotiations" he said, with "more political turmoil, more contracts
negotiated but never ratified and more internal upheaval" in the unions.
If American can look forward to some tough talks across the table,
airline analyst Glenn Engel of Goldman Sachs said that with other labor
agreements pending at several competitors, "at least a blueprint has
been established. The good news is that other people will be paving the
way for them to reach contracts. The bad news is that the contracts will
be more expensive this time around."
Carty has been before Congressional committees on several occasions to
give his side of the story on the industry-wide and company-specific
delays, cancellations and service cuts that have drawn fire from
politicians and public alike.
"I don't want to sound like an airline executive blaming the whole
world for his problems," Carty said. "But the problem we have now is
that growth has so far exceeded the capacity of the air traffic control
system to handle it. When you have these complex networks, almost every
part of the country can be affected by what happens in a single part."
Although American has "completely restructured our hubs in hopes of
being able to operate more reliably," until "a system that is in crisis"
can be fixed, "no matter what the airlines do or what Congress does, it
won't change anything."
Smooth merger so far
American's $742 million purchase of bankrupt TWA, finalized last week,
is apt to create some headaches for Carty and his staff but early
indications are that it is proceeding fairly smoothly. A last-minute
court challenge was turned aside and the airline has also reached a
proposed agreement with its pilots on job protection and other issues.
That was a crucial hurdle for the carrier as pilot fury over its buyout
of Reno Air in 1999 led to weeklong sickout. That unauthorized job
action led to the pilots union being ordered to pay $46 million in
compensation to the airline, although AMR has never moved to collect.
While it is still too early to tell how it will shake-out, Carty said
that TWA employees are "tremendously enthusiastic. The cultures have
some surprising similarities - lots of history, lots of pride."
One thing they won't have, however, is a flock of new planes from
Airbus Industrie. Immediately upon completion of their acquisition,
American moved to cancel a TWA order for 45 A318 and A319 aircraft from
the European consortium. And, for the time being, American will operate
TWA as a separate unit until its workers, routes and equipment can be
fully integrated into the existing system.
Engel sees American quickly achieving "several hundred million in
savings" from the merger, pointing out that in addition, "anytime you
take capacity out of the industry, it improves returns and American will
certainly be taking some of TWA's" underperforming capacity offline.
Analyst Ray Neidl of ING Barings said that the buyout should strengthen
American's competitive position but "I am also very cautious. They
appear to doing this merger correctly but I am always leery of airline
mergers because of the complications and expenses of merging two
companies - particularly in the [area of] labor."
Turbulence on Wall Street
Over the past year, shares in AMR have been lurching around like a
drunken Aeroflot pilot. It hit 52-week low of $26 just before the Fourth
of July, ran back up a high of $43.94 on January 5, and then slipped
again. On Tuesday, shares closed up 40 cents to $35.
Neidl maintains a "buy" rating on AMR stock, with a 12-18 month target
price of $44. He notes that even if the United-US Airways deal does go
through, it "may make them bigger in size but not in profitability. That
integration process is going to be a two-year stomach ache."
At the anniversary celebration on Monday, much of the emphasis was on
the American's impressive past. Flight attendants in period uniforms
were on hand to add a nostalgic air, along with one of the company's
very first "stewardesses," now into her 80s.
However, even as he proudly ran down a list of past accomplishments,
Carty told the assembled group of employees, CEOs, public officials and
media that the future remains his primary concern: "If you forget that
history and destiny are two different things, then pretty soon you will
- This story was sent to you by sfrealtor@... with these comments:
From CBS.MarketWatch.com, online at:
CBS.MarketWatch.com Quotes & News symbol/fund/keyword Find Symbol 4:19 PM ET Oct 25, 2002 Latest Market Overview UAL mechanics say update is 'benign'
CHICAGO (CBS.MW) -- UAL Corp.'s mechanics will receive what has been described as a "benign" update Friday on the status of weeklong labor discussions with the company's management team.
Union spokesmen said an e-mail would be delivered, but said that it won't include any details about the negotiations to shave $5.8 billion off labor costs over a 51/2-year period. The mechanics will share those cutbacks with the pilots and flight attendants unions.
Members of the union were awaiting word on a preliminary resolution, but spokesmen said the talks were still ongoing.
"There's no big announcement coming," spokesman Joe Tiberi said. "What we're going to put out later is simply an update on the talks.
The mechanics leaders have been unusually quiet during negotiations. Two weeks ago they said they would hold talks with management separate from the coalition of unions. They added that they didn't necessarily believe the operating savings should come from wage cuts only, but include a broader program of fixing what's wrong with the carrier's business model.
Tiberi said there is no timeline for when the talks should be concluded. UAL is facing about $875 million in debt payments in November and December.
"We know when the payment are due," Tiberi said, "but we do not have any deadlines or timelines that we're under."
United's executives have been in bilateral talks with all of its employee groups in hopes of keeping the nation's second-largest carrier out of bankruptcy.
Late Tuesday, UAL (UAL) refiled a request to the Air Transportation Stabilization Board for $1.8 billion backup of $2 billion in loans. The money, coupled with a host of concessions from labor, vendors and lessors, is expected to keep the carrier aloft while it struggles to return to profitability.
United spokesman Jeff Green said management was in constant negotiations with all six of the company's unions.
"We have agreed on the framework, but we are still talking about who will take what portion of the $5.8 billion in cuts," he said.
Pilots' union spokesman John Hartz said negotiations were moving forward. "There's no timeline," he said. "They will meet for as long as they need to."
Ditto for the flight attendants, said spokesperson Jeff Zack. The flight attendants are looking for a return of sorts that could include shares or a percentage of profits, Zack said. About 55 percent of the company is owned by employees, but the flight attendants are not part of that program.
Earlier Friday, UAL named Pete McDonald executive vice president to lead all divisions relating to the carrier's operations: maintenance and engineering, flight operations, onboard service, system operations control, airport operations, information services and safety. The promotion from senior vice president of airport operations is considered a crucial one to meeting union requests, particularly the mechanics union.
McDonald has worked at United since 1969, progressing through the company's operations and sales organizations, running the Denver hub and overseeing the transition to Denver International Airport. He oversaw the company's sales, marketing and airport operations in Southern California before moving to the Chicago base as vice president of operations services. For the last year, he has led operations for the airline's 85 airports across the U.S.
Shares of UAL closed at $2.59, up 25 cents, or nearly 11 percent.
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