What's Wrong With United Airlines? A Little Bit of Everything

An article taken from "The Street" by Ted Reed

Original article can be found here

Chicago (TheStreet) -- Beleaguered United (UAL_) poses the airline industry's biggest question: What's wrong with United? But no one seems able to answer it with certainty.

United has generally disappointed since its 2010 merger with Continental, which former CEO Glenn Tilton chased for eight years, including three in bankruptcy. In the first quarter of 2014, United lost $489 million while rivals American (AAL_)and Delta (DAL_) reported record results. Earlier, earnings declined for nine consecutive quarters starting in the second quarter of 2011.

Now United is under the microscope, but no one has isolated a single cause of its continuing underperformance. Rather, it seems, a multitude of problems are to blame.

The airline's pilots have been the most vocal critics. In a letter to members in April, leaders of the airlines' Newark pilot domicile called on CEO Jeff Smisek to step down. They blame problems in intra-company communications, bad morale, excessive outsourcing, and chronic information technology issues for driving away premium passengers. "Delta and American get the suits, we get the flip-flops and backpacks," they wrote.

Aviation consultant Bob Mann said he wonders whether executives know what's wrong, whether "they have done something and are waiting for a response," or whether "they don't know and are just struggling."

Aviation consultant Mike Boyd, like other experts questioned for this story, said he doesn't see obvious problems. Boyd said mainline service at United's hub in Denver, where he lives, is good. "The only issue I see is their quarterly report," he said. "They're not doing anything stupid, their market planning seems sound and their fleet plan is solid."

The safest conclusion seems to be that United suffers from a number of problems which, collectively, have caused many constituents -- employees and others -- to lose confidence in management. Many but not all.    

Last week, as part of a Wolfe Research airline investor presentation, analyst Hunter Keay hosted a dinner with United Chief Financial Officer John Rainey and other executives. The meeting "started off with difficult questions from investors," Keay wrote in a report issued Friday. "The tone was generally negative (but) management handled it well."

Keay said he left the dinner "increasingly optimistic that the current management team can turn things around." He has an outperform rating on the shares with a $54 price target. 

United closed Friday at $43.57, up 15% year to date. During the same period, American shares have risen 55%, Delta shares rose 43%, Southwest (LUV_) shares rose 37%, Alaska (ALK_)shares rose 34% and JetBlue (JBLU_)shares rose 7%.

Regarding United's first-quarter results, Keay said the carrier expected to lose about $300 million, but bad weather widened the loss by $200 million. United's business is more seasonal than its competitors', which "is part of why 1Q looked so bad," Keay said. "No one wants to go to United hubs like Denver or Chicago in February." Strong Florida traffic benefited Delta more than it benefited United, he added.

Additionally, Keay said, American benefits from labor costs that are $1 billion annually lower than United's labor costs. Since the merger, United has signed joint contracts with most labor groups including the largest, the International Association of Machinists. Also, the carrier said Monday it has reached agreement with the Association of Flight Attendants "to begin a collaborative process of faciitated problem-solving" in an effort to reach a joint contract.

Airline Division Week In Review - May 24, 2014

Airline Industry News

Governmental and Regulatory

President Barack Obama  announced a plan to expedite the entry process for travelers entering the U.S., beginning with the 15 largest airports. Obama also plans to develop an inter-agency team toward development of a national goal to reduce customs wait times.  

A new NTSB report says the government relied too much on Boeing for technical expertise when it certified the 787’s lithium-ion batteries as safe. The report also said the standard for certifying and testing such batteries on airplanes may not be adequate. 

According to the U.S. Department of Transportation, U.S. airlines are hiring. The agency reported that commercial carriers had 383,610 full-time workers in March, up nearly 1% over last year. This is the fourth consecutive month the industry has shown growth.

Airlines, Industry and Labor 

AirTran Airways will take its last flight on Dec. 28 from Atlanta to Tampa, Fla. Southwest Airlines acquired AirTran in 2011 for $1.4 billion, and all aircraft will fly under the Southwest name. AirTran was founded in 1993 as ValuJet, and changed its name to AirTran in 1996.  

Honeywell said progress continues on its Electric Green Taxiing System (EGTS), which is on track for a 2017 entry into service. Honeywell also said more than 30 airlines have expressed interest in the EGTS, which reduces fuel costs when an aircraft is taxiing.  

Boeing announced plans to acquire ETS Aviation for an undisclosed amount. Based in the U.K., ETS Aviation provides software that helps achieve fuel efficiency. 

Kurt Kuehn, the chief financial officer for UPS, said the package carrier is predicting solid resultsfor 2014. "We're seeing a slowly growing economy," he said. "Clearly there's some challenges in some areas. We're pretty confident that it's going to be a solid year."  

American Airlines plans to deploy its first CRJ-900s on its regional subsidiary, PSA Airlines. American also owns two other regional carriers, Envoy Air and Piedmont Airlines.  

Mesa Air Group Inc. today said it has reached an agreement to add six CRJ-900 aircraft to its fleet of 51 planes under contract for regional flying with American Airlines Group Inc. 

Steven Rothmeier, the no-nonsense executive who remade Northwest Airlines in the 1980s only to lose control of the company to a debt-fueled buyout, died Thursday in a Florida nursing home. Rothmeier, 67, had suffered from Lewy body disease, a type of progressive dementia, and Parkinson’s disease, which he’d struggled with for several years, said his brother Michael.

In recognition and remembrance of those who have lost their lives in defense of our freedoms and our nation,

the offices of the Airline Division will be closed on

Monday May 26, 2014. We will reopen for business on Tuesday, May 27^th.

We ask that you join us in remembrance of the Soldiers, Sailors, Airmen, Marines and Coast Guardsmen

who have served and given their last measure for us.

Airline Division Week In Review May 17, 2014

Unity Conference Concludes

Airline Division Director David Bourne, International Representatives and representatives of Airline Division Locals and the TAMC were in Las Vegas this past week for the Teamsters Unity convention.

Members attended workshops and presented reports on various events and groups within the Division and the Teamsters. A very productive week was reported with members leaving more focused on continued efforts to provide increasing levels of service and representation to the membership.

Airline Industry News

Governmental and Regulatory

A U.S. Airways regional jet was nearly involved in a mid-air collision with a drone while flying over the Florida panhandle

The Transparent Airfares Act would boost the U.S. airline industry by removing onerous advertising rules imposed by the Department of Transportation, writes blogger Vinay Bhaskara.

Airlines, Industry and Labor

American Airlines just renewed a 5-year lease at Rio West Business Park in Tempe, Ariz., and plans to bring hundreds of new accounting, information technology and customer service jobs.

Alaska Airlines, long a target of labor activists calling for a $15 minimum wage at Seattle-Tacoma International Airport, said Friday it has negotiated a pay raise to $12 an hour for entry-level employees who work for its local vendor partners.

Pedro Fábregas, the CEO and president of Envoy Air, reassured employees about the future of the regional carrier. "As American has previously stated, 25 of our Embraer 140 aircraft will be retired by the end of 2014 and Envoy will continue to fly approximately 200 aircraft for the foreseeable future -- including our 47 larger Bombardier CRJ-700 aircraft," he said.

Financial institutions and banks plan to step up financing for aircraft, according to a survey from Boeing, which found 70% of institutions active in the sector planning to increase financing.

JetBlue Airways CEO Dave Barger, 58, is weighing his next steps and considering possible succession plans when his contract expires next year, according to the carrier's board of directors.

The Mechanics Dispatch For May 10, 2014

Negotiations Update

The parties met on May 7th in Las Vegas. The purpose of the meeting was to prepare a report for mediator McGuckin on the parties’ respective table positions from last November. In discussing the positions, it became clear that a further meeting was warranted with a few subject matter experts. Accordingly the parties agreed to a small committee meeting May 28th and 29th in Chicago. In attendance for the Union will be our economist Dan Akins and several Business Agents along with Clacy Griswold and Bob Fisher from the Airline Division. It is expected that the full steering committee will meet in late July or early August to review what has transpired to this point and to discuss moving forward.

As previously reported the first mediated session is scheduled for the week of August 18th.

Arbitration Schedule

The outsourcing arbitration case that was scheduled to be heard on the 14th of May has been postponed. A new date is currently being scheduled.

The remainder of the sub CAL medical arbitration case is now scheduled to be heard August 5th and 6th. It is hoped that the case will conclude with this session given that there are two days set aside to hear the issues.

The remainder of the sub UA medical arbitration is now scheduled to be heard on September 8th. 

The schedule for the continuation of the resource utilization letter is not yet confirmed but it will be reported in the Dispatch when known.

Airline Division Advisory Board Meets

On May 6th, the AD Advisory Board met in Las Vegas. The meeting was chaired by Chairman George Miranda. Reports were given on all current negotiations the Division is currently involved with. A presentation was made to the Board regarding pension plans by Peter Hardcastle of Cheiron and Ed Gleason of Ed Gleason Law. The Board was given an overview of the different typical ways pension solutions were crafted in the past and how new plans should be structured in the future to protect plan participants. Chris Moore gave a presentation on the TAMC from where it started to where the organization is currently. Chris also presented a vision for that organization moving forward.

Furloughed members urged to update their addresses

Members on furlough are advised to keep their addresses current with the company while on layoff. It is predicted that there will be many movements this year and there have been several members that have been removed from the seniority list because old addresses were on file when notices were sent.

If you are in touch with a furloughed member, please forward this information to them. Updates may be emailed to: ESC@united.com . The ESC will provide a fax number and ask members to send the address change accompanied with a signature.

Useful links

If you would like to see a link added to this list please contact Bob Fisher at: rcfisher7@yahoo.com

The following Locals represent these respective cities:

Boston Local 25

New York & Washington Local 210

Charleston & Atlanta Local 528

Miami, Ft. Lauderdale Tampa & Orlando Local 769

Cleveland Local 964

Chicago Local 781

Houston, Dallas & New Orleans Local 19

Phoenix Local 104

Seattle, Portland, Los Angeles, Hawaii & Guam Local 986

San Francisco Local 856/986

Denver Local 455

Airline Division Week In Review May 3, 2014

World Airways Shutdown Update

The IBT Airline Division has been working very diligently on behalf of its members in the wake of the airlines untimely shutdown. Attorneys for IBT have spent the past few weeks identifying IBT-represented employees’ claims against World and filed a Proof of Claim on behalf of those employees on April 24, 2014.  Of particular concern have been hundreds of thousands of dollars in unpaid medical claims for services provided to for members when the World health care plan was in effect.  Worlds shut down with these claims unpaid and with no guarantee of payment, potentially leaving some members liable for extensive medical bills. IBT’s attorneys have been exploring potential legal avenues for relief and have filed multiple motions bringing the issue to the attention of the bankruptcy court.  They are now in negotiations with relevant parties for funding and a process to provide for the payment of those claims so that our members will not face any liability.

On the political front, the IBT has also been seeking political assistance with the unpaid medical claims issue.  Lobbyists for IBT spent the past week meeting with more than a dozen members of Congress and have generated significant sympathy and interest in our members’ situation.  These meetings were used to explore a variety of different options that legislators could employ to bring pressure to bear on Global stakeholders to make good on their obligations to World pilots and flight attendants. 

On the media front, General President James P. Hoffa published an article in the Huffington Post titled, “Cerberus Loots Bankrupt Airline’s Health Care Account.”  The article explained Cerberus’s involvement in the crisis that members face and the unfairness of Cerberus’s decision to sweep World’s accounts clean while health care obligations remained outstanding.  The article generated significant attention and there are plans to follow up with more media coverage.

To read the article, click on the following link:

http://www.huffingtonpost.com/james-p-hoffa/cerberus-loots-bankrupt-a_b_5225964.html.

Additionally, the IBT and Airline Division have reached out to other carriers, including Atlas Air and Omni, to find prioritized placement for its pilots and flight attendants in vacancies at these IBT-represented carriers. More than fifty pilots have applied for jobs at Atlas, a healthy and growing carrier, and there are also a number of opportunities for flight attendants there.  Efforts will continue to assist members to find new employment with Teamsters or other carriers wherever possible.

United Airlines Flight Simulator Negotiations Update

The past weeks discussions with United Airlines were met with disappointment as the company expressed their desire to stall negotiations and announced intentions to cancel the next scheduled meeting at the end of this month.

The company has stated its position remains that a contract is developed with no relation to the current Sub-UAL agreement; a position the union has advised management is unacceptable.

The Committee and team will go ahead with their planned meeting later this month, despite the notice by the company that they will not attend. The group will work on language and positions for Articles that have already been passed and ones requiring our attorney’s assistance.

UAL Representatives Attend Training 

On April 29^th and 30^th, twenty five Chief Stewards and Business Agents attended training on preparing and presenting cases at the System/Joint Board level. The class was coordinated by the IBT Training Department and was led by Iliana Flores after a request by the Airline Division.  

The first day was spent learning preparation and presentation theory and tactics. The modules taught were building the case file, formulating the question to be asked of the board, witness preparation, painting a simple story for the board and finally what board members look for in a presentation. There was much interaction and feedback regarding past and current cases.  

The second full day was spent using the knowledge in a practical situation. A mock board was held using a current discharge case. The class was divided into three groups, the board with both union and company members, the union side and the company side. The case was dissected and discussed in many different ways over the course of eight hours. The designated company representatives presented their case, including witness testimony, and the designated union group cross examined the witness followed by redirect from both sides. In a similar manner the designated union representatives mounted their defense of the grievant. Finally the designated board went into executive session and rendered a decision. 

It was evident the participants were enjoying their roles and were gaining insight to further help the members by mounting solid cases. Given the participation and feedback from the group this class will be ongoing. Also materials are being developed as a result of the feedback to further aid these representatives in the future. 

The class was hosted by Local 856 in San Bruno. A special thanks goes to Principal Officer Peter Finn and the entire staff of Local 856; without their valuable support this class would not have been as successful as it was.

Former Congressman James “Jim” Oberstar Passes Away, “A Great Supporter of Aviation and Labor”

Former U.S. Congressman James L. “Jim” Oberstar passed away unexpectedly on May 3, 2014 at his home in Potomac, Maryland. He was 79.

Oberstar, a Democrat was first elected to the 94^th Congress on in 1974, serving seventeen successive terms from January 3, 1975 until January 3, 2011.

During his tenure, he became a widely recognized expert on aviation and aviation safety. During his entire tenure in the House he served on the Transportation and Infrastructure Committee and known and widely respected for his expertise on aviation and aviation safety. A strong advocate for rebuilding the nation’s infrastructure, he also served as a member of the President's Commission on Aviation Security and Terrorism.

An early and open opponent of free trade agreements, he fought against the North American Free Trade Agreement (NAFTA), and the Central American Free Trade Agreement (CAFTA), believing that the free trading offered little or no economic opportunity for American workers and producers.

"Jim Oberstar was a solid and strong supporter of labor and a good friend to airline labor groups,” said Airline Division Director David Bourne. “Whenever we needed Congressman Oberstar’s assistance, his door was always open and he stood ready to help. He was a tremendous friend to the American worker and hearing of his unexpected passing today was a great shock. While Jim Oberstar will truly be missed by everyone who had the pleasure of knowing him, his legacy will live on,” he concluded.

Congressman Oberstar is survived by his wife Jean, four children and eight grandchildren.

Airline Industry News

Governmental and Regulatory

Two fatal crashes of Alaska commuter aircraft and five other accidents or incidents have led the National Transportation Safety Board to recommend a comprehensive safety audit of the company that provides most commuter air service within the state.

The FAA has released details on airport improvement grants

for 2014. 

Airlines, Industry and Labor

The Machinists union said Tuesday it will seek legislation to hold Boeing accountable for creating and maintaining middle-class jobs with the state tax incentives the company received last year. The move follows a series of Boeing announcements that it is moving thousands of engineering jobs out of Washington to lower-pay regions.

Budget airline Norwegian Air has suspended talks on buying 20 Dreamliner planes from Boeing because of a delay in receiving U.S. backing for its long-haul plans, Chief Executive Bjoern Kjos said in a letter.