Rumors / Speculation / Gossip / Hostility / Frustration

Hi Everyone -

Thank you so much for all of your feedback and kind responses to the last two posts.  It has been awhile since I have felt like writing.  Even though I do not fly United as much as I used to, with Facebook and e-mails, you all have kept in touch and take the time to express your frustrations and tell me all about what is happening.  After some time, I begin to question whether or not to put any more energy or money into something that has little hope of making a difference.  In our hearts, and from first-hand experience, we all know that this new United is not the world-class airline that it is meant to be. I am flattered and honored that what I post does get read and that it does help to keep everyone energized.

Recently, in the Wall Street Journal, there was an article about the compensation corporate leaders receive today.  I was unable to find a copy, or else I would post a link so that you could read it.  The gist of the article was that the pro-business bent of the Reagan administration ushered in a new "me-me-me" type of leadership with compensation tied to stock price performance.  Before this time, being the head of a major corporation was not about making themselves and shareholders obscenely rich. In exchange there was prestige and power, plus there were moral imperatives and ethics that came with position.  Good leaders knew they had to treat their employees fairly, and that they should not be enriched at the expense of those who are the backbone of the organization.  Don't get me wrong, corporate leaders did alright for themselves, but there was not this huge gap between what management is paid over their employees.  This article closed by saying that maybe it was time to bring some of that morality back, and by doing so, big business could once again be viewed as a good thing for our economy and society.

2014 was a profitable year for United Continental Holdings, Inc. (UAL), and as his contract stipulates, Mr. Smisek is to be rewarded for guiding the company to achieve this.  With salary, profit sharing, stock options, and other benefits, Mr. Smisek's compensation in 2014 was just nearly $13 million.  His lieutenants, James Compton, John Rainey and Gregory Hart all did well too, earning seven figure amounts.  Combined, the four of them received compensation that totaled $25.9 million.  Was their leadership, wisdom and guidance all worth this much money?  The majority of UAL shareholders, and their Board of Directors, all seem to think so.

I looked at the full-year 2014 and first quarter 2015 financials and there some things that caught my attention:

1. Since the merger was booked in 2010, through the first quarter of this year, nearly $4 billion has been spent or set aside for merger-related costs and severance packages.  This is more than double what was originally estimated.
2. $100 million in this year alone is being set aside for payouts to 2,500 Flight Attendants who took early buyouts or were furloughed.  Yet, this summer, United finds itself in the position of having to pay time and a half for Flight Attendants to voluntarily pick up extra hours to cover shortages.  They are also actively recruiting to hire new Flight Attendants.  Somewhere in all of this are extra costs that did not have to be incurred.
3. In 2014, United carried nearly 3.8 million fewer passengers than it did in 2011.  
4. The $1 billion dollar swing from a loss in the first quarter of 2014 to a profit in the first quarter of 2015 is all coming from lower fuel prices.  

What concerns me though is that excluding fuel expenses, controllable operating expenses have gone up nearly 11% from where they were in 2011.  This is one why UAL's share price performance trails its competitors.  This is where management's focus is now, and once again they are going to be wanting to hammer at labor costs.

All of the above is old news.  This management has made very costly strategic decisions such as shifting domestic business to regional partners and then choosing Continental's reservation system over that used by United.  Twice in the last two months, United has been hit with system wide delays because their computer systems went down.  Over four million passengers who used to fly United are now flying other carriers.  Yet, there is no one on the Board of Directors who wants management to answer for these mistakes.

Looking forward - its your turn...

As I mentioned earlier, I have received feedback from many of you about what is going on at United Airlines, especially for the Flight Attendants.  Sam Risoli blames the lack of progress in the contract negotiations on the three pre-merger groups who are unable to set aside some of their own differences.  I have also of isolated stories from the line that tell of hostility toward pmUA Flight Attendants who crossed over to pmCO.  If any of this remains true, it is discouraging, because management will take advantage of this divide, and it is certainly behavior that would not be expected from a United Flight Attendant.

I can tell that you all are frustrated by the lack of answers, either from management or your union leadership, to key issues that need to be worked out to reach a joint agreement.  If I were to pick one issue that you all want answered now it is "Seniority Integration."  For the pmUA side it is black and white, seniority is determined by date of hire.  However, for the pmCO and pmCMI side, you all do not want to give up the seniority you have earned and you want to some sort of relative seniority factored into a joint agreement.  

What is meant by relative seniority?  To clarify this for the civilian readers, it is helpful to have a history of Continental Airlines.  Back in the early 80's, Texas Air, operating as Texas International Airlines acquired Continental.  Texas Air was run by a man named Frank Lorenzo.  Deregulation of the U.S. airline industry was signed into law back in 1978 and Texas International, with their "peanut fares," quickly became the leader in the low-fare industry.  However, if you are going to be a low-fare airline, costs to run that airline had to come down and labor was in Mr. Lorenzo's cross-hairs.  After Texas Air acquired Continental, Lorenzo was unable to get the concessions he wanted from labor, so in 1982 he put the entire company into bankruptcy and voided all the collective bargaining agreements.  Employees were faced with coming back as non-union "scab" labor with big cuts in pay and benefits, or they did not come back at all.  Most of the employees at today's Continental are all new hires after the Texas Air takeover and bankruptcy. 

After Continental, Texas Air acquired Eastern Airlines, and those unions would not roll over for Mr. Lorenzo. Eastern Airlines was then put into bankruptcy and eventually out of business.  Some Eastern employees stayed on working for Continental, but many lost their jobs.  In 1986, Frontier and People Express Airlines both went out of business, with Continental purchasing most of the assets.  Some Frontier and People Express employees were hired by Continental, but most lost their jobs.  Continental employees who were around during the Lorenzo years have put in their dues and seen their share of bankruptcies. They have seen Continental at its worst, and they have seen Continental at its best. 

For the Flight Attendants and their seniority, on the Continental side, there will be few, if any, Flight Attendants that have a hire date before 1978.  On the United side, the Flight Attendant holding the number one spot was hired back in 1958.  If the number one spot on the Continental side belongs to someone hired in 1978, if you go by "date of hire" then that person gets pushed down to the same level as someone who was hired by United in 1978.  Instead of being number one, that person might be assigned as number 2001.

So both sides, United and Continental, have valid arguments for their position on seniority integration.  So the next question to be answered is what is the formula for determining "relative seniority?"  What model should be used to equitably integrate the three groups?  I do not know all the legalities, or all details of what has been discussed, but I do know that the Negotiations Committee is working with a Federal Mediator, and with any impasse, neither side might not like what the Mediator comes up with as a solution.  If I were a Mediator facing this decision, I would just have to so some serious math, look at weighted average time of service and see if there was a middle road to be met.

I polled some of you asking for your date of hire and what number you have on the seniority list.  Then I weighed in estimates for new hires from Pan Am on the United side, and new hires from Frontier and Eastern on the Continental side.  Then I put in estimates for expansion and contraction periods for the two separate airlines.  Finally, I put in my estimate for the early buyouts, furloughs and crossovers that affected the United side.  Using all of these factors I was able to come up with a reasonable distribution by year and the number of Flight Attendants who would have a hire date in that year.  With all that I could calculate a weighted average seniority for both groups.  To my surprise the difference came out to only four years.  On the United side the weighted average year of hire was 1988 and on the Continental side, it was 1992.  I am sure the real numbers are different, but what it does suggest is that there may be room to compromise.  A mediator could split the difference and say that Continental flight attendants hired before the 2010 merger would get their seniority assigned based on a date that is two years before their actual date of hire.        

However this all falls out, Flight Attendants from both sides have to be prepared.  I think they have taken more hits on the United side, so it would be nice if some of the senior people got some of their regular flying back.  Seniority may be assigned system wide, but trips are awarded by domicile.  Depending on where you are based, you may regain some ground you lost, or you may find yourself taking a back seat to many others that work on the other side.  My personal opinion is that "date of hire" should be used straight across, but only because I think the time a person has committed to their job should not be discounted.  On the average, United Flight Attendants may have only four more years of experience, but a lot can be learned in four years.  It took only one day in September of 2001 and Flight Attendants hired before that date will definitely have a different experience story to tell over those hired after September 2001.  My opinion aside, the main point that I finally am getting around to that Seniority Integration may not have the impact you expect and it should not be something that prevents all of you from coming together and presenting a united front to management.

I listened in on last week's teleconference with Sara Nelson and I am encouraged by the show of unity from the Flight Attendants. Your Negotiations Committee is working hard to reach compromises with each other and stand firm with management on issues that are important to all of you.  It is important that all of you come together to back them up. This is why the "Day of Action" set for this Thursday, July 16, is so important.  Take the time to show up and show management that you all can stand together.  Do not let them use what divides you now to their advantage.  This is about a Joint Agreement that makes sense, one that recognizes your contributions to this airline, one that recognizes that you are United Airlines. 

P.S. - unless my day job gets in the way, I will be standing with you all at LAX on Thursday.  I hope to meet many from the pmCO side and let you know how much, as a customer, I appreciate how hard your job is and thank you for keeping the skies friendly.