Finding my Mojo - Part 2

For months now, I have tried to sit down to write, yet could not find the energy or drive. My day job has been kind of a nightmare, things at home are a little unsettled, and new medications have had their side effects.  All of the crap that comes up in our lives can distract us from some things we do care about, and I have learned that in order to not lose my mind altogether, I have got to make the time to focus on something I enjoy.  It is time to get my mojo back, and it is time to get back to the Friendly Skies.

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In Part 1 of this post, I recapped everything that has gone on over the last ten months at United.  So much has happened, confusing the employees and customers.  Would there ever be a truly great United Airlines once again?

Flight Attendant Contract Negotiations

I want to bring this up first as it has been six years since the merger of United and Continental was announced and the three Flight Attendant groups, pre-merger United ("pmUA"), pre-merger Continental ("pmCO) and pre-merger Continental Micronesia (pmCM), are all still working under separate contracts.  A federal Mediator was brought in after talks with management had stalled, and it appeared there was still divisiveness among the three flight attendant groups.  Mediated negotiations sessions have been going on since the summer of 2015.

Though not made public, it was rumored that a thorn in the negotiations was the Continental MEC President, Marcus Valentino.  He was Union President when Continental and Continental Micronesia Flight Attendants were represented by the IAM, and was also rumored to be a close confidant for Jeff Smisek.  He fought hard against the vote to have the the two Continental groups join the AFA alongside the United Flight Attendants.  With contract negotiations being hampered by Mr. Valentino, AFA's International Office, and International President, Sara Nelson (herself a United Flight Attendant) stepped-in.  Mr. Valentino was asked to resign as MEC President and step away from the negotiations. With this settled, United's AFA releases a joint announcement that the three groups are standing together in the negotiations and vow to get an industry leading contract for United's Flight Attendants.

United's Flight Attendants have the Our Contract web site (www.ourcontract.org) where you can find information about the negotiations.  United management has set up their own United Negotiations web site (www.unitednegotiations.com) to present their side in the ongoing negotiations.  It is interesting to read the releases from both sides, who blame each other for the lengthy negotiation process.  

These negotiations are especially important to the pmUA Flight Attendants.  They fought hard to set in place protections that would limit the length of duty days, set minimum rest periods between trips, and put into place an A/B Reserve rotation system.  This rotating system allows junior Flight Attendants the opportunity to hold lines every other month rather than be "on reserve" all the time and not have the security of knowing when they would have to report for duty.  Limits on duty days, and minimum rest periods are needed to ensure that Flight Attendants are well rested and alert, and are able to properly respond in the event there is an emergency in flight.  On the Continental side, their duty days are longer, minimum rest periods are shorter, and they do not have the rotating reserve system.  This allows the company to set their schedules such that in the event of irregular operations, they may not get the proper rest periods, which compromises safety.  All United Flight Attendants, and I certainly agree with this, should not be asked to give up protections that are in place to ensure the safety of crew members and passengers. 

It was not until April of 2016 that any real talks about compensation began.  Both sides have offered proposals that they say are comparable to the wages paid to American and Delta Flight Attendants.  United management immediately responded saying they thought that the AFA proposal would have a negative impact on United's financial performance, something they could not accept.  Management was supposed to come back with a revised proposal in May, yet there is no indication that the two sides are close to an agreement. Contract talks are resuming today in Reston, Virginia. 

Compensation for United management is dependent upon profitability of the airline and so many managers feel that the Flight Attendants do not deserve much more than they are getting now.  The AFA delivered their compensation proposal to management on April 21, 2016, the same day first quarter results were released.   With the release of the first quarter results and dimmer outlook, UAL's share price has taken a significant hit.  Part of the compensation for United management is determined by share price performance. Management is now under pressure to get costs down and any proposal by the Flight Attendants is going to be deemed as having a negative impact on United's financial performance.     

It is ironic that management complains about compensation demands, given the amount they themselves make and are worth.  When UAL's share price stared to drop dramatically, United managers and Directors started to buy up shares to publicly show their confidence in the company.  One of those managers is Michael Bonds, Executive Vice President for HR and Labor Relations, and the one who rejected AFA's compensation proposal back in April.  On April 26 he purchased an additional 2,000 UAL shares at a cost of $96,766. The Form 4 that was filed with the SEC says he directly owns 52,865 shares in UAL, which at today's trading price is worth $2.4 million. Those shares would have been worth $3.3 million back in February, so Mr. Bonds has taken quite a hit.  I only bring this up to point out that Mr. Bonds and most of United's management, at the Senior Vice President level and above, are millionaires.  Their compensation, including profit sharing and other incentive payments, are all at six figures and above.  It is hard for me to accept Management's complaints about the negotiations while Flight Attendants are struggling to make ends meet with average compensation below $50,000 per year. 

Since mediated talks began last summer, United Flight Attendants have held a "Day of Action" every month, with informational picketing at the hubs and major airports to show their unified resolve to get the contract they want and deserve.  The next "Day of Action" is being held this Thursday, May 19.  I am taking the day off to go out to LAX and offer my support.  I need to get involved again as these negotiations are so important to the success of United Airlines.   If you are flying United on that day, or any day soon, please take a moment to thank your Flight Attendant as they are putting a lot on the line to ensure your safety and to make United Airlines great again.

There is much more I wanted to write about, but my day job is getting in the way again. Now that I have my mojo back, I am more motivated than ever to keep writing, and more importantly I want to get back into the Friendly Skies.  The Annual Shareholder's meeting is coming up on June 8, 2016.  I am hoping to make the trip so that I can address this new Board of Directors and once again voice my support for the Flight Attendants, Technicians, and all front line employees.  Thank you again to all of you for your support, I am looking forward to seeing you soon.

P.S. - I still have some "More than a Co-Worker" wrist bands to share.  If you are interested in any just e-mail me at jimfrompicon@gmail.com.  There is no cost, all e-mail addresses are kept confidential and used only for this purpose.  - Thank you!

Finding my Mojo - Part 1...

For months now, I have tried to sit down to write, yet could not find the energy or drive. My day job has been kind of a nightmare, things at home are a little unsettled, and new medications have had their side effects.  All of the crap that comes up in our lives can distract us from some things we do care about, and I have learned that in order to not lose my mind altogether, I have got to make the time to focus on something I enjoy.  It is time to get my mojo back, and it is time to get back to the Friendly Skies.

It has been 8 months since Mr. Smisek "resigned" amid the Port Authority scandal, and so much has happened.  The news shocked everyone.  I made a trip to New York right after this happened, and everyone I spoke with at United was overjoyed.  They were looking forward to getting their airline back.  Oscar Munoz, one of the UAL Board Directors, was appointed as President and he hit the ground running.  Right away he went out to the hubs and other stations to talk to customers and employees.  He wanted to find out what was needed to make United Airlines great again, and he recognized that this information was only going to come from the front lines.  He was having success in rallying the troops, and earning their trust and support.  However, all of the traveling and long days took their toll, and Mr. Munoz was sidelined by a heart attack just six weeks after he started.

The elation that the employees felt then quickly dissipated as the sudden uncertainty of what was going to happen next took hold.  Would Mr. Munoz be back?  Who is going to replace him?  It took a couple of weeks before UAL's Board of Directors made any announcement of an interim plan.  For Mr. Munoz, recovery prospects were good and he would be back to work In January of 2016.  Until that time, Brett Hart, UAL's General Counsel would step up and take the title of interim President.  Mr. Hart pledged to continue the plan that Mr. Munoz had laid out for the airline.  A plan that would stop customers from defecting and garner the support of the front line employees.

Side note #1 - about Mr. Hart, my first impression of him comes from the Shareholders Meeting held in New York City back in 2012.  He was curt, and acted like the whole thing was an imposition.  Then, in 2014, I had submitted a Shareholder Proposal to be put on the agenda at the next Shareholder's meeting.  The proposal called for an advisory vote for shareholders to weigh in and cast a vote of "no confidence" in Mr. Smisek, and his management team.  Not long after Investor Relations received the proposal, I was asked to go to Chicago and sit down with Mr. Hart and other managers to discuss what is going on at the airline and convince me to withdraw my proposal.  I went out, and met Mr. Hart.  This time, I found him to be very gracious and personable.  When it was announced he would step in as interim President, I was surprised.  James Compton was Mr. Smisek's right hand man, and Vice Chairman, and he came over from Continental with Mr. Smisek. He seemed to be the logical choice.  Brett Hart was a new hire after the two airlines merged, and I think the Board made the best choice in him because he was not a Continental manager and he pledged to carry on the work that Mr. Munoz had started.

Another surprise comes on January 6, 2016 when it was announced that Mr. Munoz had undergone heart transplant surgery.  What now?   Assurances were put out there that he was going to be better than ever and would be returning to work late in late March or early April.  Business news television and newspapers interviewed physicians and other executives who had undergone transplant surgery.  They all felt Mr. Munoz should take a year off.  That would mean looking for a new President and the positive momentum that Mr. Munoz was able to get started would be halted.  In February, Mr. Munoz was back at the Willis Tower on a part-time, advisory basis and he returned to full-time duties on March 14, 2016.  There are critics who say he pushed himself to get back in order to receive a cash incentive bonus that was promised when he was made President.  That may be part of it, but I do think Mr. Munoz is the type of person that needs to be working and he was dedicated to getting his plan for the airline out there.

Just as Mr. Munoz is getting back to work, along comes another distraction.  Two of UAL's largest shareholder groups, PAR Capital Management ("PAR") and Altimeter Capital ("Altimeter"), announce their proposal to nominate six new Directors of their choice. They felt that more airline and travel experience was needed on the Board, and one of their choices just happened to be Gordon Bethune, the former President and Chairman of Continental Airlines.  He is credited with the turnaround of Continental in the early 1990's.  He also hand-picked Mr. Smisek and hired him as Continental's General Counsel. Just as UAL's Board was finally doing something to make changes in management and right the ship, comes the news that someone wants to bring in the "savior" of Continental Airlines.  Continental managers have had five years to make this merger successful, and Mr. Smisek's ouster is a definite sign that their style of management was not going to unite the two distinct carriers.  Letting PAR and Altimeter succeed in bringing in Mr. Bethune was not the right thing for UAL.  Reaction by employees was swift.  I received calls from employees asking me what I thought was going to happen, and the pilots and technicians made their opinions very public by protesting outside the offices of PAR and Altimeter. 

Side Note #2 - about Mr. Bethune.  In the early 1990's, while Frank Lorenzo was still at the helm, Continental was my only choice to fly to my home town in Wyoming to see the family.  It was always an uncomfortable experience with not so friendly employees, so many new hires, and an overall less than classy feeling.  Mr. Lorenzo was ousted by the Continental Board and Gordon Bethune stepped in.  He simply recognized his first goal was to improve the morale of the employees, then upgrade the fleet and facilities.  He closed competitive hubs and took advantage of hubs they could monopolize, Houston, Cleveland and Newark.  Continental quickly showed improvement in customer service and returned to profitability.  I flew Continental again after Mr. Bethune took over, and even though he made a lot of positive changes, he held on to some of Mr. Lorenzo's ways of running things.  For example, he raised wages, but they were never brought up to the level other airlines were paying.  That made it hard to recruit experienced talent to work the front lines.  CNBC has Mr. Bethune on a lot as commentator and contributor, and I did gain some respect for him with his last interview a couple of weeks ago.  The segment was on the airline business in general, and he was asked what he would do if he were asked to step in again and run an airline, i.e. United Airlines.  His response, and I am paraphrasing, was to get middle and senior managers out of their ivory tower offices and have them on the front line more often.  You can only effectively manage if you are working side by side with the employees you are managing and have the chance to talk with the customer yourself. Read back to some of my earlier posts and you will find that I have said the same thing many times.

PAR/Altimeter and UAL go back and forth with press releases and making themselves available to television and newspapers.  Brad Gerstner, Founder and CEO of Altimeter, gets out there with the message of how important it is to have more airline and travel industry experience on UAL's Board, and this is the only way to make effective changes. He tries to reassure employees that Gordon Bethune, as Chairman of the Board, would only have an advisory position and that Mr. Munoz would continue as President. Shortly after the announcement of PAR and Altimeter's proposal and possible proxy fight, UAL's Board announces three new Director appointments, James Kennedy, Robert Milton, and James Whitehurst, all of whom have airline experience.  PAR and Altimeter are not not entirely convinced by the new appointments and keep moving forward with their proposal. However, they are showing some signs of compromise.  Through a phone-in interview with CNBC, Mr. Gerstner states that the appointment of Mr. Bethune is not critical to their plan.  They are once again trying to reassure United employees and customers that they do not want to disrupt the momentum behind Mr. Munoz.

There are weeks of uncertainty and lots of back and forth public announcements by UAL's Board, PAR and Altimeter.  Then on April 20, 2016, the day before the release of the first quarter 2016 earnings, UAL announces that a settlement has been reached.  Robert Milton, a former executive from Air Canada, is going to take over as Non-Executive Chairman, succeeding Henry Meyer.  In addition, two of PAR and Altimeter's nominees would be added to the Board, and there would be a third addition to be chosen by both sides.  This brings the total number of Directors to 14 - 11 "independent" Directors, Mr. Munoz, one Director from the ALPA, and one Director from the IAM.  PAR and Altimeter withdraw their proposal and a proxy fight is avoided.  Mr. Munoz is now free to get on with the business of running United.

The First Quarter, 2016 Earnings Release comes out and Mr. Munoz himself participates in the conference call with investors and the media.  Even though the results show a profit, largely coming from lower fuel prices, the numbers show a continuing decline in market share and weakening demand.  Weakening demand puts pressure on Revenue and forward looking projections paint a less optimistic picture for United.  As of Friday, May 13, UAL stock is trading at $43.54, nearly 30% lower than the $60-$63 dollar range we saw in February of 2016.  These numbers are evidence that all of the changes and distractions at United have eaten away at employee morale and have chased customers away.

So - to recap the last ten months:

1. July 2015 - John Rainey, UAL's Chief Financial Officer, announces his resignation and that he has accepted a position at a technology startup.  His reason is that this new position offers a track to top leadership making it evident that UAL's Board does not see him in line for succession to Mr. Smisek.  Red flags are raised - if you recall, Mr. Rainey, shortly after he took over as CFO in 2012 (after Zane Rowe's sudden departure), at the JP Morgan Aviation Conference, makes the announcement of the changes to the Mileage Plus program.  These changes would reign in the number of free-bees given to United's over-entitled customers.
2. September 2015 - The surprise announcement of the resignation of Jeffrey Smisek, Nene  Foxhall, and Mark Anderson.  UAL's Board cites Mr. Smisek's, Ms. Foxhall's, and Mr. Anderson's involvement in a bribery scandal involving a New York Port Authority official.  One of the bribes is supposedly the awarding new slots at Newark International Airport in exchange for United adding a non-stop flight from Newark to Columbia, South Carolina, which close to a getaway cabin that is owned by the Port Authority official under investigation.  The route is unprofitable and United pulls it from the schedule after the announcement that this Port Authority official is being investigated, along with Mr. Smisek and Ms. Foxhall.  Oscar Munoz, one of UAL's Directors is named President, succeeding Mr. Smisek, and Henry Meyer is named Non-Executive Chairman.
3. October 2015 - Mr. Munoz suffers a heart attack and after two weeks, UAL's Board chooses Brett Hart, UAL's General Counsel, to step in as interim President until Mr. Munoz can return to work.
4. December 2015 - Mr. Munoz' family announces that his recovery is going well and that he is expected to return to work in January of 2016.
5. January 2016 - Right after the new year comes the surprise announcement that Mr. Munoz has undergone heart transplant surgery.  His return is pushed back to March or April of 2016.
6. February 2016 - PAR Capital Management and Altimeter Capital announce their proposal for the appointment of six new Directors and begin the process of soliciting proxies from shareholders.  Key among their nominees is Gordon Bethune, former President and Chairman at Continental Airlines.  Also in February, Mr. Munoz comes back to work, on a part time advisory basis.
7. March 2016 - Mr. Munoz returns to work full time, and right away, in response to the proposal submitted by PAR and Altimeter, the UAL Board announces their own selection and appointment of three new Directors, all with airline and travel industry experience. This does not convince PAR and Altimeter and they move forward with their proxy fight.
8. April 2016 - UAL reaches a settlement with PAR and Altimeter and they withdraw their proxy fight.  Gordon Bethune is out of the picture.  Robert Milton, formerly of Air Canada, will be taking over as Non-Executive Chairman.  The earnings release for the first quarter of 2016 paints a dimmer picture which dampens forward looking projections.  UAL's trading price drops 30% from it levels in February.

Many of you already know about all of these events, but I wanted to go over them myself as they are important to what is going on now at United.  Especially critical are the ongoing contract negotiations with the Flight Attendants and Technicians. These two groups still do not have unified contracts and continue to work under the pmUA and pmCO divisions.  The time to take care of these is now as they are critical to the success of this United Airlines.  I will write about this in the post titled "Finding my Mojo - Part 2."  Thank you again for reading and thank you for all of your support.

It is time -

Dear Readers - 

I have to apologize for being out of touch.  This time of year is crunch time at my day job and there has been a lot of health and other personal crap that saps the energy out of me.  This post I had started while traveling in December.  Nothing like posting it four months later, but I think it has something to say.  I have started a post about all of the recent shenanigans and hope to finish it this weekend.  Thank you again for all of your support and encouragement.  It means so much to me and it is a testament to how dedicated you are to United Airlines.   

December 2015

As I write this, I am sitting in the United Club West at Denver International.  I am waiting for my flight home after visiting family in Colorado for a few days.  It has been three months since Mr. Smisek was shown the door.  His successor, Oscar Munoz, was sidelined with a heart attack less than six weeks into his new job.  Brett Hart, United/Continental Holdings (UAL) General Counsel was appointed interim CEO until Mr. Munoz' anticipated return in January.  Around January 20, 2016, UAL will be posting its fourth quarter 2015 results and many will be waiting to see how this newer United is performing. 

I traveled on United in September shortly after the Smisek ouster and the employees were shocked and elated at the same time.  For five years under Smisek's leadership so many of the employees tried very hard to let management know of the mistakes that were being made.  United was going downhill at a faster clip and they were powerless to make any changes, until "he who shall not be named ("HWSNBN")" was defeated.  Right away Mr. Munoz took to the road to visit the hubs and many other stations to actually hear what the employees had to say about what was happening to their airline.  

Mr. Munoz was listening, and he responded by placing full page ads in the Wall Street Journal, USA  Today, and many other newspapers publicly apologizing to both United's customers and its employees about how bad things had gotten, and he pledged to make things right once again.  This was the first time in the 5 years since the merger was completed that someone from senior management was acknowledging that United was losing its most loyal customers to the competition.  I get a little angry thinking about how much time I have spent writing this blog, attending shareholder meetings, and standing with employees on the picket lines as they try to get the attention of management.  I have been saying for 5 years that the numbers proved United was losing customers, yet the arrogance that was the hallmark of HWSNBN would not let him do the right thing and accept that the Continental way was not going to work with the merged carriers.  

Back to today and I am sitting here in the United Club - I have not really noticed any of the positive changes that were promised by Mr. Munoz and Mr. Hart.  Employees appear happier, but their enthusiasm has waned.  Crappy fare is still being served in the United Clubs.  Mr. Munoz - please, the Mediterranean fare is disgusting.  Nobody wants to eat cubes of cheese or hummus that have been sitting uncovered out in the open air, or soup that has lingered all day in the tureen to turn into salt.  

Most importantly, and most noticeable, is that United's Flight Attendants still do not have a joint contract.  Mr. Munoz - your Flight Attendants spend the most time with the customers, and they are very unhappy and frustrated by lack of any progress in the negotiations.  It baffles me why Mr. Keen and Mr. Risoli go to the bargaining table expecting concessions from a group that has already given up so much.  Pilots, engineers and technicians, customer service and other groups all made net gains with their joint contracts.  Why must the Flight Attendants be expected to move backward?

September 11, 2015

Thank you everyone for your support of this blog. As I post this today, there is unexpected news that has just come out about changes in leadership at United Airlines.  I will not use this post to discuss what has transpired, but when I travel on Friday, I think I will see some new smiles and optimism that has gone missing at United in the last couple of years. I also wanted to let everyone know I do have a new supply of the "More than a Co-Worker" wrist bands.  

They are free to anyone who wants them, first come first serve, while supplies last.  Just send me an e-mail through this blog, or private message through my Facebook page, with your mailing address and how many the wrist bands you would like.  If I sent some to you previously, and your address is the same, then just send me note that you would like some more.  All addresses are kept confidential and are only used for the purposes of distributing the wrist bands.  

SEPTEMBER 11, 2015

Sometimes, it is hard to believe it has been fourteen years since that awful day in 2001. So much loss and grief, not only on that day, but in the years since with wars in Afghanistan and Iraq, world economies enduring a prolonged recession, and now today, refugees flood into the European Union to escape war and hardship in countries where ISIS terrorists grow stronger and take over for defeated Al Qaeda terrorists.

Here in the U.S., September 11, 2001 is commemorated in many different ways. There will be ceremonies in New York, Washington, D.C., Pennsylvania and all across the country.  News media will no doubt have reports on whether or not our skies are safer, and why the FAA and TSA have not made the advances we expected so that we do not have to endure the delays to be screened at the airports.  As the 2016 election cycle picks up, this week is a good time for candidates and pundits to trade barbs and warn us all that the current administration has let down its guard and we need to get back on track because it inevitable that there will be another September 11 event.

September 11 is an especially difficult reminder for those who were directly affected.  I am talking about family members and friends who lost loved ones on the planes, in the towers or at the Pentagon.  There are also the first responders on the ground who will never forget the horror they witnessed.  It is a hard day for airline employees, especially those at American and United Airlines.  Not only did they lose colleagues and friends on that day, every airline employee found themselves awakened to a new reality and unprecedented stress and uncertainty.  Every passenger is now a suspect and things that were regarded as harmless implements or pieces of clothing can now be used as a weapon.  For many airline employees it caused them to think long and hard as to whether or not this was now the job they had signed up for.

September 11 put a new focus on the importance of the Flight Attendants.  The first casualties and first responders on September 11 were the flight attendants on those four planes.  This event woke us all up as to how important Flight Attendants are, and how we take that for granted.  I often think back to those flight attendants and pilots who showed up for work those first days after September 11, 2001, as U.S. airlines began getting their planes back in the sky, and our country started moving again.  Not only were they still grieving the loss of their friends, but they had no idea if things were any safer, nor was there enough time to properly train or counsel them on what to do if the unthinkable should happen again.   

As the first anniversary, September 11, 2002 approached, the focus by the news media was whether or not Bin Laden had another attack planned, and if planes and people would be flying or would they stay home.  There was no doubt for me - I was going to make sure I was on a plane that day.  I wanted to use the day to thank the flight attendants and other airline employees at United Airlines for continuing to make it possible for me to buy a ticket and go where and when I wanted - SAFELY.   That day, on my flight back to LAX, the Captain came on to thank us for being there today.  He went on to explain how the outlook for United remained positive and that they were not going anywhere.  New planes were being delivered and customers were coming back.  It was the customers that gave him and the other crew members a new resolve that United will survive.  It is that resolve by the employees that has kept me coming back to United to this day.

So this Friday, September 11, 2015, as I have done for the last 13 years, I will be flying United to New York and back.  It is a day that I can show that no matter what is thrown at us, I still have the right and freedom to get on a plane and be assured that I will reach my destination safely.  It is also my chance to personally thank a few employees at United Airlines for everything that they do for us customers.   My one day trip has me leaving LAX at 6:00 AM (ughh!), and heading up to SFO to connect to the 8:45 AM P.S. flight to JFK. From JFK I will take the nonstop back to LAX leaving at 7:55 PM and landing at 11:00 PM.  It is a long day, and I have friends who question why I do it.  The answer is simple, because it is United Airlines.

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.

Be predictable - Be gracious - Be the solution - Be the Brand .....Part 2

This two-part post was started a few months ago and before you get into Part 1, I wanted to start out with an update on the negotiations towards a joint contract for United's Flight Attendants.  As you know, tentative agreements were reached three years ago with each of the three working groups - pre-merger United (pmUA), pre-merger Continental (pmCO) and pre-merger Continental Micronesia (pmCMI).  One part of these tentative agreements was that that Flight Attendants (FA's) from one working group could not work on planes (aka metal) that was once part of another subsidiary.   For example, pmCO FA's could not be trained for or scheduled to work on the 747's which were part of the pre-merger United fleet.  On the other side, pmUA FA's were not going to be permitted to train for or work on the new 787's that had been ordered by Continental.  This arrangement has led to a lot of confusion, and resentment for not only the FA's, but for us customers as well. 

By all appearances over the last three years, Mr. Smisek's buddies cannot make up their mind on where to position aircraft and how to staff the domiciles. For example, when you look at a schedule, a 1:00 PM flight from LAX to Denver can have a different flight number and different aircraft every day (I so long for those days when I used to know the flight numbers and knew what equipment was being used).  In their contract, the pmUA FA's have work rule protections so that they have adequate rest periods, minimum layover hours, and a maximum number of duty hours they can work in one day.  These protections were kept after they were asked to take huge pay and benefit cuts when United was in bankruptcy ten+ years ago, and the pmUA FA's fought hard to keep them.  The pmCO and pmCMI FA's do not have some of these same protections and management has more flexibility in stretching out their duty days.  Add these protections in with the restriction on which metal pmUA FA's can work, and then throw in this daily rotation of flight numbers and aircraft, and scheduling for pmUA Flight Attendants becomes significantly more complicated than for their pmCO and pmCMI partners.  It also does not help when fleet scheduling moves pmUA metal into Continental's hubs in Houston and Newark.  That means more pmUA FA's have to "dead head' to those hubs to start their line, and those "dead head" hours are paid hours.  So with the work rule protections, restrictions on "metal," and more "dead-heading" hours, the contract with pmUA FA's makes them more expensive than their partners at pmCO and pmCMI.  At the outset, Mr. Smisek made his goal very clear - to cut costs, and that they are going for a joint contract for the FA's that does away with many of protections that the pmUA group still has.  

Over the last three years, there has clearly been a bent by management to "stack the deck" and pare down the number of pmUA FA's with the hope of being able to shift the outcome of the vote for a joint contract.  Cash buyouts were offered to encourage senior pmUA FA's to retire.  Those who did not accept the buyouts were then forced to cross over to the pmCO side or be furloughed.  FA's who did cross over lost their seniority and became junior to their pmCO partners.  Then, in April of 2014, 111 pmUA FA's were involuntarily furloughed.  At most domiciles, pmUA Flight Attendants with as much as thirty years of service found themselves back on Reserve.  To add salt to the wound, while all of this was happening on the pmUA side, United management was actively recruiting and hiring new FA's for the pmCO group. Now this was all last year, but the summer of 2015 is a little different picture.

As I wrote about in Part 1 of this post, United management has had some new revelation and you can see some of how the old United used to operate. With more mainline domestic flights, things have turned and United is now having to hire new FA's for the pmUA side.  In addition, within the last three weeks management has also had to declare at least three "Limited Critical Coverage" days, not only in the U.S., but at their domiciles in London and Frankfurt, asking pmUA FA's that had not worked their maximum to pick up trips at 1.5 times their rate of pay.  When the schedules came out for July, all of the pmUA FA's had lines that scheduled them out to 100 or more block hours.  When you add in layovers and added duty hours, some FA's might be home six days during the whole month.  It has been nice to see Mr. Smisek and his buddies actually forced into admitting they need the pmUA FA's.  It is nice to have their arrogance from last year coming back and biting them in the a**.    

Negotiations towards a joint contract began in 2012; however, it was not until a year ago after a Federal Mediator was brought in, that these negotiations began a small crawl forward.  When I say a small crawl, in realty, there has been nothing substantive that has been agreed to.  FA's from all three groups have become very frustrated and rumors circulate about what is going on with negotiations.  The AFA has been very quiet and very little public information made available.  On the management side, Sam Risoli, United's Senior Vice President for Inflight Operations has sent out generic memos saying that negotiations are moving forward, but he too has not been able to offer anything substantive.  All he can offer is "Thank You for all you do."

On July 1 the AFA MEC Presidents, as well as members of the negotiations committee, for the United, Continental and Continental Micronesia groups all came out with a joint announcement for a "Systemwide United Flight Attendant Day of Action" to be held on July 16 at all domiciles.  FA's from all three groups will be coming together to publicly declare their frustration at the pace of negotiations and that they will not back down to management.  I cannot tell you how encouraged I feel to see this kind of unity after all these years, and I encourage all of you reading this, to do your part to support this effort. There are so many other inefficiencies and problems that need to be dealt with at this airline.  United's Flight Attendants are hard working and dedicated and they are not the problem.  They are not going to be Mr. Smisek's sacrificial lamb in order to boost the stock price.  

The AFA has also come out with a red "Unity" pin that all AFA members are going to be receiving and wearing this month.  If you are a customer flying United or another airline and you see a Flight Attendant wearing this pin, take the time to thank them and let them know you support them.  I hope to be able to pick up my own pin this month to wear when I fly United, and I hope to have time on the 16th to go out to the airport to lend my support and say thank you.  Mr. Smisek this "Day of Action"' is not about pay and benefits - it is about what this airline has become under your leadership.  These Flight Attendants are gracious, they are the solution and they are the Brand.  These hard-working dedicated professionals are the Friendly Skies and they are United Airlines.   

Be predictable - Be gracious - Be the solution - Be the Brand .....Part 1

United calls these four directives their "Service Principles."  For the last year or so, when United employees log in to the company's intranet, they have been greeted with this message.  The intent of the message is not only to motivate United's employees to do their best, but it is also intended to unify them and get them to rally around a common idea.  That idea being the "Brand" that is United Airlines.

All big corporations have their catch phrases and jargon that is put out there to encourage and inspire.  Young MBA's coming out of their A-school programs land jobs in the executive office or with a consulting firm; and leap over those on the front line with the customers. While in school they have read, discussed and come up with their own theories from numerous case studies of actual missteps made by major corporations.  At the same time, you have academics shaping those young minds with their own theories of what should have happened, even though many of these academics would not last a month in the corporate world.  This is where concepts such as "Service Principles," as well catch phrases and jargon are bred.  

Some of the missteps studied include the introduction of a new product to replace something that was tried and true (new Coke); leveraged buyouts and how they overvalued companies at the expense of shareholders and employees (KKR and Nabisco); and one that I studied, how the delay in upgrading computer reservation systems was critical to the demise of a highly respected and profitable airline (the original Frontier).  I suspect that if they are not already being written, in a few years business schools are going to be studying the merger of United and Continental and the mistakes made in trying to unify two disparate corporate cultures.  

I suspect there is some highly paid MBA, most likely a consultant, who came up with these four service principles for United Airlines.  Had he or she spent any time on the front line beforehand, they would have realized that the dedicated employees at both United and Continental had already embraced these service principles on their own from the very first day they reported for duty.   The suits in the Willis Tower need to show they too are contributing to ensure the success of this airline, and that is why you see crap like this coming down to the line.  Yet some hard working flight attendant, who did not get any sleep the night before in their glamorous layover hotel near the airport, is supposed to check-in for what could end up being a 13 or 14 hour duty day, read these service principles, and then all is right with the world.  This merger has cost hundreds of millions of dollars more than originally projected, much of that cost coming from overpriced consultants with ivy league MBA's and PhD's; all of whom are so arrogant to think they know for certain that their solution is the right solution.  Buried in this is probably a cost that ran at least seven figures for someone to come up with these four service principles.

Like a lot of corporate jargon and feel good catch phrases that get pushed down the line from management - many of United's front line employees just think of the four service principles as a load of bullsh*t. It is obvious they are not being embraced sincerely.   Here is the proof - since the merger was completed five years ago, United has consistently placed last or near last in many national customer service surveys (e.g. J.D. Power).  Add to that the number of complaints registered with the DOT by passengers in just 2014 alone, where United was second only to Skywest.  Ironically, Skywest is United's largest Express partner.   

Further evidence that confirms that the service principles have not been working are the significant changes in how United Airlines has been operating in the last few months. There are hints of some of the old United Airlines coming back, although much of it is too little and too late to woo back many premium customers who have already defected to other carriers.  To make my point here it is best to compare what what was happening a year ago, the mistakes that were made to that point, and then look at what is happening today.

Summer of 2014
As you know, most of the senior management ranks at United are made up of those who came from Continental Airlines, and they all brought with them an attitude that they were certain that what had worked at Continental was going to work for what was now the world's largest airline.  Starting in 2010 through to the summer of 2014, United's new management implemented changes that they certain would make this airline better then the rest.  This is a picture of where United was a year ago:

• With delivery of the new ERJ-175 jets, for which United committed hundreds of millions of dollars, many domestic routes were being switched to United Express carriers, and stations in mid-sized cities became entirely outsourced. Long-time United and Continental employees either had to transfer out of those stations, accept lower paying positions with the Express partner, or retire.  These new jets were also being put into service on flights between hubs, such as Denver to Washington-Dulles, replacing mainline service, taking away jobs from mainline Pilots, Flight Attendants, Mechanics, etc..
• 757's were being retired or put into service on shorter Atlantic routes, and then replaced by the newer 737-900's.  Most legacy United flights to the Hawaiian islands were now flying pmCO 737-700 or 737-800's because they used less fuel, and pmCO crews could be scheduled for longer duty days and work more turns rather than having to layover.    
• Expensive and heavy In-flight entertainment systems were being pulled off and far cheaper broadband internet wi-fi installed so that customers could use their own devices to stream movies and TV shows.  This became known as BYOD, or bring your own device, flying. 
• A new thin-line economy seat was introduced that would reduce weight and allow for an extra row or two on the planes.  Passenger comfort was not a concern.    
• There were very few wide body aircraft on domestic flights, all of these planes had been repositioned to be put into service solely on international routes.  The new 787 was flying, but it had been grounded for awhile because of the battery problem, and Boeing was still experiencing delivery delays.  The 787's being delivered were planes that had been ordered by Continental and are configured with only two classes of service.  These did not fit with United's, 3-cabin, International Premium Travel Experience product that long-time United customers were accustomed to.
• Across the system food service was being cut.  Meals were only going to be served on flights over two hours.  There would be no meal service on the United Express flights.
• Bag fees were increasing, and United was adding everything in that was possible that could be purchased for an an extra charge.  You no longer had to be a frequent flyer to have "Premier Access," you could buy that for a nominal charge.  Long-time loyal premium flyers were being pushed aside.

All of this was done so that each and every flight segment was profitable.  That was the Continental way of doing things.  

Something happened with all these changes though - the customers were not embracing them, and there were operational glitches that led to costly delays and even more customer service problems -

• Global Services and other premium frequent flyers in those mid-sized cities that were now outsourced took their business to American and Delta.  Why endure a long-trip across the Atlantic in a cramped narrow-body 757 only to be crammed into a smaller regional jet for another 3 to 4 hour flight from IAD, ORD or EWR to their home airport.  
• The wi-fi roll-out was a clusterf**k and for most of last year many domestic flights flew "dark," being without wi-fi or any inflight entertainment system.  If you did not bring your own already downloaded entertainment or a good book, trans-continental flights got pretty long.  Another problem is that management did not see the need to install additional power outlets on these planes, even in the First class seats. Customers now have make sure they are "charged-up" before getting on one of these flights.   Even so, the charge is not going to hold on a five hour trans-continental flight.
• Any problems with headwinds and the trans-Atlantic 757 flights had to stop for refueling causing delays.  The same for the 737's now flying to Hawaii.  Flights from LAX to Hawaii were being diverted to SFO to top off the fuel before heading out over the Pacific.
• The new generation 737's with their longer fuselage and being closer to the ground require longer runways for takeoffs.  Where a 757 may be able to take off at 140 knots, a 737-900 requires 180 knots before being able to lift off.  United won a coveted transcontinental route from San Francisco to Reagan National Airport in Washington.  Other than the 757, the only other planes United can use are the A-320 and A-319, plus the smaller, cramped older 737-700 or 737-800.  I think United chose to use the older 737's because they can schedule the pmCO flight attendants to work the return flight the same day rather than having to pay a crew to layover.  These older 737's have have fewer seats to sell, and transcontinental routes to DCA are premium and business flyers will pay the higher fare for the convenience of landing at this airport closer in to Washington, D.C.  I don't think the cost savings exceeds the lost potential revenue had the 757 been put into service on this flight, and now there are not enough 757's available.  Some of the Hawaiian island airports previously served with 757's and 767's are also not able to accommodate the 737-900.  
• Premium frequent flyers are defecting at far greater rates than anyone could have expected. Loyalty no longer mattered - status could be purchased for a price.  This is all evidenced by the losses in market share in cities where United faces competition.  

Summer of 2015

This summer there is a much different picture at United; however, it does not mean that flying United is a better experience.  It is just interesting to watch how schizophrenic this management seems to be as they make change after change after change.  Most notable of these changes is the reintroduction of mainline flights to many domestic mid-size cities.  United's premium customers were put off by the down gauging of service and they defected to Delta and American who still had or increased mainline service either to their home airport or destination cities.  Looking at market share statistics for 2014, it actually looks like Delta increased their mainline flying to accommodate the customers that were defecting from United.  In addition, the regional carriers are notoriously bad when handling irregular operations.  The bad winter of early 2014 is a good example - United lost hundreds of millions of dollars because of canceled flights, the majority of them being on Express carriers.  

But to show that this short-sighted management can't get their eye off of every nickel, even though mainline jets are back in many cities, staffing at those stations is still outsourced.  I don't think these agents have been trained in the four service principles - case in point being my most recent experience in Albuquerque a few weeks ago.  I don't think it can be called First Class service when the agent working that line suddenly walks away leaving premium customers to wonder how they can get checked in and their bags checked.

United has also committed a lot to upgrading the United Clubs.  They are a big profit center now where anyone can buy a day pass.  Membership is no longer limited or exclusive to those willing to commit to a full year, and another reason why they can no longer call it a "Red Carpet Club."  Some of the upgrades are nice and long overdue.  With new furnishings, there is not much fighting over an electrical outlet to charge up your device so that it will last long enough for a movie on the next flight. On the down side, they are testing new food offerings in some clubs which are kind of a joke.  I am not sure what was wrong with what they had before - long time members were not expecting a meal when they went into the club, but I suspect the single day users want a lot for their $50.  So the new offerings include hot soup - even in the summer - which languishes all day in a tureen, hummus that is uncovered and left under hot lights, pita chips, "artisan" breads that are at least a day old, olives (which I am highly allergic to) left uncovered under hot lights, salami left uncovered, chunks of cheese on a wood cutting board uncovered under hot lights, and disgusting hard brownie chips (they taste like something you would scrape off of the pan from a burnt batch of brownies).  Gone are the sanitary individually wrapped cheeses, fresh crudite, little packages of fresh carrots, and fresh cookies.  Again, some highly paid bozo came up with something that would appear as an upgrade, but is really kind of a mess and appears more difficult to maintain.  Why do they keep trying to fix things that were not broken?
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While United began cutting back on service, the competition stepped things up, and premium customers began defecting at a rate that this management did not expect. This is all evidenced by the loss of market share across the board, and most critically, United's long held dominance across the Pacific is eroding.  What is apparent about this "Continental" management is that they do not know how to compete.  Case in point, the pulling out of JFK.  Granted, United only has service to and from LAX and San Francisco, but they were the first to come up with Premium Service flights, and for a time, well-heeled bi-coastal frequent fliers were left with a feeling that flying United's Premium Service was something special.  Slowly, the niceties on these flights were taken away, and then the down gauging from three cabin to two cabin service.  Seats that went for $6,000 round-trip were taken out - saving a nickel only to lose a hundred dollars.  Those who flew United P.S. flights for prestige are now flying American or Delta, both of whom upgraded service on these routes.  I don't think Mr. Smisek and his buddies do not fully understand what it means to "Be the Brand"  and thus they themselves are not embracing all of the service principles that they push on to their front line.  Mr. Smisek, if you want to cut costs and make this airline run better, do some house cleaning there in the Willis Tower first.  In the safety videos you keep talking about making United a world class airline, well to do so, you have to know how to compete, not know how to run away from a challenge.

There is so much more that I want to write about, but time is limited and you are probably already bored at this point.  I just do not have the desire to fly like I used to, but I do stay loyal to United Airlines.  I hear that I can get a better experience for my dollars at other carriers, but it is nice to see my friends, who through all of this, show up and, like they have been doing since the first day they started at United - thank me for flying the Friendly Skies