Snarge

My perspective on the TA vote... the No voters were against the TA because the agreement didn't reflect their identity as airline pilots and reprimand the company for historical harm. While understandable, a business deal is about today and tomorrow, not claims on the past. Yet the past is relevant in the big picture. I am sure this has been posted before...consider it a refresher. If you have a United/Chase credit card... cut it up....

This is opinion and I can't find the NYT article... but the real deal is the money behind UAL/CAL/UCH... and who controls power. Voting NO on the TA was simply an invitation to divide and conquer and bust unions... We got what we got because we leveraged the NMB and govt.

Any UAL guys who went thru this or know Len... your thoughts?


Know your Enema…

“Know your enema” Capt. Benjamin Franklin “Hawkeye” Pierce, 4077 MASH .

I’ve seen so many CEO’s come and go in my 31 years at United Airlines, I am running out of fingers to count them on. None of them has acted alone. The one constant in all that time is the involvement by the Chase Manhattan Bank in just about every major malady to befall the United pilots.

The Chase Manhattan Bank, now known as JP Morgan Chase after a recent merger, has long been the enemy of union pilots in general, and United Airlines pilots in particular. The Chase held 75% of the commercial paper at Continental Airlines the day Frank Lorenzo initiated his infamous strike in the early 80’s. You don’t stiff the Chase for that much money, then or now, if you want to keep your CEO job for more than a few hours. So logic would dictate that Lorenzo took CAL into chapter 11 bankruptcy and a debilitating strike with the tacit approval and probable the guidance of the Chase.

I was furloughed from UAL and working for Merrill Lynch in 1983 when another broker tore an item off of the now quaintly antique DOW Jones Newswire teletype and laid it on my desk. The self same Chase Manhattan Bank had just given Dick Ferris and United Airlines the biggest line of pre-approved revolving corporate credit in the world to that date: 3 BILLION 1983 dollars. UAL Corp only had a $6 billion market cap at the time. It was enough money to buy a controlling interest in UAL! Ferris at that time was considered so much a “friend” to the pilots that we gave him an honorary pilot seniority number: 6000. Tail End Charlie. A mere month after taking the Chase’s loan deal, Ferris morphed onto a union-busting goon, bent on being the rock to Lorenzo’s hard place and de-unionizing the entire industry between them. A coincidence? I think not…

Ferris let his ego overpower his judgment and bungled the winning hand the Chase had given him. After spending $1 billion of the Chase’s money, he got impatient to win our strike when he had us about to crack. He played us off against the AFA who had struck in sympathy with us, and gave the AFA a sliver of daylight in the door to pull us all though and back to out jobs. He could not imagine that AFA would have made a self sacrificing gesture to save us all. But they did.

That is a debt the pilots have yet to repay, by the way…

The strike in ’85 was all about the survival of trade unionism in the airline industry. Since UAL had retained earnings of over half a billion dollars after taxes in ’84 and was performing well in the first half of ‘85, it was not about economic issues inside UAL. The strike was about a larger industry wide agenda, possibly dictated by the Chase. They at the very least put an enormous amount of money in Ferris’ hands to foster that agenda…

The strike was not about increasing pay for incumbent pilots. It was about survival. We survived, so Ferris failed. The Chase fired him as CEO in 3 short months, and replaced him as Chairman shortly thereafter. Out of work at age 54 and the recent Chairman & CEO of a Fortune 500 company, Ferris could not find work running another company ever again. That’s what being blackballed by the Chase gets you.

Fast forward to 1987 and the pilots-only ESOP. 6000 pilots had agreed to pay $300 per share for ALL of the outstanding shares, delisting UAL and taking the company private. All the details of the deal were complete. The union, the company, and the government had all approved the deal. The big Japanese money-center banks had agreed to lend us the money. We had a nice big bow tied around the deal and were simply waiting 1 week for the papers to be signed and the stock to change hands.

Then it was announced that the Chase wanted to be part of the financing syndicate, taking a large part of the financing. I warned other pilots at the time that the outcome would not be good for the United pilots, but even I had no idea how truly bad that outcome would be…

Keep in mind, the Japanese money-center banks do not “hold the paper” on loans they make on this sort of deal. They quickly sell their interest to the second-tier Japanese banks and look for another deal. The more often they turn the money over in a year the better. Having the Chase take a big chunk of the loan off of their hands early sounded appealing. They should have known better.

With UAL selling at $270 per share and Wall Street arbitrageurs borrowing every penny they could get their hands on because it would be worth $300 in just one week, the Chase stabbed their Japanese colleagues in the back. They pre sold their interest at a discount to the second-tier Japanese banks, cheapening the price they would be willing to pay for the rest. When they realized how they had been outmaneuvered, the big Japanese money-center banks pulled out of the deal in unison, causing it to collapse mere days before we would have owned a then highly profitable UAL whole. UAL stock was frozen the next morning due to an order imbalance. When it finally opened around 10 AM, it had dropped from $270 per share to $60. Everyone who had borrowed money to buy UAL got margin calls within the hour. They had until the end of the trading day to come up with the $210 per share cash shortfall for every share they had borrowed money to purchase. Some very big players had to sell every share they held. They panic-sold IBM, Microsoft, US Steel and every other quality company they held. Some even had to sell their seats on the exchange, triggering the single biggest one day percentage drop in the DOW. 25% For years to follow, the UAL Pilots-Only ESOP was known on Wall Street as “the DEAL FROM HELL”. Wall Street blamed union pilots, not the Chase for their losses. It’s much easier for Harvard MBA’s to blame their failures on unwashed union goons than it is their classmates or their own faulty judgment.

A few years later, Steven Wolf had no trouble finding Wall Streeters more than willing to help him craft an ESOP that was little more than a short term lease that was designed from the outset to eventually leave us all empty handed. Payback is a *****…

Fast forward to the end of our ESOP and the gutting of Contract 2000 in bankruptcy. Our Bankruptcy Debtor in Possession was none other than the self same Chase Manhattan Bank, now known as JPMorgan/Chase. And we have the words of Mr. Rice, a Senior vice President for JP Morgan Chase for corroboration. Just Google “Glenn Tilton”, look for the “New York Times” link, and read the story dated April 28, 2008. On the second page, Mr. Rice claims to have been Glenn Tilton’s mentor “since the day he arrived at United Airlines.” Is the picture getting any clearer?

Mr. Rice goes on to outline his personal vision for UAUA. It involves a merger that produces economies through the elimination of needless duplication. That’s shorthand for you & me.

The Chase is deep into the financial dealings of three major airlines. We are one. Continental is obviously the other. Guess who the third one is? Yup. Good old US Air. Is it any wonder that the old US Air merger keeps rising out of the grave like a ‘B’ move vampire?

The only thing that saved us from the US Air merger in early 2001 was the Bush Administration Justice Department vetoing the deal because it gave us a near monopoly in Washington DC. Regardless of our personal political affiliations, we all need to send Dumb Old George a thank you card for saving our jobs. Saddling ourselves with $11 billion of needless debt just before 9/11/2001 would have all but guaranteed liquidation for UAL Corp., much to AMR’s delight.

Those of you in Denver should recall how brutally critical I was of APLA’s paid financial advisor face to face in front of hundreds of pilots for supporting the US Air merger. In that meeting, months before 9/11, I criticized his assessment that the US AIR merger would be “good” for us economically as being shallow to the point of negligence. I stated that despite the then rosy economy, we were soon headed toward a train wreck of a recession and the deal’s crushing debt would kill us as a viable company, eliminating all our jobs in the process. Sadly, 9/11 accelerated the recession I told the group I saw coming, driving us into a bankruptcy we have barely survived even without the added debt burden a merger would have crushed us under.

So, where does that leave us now? The credit market collapse and resulting lack of available financing for an ‘actual’ merger has pushed management toward virtual mergers via code shares and limited partnerships. In my judgment, the Aer Lingus deal is nothing less than a trial balloon for Star Alliance Air, and the end of our profession. ANA has openly expressed a desire to join UAUA and copy the Aer Lingus deal in Asia. Could the recent lawsuit against ALPA be a ploy to keep us quiet while the Aer Lingus deal unfolds? Is Tilton creative enough to have laid this plan out all by himself, or is he being guided by others? Mr. Rice and his staff at JPMorgan/Chase, perhaps? Whoever is calling the shots, underestimating Tilton as being ‘stupid’ is a huge mistake. It would also be a mistake to think that Glenn Tilton is negotiating against us alone.

It has taken a quarter century for the intended result of airline deregulation to come near to reality. In my opinion we are in for a struggle that may well make the Strike in 1985 seem like an easy fight. Already we are seeing the company dust off some of the old tactics from 1984, and come up with some truly alarming new ones. What can we each do about it? I can’t choose what’s right for each of you, but I will tell you what I’ve done and plan to do for myself.

Disclaimer: Consult with your own investment advisor before following any of the financial advice below. I can not and will not manage investments for other pilots.

First, save every penny you can. Pay down debt. No easy feat these days, but having a personal war chest will be absolutely vital in the days ahead. Start raising one now. Establish lines of credit. And if a strike looks imminent, withdraw every penny from your credit line and put it in an interest-bearing account before your bank or credit union can cut your credit limit. If you wait until after a strike begins, it may be too late to get at those funds.

Although I doubt it, the strike may fall to the AFA or the IAM instead of ALPA this time, but it can still put you on the street without a paycheck. I went without a paycheck for 53 days in 1979 when the new-to-IAM ramp workers drug the mechanics out on strike with them.

Next, get comfortable with the concept that the union is not “they,” the union is “we.” Each of us must step up and pull on the same end of the rope if we are to succeed. If we oppose one another, or wait for ‘the union” to do all the heavy lifting, we play into management’s hands. Stay informed. Get involved. It’s your future that’s at risk. Don’t leave the job of saving it to others.

Len Predaina.

APC225

It seems you meant this as comment on no vs yes voters. OK.

Aside from that, I haven't read a better post on how UAL has been mismanaged for decades, the last one perhaps most egregiously, and that the parking of the 737s, instead of being a star-chamber plan for the merger, was one of many historical scrambles to pay off debt by using planes as collateral and labor as pawns. The merger was simply the latest hail-mary pass to fool wallstreet into believing they were acting to solve their problem-de-jour by getting new and brilliant (ha) management which is just as effective as moving your peas around on the plate.

Back to your yes vs no vote, I think we'll find mismanagement of the airline will continue in keeping with its history regardless of the vote.

Baron50

I am not sure who this guy may be, but one thing certain is that he has the historical facts wrong. Ferris was not replaced by the UAL board until the 1987 ESOP attempt and pilot shareholder lawsuit. The failure of the subsequent ESOP attempt as a result of the US secretary of commerce's remarks in Japan occurred in 1990. The notion that one bank was responsible for all of our woes is naive. All of the banks and the entire business community hate all unions, not just us. They are taught this in business school, we even have them within our own ranks.

I don't know "Len", but his read of the AFA in 1985 is just wrong. We did not ask them to strike in sympathy with us, they did that as a calculated strategy to get the "Chit." The airplanes were not flying anyway, it was a bold move on their part, but it may have been better for us if they had stayed on the payroll as did the IAM. They made no difference in the outcome, not one scab flight was cancelled because of a lack of flight attendants. One thing that is true is that Len was not part of ALPA leadership of the period, so his observations are that of an uninformed outside observer.

His comment about the consequences of a US merger in 2001 is purely speculative, we will never know. What is true is from a business perspective it made a great deal of sense to be number one in market share on most east coast routes. If Wolf had accepted our seniority integration proposal, few would have objected. The fact that he did not, resulted in the UAL-MEC's opposition to the merger. That disapproval may have had some influence on the Justice Department, unlike the current merger where the MEC Chair was strongly supportive, but that's just speculation.

Notwithstanding Len's proclivity for the conspiracy theory, he is quite right about personal finance management, prepare for the worse and hope for the best.

Baron

Probe

It was an interesting read, and I can only comment on one item that is total BS. Claiming that a failed UAL pilot ESOP caused the stock market crash of '87 is a joke, and delusional. I don't have enough knowledge of the rest of the stuff written but I lived through that October day in 87 with skin in the game.