NWA May Go Bankrupt Without Labor Concessions

[davetheflyer]

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Primarily why I used the steak analogy. You can get a steak anywhere, but if you want to charge more for it, you're going to have to start with a better product.



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Which brings me to one thing that concerns me about the future of the legacies. They charge more, but do they provide a better product?

Most of the customer raves seem to come from companies such as Southwest, Jetblue, and Independence (yes, passengers love to fly the big I). They have tvs, video players, and assorted gimmicks that customers love.

In contrast, the majors frequently make headlines for eliminating magazines, blankets, pillows, or trying to sell food that they previously included in the ticket price. A major airline ticket will often have a passenger flying an RJ on the same route that an LCC would fly an Airbus or 737. (Although this isn't necessarily a bad thing. Some pax like RJs better because they get on and off faster.) Cutting costs can go too far if it becomes a customer service issue.

The big advantage that the majors have is route structure. As we've discussed, the majors fly to small cities that LCCs don't. Some LCCs are expanding into these markets though.

The majors also have a lock on the international markets with the exception of a few Canadian and Mexican cities. I think that this will also start to change in the next few years.

 

[flyover]

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I don't know if my way will work.

I will tell you this. It ain't working the way they're doing it now. And doing the same thing over and over again and hoping for different results to me isn't a good business plan. It's insanity.

If there really has been a paradigm shift into new realities, then they need to adapt to it. And you can't keep on dumping on the employees like they have. Concessions are the easy route and they've been done up the ying yang.

Management's going to have to earn every single dime they get paid to figure out a way out of this.

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Pretty much agree. There has been no "paradigm shift" really. The same supply and demand situation that delivered profits in the 90s is taking them away now. The problem is, how do you shut down part of the system? Clearly UAL and USAir are not viable busnesses, but they try to survive, mainly because their creditors think they will get more in the long run by keeping them alive.

I will grant you that a major part of their long term goal may be to shift significant cash flow from salary and pensions in their (the creditors) direction. Labor can try to fight this, but at the gamble of losing everything. Since the same creditors, like GE, hold sway at all the airlines, they can decide who lives or dies should some labor group make an heroic stand. Not very fair, but on the other hand, more fair than what employees faced at Braniff and Pan Am and other companies that have disappeared over the years.

The difference in leverage is a pretty profound one. Before bankrutcy the unions can, with a great deal of creditbility, threaten to shut the company down. After bankrutcy the creditors can, with even more credibility, threaten to shut the company down.

In any case, you can stop worrying about stockholders and BODs and the hated MBAs. The creditors own the industry now and are calling the shots. Which I guess means their stockholders, BODs and (hated) MBAs are now in charge.