The subtle meaning of Judge Lane's S.1113 ruling

In a landmark ruling Wednesday, Judge Lane refused to abrogate the pilot contract at American Airline under S.1113 of the bankruptcy code. He did so based on two provisions in the company's proposed new terms, and in his ruling, set out a clear path on how AA could remedy that and come back and ask for a do-over.


Here's my take... All the employees who said "we'll take our chances with the Judge" rather than negotiate just got a huge wake-up call.

I suspect the ruling is a lot more significant than some are seeing. 


Let's face it -- labor relations at AMR have been in the crapper for the past 10 years, even before the debacle of April 2003, and both sides share the blame for this.

Starting with management, I clearly fault Arpey and the board for not having the foresight and backbone to halt the feeding at the trough when it came to the stock price incentive payouts. They didn't, and it created the environment that persists at AA today. 

Sure, it was the unions fault for not insisting that management's compensation be tied to their compensation, but hey, we were all sort of mezmerized by the "Pull Together, Win Together" and "Shared Sacrifice" messages pouring out of CP5. 


But it takes both sides to really screw things up. The unions dug in deep, and have refused to look outside the "we hate management" lens. 

We saw six years of negotiations leading up to the bankruptcy filing. The unions repeatedly banged the drum that AA wasn't negotiating in good faith, and that what management was asking for was unreasonable. 

When the NMB put negotiations on ice a few years ago, many unionists blamed the company for negotiations going nowhere. How could AA not move off their negotiating positions?  Didn't they see the big picture?

What the union leaders and negotiators didn't see or act on was that perhaps management really wasn't kidding about what their position was, what was sustainable, and what wasn't. 


How does the ruling fit into that?

Simple... It reinforces (in my mind, at least) perhaps the real reason the NMB put AMR's unions on ice and didn't rule on an impasse --- the mediator saw the same economic realities that Judge Lane expressed in his ruling, and that the unions were the ones perhaps not negotiating in good faith.

Now that the company is in bankruptcy, it looks like the message may have started to get thru to the unions' leadership.

It's pretty clear that Laura Glading and the APFA leadership see it for what it is. So does Jim Little and the TWU.

I suspect that former APA president David Bates read it and wondered if he should have perhaps held onto his position for a week or two longer, rather than resign... And his replacement is now going to be in the difficult position of having to perhaps take up his predecessor's position.

But I'm not so sure that the rank and file get it. And that's disturbing. The TWU vote won by about 25 votes, and the APA vote failed by a huge margin. We have yet to see how the APFA votes.

Both management and the union leadership have a long way to go at educating the rank and file on what's realistic. And that's going to take a long time. Maybe having an independent ruling like this will help. Or maybe the hard-liners will simply write it off as another crooked judge in the company's pocket. I hope not.


One last observation, and I promise that will be the end...

Let's assume the APA and/or APFA vote no, and go thru abrogation, and at some point in the immediate future, an impasse is declared in their ongoing Section 6 negotiations, a cooling off period expires, and a PEB is called.


If I'm right that the NMB saw management's arguments as sound, and we know the bankruptcy court saw management's arguments as sound, how can any sane individual still believe that a PEB decision is going to turn out any differently?

Hopefully we don't see things get to that point...

A few words of wisdom from Richard Moran's "Never Confuse a Memo With Reality"

Business is made up of ambiguous victories and nebulous defeats. Claim them all as victories.

Keep track of what you do; someone is sure to ask.

Be comfortable around senior managers, or learn to fake it.

Never bring your boss a problem without some solution. You are getting paid to think, not to whine.

Long hours don’t mean anything; results count, not effort.

Write down ideas; they get lost, like good pens.

Always arrive at work 30 minutes before your boss.

Be sure to sit at the conference table—never by the wall

Help other people network for jobs. What goes around comes around

Don’t take sick days—unless you are.

Assume no one can/will keep a secret.

Know when you do your best—morning, night, under pressure, relaxed; schedule and prioritize your work accordingly.

Treat everyone in the organization with respect and dignity, whether it be the janitor or the president. Don’t ever be patronizing.

When you get the entrepreneurial urge, visit someone who has his own business. It may cure you.

Never appear stressed in front of a client, a customer or your boss. Take a deep breath and ask yourself: in the course of human events, how important is this?

Recognizing someone else’s contribution will repay you doubly.

Career planning is an oxymoron. The most exciting opportunities ten to be unplanned.

Always choose to do what you’ll remember ten years from now.

The size of your office is not as important as the size of your paycheck.

Understand what finished work looks like and deliver your work only when it is finished.

The person who spends all of his or her time at work is not hard-working; he or she is boring.

Know how to write business letters—including thank-you notes as well as proposals.

Never confuse a memo with reality. Most memos from the top are political fantasy.

Eliminate guilt. Don’t cheat on expense reports, taxes, benefits or your colleagues.

Reorganizations mean that someone will lose his or her job. Get on the task force that will make the recommendations.

Job security does not exist.

Children are a source of truth and ideas. The best icebreaker to use in intense meetings is one I heard from a six-year-old: “Raise your hand who’s mad.”

Always have an answer to the question “What would I do if I lost my job tomorrow?”

Go to the company holiday party.

Don’t get drunk at the company holiday party.

Avoid working on the weekends. Work longer during the week if you have to.

The most successful people in business are interesting.

Sometimes you’ll be on a roll and everything will click; take maximum advantage. When the opposite is true, hold steady and wait it out.

Never in your life say, “It’s not my job.”

Be loyal to your career, your interests and yourself.

Understand the skills and abilities that set you apart. Whenever you have an opportunity, use them.

People remember the end of the project. As they say in boxing, “Always finish stronger than you start.

AA Term Sheet Predictions

Tomorrow is the day that AA's unions find out what their future abrogated contract terms might be...

My guesses....

1) Pay goes untouched for most employees
2) Scheduling max for making guarantee goes up for APFA and APA (currently max of ~78 for pilots, expecting 85-90 for both pilots &
FA's)
3) Scope for pilots eliminates caps on < 91 seat aircraft (currently capped for 70 seaters)
4) Domestic codesharing permitted regardless of aircraft flown by the partner carrier (currently not allowed with airlines flying >50 seat aircraft)
5) Scope caps in TWU contract eliminated (covers both regional flying plus outsourcing)
6) Staffing caps in TWU contract eliminated (restricts part-time to 50% of full-time employees & outsourcing in outstations)
7) Single benefit plan for all employees (eliminating separate plans for management/agents, APFA, and APA)
8) Single benefits rate/copay structure for all employees
9) Frozen pension with 401K match
10) Reduced benefits for employees who dump their schedules thru trading (expect requirement to work 50% in order to retain benefits)
11) Banding of pay on the B772/B773, B767/B787 and B737/A320, and maybe A321/B757 fleets
12) Outsourcing all widebody aircraft overhauls plus a percentage of new narrowbody overhauls
13) SK & VAC modified to become paid time off bank
14) Elimination of crew bases outside hubs, and Intl/Dom bases/bids for FA's

We'll know in about 12-14 hours.

DL + AA? No way....

OK, I've refrained from commenting on the AA bankruptcy, but a set of news reports came out today that have spurred me into the need to issue some armchair analysis....

In the Wall Street Journal and also the Atlanta Constitution Journal, news came out today indicating that both TPG and Delta were said to be evaluating bids for AA.

Time will tell, but in short, this is probably the most anti-competitive idea to float in the US airline industry since.... well, ever.

It would effectively allow the #1 and #2 airlines to carve up far too many markets to pass muster with the DOJ.

---

First of all, this is probably way premature. AA still has the right to come up with their own plan, and probably will continue to do so for some time. The minimum timeframe a company can be given to come up with a Plan of Reorganization is 120 days, which will be coming up in February. But that's just the minimum. Given the complexity of the case, I'd be shocked if the court didn't grant extensions for AMR to come up with a plan. If fact, I'd fully expect that based on how full the docket is, AMR will likely get to run out the clock on the maximum 18 months allowed under the 2005 bankruptcy changes.

Only then will someone like TPG or DL be allowed to make a standalone bid.


Second, I had no doubt the guys in Atlanta would be looking at every option once AMR filed, including asset acquisitions like they did with Pan Am. I'd also been expecting to see TPG surface at some point. In fact, I'd commented to more than a few people over the two years prior to AA's filing that I half expected a pre-packaged filing with TPG's backing.


Until the clock truly runs out on the exclusivity period, it's all speculation, and fun speculation for some at that, unless of course, you work for AMR...

---

Now... With all that and my usual disclaimers (link to the right) fully referenced....

I see a move by DL to be nothing more than just hype.

There are dozens of reasons I could go into... and I probably will look at a half-dozen or so over time, but the first one that jumps off the page is the resulting networks.

I see no possible scenario that allows a merger of AA into DL to pass muster with the DOJ, or to even be practical, absent a serious downsizing of AA's current operation. With the exception of AA's hubs at DFW and LAX, there's just way too much overlap.

Let's start in the lower right hand corner of the map... While ATL & MIA are distinct domestic markets, once you start looking at international coverage, there are very few markets from MIA where AA is that DL isn't also serving from ATL, and vice versa.

And that's just the Southeast. Let's move up to the Midwest. Same situation, but amplified.

As in "None more loud... our amps go up to 11."

DL already has significant hubs in MSP & DTW. Is it really practical to have a third hub almost smack dab in the middle of that? Are there any international locations served from DTW or MSP that aren't also served by AA from ORD?...

Think that's it? Nope. Let's float a couple hundred miles down the Mississippi from MSP.

Within a 360 mile radius of Peoria, IL (hardly the center of the US, but...), you'd have three major hubs, but also three former hubs which still have significant presence from AA or DL -- STL, CVG, and MEM.

Certainly, having four hubs and focus cities in former steamboat markets has to be enough, right?

Hardly. We haven't even addressed DC or NYC...

At JFK, clearly, a combined AA/DL would dwarf the competition, and account for some 25% of the available terminals, and probably a little bit more than that in terms of ASMs. It's the only move DL could make to truly be able to trump UA's EWR hub, but is that really necessary?

I'll admit, I've been wrong a few times before with my predictions, but on this one, I'm pretty certain that even the most liberal interpretation at the DOJ would negate most of the "benefits" you'd see from allowing the #1 carrier to absorb the #3 carrier...

At a minimum, I'd see the DOJ requiring AA to forfeit **all** of its slots at JFK, DCA, and LGA, and realistically, something would likely have to give to deal with all the overlap at MIA/ATL and ORD/DTW/MSP plus STL/CVG/MEM.

If DL's merger with NW is an indicator, that says massive layoffs and cutbacks in ORD, which also conveniently cedes that market to UA. Given MIA's expense vs. ATL, I can see a huge shift there as well, and yes, I'd expect UA to jump all over that, too.

I have to admit, that this is the only deal I've heard of which makes a US/AA deal sound, well, reasonable. And I've got serious doubts about that one as well, but that's an essay I've chosen to avoid.

As I said earlier, time will tell. And I suspect we're going to have a long time to wait to hear this one firm up.

Cars strike stopped train... and drivers blame the railroad?

On Monday, there was a somewhat freakish accident in Chicago, where two cars struck a stopped train.

Yes, a stopped train.  Normally, it's a train striking cars or people.  Not this time.

You can read the Sun-Times version of the story here, but while I'm all for giving drivers the benefit of the doubt, the facts are really starting to stack up in the railroad's favor...

1) The railroad had logged the signals as inoperative prior to the accident (source: Sun-Times)

2) The train crew told first responders that flares were in place at the time the train was cleared to cross thru the grade crossing (that would also be evident at the scene, so lying about it would be futile, right?...) (source: Sun-Times)

3) Under Illinois law, once the train safely enters a crossing (protected or not), it has the right of way, and vehicle traffic is to stop at least 15 feet from the tracks (source: Rules of the Road, 1982)

4) FRA rules require that when automatic signals are inoperative, and a railroad provided flagman or local law enforcement are not present, "each train must stop and a member of the train crew must dismount the locomotive and flag highway traffic to a stop before the train occupies the crossing." (source: FRA Signal Crossing Safety Manual)

5) GCOR Section 6.32 (http://www.sdrm.org/faqs/rulebook/movement.html#6.32) states that "When a train has been notified that automatic warning devices are not operating properly, the train must not occupy the crossing until vehicular traffic is clear of the crossing." (source: GCOR)

You'll note that nowhere is it required that a flare be lit, or that a flagman remain present until a train clears the crossing.

So, I'm not sure what else the railroad was supposed to do under the circumstances. They complied with all of the applicable laws, guidelines and even best practices.


So let's focus some attention on the drivers...

1) The posted speed limit is 35 mph (source: I'm guessing based on the nature of the street)

2) The driver of one of the cars also stated he was going 35 mph when he hit the brakes (source: Sun-Times)

3) Normal stopping distance at 40 mph ranges between 120-200 feet, depending on dry or wet pavement (source: various stopping charts on the web)

4) City of Chicago streetlights are usually spaced 80 feet apart, and on both sides of the street (source: personal experience & Google Earth measurements...)

5) Google Earth and Google Streetview imagery of the accident scene clearly shows light poles spaced every 80 feet on both sides of the intersection (source: Google Earth)

6) The poles immediately north and south of the tracks are 50 and 60 feet from the track centerline (source: Google Earth)

7) That amount of lighting would not only forward-light, but also back-light the train (source: my assumption)

8) That amount of lighting should also be reflected off the FRA mandated yellow safety striping on the railcars (source: my assumption)


As I said, I'm all for giving people the benefit of the doubt, but they were unable to see a stopped train from 200 feet away with adequate street lighting.

The only reasonable explanations for that are that they were distracted from concentrating on the road ahead of them, be it conversation, texting, or talking to their passenger or on the phone.

Time will tell and the FRA will no doubt release its report by the time the 2012 elections are decided. Maybe sooner if we're lucky...

Illinois backtracking on "Free Rides for Seniors"

From the title of the blog, I do try to write about more than just flying.  Today, it's mass transportation in general, but there is a rail twist to it as well...

Back in 2008, former Governor Rod "Name Your Price" Blagojevich came up with the idea of offering all senior citizens, regardless of income, free rides on all state funded mass transit systems... Sounds great, except that the State of Illinois is essentially broke, and this is an unfunded mandate.  Shocking, I know, but since then,  transit agencies across the state have taken a noticeable financial hit due to the program.

This was really well intended -- allowing seniors on a fixed income to be able to benefit from all the years they paid into the system.  And I do understand and agree with that concept.  Unfortunately, the law was poorly worded, and as often happens, people quickly found ways to game the system to their advantage.

I ride Metra commuter rail several times a week from the Northwest Suburbs into downtown Chicago.  Some of the lines go thru extremely affluent areas, like Barrington, Lake Forest, Glencoe, and Winnetka.  And it's not uncommon for people living in those areas (bankers, lawyers, executives) to work past 65.  From experience, I've seen guys earning six figure salaries using the free rides program.

If you figure perhaps 500 people who were otherwise buying monthly passes at about $150 each, you wind up with close to $1M per year in ticket revenue which is no longer being collected.

That's not chump change, and I suspect that the numbers of people using the program are indeed far higher than that.

Fortunately, the Illinois House of Representatives has finally taken action -- last night, they voted 95-15 to limit the free rides program to low income seniors only. The current thresholds are $28K for a single household and $37K for a two person household...

As the Illinois Senate has previously tried to limit the program in similar fashion, hopefully this will become law.  Stay tuned....

Continental BusinessFirst... a comparison against AA and others

This month, I had a chance to fly on Continental, which is not one of my regular picks... I had a last minute trip to GRU, and more or less was priced out of flying on DL, UA, and AA by a pretty wide margin. Knowing budgets were tight because it was the end of the yea, I decided to take one for the team and go cheap...

Domestically, CO's business class is pretty good.  Meals and service levels were on par with what I'd experienced with UA and AA, as was the seat.  The only serious downside was the lack of seat power.  I'm spoiled by AA in this regard (especially now that they're putting "normal" 110v plugs on the new 737s, instead of the 12V cigarette plugs found on all the rest of their domestic fleet).  On a two hour flight, I didn't need it, but on a longer haul or if I had a short connection, it would become a significant downer, at least to me...

Internationally, CO's business class pales in comparison.  On the positive, the menu was as good as I've had with AA in the past year, and CO gets high marks for their flight attendants.  Totally different vibe than I've seen on AA or other North American carriers in a long time, and that was from all four crews I came in contact with.  And they did offer seat power, but unfortunately it was the 4-pin Empower 12V plug, which I no longer carry.  At least with AA's 12V plug, I can use the inverter from my Jeep.  No such luck with the 12V Empower jack.

On the downside...

CO's seating on the 762 is the pits.  I felt like I was sitting in a Laz-Y-Boy recliner.  Seatback reclined only about 50 degrees, and the legrest was pretty useless for someone of my height.  I never thought I'd find something worse than IB and AA's not-quite-flat seats, but I did.  But it gets better:  when the person in front of me reclined their seat, it actually came in contact with my tray table as I was eating.  There's nothing grosser than having the back of someone else's head about 6" from your food.

Entertainment options were also a step into a time machine.  Unlike other airlines who have moved to "on-demand" programming, CO is still using looping tape technology.  That means 24 options on a 2.5hr cycle.  Don't like your movie, or miss the beginning of a movie you wanted to see?  You get to wait until the 2.5hr cycle restarts.  That means on a 10 hour flight, you will see a maximum of three movies, regardless of their length...  By comparison, I've seen as many as five on a 9 hour flight when flying IB...

While things like service and menu will always be seen differently by different people, flaws like those in CO's hard product are much harder to overcome.  Good service won't negate an uncomfortable seat.  A good meal doesn't offset the remaining 8 hours of a flight.

Conclusion.... I'd probably try CO again for a short flight, but not for anything over three hours.  How this gets addressed in the UA/CO merger is yet to be seen, but I'm not holding out a lot of hope for it changing before the end of 2011.