JUNE LABOR ADVISORY REPORT;
Doug Parker, US Airway's CEO, two members of the Board of Directors and numerous VP's, managers and directors met with the Union Labor Leaders in Phoenix at 4:00 PM on June 11th. We met and discussed relevant issues as to how the oil crisis has effected this industry.
Doug Parker stated for every dollar per barrel that oil increases ,the cost to to the company equals an additional
$37,000,00.00 approximately an additional two billion dollar increase from last year. One factor he used was averaging the cost per paying revenue customer, the company needs $299.00 per r/t passenger just to break even for fuel cost.
They are reviewing cost cutting measures from each department. Possibly reducing the fleet and flts. that have low capacity or unprofitable routs.
During the meeting, many of the labor leaders asked what locations would be reduced, how many of our members would be furloughed and the company advised us that nothing was final at that point. We did get the information the following day, June 12th, when the company announced domestic capacity reductions, reducing headcount and implementing several new revenue initiatives, such as checked bag fees and charging for beverages, which you have all heard about by now.
Doug stated that he believes seat capacity will be reduced by as much as 10% by the forth quarter of 08 due to increased prices.
The CWA/IBT Association representatives had the opportunity to speak on many topics in particular making sure that if labor was reduced in this craft that it must coincide in respect with the over all fleet size. In the passenger service craft they are already lean, they are not prepared as well as other carriers, their IT technology is far from updated. Tools for communication & automation are on the most part inadequate. We stressed to keep customer service at its highest level including maintaining and building positive attitudes, the staffing model needed to be judged realistically, considering irregular operations which unfortunately is often.
The IBT representative suggested if the going gets rough in the future, the company should consider a temporary suspension in positive space passes given to Directors and above including family members. That after all when you reduce the fleet to increase the overall capacity, fewer seats are available thus Directors and above including family members are occupying seats that could be made available to revenue passengers. That concept seemed foreign to some of the Directors and VP's in attendance.
MAY LABOR ADVISORY REPORT
Frank Spencer, Area Vice President for Local 2252 in District 2 and Ellis Ryan, President for CWA Local 3140 in District 3 attended the May Labor Advisory meeting on behalf of the CWA Passenger service employees. The following information was reported;
Doug Parker, CEO, started the meeting by telling us that our industry is in serious trouble, because of the record high cost of oil. The company expects jet fuel to cost 1.5 billion more in 2008 vs 2007.
Every one dollar increase in jet fuel represents a 37 million increase in our fuel bills. The company is hedging approx. 50% of our fuel needs up to 6 months in advance. Capital spending will be reduced approx. 75 million dollars this year to offset the increase in fuel costs.
Parker also discussed "ala carte pricing", ie preferred seating and the recently introduced second bag charge. Preferred seating is projected to generate 25-30 million yearly and the second bag charge is expected to generate 75 million annually.
Mr Parker also discussed industry consolidation, but would not comment on recent rumors about a US & UA merger. According to Parker, consolidation generates large synergy value. Secures our future now, with oil at 120 dollar per barrel. A merger for US would provide job security and would have limited furlough, if any. Should we merge with another carrier, then the highest cost contract would be honored, upon integration.
Robert Isom started his presentation acknowledging that last summers operation was very ugly and brutal for the front line employees. The company is striving to be reliable, convenient and have a better appearance. Our on-time performance, completion factor and A14 stats all have been very good since the first of the year. We ranked #1 for on-time in the first quarter.
C.A. Howlett (government affairs) reported that the company is lobbying for legislation to make exceptions to the perimeter rule, at DCA. The perimeter rule was introduced in 1967, to force long-haul flying to the newly opened Washington Dulles Airport. The rule restricted flying into and out of DCA to flights of 750 miles or less. Over the years, the mileage increased to 1000 and today is 1250. There are currently 10 flights that operate outside the perimeter and this was permitted by special legislation.
DCA-DEN: UA and F9
DCA-SLC: DL
DCA-LAX: AS
DCA-SEA: AS
DCA-PHX: US
DCA-LAS: US
In addition to the perimeter rule, DCA is slot controlled. If passed, the new legislation would allow carriers that serve DCA to operate beyond the perimeter, by using slots that they now use to serve their hubs. The hub provision should protect small communities, from loosing air service to DCA.
