It's the Labor Costs, Stupid!

The Legacy Airlines have lost $33 Billon, since the beginning of 2001

Since 2001, the U.S. airline industry has confronted unprecedented financial losses. Two of the nation’s largest airlines—United Airlines and US Airways--went into bankruptcy, terminating their pension plans and passing the unfunded liability to the Pension Benefit Guaranty Corporation (PBGC). PBGC’s unfunded liability was $9.6 billion; plan participants lost $5.2 billion in benefits. [GAO]

The Legacy Airlines (the ones with heavy union millstones about their necks) shrank their Chicago capacity by 10% this last year (O'Hare and Midway).  At the same time, Southwest Airlines was expanding its Chicago capacity by 60%, compared to a year ago.  According to Forbes, "Southwest now carries more passengers than any other U.S. airline." And, Forbes also reports that "Southwest reported second-quarter net income was up 41% to $159 million."  That was achieved, even though SWA's fuel costs increased by 25%, during the last year. CEO Kelly, predicts that SWA earnings will increase by at least 15% per share, in 2006.

JetBlue is the only other airline that is likely to make a profit for the entire 2005 year. The airline industry as a whole, should lose about "$4.5 billion in 2005," according to Securities analyst Ray Neidl.  He estimates the "second-quarter losses of the big six carriers--Delta, US Airways, Northwest, Continental, American and United--at $800 million."   Although AMR & CAL did manage to report better-than-forecast earnings, CAL still expects to show a loss for the full year.


UAL still needs to persuade some sucker "investors" to lend it almost $2 billion in new capital, before UAL can finally emerge from bankruptcy. Frankly, I doubt that it ever will.  It appears to me that total liquidation is in the cards for UAL, as it continues down the bone-yard path to the dinosaur tar pits.........

US Airways is temporarily having its ass saved by the merger with America West (AWA), yet it is still losing tons of money, while SWA and Jetblue continue to coax away their customers.  I think all that merger will eventually lead to, is the total liquidation of both airlines.  

The Legacy Carriers have shrunk their West Coast operations by 10%, while the SWA-JetBlue dynamic duo, continues to snap up their customers on both coasts.  SWA now controls 32% of the West Coast market. JetBlue has been carefully expanding schedules from Boston, Washington-Dulles and New York to West Coast destinations. 

The continuing, very aggressive expansion of JetBlue and SWA, will probably put even more pressure on the Legacy/Union/Millstone airlines, so that more of them will enter bankruptcy and some will likely end up totally liquidating, as did Eastern Airlines.  When that happens, count on the brain-dead union militants to scream it was all the fault of lousy management............. They will never admit that their blind acolyte acceptance of the Frederick Dubinsky/Roger Hall model of airline management, is what led to the loss of their pensions, jobs and probably their medical care too.


                     http://AirlineSafety.Com/images/HighUALSeatMileCosts.jpg          http://AirlineSafety.Com/images/PilotHours.gif                        


Michael Moore, one of the most devoted adherents to the principle of the Goebbels Big Lie, wrote this in one of his books:

Joining a union will make you money!

If you are a worker, and not a boss, who considers himself a conservative and hates unions, I have one question: why? If you want to make more money, “union” is the way to go. According to the US department of labor, union workers make an average of $717 a week. Non-union workers like you make an average of $573 a week. Being a conservative is about you and you making as much money as you can. So why stay non-union?

Tell that to the thousands, upon thousands of  Legacy Airline Union workers, that now have no jobs.  Explain to them why a non-union airline, like Jet Blue, has continued to hire new employees, buy new airliners, expand their routes and total employment, while the Millstone Union Airlines have had to park airplanes, cut out routes, and lay off employees, not to mention having to file for bankruptcy.  

Tell that to the union employees who no longer have their jobs in the steel and auto production plants (Hundreds of Thousands of those jobs lost).  Have Moore explain why the private sector union membership has shrunk to only about 8% of the American working population, from its former high of about 32% in the mid-1950s.  And, have him explain why the Great American Middle Class has grown enormously during that time, and why the GAMC is better housed, better fed, better clothed, has better medical care, and is more prosperous than any such class of human workers, in the history of mankind.  Have Moore explain why there has been a reverse correlation, between that unprecedented expanding prosperity, and the decline of union membership.

The United Food and Commercial Workers Union managed to persuade enough Wal-Mart employees, in Quebec City, Canada, to vote for their union.  It was the first unionized store in the entire Wal-Mart chain.

The result:

“Despite nine days of meetings over three months, we’ve been unable to reach an agreement with the union that in our view will allow the store to operate efficiently and profitably,” reported Andrew Pelletier, a Wal-Mart spokesman.

Nearly 200 employees lost their jobs, when that Wal-Mart store went out of business.  In addition, the local citizens now have to pay higher prices for the commodities they need, than they would have, if Wal-Mart had been able to remain in business in that area..  

You can bet your sweet bippy that the union bosses, in the United Food and Commercial Workers Union, are all still getting their paychecks.  And, Michael Moore continues to get rich and richer, as he publishes lie after lie, while giving out bad advice to hard-working citizens----who lost their jobs, because they believed what he said. 

Same thing happened to an awful lot of United Airline Union Workers, who listened to what Frederick Dubinsky and Roger Hall said.  Those two greedy, power-hungry, incredibly selfish, economic charlatans, preached that all the union employees had to do was to maintain "solidarity," and they could expand their own economic prosperity simply by demanding that United Airlines capitulate to their every demand.  The gullible rank-n-file actually believed that siren song of Dubinsky/Hall----that the customers would keep flocking to their doors, no matter how much they abused those loyal customers, no matter how high the ticket prices had to go to support all those obscene labor union costs, hanging like millstones about United's neck.

The Summer From Hell, reveals how Frederick Dubinsky was directly responsible for the beginning of the end, at United Airlines. 

Of all the 25,000 canceled flights, of all the customers stranded by United Airlines' summer of delays and disservice three years ago, Gerry Nendick remembers the weeping woman trying to make a funeral.

The passenger's sister had died in a traffic accident. She was desperate to get to the service in Pennsylvania. But her United flight out of O'Hare International Airport had been delayed once--a mechanical problem, the pilot had said. Now it looked like the replacement plane might be canceled too.

Tears streamed down the woman's face as she appealed to Nendick, a United customer service rep who had spent two decades trying to solve passengers' problems.

Hoping to plead the woman's case, Nendick poked her head into the cockpit. The captain turned around and asked, "Who's going to kiss me first? This flight is canceled."

Fixing the smug pilot with a glare, she sputtered, "You go out and tell the woman who is going to miss her sister's funeral how happy you are."

Dubinsky promised hard-nosed tactics. Goodwin recalls that Dubinsky in one meeting repeated his oft-stated philosophy of negotiations. "We don't want to kill the golden goose,'' he said. "We just want to choke it by the neck until it gives us every last egg." With United "awash in cash," in Dubinsky's words, he figured the goose had plenty of eggs to spare.

If the pilots, flight attendants, mechanics and other employees at United want to know why they may lose part or all of their pensions, medical care, and even their jobs, then read that Chicago Tribune article, and the other linked articles in that series on the decline of UAL.  

Frederick Dubinsky was the top culprit.  He and his fellow ALPA union bosses are the reason why so many of United's loyal customers began abandoning that airline in droves, never to return. Of course, the greedy and gullible pilots, who followed him like mesmerized acolytes, deserve some blame too.  They should have realized that the Hall/Dubinsky plan was sheer economic idiocy.  But, even if they were unable to comprehend the basic fundamentals of economic reality, they should have displayed some realization of how incredibly immoral their tactics and demands really were.
As long as anyone is willing to accept the idea that wealth and abundance can be produced, just by union "solidarity" forcing the employer to capitulate to every irrational demand of the union bosses----without any regard to the realities in the Free Market Place----then union jobs will continue to go the way of the Dodo Bird.  Loyalty to one's peer group is a poor substitute for understanding the basic laws and fundamental facts of economics.

Unions do not create and protect jobs; they destroy them.


July, 2005

Robert J. Boser    

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