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To: Knighty Tin who wrote (236433)	4/19/2003 8:45:13 PM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 436258

so are you saying hickey should be putting his mark on a bullish outcome at this juncture? <g> bears need all the flexability they can muster at the moment... you are welcome to provide some <vbg> oh father of trading.

To: Knighty Tin who wrote (236433)	4/20/2003 1:15:19 AM
From: ild	Read Replies (2) \| Respond to of 436258

The Airline Wage Escalator The airline industry turned in another emergency landing this week, with flight attendants from American Airlines finally joining two other unions in agreeing to wage concessions. This may save American from bankruptcy, but don't expect it to save the overall industry from its long-term death spiral. We are merely now in another down phase of the wacky up-down-up airline cost escalator. American's union concessions follow those at US Airways and United, which had to be wrung out of bankruptcy court. Now the pressure will be on Delta ($466 million first-quarter loss), Northwest and maybe others to follow. When times were good, all of these airlines chased United up the union wage escalator; now in bad times they're pursuing it down. Does anyone think there might be a better way? All the more so because these latest concessions contain a built-in return to the up escalator. By next year American's pilots , flight attendants and mechanics will all be looking at salaries about 15.5% to 17.5% below current wages. But in 2004 workers will begin receiving annual 1.5% raises, and some unions have been allowed to cut the length of their contracts so to be able to renegotiate better terms sooner. American had to "buy" even these concessions. The company has offered unions a new stock-option plan and profit sharing that could have employees owning up to 20% of the company. Management also threw in a promise of a bonus wage increase of up to 4.5% annually if the company regains an investment-grade credit rating. United had the advantage of a bankruptcy judge to help encourage somewhat better contracts. The tentative agreements will save the airline about $2.56 billion a year, or 36% of overall labor expenses. Yet even United had to agree to let the pilots' union keep its seat on the board and participate in a profit-sharing plan that will start paying out in 2005 if United hits a specific pre-tax profit margin. By the way, taxpayers are on the hook for part of these airline restructurings, via unaffordable pension benefits. US Airways has already dumped its $1.7 billion pilot pension liability into the lap of the federal Pension Benefit Guaranty Corp. It's only a matter of time before the other airlines do the same; they (which means you the taxpayer) collectively face unfunded pension liabilities of as much as $19 billion. The root problem here is the monopoly on bargaining power held by the airline unions. Under the rules of the 1926 Railway Labor Act, unions lack incentive to bargain in good faith; they know they can ride out any contract and then blackmail management by threatening a strike that airlines can never afford to take. (They'd be out of business in a few days.) Thus the up escalator in good times, which has made labor costs about 40% of the total for the larger airlines. Senator John McCain proposed last year to reform the Railway Labor Act to allow "best-offer" binding arbitration, giving both labor and management an incentive to make fair wage offers that a panel of arbitrators would then choose between. We hope the Arizona Senator sees fit to reintroduce the bill soon. Unions object, but we suspect their rank-in-file might prefer such a system to the unpredictable booms and busts under current law. Labor costs aren't the only airline problem. We're sympathetic to their claim that the government should pick up post-9/11 security costs, but the rest of their federal aid requests will only prolong what is a problem of overcapacity and high fixed costs. Sooner or later one of the big airlines is going to have to liquidate under Chapter 7 rather than revive under Chapter 11. The way Congress could help immediately is to stop the crazy up-down airline wage escalator.