August 22, 2012
Negotiations Update
Negotiations will continue later this week in Chicago. UAL representatives have invited the entire steering committee for a brief meeting pertaining to upcoming discussions. On behalf of the membership, the Airline Division accepted the meeting and informed the committee.
The recent news regarding the Pilots “Agreement in Principal” as well as the announcement to expedite negotiations with the IAM, are telling signs that the company is indeed committed to a timely conclusion to agreement talks with all of its represented unions. This is the message that has been conveyed, and the company is showing real effort in the fulfilling this commitment.
The full committee will be meeting on Thursday, and it is expected that the presentation from the company will include Mike Bonds, Doug McKeen, Jim Keenan, Mark Mounsey and Joe Ferreria, as well as the company negotiating team. A report of what transpires at this meeting will be provided as quickly as possible after its conclusion.
Second Quarter Earnings Report
One of the departments within the Teamsters that provide us tremendous support is the very capable and talented Capital Strategies Department. Jamie Fleming is a Corporate and Financial Research Analyst with this department and offers this review on UAL as part of her quarterly report to the Airline Division.
United Airlines (reported July 26, 2012)
Price: $19.20
Reported ongoing earnings per share of $1.41, far behind analyst consensus estimates for earnings of $1.65 per share.
Several possible explanations for the miss include a one-time hit to labor costs for high medical expenses, an accounting adjustment for air traffic liability, and plain old lower revenue with higher costs.
UAL management had previously guided down second quarter PRASM (Passenger Revenue per Available Seat Mile), but perhaps some analysts did not suitably lower their expectations.
Investors beginning to question UAL management for repeatedly missing earnings expectations in different ways, especially with merger synergies starting to really kick in.
Ex-fuel costs rose 2.1%, a point lower than the industry, but cost pressures are building as the combined company tries to fix service problems and put labor contracts together. (which usually means raising them)
Expect higher cost increases through the second half of 2012 – 3-4% increases likely
Consolidated revenues increased 1.3% in the quarter.
Operating margin of 7.9% is lower than last year, and analysts expect UAL to be the only airline reporting LOWER year-over-year margins.
Analyst opinion:
Glenn Engel of Merrill Lynch: Rating is Neutral with price target $25
Michael Linenberg of Deutsche Bank: Rating is Buy with price target $31
Kevin Crissey of UBS: Rating is Buy with price target $36
Seniority Integration Committee
The Professional Association Attorneys at Law of Sugarman & Susskind were independently hired by Teamster Local 769 to further investigate the subject of the consent decree as related to the combined group of sCO and sUA mechanics.
In their final report, the law firm, through the attorney Howard S. Susskind, advanced and principally agreed to the two earlier opinions of Airline Division Attorney Ed Gleason, and the attorneys from Spivak Lipton LLP, who were retained to investigate this matter.
In his report, Susskind expressed the inherent difficulties in arguing against the position of the other attorney’s opinions as related to consent decree seniority and hire date placing. The following are inserts of the brief.
First of all the original consent decree signed by the now deceased Judge did not contain a fixed termination date. “Consent decrees remain in effect until they terminate of their own accord, are fully satisfied, or are subsequently modified or set aside through judicial action. None of those events has occurred. The consent decree by its express terms was to remain in effect for United and its successors as well as for the labor unions named therein and their successors.” The opinion of validity from the two prior law groups is consistent.
The second argument turns to the stage of the integration process and demands the question; is the integration done in a fair and equitable manner?
To this Susskind writes, “Reasonable people can and do disagree as to what is fair and equitable when it comes to seniority integration. In the event such intra-union disagreement is not resolved, it is my understanding that there is a provision for arbitration. It is important to bear in mind that a significant number of employees presently have their seniority for the purposes of layoff and recall established by the terms of the decree. United is bound by the decree. The decree remains in full force and effect. To the extent that an arbitrator is called upon to resolve an intra-union dispute over seniority, these are powerful and persuasive considerations affecting his award.”
The next question became the ability to modify the agreement through judicial means (arbitration does not have the authority to override federal courts).
Susskind responds, “The terms of the decree itself place jurisdiction over its enforcement in the United States District Court for the Northern District of Illinois, in Chicago. Any litigation to modify or terminate the decree must be filed there. The judge who entered the decree is no longer on the bench. Any judge hearing the case would have to familiarize himself with litigation that began in 1973, a factor that militates against an expedited ruling on a petition to modify or terminate the decree”.
He further explained the two avenues that could be used to argue the opening and exploration of the case.
The first would necessitate the involvement of all parties implicated in the decree within the entire company. This would suggest having every union as well as the company agree that the decree should be revisited. In some cases this could delay their own negotiation proceedings.
The second would be to argue with a high burden of proof that the original decree is no longer just or equitable in regards to all parties of the class and craft.
Susskind writes, “beyond the costs and delays that come with any federal litigation, this standard amounts to proving that the consent decree’s layoff and recall provision is unjust and inequitable – a provision that has been embodied in a collective bargaining agreements for more than a decade, one that is supported by IBT locals and members as well at this time.”
To summarize, Susskind’s report ended with; “the consent decree remains in effect. It may be modified or terminated, but only through litigation in the Northern District of Illinois. That litigation would be prolonged, expensive, and – give the high standard that must be met to modify a decree – unlikely to succeed based upon the information provided. An arbitrator may not modify or rescind the decree and would find it persuasive (and possibly even binding) in issuing his own ruling. To the extent that the decree’s own terms allow modification through collective bargaining, that provision of the decree does not apply at this time to an intra-union effort to integrate seniority.”
The decision to investigate this further has been the resolution of some of the Locals. The Airline Division would like to express the appreciation of these Locals for so diligently looking after their member’s best interest. It is recognized as the Locals responsibility to regard the absolute safe guard of each of their members. It is to the benefit of all of us as UAL Teamsters that all arguments on this subject are heard, and that each Local and member has the ability to voice their individual concerns.
