[Rhodes22-list] different subject - The Airline Mess

[brad haslett]

The Axis of Excess: By Joe Brancatelli

April 24, 2003 -- You can't watch the unfolding saga
of corporate greed and malfeasance in the executive
suites of the Big Six airlines without immediately
thinking of snappy joke lines.

You know, stuff like Monkey See, Monkey Steal. Flying
Pigs at the Trough. Or, my personal favorite:
Barbarians at the Boarding Gate.

But this is not funny. While the greedy, amoral men
who run the nation's largest carriers are looting
their airlines, shareholder equity is being destroyed,
good jobs are being lost, surviving rank-and-filers
must bear draconian pay cuts, taxpayer dollars are 
being squandered and the nation is watching a huge
portion of its airline infrastructure disintegrate.

It is a disgusting display. The buccaneers who run the
nation's Big Six carriers are the American equivalent
of the street mobs who looted the Baghdad Museum of
its cultural treasures.

There's no difference between Delta chief executive
Leo Mullin, who paid himself $100,000 in cash bonuses
for every $100 million the carrier lost last year, and
a street thug who stole a priceless Sumerian pot from
the Baghdad Museum. United chief executive Glenn
Tilton, who lived in an $18,000-a-month condo on the
company tab while the airline was hemorrhaging $20
million a day during the winter, is no 
less reprehensible than the looter who carried
Babylonian treasures out of the broken front doors of
the Baghdad Museum.

Mullin, Tilton, Continental bully-in-chief Gordon
Bethune, the current roster of fools who run Northwest
and US Airways and even American chairman Don Carty,
who these days looks more like a lost soul than a 
master corporate schemer, are all the same. They dress
better than Baghdad street looters, but their
mentality is the same. They are thieves.

The men who are running the Big Six into the corporate
grave form a repugnant Axis of Excess. Nothing matters
to them except lining their pockets and their
retirement portfolios. The Axis of Excess has no sense
of personal shame, no sense of fiduciary
responsibility and absolutely no agenda except cashing
out.

In case your attention has been diverted by the war in
Iraq or the spreading SARS epidemic, let me give you a
brief carrier-by-carrier recap of what has been
learned as the Big Six have filed their proxy 
statements, 10-Ks, annual reports and other required
Securities and Exchange Commission (SEC) documents.

AMERICAN AIRLINES American's parent, AMR, lost $3.5
billion last yearand yesterday it reported a $1
billion first-quarter loss. After weeks of
negotiations, promises that executives would share in
sacrifices and threats of a bankruptcy filing, the
airline secured $1.8 billion in annual concessions
from pilots, mechanics and flight attendants. 

Then the agreements imploded when American admitted in
delayed SEC filings that it had shielded some of the
pensions of the airline's top 45 executives from the
effects of a bankruptcy filing. The top six 
executives were also offered "retention bonuses" of
nearly twice their base pay to stay with the airline.
Earlier this week, Carty cancelled the retention-bonus
plan and apologized for misleading the unions, but
he didn't repeal the trust that protects the executive
pensions nor did he apologize for allowing the
executive booty in the first place. 

Ironically, American has traditionally paid its top
executives less than most other airlines and the newly
disclosed perks pale in comparison to the lush
programs offered to top officials of the other 
carriers.

CONTINENTAL AIRLINES After rashly promising that
Continental would be in the black by last year's
second quarter, the airline reported losses in excess
of $450 million in 2002. Last week it reported a 
first-quarter loss of $221 million, sharply higher
than last year's first-quarter loss of $166 million.
The airline now admits there is no chance for profit
this year or 2004, either. How has Continental 
management reacted to the huge--and, to them,
unexpected--losses? 

Well, Bethune gave himself a pay package of about $7.6
million last year, more than 82 percent above his 2001
compensation. Along with stock options and other
perks, Bethune's 2002 compensation was $11.9 
million. The airline's other top executives were
proportionately rewarded.

DELTA AIR LINES I detailed the lavish awards made to
Delta's top five executives in a column posted last
month:

<
http://www.zyworld.com/brancatelli/bf2003/branc032703.htm>
.

But just to recap: The carrier has lost $2.5 billion
in the last two fiscal years, including $1.3 billion
last year, when Mullin paid himself a $1.4 million
cash bonus. The excesses at Delta led Congress 
to write some minimal rules about executive payouts
into its latest airline bailout package, but Mullin
and crew seem blind to the rebuke. 

After taking a cosmetic pay cut last month, Mullin
defended the airline's egregious pay packets and
"retention" bonuses, claiming he needed to keep the
executive team together. In other words, an airline
that lost $466 million in this year's first
quarter--or the equivalent of more than $5 million a
day--just can't afford to lose the crack 
executives who are responsible for the carrier's
alarming cash burn.

NORTHWEST AIRLINES Northwest was long ago looted by
the departed Al Cheechi and by current chairman Gary
Wilson. During the 1990s, they funneled tens of
millions annually out of Northwest to their private 
companies, claiming the payments were personal
management fees. New management is no less abusive,
however. The carrier lost $798 million last year, yet
chief executive Richard Anderson paid himself a cash 
bonus of 50 percent of his annual salary of $500,000.
He also received a retention bonus of stock worth
almost $2 million more. Northwest also paid out
millions in retention bonuses to dozens of other top 
managers. This week, a Northwest filing with the SEC
revealed that former Northwest chief financial officer
Mickey Foret (former Continental executive) has been
hired as a consultant. Foret was paid an up-front fee
of $240,000 and he draws a monthly stipend of $80,000 
through December, 2004. By the way, last week
Northwest reported a first-quarter loss of $396
million, more than double last year's first-quarter
loss of $171 million. It is also negotiating with its
labor unions and rank-and- file workers, demanding
almost $1 billion a year in concessions.

UNITED AIRLINES United Airlines paid new chief
executive Glenn Tilton nearly $12 million to join the
sinking ship last fall. He promptly ensconced himself
in an $18,000-a-month condo on the company expense 
account. Since his arrival, the airline has filed for
bankruptcy and reported a 2002 loss of more than $3
billion. His recovery plan for the carrier has been
ridiculed by the government agency that administered
the 2001 loan-guarantee program, United's
bankruptcy-court judge and virtually any analyst that
has examined it. He is also paying the McKinsey
consulting firm a monthly fee of about $1 million to
help 
him develop a carrier-within-a-carrier even though
United has already failed with an earlier attempt to
create a low-fare unit. Meanwhile, United employees,
who once owned 55 percent of the carrier in exchange
for massive wage and benefit concessions granted in
the 1990s, have lost all their equity. They have also
been forced to accept billions more in concessions as
United used the shield of bankruptcy court to break or
renegotiate their contracts. Of course, all this comes
against the backdrop of the tens of millions former
United boss Steve Wolf paid himself while he ran the
company.

US AIRWAYS US Airways was driven into bankruptcy by
the aforementioned Wolf and his team of cronies. They
paid themselves hundreds of millions of dollars during
their disastrous six-year regime. They subsequently
retired, but not before the airline paid out $35
million in lump-sum retirement benefits to Wolf,
former chief executive Rakesh Gangwal and Larry Nagin,
the airline's former top legal official. After 
declaring bankruptcy, the airline terminated its
pilot's pension fund. 

Retired US Airways pilots now face pension cuts in the
neighborhood of 70 percent. Meanwhile, the new
management team continues to reward itself lavishly.
The current chief executive, David Siegel, received 
2002 compensation of $533,000 in salary, a cash bonus
of $750,000 and more than $160,000 in other
compensation. Other notable figures in the airline's
SEC filings: US Airways paid Siegel $68,000 in moving 
expenses last year. The new chief financial officer,
Neil Cohen,received $40,640 in moving expenses. That's
about the same amount a senior flight attendant at US
Airways now earns.

One final note. Remember that 2001 taxpayer-funded
airline bailout of $4.5 billion? Hawaiian Airlines
received about $30 million of it, but 
that didn't help the carrier avoid a bankruptcy filing
last month. 

Boeing, which is one of Hawaiian's biggest creditors,
wants the carrier's management removed.

Boeing claims Hawaiian's management paid out more than
$25 million via a tender offer last year as a "reward"
to shareholders. In a filing with the bankruptcy
court, Boeing adds that members of Hawaiian's
management and their affiliates received more than 69
percent of the $25 million tender. In other words,
Boeing believes Hawaiian's management personally
pocketed more than half of the $30 million in 
taxpayer grants.

What do you think? I'd like to know. Contact me at
JBrancatelli at aol.com.

Joe Brancatelli is editor and publisher of
JoeSentMe.com, a Web site for business travelers. He
is also the former executive editor of Frequent Flyer
magazine, travel advisor of Travel Holiday and
contributing editor to Travel + Leisure. He can be
reached at travel at usatoday.com.



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