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CNN Live Saturday
Interview With David Field
Aired November 30, 2002 - 18:08 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: Flight attendants for United Airlines have agreed to take more than $400 million in pay cuts.
What does this mean for the cash-strapped airline industry? The editor of "Airline Business Magazine," David Field, is in Washington to give us some perspective. David, thanks for joining us.
DAVID FIELD, EDITOR, AIRLINE BUSINESS MAGAZINE: Thank you.
COOPER: Obviously this is a positive development for United Airlines but will it be enough to prevent bankruptcy?
FIELD: Not on its own. It has to come as part of an agreement from every employee group at United Airlines to take a certain amount of pay cuts. And unfortunately late last week one of the largest groups -- the International Association of Machinists -- that's the mechanics who fix the airplanes and clean them also -- rejected $700 million worth of pay cuts over the same five and a half year period.
And without that $700 million the whole plan to keep United out of bankruptcy court may well collapse.
COOPER: Now I'm hearing, though, that the mechanics may get together again tomorrow to re-look at that and there may be some pressure from their union representatives to make a deal.
FIELD: There's pressure from the top. There's pressure from Tom Buffenbarger, who's the head of IAM. There was very low turnout. Just about half of the people voted. And they tend to be the militants -- the guys who are most angry and most concerned and who have been around the longest and therefore feel they've been abused the longest.
There is a good chance they'll be able to redo a deal but they have to do it in the coming week. The coming week is absolutely vital. There's a $375 million lease payment that's due. There is a grace period on that but that grace period is just 10 days.
So we're looking at 10 days to get together this whole package once again.
COOPER: So obviously the next 10 days are crucial. How can United save itself? Is it all about just getting cuts -- salary cuts from their employees?
FIELD: Salary cuts are a big part of it. But why does United want the salary cuts? They want the salary cuts so they can get about $1.8 billion in federal loan guarantees. The loan guarantees, which still involve an outlay of funds from the government, will get $2 billion worth of loans in a large package, which along with the pay cuts and along with some other changes -- structural changes, route changes -- may be enough to get the airline to survive through this very slim winter and . . .
COOPER: But . . .
FIELD: . . . make a profit.
COOPER: But long-term there is a problem. United has backed itself into a corner. They can't really raise prices right now. They can't really get the business travelers back. They're a discount airline right now.
FIELD: They've been forced to be a discount airline. One of the Wall Street analysts quips that they're the world's largest discount airline. They've been forced there by Southwest, Jet Blue and everyone else.
No -- they can't raise prices. That's why they have to get costs down. The only hope is that there will be some sort of uptick in the spring and the summer as the economy recovers.
Every big airline -- every traditional airline -- the hub and spoke or network carriers -- the old fashioned carriers -- whatever you want to call them -- has to think about what they are going to do now that the business traveler -- the full fare -- the $2,000 trip to Chicago -- now that those folks are gone they're probably not going to come back.
COOPER: All right.
FIELD: And even in the long-term even if United evades bankruptcy it has to ask what it's going to to reshape and reinvent itself.
COOPER: All right -we're going to have to leave it there. David Field -- thank you very much -- appreciate it.
FIELD: Thank you.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired November 30, 2002 - 18:08 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: Flight attendants for United Airlines have agreed to take more than $400 million in pay cuts.
What does this mean for the cash-strapped airline industry? The editor of "Airline Business Magazine," David Field, is in Washington to give us some perspective. David, thanks for joining us.
DAVID FIELD, EDITOR, AIRLINE BUSINESS MAGAZINE: Thank you.
COOPER: Obviously this is a positive development for United Airlines but will it be enough to prevent bankruptcy?
FIELD: Not on its own. It has to come as part of an agreement from every employee group at United Airlines to take a certain amount of pay cuts. And unfortunately late last week one of the largest groups -- the International Association of Machinists -- that's the mechanics who fix the airplanes and clean them also -- rejected $700 million worth of pay cuts over the same five and a half year period.
And without that $700 million the whole plan to keep United out of bankruptcy court may well collapse.
COOPER: Now I'm hearing, though, that the mechanics may get together again tomorrow to re-look at that and there may be some pressure from their union representatives to make a deal.
FIELD: There's pressure from the top. There's pressure from Tom Buffenbarger, who's the head of IAM. There was very low turnout. Just about half of the people voted. And they tend to be the militants -- the guys who are most angry and most concerned and who have been around the longest and therefore feel they've been abused the longest.
There is a good chance they'll be able to redo a deal but they have to do it in the coming week. The coming week is absolutely vital. There's a $375 million lease payment that's due. There is a grace period on that but that grace period is just 10 days.
So we're looking at 10 days to get together this whole package once again.
COOPER: So obviously the next 10 days are crucial. How can United save itself? Is it all about just getting cuts -- salary cuts from their employees?
FIELD: Salary cuts are a big part of it. But why does United want the salary cuts? They want the salary cuts so they can get about $1.8 billion in federal loan guarantees. The loan guarantees, which still involve an outlay of funds from the government, will get $2 billion worth of loans in a large package, which along with the pay cuts and along with some other changes -- structural changes, route changes -- may be enough to get the airline to survive through this very slim winter and . . .
COOPER: But . . .
FIELD: . . . make a profit.
COOPER: But long-term there is a problem. United has backed itself into a corner. They can't really raise prices right now. They can't really get the business travelers back. They're a discount airline right now.
FIELD: They've been forced to be a discount airline. One of the Wall Street analysts quips that they're the world's largest discount airline. They've been forced there by Southwest, Jet Blue and everyone else.
No -- they can't raise prices. That's why they have to get costs down. The only hope is that there will be some sort of uptick in the spring and the summer as the economy recovers.
Every big airline -- every traditional airline -- the hub and spoke or network carriers -- the old fashioned carriers -- whatever you want to call them -- has to think about what they are going to do now that the business traveler -- the full fare -- the $2,000 trip to Chicago -- now that those folks are gone they're probably not going to come back.
COOPER: All right.
FIELD: And even in the long-term even if United evades bankruptcy it has to ask what it's going to to reshape and reinvent itself.
COOPER: All right -we're going to have to leave it there. David Field -- thank you very much -- appreciate it.
FIELD: Thank you.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
