more on When You Fly in First Class ON UAL , It's Easy to Forget the D

["David Farber" <dave () farber net>]

-----Original Message-----
From: Daz [mailto:articles.daz () gmail com] 
Sent: Sunday, January 29, 2006 11:40 PM
To: dave () farber net
Subject: Re: [IP] more on When You Fly in First Class ON UAL , It's Easy to
Forget the D

David Farber wrote:
> I too would like to understand how a management who are so  incompetent 
> with customer relations can win so big. djf

Try massive subsidies and corruption in the gov?  What subsidies?  Well 
start with oil, then move on to tax breaks, all the other subsidies like 
infrastructure, various forms of bankruptcy which essentially screw 
amongst others, employees in pensions and salaries so that the operating 
costs are artificially lower, allowing it to exert even more of a 
monopolistic axe over any competition....

daz

> Begin forwarded message:
>
> From: Esther Dyson <edyson () edventure com>
> Date: January 29, 2006 5:33:53 PM EST
> To: ebiz () nytimes com
> Cc: dave () farber net
> Subject: Re: [IP] When You Fly in First Class ON UAL , It's Easy to  
> Forget the D
>
> Ben -
>
> I don't know enough detail to comment publicly (though your/Phil  
> DeMuth's answer, might merit airing).  But I do know that it is more  
> complicated than what you describe below.  First of all, not all  
> employees are created equal.  The pilots and the rest of the staff  have 
> very different deals.
>
> who was representing the employees on the board?  Management doesn't  
> make decisions on its own.
>
> That the airlines are badly run is not in question. That top  management 
> makes a lot, also not in question.  But Tilton is a  relatively recent 
> arrival....  Why should he have taken the risk in  the first place?   
> Were employees really "goaded" into taking over  the airline?  Surely 
> they wanted to... at the time.   UAL is hardly  the only legacy airline 
> to get into trouble....
>
> I'd really like to understand all this.
>
> Esther Dyson
>
> At 05:08 PM 1/29/2006, you wrote:
>
> > http://www.nytimes.com/2006/01/29/business/yourmoney/29every.html
> >
> > When You Fly in First Class, It's Easy to Forget the Dots
> >
> > By BEN STEIN
> > ONE of the best conspiracy movies ever made is the perfect British
> > classic, "The Third Man." In the most haunting scene, the villain,
> > played adroitly by Orson Welles, takes Joseph Cotten, the good guy,
> > up in a Ferris wheel. The villain, named Harry Lime, has been selling
> > adulterated penicillin in postwar Vienna, making a fortune and
> > causing children to become paralyzed and die.
> >
> > Mr. Cotten's character, a pulp fiction writer named Holly Martins,
> > asks him how he could do such an evil thing for money. The two men
> > are at the top of the Ferris wheel, and the people below them look
> > like tiny dots. Mr. Welles's villain looks down and says, "Tell me,
> > would you really feel any pity if one of those dots stopped moving
> > forever? If I offered you £20,000 for every dot that stopped, would
> > you really, old man, tell me to keep my money, or would you calculate
> > how many dots you could afford to spare?"
> >
> > This scene comes to mind when I think of Glenn F. Tilton and other
> > executives of the UAL Corporation and the hapless employees of its
> > primary business, United Airlines. Its history is a perfect text for
> > the ethical morass in which American business often finds itself.
> >
> > United is one of the proudest names in airline history. It has long
> > been a synonym for fine service and extensive, convenient routes. In
> > the early 1990's, when some investment bankers were casting around
> > for a way to make tens of millions of dollars, they came up with a
> > doozy: the employees of UAL would give up some of their salaries and
> > benefits in exchange for stock in UAL, eventually becoming UAL's
> > largest owner through an employee stock ownership plan.
> >
> > The deal went through — with staggering compensation to Wall Street —
> > and in 1994 the American employees of UAL, as a group, became its
> > largest owners. Within a few years, overseas personnel were allowed
> > the privilege of tossing their life savings into UAL, too.
> >
> > Trouble was not far behind. The employees found management demanding
> > pay cuts, big (and, for passengers, inconvenient) changes and cuts in
> > scheduling and services, and even silly changes in their once-great
> > flight attendant uniforms. Then came the blows of 9/11 and a
> > recession, and then rising fuel costs. There were demands for more
> > cuts in pay and benefits and more layoffs. That was not enough. About
> > three years ago, UAL was "forced" to enter bankruptcy to stay alive.
> >
> > This step meant that UAL could drastically cut workers' pay — and it
> > did. Pensions were simply jettisoned and made the burden of the
> > federal government's Pension Benefit Guaranty Corporation, which
> > meant cuts of close to two-thirds in some pilots' pension payments.
> > And, of course, the bankruptcy simply eliminated all of that equity
> > in UAL that the employees had bought with their hard-earned savings.
> >
> > Thus, in a series of evil events, management of UAL basically ruined
> > the lives of the employee-owners, if that is not putting too fine a
> > point on it, by taking away their savings, incomes and pensions. (I
> > am indebted to my pal, Phil DeMuth, for much of this research.)
> >
> > All right, you might say. What else could management have done amid
> > high fuel costs and a deregulated, supercompetitive market? That's
> > "creative destruction," and it's good for the economy, some of my
> > fellow Republicans and admirers of the free market might say. But
> > what about the rules of law and common decency? Because, you see,
> > there is a bit more to the story.
> >
> > Now UAL has been reorganized. It is preparing to emerge from
> > bankruptcy. It will soon have a stock offering. This offering is
> > expected to raise very roughly $6 billion. It is presumably worth
> > that because UAL now has such low labor costs that it may actually
> > make a profit of some size. (I'll believe it when I see it.)
> >
> > Here comes the good part: management has asked the bankruptcy court
> > to let it have — free — roughly 15 percent of the stock in the new
> > company, or about $900 million. Mr. Tilton, the chief executive, who
> > plays the Orson Welles character in this drama, would get about $90
> > million personally for his hard work shepherding UAL through
> > bankruptcy (for which he was already paid multiple millions of  dollars).
> >
> > The bankruptcy court, instead of ordering Mr. Tilton's arrest,
> > instead cut the management share to about 8 percent, so he will get
> > more than $40 million, more or less. That is more than Lee R.
> > Raymond, the chief executive of Exxon Mobil, one of the most
> > successful companies of all time, was paid in 2004 (not counting Mr.
> > Raymond's 28 million shares of restricted stock).
> >
> > So here it is in a nutshell: employees are goaded into investing a
> > big chunk of their wages and benefits in UAL stock. They lose that.
> > Then they lose big parts of their pay and pensions. They become peons
> > of UAL. Management gets $480 million, more or less. "Creative
> > destruction?" Or looting?
> >
> > Wait, Mr. Tilton and Mr. Bankruptcy Judge. The employees were the
> > owners of UAL. They were the trustors, and Mr. Tilton and his pals
> > were trustees for them. How were the trustors wiped out while the
> > trustees, the fiduciaries, became fantastically rich? Is this the way
> > capitalism is supposed to work? Trustors save up, and their agents
> > just take their savings away from them?
> >
> > If the company is worth so much that management has hundreds of
> > millions coming to them, shouldn't the employee-owners get a taste?
> > Does capitalism mean anything if the owners of the capital can be
> > wiped out while their agents grow wealthy? Is this a way to encourage
> > savings and the ownership society? Or is this a matter of to him who
> > hath shall be given?
> >
> > I know that this is basically the same story I described recently
> > concerning the Delphi Corporation, where something similar is going
> > on. But that's exactly the point. Management is using competition,
> > higher fuel costs and every other cost complaint to cut the pay and
> > pensions of its own employees while enriching itself.
> >
> > And I can well imagine what goes through Mr. Tilton's mind as he does
> > it: "Hey, I'm a great executive. Great executives in private-equity
> > firms make more than I do. Why shouldn't I get the moolah? Basically,
> > I've worked it so UAL is now a private-equity deal anyway. That's
> > what it's all about now, isn't it? Who's got the most at the end of
> > the day at Bighorn or the Reserve or whatever golf course I choose to
> > retire at? And, anyway, wouldn't you take $48 million for a few of
> > those dots we used to call our employees and owners to stop moving?"
> >
> >
> >
> > Ben Stein is a lawyer, writer, actor and economist. E-mail:
> > ebiz () nytimes com.
> >
> >
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>
>
> Esther Dyson              Always make new mistakes!
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