United We Fall

It was clear from the beginning that labor dissent would be a bigger challenge for Jeff Smisek, president and CEO of United Continental Holdings Inc., (NYSE:UAL), the holding company for United Airlines, than the financial merger with Continental Airlines. United Continental is the world’s largest air carrier and Guam’s largest employer. Flight Attendants, reservationists, pilots, cargo and ramp personnel, all have legitimate concerns about the combined company’s future intentions for the island - and their jobs - as United confirmed information reported by Guamblog yesterday, that the airline will reduce its local workforce.

United Airlines lands on Guam with a legacy and poor track record in labor relations and negotiations. That prolonged, contentious and bitterly divisive negotiations continue to reinforce long-held resentments among older United workforce holdovers, “does not lead to a path for success here in Guam,” one labor leader told Guamblog. The labor activist requested anonymity for fear of retaliation from the new local bosses.

Before local residents knew it, the island’s biggest employer was under the control of management from another company that has a track record for slashing local workforces and outsourcing local jobs, often at half the former wage rate and with no health insurance or benefits. United management typically uses a stale mantra: “Pay for performance” or “profit sustainability through reduced costs.”

“‘Pay for performance’ is a cruel joke coming from the executive suite at United,” the United supervisor told Guamblog this afternoon. “It’s what they always say. But they never tell you about United Continental Holdings chair Glenn Tilton. He has taken more pay, bonuses and stock options in recent years than any other airline executive.”

Tilton’s peers at other airlines have mostly foregone any bonus, and even pay, while their employees continue to suffer like United workers at hubs across the country - and here on Guam.

Local workers at United are more than ever deeply concerned that not enough was done for local job protection and wonder what benefits local government gives the airline, even as it prepares to quietly reduce the size of the workforce over the next 2 years.

“They are taking from our families, neglecting our airline and lining their own pockets. They are outsourcing lower standards and costs. I hope GEDA is not providing them a tax-break to send jobs offisland or lower the quality of job for workers here,” stated the United source.

Another labor activist at United said, “It’s absurd that executives argue they need pay-for-performance from us, but they continue to be richly rewarded when they fail workers, passengers and shareholders. And most of all the community here.”

In July, United Continental Holdings reported second-quarter 2012 net income of $545 million before special charges, like the $206 million in special one-time charges related to Continental and United’s integration.

This year another stock bonus worth as much as $100 million is planned for executives. Meanwhile, the first bloodletting at United’s Guam operations will bump no less than 40-45 employees onto the unemployed and medically indigent rosters, leaving taxpayers to foot the social costs.

The initial layoff of workers will more realistically end up involving as many 90 workers according to one Guamblog reader; others argue the number will be greater and warned of misleading statements by United. “That figure is bound to rise. It will be followed with ultimately a 5% - 7% workforce reduction by the end of the year,” one blog follower claimed.

“More cuts,” still  another airline source said, “are to be crept in under the radar following that reduction and will continue over the next 18 months and will exceed the number being floated by United to local media outlets.”

The outsourcing taking place at United is exactly the type of activity people like Lee Webber and others love to promote for GovGuam. The real cost to the government of Guam to provide a safety net for just these families left in the profit lurch remains unaccounted or even considered by lawmakers or Adelup, but the airline promises unconvincing claims of “assistance” for displaced workers.

After two years adrift and directionless, the Calvo/Tenorio braintrust remains bankrupt, offering no real job retention plan, let alone an economic development strategy. The island’s largest employer’s outsourcing of jobs is a hard blow to a fragile job market.

Watching this slow bleed of decent-paying Guam only convinces me Adelup will continue a listless, aimless economic drift the next 2 years. A pandemic, geopolitical and financial market instability could easily result in United’s reduced commitment to the local community a scenario, wherein Guam’s valuable hub status could very well reduced to a sub-hub - and as much as 2/3 of local jobs would shift to outsourcing or eliminated.

Though management may deny any such intentions, United has a flighty record with their approach to relationships between executives, management and labor, especially when it comes to squeezing profits through cost reductions. Only time will tell how much Smisek and his friends really value their relationship with Guam. This situation in the next couple of years bears watching - united we fall with any further job loss.

we.19.sep | 2012 | 310p Told you so. ; -) Citing Guamblog’s previous assertion about mantras…Koji Nagata, Director Asia/Pacific Communications for the flying behemoth, belted the perfunctory refrain “sustained profitability” to local media in a quick PR fly-by. Kiss my sweet brown ass in the sky! Profitability? Really???

The Street had wanted to see a valuation of $10 billion for United Continental by now…plus some even. The last quarter for United Airlines ended with $8.2 billion in unrestricted liquidity, comprised of $7.7 billion of cash, cash equivalents and short-term investments and $500 million of undrawn commitments under a revolving credit facility.

Not shabby…and plucking the other ass cheek:

During the second quarter, the company generated $959 million of operating cash flow and had gross capital expenditures of $500 million. The obscenely lucrative holiday travel period has already begun to pick up pace for improvement over last year. Barring war in Iran, which would surge the airlines fuel costs despite hedging, the executives and shareholders are flying to a robust year.

Things look very good for UAL executives and management, but not so good for the “47%” left dangling at the end of a short rope on Guam as they watch their jobs fly out of here faster than a fruitbat from a fiesta.

Like a really bad movie, one where Paris Hilton is the first to die, even before the black guy…on the other end of the rope, hubris; relentlessly gnawing away at the safety net for displaced workers, government workers and their families.

Uh oh.