Tag Archives: ows

Business/Economics, International, U.S.

Occupy America! U.S. Capitalist Airline industry is a big FAIL! History of bankruptcies and losses! Testimonies before Congress prove it! More proof that American Airlines can’t be trusted!

“The airline industry has the worst financial performance of any of our major business sectors. While the industry has enjoyed some profitable years, airline operators as a whole have lost money since deregulation in 1978.”– from Current Situation and Future Outlook of U.S. Commercial Airline Industry, September 28, 2005

In September 2005, the U.S. House of Representatives’ Committee on Transportation and Infrastructure, and the Subcommittee on Aviation, heard testimonies on the economic viability of the U.S. airline industry.  It wasn’t good.

Here’s some quotes from the report:

“Historically, airlines have failed at a much higher rate than most other types of businesses.”

“In fact the U.S. airline industry has seen 150 bankruptcy filings in the last 25 years, an average of almost six per year.”

Bankruptcies don’t work because “…history has shown that the growth of airline industry capacity [a type of competition based on supply and demand] has continued unaffected even by major liquidations.”

“Over the past four years, U.S. commercial airlines have lost over $32 billion collectively and it is estimated that the industry will experience another $10 billion in loss in 2005.”

Don’t blame the September 11, 2001 attacks, the airlines were in trouble before that: “…well over 100,000 jobs have been lost in this industry since that time [the year 2000] and just recently, in concert with their announced bankruptcies…”

Don’t blame the cost of labor, like the CEO of American Airlines is doing: “Numerous factors have contributed to the problem and Mr. Kiefer mentioned some of them. I would say that three stand out in the current environment: very high jet fuel prices, intense price competition in the domestic market; and heavy debt and pension burdens.”

So they whine about fuel prices, but haven’t they been jacking up their ticket prices to cover that? They whine about competition! Isn’t competition the American Capitalist way? I think the mantra goes ‘if you can’t handle the competition then you should get out of the business’. And they whine about being in debt! You see, we individuals have been lectured for years about the sins of debt, yet the biggest debt offenders are the Corporations of America (after the Federal government)!

However, a professor from the Northeastern University Boston, and a senior fellow from the Brookings Institution, testified that in their opinion the three biggest costs to the airline industry is fuel, competition and labor.

Speaking of labor and American Airlines, the 2005 testimonies show that labor cost for the now bankrupt airline had already been reduced: “…airline employees have been asked to take substantial pay cuts, trim their benefits and in some cases, lose their jobs. Exhibit 5 in my remarks shows broad expense categories for AMR, parent of American Airlines, in 2002 and in the second quarter of 2005. Over that period labor costs declined from 41 percent of total expenses to 32 percent.”

Again, don’t blame the cost of labor: “…airlines have undertaken significant steps to trim their losses but these have so far been insufficient to restore profitability, largely because of the fuel prices.”

The nature of the industry makes it almost impossible to make a profit, it involves a lot of guessing and optimism: “The airline industry has always been a cyclical one because the demand for air travel is sensitive to the level of economic activity and carriers must invest in capacity well before they know the level of economic activity and demand.”

Airlines have always used bankruptcy to destroy union labor contracts, in the name of competition: “Legacy carriers have been cutting costs where they can and since labor is the largest category of airline costs, it has been the target
of cost cutting and enhanced productivity through negotiation as well as in bankruptcy as the legacy carriers seek to reduce costs to compete with low cost carriers.”

Some officials blamed the consumers for not being able to pay higher ticket prices, and blamed airline executives for not having the guts to pass on the true cost of fuel to their customers, again in the name of competition: “The airline industry however suffers from the burden of having to pay high prices without the flexibility of necessarily receiving higher fares. Historically, carriers have been loathe to pass on higher fuel costs in the form of any additional tariff for fear of being undercut by competition. This has led to a vicious cycle within the industry…” In other words, ticket prices haven’t gone high enough!

According to testimony from Moody’s officials, most airlines that go bankrupt don’t really change the way they do business: “Airlines operating in bankruptcy generally continue to pay airport rates and charges and in most cases do not radically downsize their operations.”

Testimony at the 2005 hearings foretold of American Airlines’ bankruptcy filing on November 29, 2011. The testimony was about what else American Airlines could do to further reduce their costs, and how to do it: Mr. MICA. “Again, pensions would still be sort of the big enchilada in obligations and fuel?”
Mr. BAGGALEY. “Actually, the largest portion of American and other airlines’ obligations are secured debt and leases. Pension deficits are significant but they are a minority of the total.”
Mr. MICA. “The only way you can restructure those would be through bankruptcy or negotiation?”
Mr. BAGGALEY. “Yes.”

Philip Baggaley, of Standard & Poor’s, also testified that many financial problems for the airline industry are “inherent” and go back before the 1990s.

Baggaley also explained that a major reason for legacy (airlines created before the 1978 deregulation) airlines filing bankruptcy was to destroy the pension (retirement) programs for their employees.  He admitted that financial institutions like to see companies destroy their employees’ retirement plans, and rewarded the companies with better credit ratings!

Baggaley also explained that wages and benefits are always the target of corporations, because it is the easiest to control.  Airline executives target labor as a way to offset the uncontrollable fuel costs. However, he showed that fuel costs have gone up so much that drastic labor cuts, without declaring bankruptcy, are no longer enough.  From 2002 to 2005 American Airlines gained, or saved, $1.8 billion in labor concessions, but they still lost $3.2 billion to fuel costs.

Baggaley also explained that while company mergers normally work for other industries, in reducing overall costs, history shows that mergers actually increase operating costs for legacy airlines.  He called it a “zero sum game”, and added that the only potential benefit for airlines filing for bankruptcy, and even merging, is that it’s a way of reducing competition: “…bankruptcy restructuring and mergers have the potential to improve the industry’s financial health, but only if accompanied by reduced capacity [a way of reducing competition] and, most important, by lowering operating costs.” Remember, competition is one of the three main reasons the airline industry is failing.

Mark Kiefer, of CRA International (economic and management consulting firm), testified that the problems with the airline industry go all the way back to the 1978 deregulation. He explained that the only time the airlines were really “profitable” was when they were being regulated by the Federal government!

Kiefer said government regulation kept ticket prices up, and limited the number of airlines allowed to operate (thus killing competition).  Since deregulation ticket prices dropped, and smaller more competitive airlines were born. Even after more than 30 years, the bigger, older (legacy) airlines just can not compete with the smaller younger Low Cost Carrier (LCC) airlines.  Under the traditional concept of capitalism, doesn’t that mean the legacy airlines should be allowed to die?

Kiefer also explained that the legacy airlines are still operating pre-deregulation when it came to wages and benefits for employees.  They tend to pay more than the LCC airlines, and offer company health and retirement benefits.  Kiefer says no LCC airline offers such benefits.  LCCs do offer “…defined contribution and profit sharing plans that have a much lower overall cost to the airline.”

Steven Morrison, Northeastern University Boston, and Clifford Winston from the Brookings Institution, say that, amazingly even after 30 years, the legacy airlines “…still needs time to adjust to its deregulatory freedoms by ridding itself of remaining cost inefficiencies…” In other words, the last hurdle to fully deregulating the legacy airlines is unionized labor.

But while the highly edjumacated college officials blamed labor for the airlines’ problems, U.S. Representative James Oberstar put the blame squarely on the legacy airlines: “Since deregulation, the legacy airlines’ revenue model has depended on extracting premium fares from a small percentage of passengers. That revenue model began to unravel in the year 2000…”

Of interest is the testimony from the executive director of the Air Carrier Association of America, Edward Faberman. Who better to explain to woes of the airline industry, and guess what, he did not blame labor!  He blamed, in order, fuel costs, homeland security costs, airport expenses, air traffic control expenses, Customs & Border Control service expenses, and finally cancelled flights.

Very interestingly, Faberman actually countered the claims of many of the experts mentioned above. Even though the airline industry was deregulated back in 1978, the legacy airlines are still getting subsidized by the government!  He basically said that in the name of competitive capitalism the big old legacy airlines should be allowed to die off, and that the LCCs should take over.

Finally, here’s what the airline officials in the United Kingdom think of the U.S. airline industry: “But America, land of the free, is turning itself into the land of the free ride. In the last four years, the airlines have soaked up $15 to $20 billion of public subsidy and loan guarantees. They’re operating in protected markets, they’re hoovering up public funds and they still can’t make a profit. They are dumping capacity on the North Atlantic, distorting competition and pricing for cash. They struggle to compete and, at some, the workforce has been demoralized. The more the government has tried to help, the worse things have become.”-Rod Eddington, CEO British Airways, September 22, 2005

 

 

 

Business/Economics, U.S.

Occupy America! Don’t blame the Unions. American Airlines’ bankruptcy is Bogus! American Airlines has $4 Billion in Cash!

On November 29 the oldest operating U.S. airline, American Airlines, filed for bankruptcy.  But before anyone gets excited, look at the facts.

The new CEO of American Airlines, Thomas Horton, blames his company’s losses on the cost of union labor.  He specifically calls union labor “cost disadvantages”.

First off, the majority of American Airlines aircraft are older fuel guzzling planes. Isn’t that a cost disadvantage?

Secondly, while American Airlines officials claim they’re losing money, they just made the largest order of new aircraft in airline history.  460 new planes ordered in July!  Isn’t making the biggest purchase of aircraft in history a cost disadvantage?

Thirdly, while claiming to be hurting for cash, American Airlines is actually sitting on billions in cash.   According to CBS News, U.S.$4 billion to be exact!  Where does Thomas Horton get off saying they have cost disadvantages?

Wouldn’t it be nice if we individuals could file for bankruptcy while sitting on a pile of cash?  Don’t blame the unions!

Business/Economics, U.S.

Government Incompetence, What Economic Recovery? Reports say Congress will let Postal Service default on December 16

“It feels like Helena and Cosby are caught in the cross hairs. There is a big battle going on and we are the ones that are going to suffer.”-Marianne Price, Montana resident who relies on the U.S. Postal Service

Recently, the President of the National Association of Letter Carriers, Fred Rolando, said certain actions by Congress, or lack of action, could put the USPS into a “…death spiral…”.

A CNN Money report says political analysts have reason to believe the U.S. Congress will not consider any more bills to save the U.S. Postal Service, until after the 2012 elections.  That guarantees the USPS will default.

The U.S. Postal Service, which does not use taxpayer money to operate, employes 557,000 people directly.  Several companies, like FedEx, also provide service under contract.  South eastern Idaho postal workers told me that if the USPS defaults, at least 200,000 postal workers will immediately lose their jobs!  It will also mean cut backs for those contractors working for the Postal Service.

The USPS is actually a contractor itself.  Under President Richard Nixon today’s Postal Service was created (it was the Postal Department before then).  The Postal Service operates on money that comes from you and me buying postal products (not taxes).  Under President Ronald Reagan stamps were added to the list of products the Postal Service could make money from (before that the government got the money from stamp sales).  The only tax money used for postal services are for mail for the blind, for mail in election ballots sent from U.S. citizens living overseas, and, for providing address information to state and local child support enforcement agencies.

For reasons not publicly known, some elected officials, and the main stream media, are misleading the public into thinking that cuts to the USPS would save taxpayer money. It won’t!

A Cornell University professor says the U.S. Congress is fully to blame (as I’ve stated in past postings): “A lot of these decisions are fundamental business decisions about quality and frequency of service, and they should be in the hands of the executives running the Postal Service. But Congress won’t let them do that!”-Richard Geddes, Cornell University associate professor

While many officials blame the Postal Service management and the unions, the fact is that USPS management and unions have been working together to make drastic cuts. Their latest agreement could cut $20 billion in postal worker health care benefits, but Congress has to sign off on it.

Just a couple of weeks ago, President Barack Obama extended the deadline for default by the U.S. Postal Service.  The new deadline is December 16.  If the CNN Money sources are right, then bye bye USPS (unless Obama just keeps extending the deadline)!

Business/Economics, U.S.

Occupy America, What Economic Recovery? Forget percentages, unemployment numbers already worse than 1930s Great Depression. Federal Reserve quietly preps banks for worse to come!

At the peak of the Great Depression, in 1933, 12.8 million people were officially unemployed in the United States.  According to the U.S. Bureau of Labor Statistics we’re already past that; 13.9 million officially unemployed!

Now take into account that some sources are saying that the Bureau of Labor is intentionally under reporting the numbers; they should read 17 million unemployed!  Then there are those that say if older unemployment counting methods were used, we’re actually double the officially reported numbers!

Now enter the Federal Reserve (the privately run central bank of the United States).  On November 22, Ben Bernanke quietly asked 19 top banks/financial institutions to conduct a stress test, for the third time since 2009.

The second stress test was completed in March 2011, and several banks failed, including Bank of America!  It was not publicly reported!

Reports say this latest “comprehensive capital analysis and review” would include scenarios like a 6.9% to 8% drop in the U.S. economy, a 21% drop in housing prices, and the potential for 23.2 million people out of work!

Bernanke also asked the six top banks (JPMorgan, Bank of America, Citigroup, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley) to predict how much money they would lose in such scenarios.

The results are due on January 9, 2012.

 

Business/Economics, International, Technology

Global Economic War: Russians have the money. Mazda, Renault, Nissan, VW, GM and Fiat make their move

“Russia is Mazda’s second largest market in Europe and sales are rapidly increasing. Mazda sold approximately 28,000 units during the period from January through September 2011, a year on year increase of approximately 77%!”-Mazda Motors statement

Mazda announced they’ve made an U.S.$80 million joint venture deal with Russian car maker Sollers.  By next autumn they will begin production of Mazda cars in the far eastern city of Vladivostok.

Mazda is not the only foreign car maker to make moves on the Russian car market: Renault-Nissan, General Motors, Izuzu, SsangYong, Fiat and Volkswagen have all started production in Russian factories.

 

Business/Economics, International

No Economic Recovery for Japan. Blame Europe

The head of Bank of Japan announced that as long as Europe struggles with a credit crisis, the value of the Japanese yen will keep going up.  That’s bad when Japan’s economy is based on exports. The more their yen is worth, the more their products will cost.

Masaaki Shirakawa said the result is that more and more Japanese companies will move their operations to other countries.  That means unemployment in Japan will only go up.

The Japanese Labor Ministry reported that there are now, officially, 2.88 million Japanese who can not find jobs.  They also said that while unemployment has been going up, the number of jobs available are unchanged.

Fukushima

Company Hero? Manager of Fukushima Daiichi resigns, major health problems!

The manager of Tokyo Electric Power Company’s Fukushima Daiichi nuclear power plant was forced to resign, because of major health problems.

Yoshida Masao has been directly dealing with the situation at the nuclear plant since the 11 March 2011 disasters.  Yoshida said a major health problem was discovered during a medical check up.  TEPCo officials refused to give any information, or to confirm if was the result of long term exposure to high levels of radiation.

Yoshida said there were three times he, and the workers at the Fukushima Daiichi plant, thought they were going to die: The explosions of reactors 1 and 3, and the coolant pump failures on Reactor 2.

Fukushima

Corporate Incompetence: Tokyo Electric can’t explain the high levels of radiation from Reactor 2!

During the week that followed the March 11 earthquakes and tsunamis that hit Japan, reactors 1, 3 and 4 at the Fukushima Daiichi nuclear plant exploded.  Yet Reactor 2 spewed the most radiation.

Contract workers at the plant say they heard an explosion inside Reactor 2, but TEPCo officials swear no explosion took place.  Independent researchers claim that Reactor 2 has emitted more radiation than the reactors that exploded!

Scientists (not working for TEPCo) say the most probable reason is that the containment vessel around the core was breached.  TEPCo also denies that.

TEPCo officials simply state that “somehow” radioactive gas escaped Reactor 2.

Fukushima

Government & Farmer Incompetence: More cesium contaminated rice, new farms affected!

Three farms in the city of Date, Japan, harvested rice that was found to be contaminated with cesium, up to 1,050 becquerels per kilogram.

Earlier in November as many as six farms in Oonami district were found with contaminated rice.  Those farms did not sell their rice, but the farms in Date did.

Now officials are trying to track down who bought the cesium contaminated rice.

Date, and Oonami are in Fukushima Prefecture, where the Fukushima Daiichi nuke plant continues to emit high levels of radiation.  Originally officials were testing rice just from the 154 farms in Oonami, but will now test more than 2,300 farms in the prefecture.

U.S.

Occupy America, World War 3: U.S. Congress about to make your backyard the next War Zone; National Defense Authorization Act will make the Patriot Act look like a joke. Ron Paul is the only Republican candidate against the bill

“The Senate is going to vote on whether Congress will give this president, and every future president, the power to order the military to pick up and imprison without charge or trial civilians anywhere in the world. The power is so broad that even U.S. citizens could be swept up by the military and the military could be used far from any battlefield, even within the United States itself.”-Chris Anders, American Civil Liberties Union

Two U.S. Senators came up with what is probably the greatest threat to our Constitutional freedoms, section 1031 of the National Defense Authorization Act of 2012 (S.1253.RS).  Those Senators are Carl Levin of Michigan, and John McCain of Arizona (I guess McCain’s time as a POW in Vietnam destroyed the concept of American freedom in his mind).

Section 1031 of the bill would “…basically say in law for the first time that the homeland is part of the battlefield…”-Lindsey Graham, U.S. Senator from South Carolina, and supporter of the bill

“America is part of the battlefield.”-Kelly Ayotte, U.S. Senator from New Hampshire, and supporter of the bill

(Note: I’m not sure if the above quotes were actually stated by those Senators.  I found one site that attributed the quotes as actually coming from an ACLU publication.  In the short time I spent trying to confirm the quotes I was not able to find anything directly linking them.  But they do support the bill.)

“One section of these provisions, section 1031, would be interpreted as allowing the military to capture and indefinitely detain American citizens on U.S. soil. Section 1031 essentially repeals the Posse Comitatus Act of 1878 by authorizing the U.S. military to perform law enforcement functions on American soil. That alone should alarm my colleagues on both sides of the aisle, but there are other problems with these provisions that must be resolved.”-Mark Udall, U.S. Senator from Colorado, who opposes the bill

The bill already passed the House of Representatives back in May. Ron Paul was one of five House Republicans who opposed it:  “I have a personal belief that you never have to give up liberty for security. You can still provide security without sacrificing our Bill of Rights. You can prevent crimes by becoming a police state . . . So if you advocate the police state, yes, you can have safety and security and you might prevent a crime, but the crime then will be against the American people and against our freedoms.”

It would “…permit the federal government to indefinitely detain American citizens on American soil, without charge or trial, at the discretion of the president.”-Justin Amash, U.S. Representative from Michigan, one of five House Republicans who voted against the bill

Section 1031 states: “The Armed Forces of the United States are authorized to detain covered persons captured in the course of hostilities authorized by the Authorization for Use of Military Force…”

The Authorization for Use of Military Force was approved under the Bush Jr administration on September 18, 2001.  It specifically says that the President is authorized to take any action “he” feels is necessary to capture those who plotted the 9/11 attacks, and “…to prevent any future acts of international terrorism against the United States…”

This is where critics of S.1253.RS section 1031 say the military could be used on U.S. soil to go after U.S. citizens.  S.1253.RS section 1031 would allow the President to use the military within the United States, if the President felt it necessary to do so, in fulfilling the 2001 Authorization for Use of Military Force.

S.1253.RS section 1031 also says: “Long-term detention under the law of war without trial until the end of hostilities against the nations, organizations, and persons subject to the Authorization for Use of Military Force.” This is where critics of the bill say you could be held in military prisons indefinitely.

However, the section 1031 does not allow the wanton detention of U.S. citizens: “The authority to detain a person under this section does not extend to the detention of citizens or lawful resident aliens of the United States on the basis of conduct taking place within the United States except to the extent permitted by the Constitution of the United States.”

That part is tricky. Basically you’d have to be found in violation of, or simply suspected of violating U.S. laws to be detained by military forces.  This is where critics say the military could be used as a police force. That’s the sinister part of section 1031, and it’s related sections under Subtitle D – – Detainee Matters, of S.1253.RS: It does not require that you be charged with a crime, let alone being convicted in a court trial, nor does it require any substantial evidence to justify your detention.

The other problem is that section 1031 says detention will last “…until the end of hostilities…” When you’re fighting an open ended, vague War on Terror, how the freak do you know when it’s finished?  Take some political science courses on terrorism and you’ll realize that as long as people get ripped off by the establishment (whether they actually do get ripped off, or it’s just in their minds) there will always be acts of “terror”. 

President Barack Obama claims he will veto the bill if it passes the Senate.  However, there are fears that if someone like Newt Gingrich becomes President in 2012, then the bill would become law.