Mitch Cronin Posted February 27, 2006 Share Posted February 27, 2006 Good mornin' Mr. Dagger sir... In another thread here the conversation shifted somewhat and I didn't want to contribute to that shifting there, but I do believe a few things you said are worth further discussion... It started thusly: Mr. Dagger said: "- the typical ACPA pilot response is to see only one side of a negotiation - they part where they go "gimme, gimme, gimme" without any concern for the health of the enterprise. " ...then there were a few responses reminding you that ACPA pilots had indeed given quite a lot up ... Captain Chico said: "let me assure you that the pilots at Air Canada have given TILL IT HURTS with a mind to ensuring the viability of the corporation. At the same time senior management has seen fit to line their pockets with huge rewards. The ACPA pilots have proven to be more than reasonable in negotiations and your comments are WAY off the mark." ...to which Mr. Dagger responded: "I don't disagree that peering over the abyss, the AC pilots made a significant sacrifice during CCAA. I do remind you, however, that you didn't find yourselves standing on that abyss because of sacrifice. As for senior management and their rewards, you have but to see the structure put in place working like it is, and you have to admire the handiwork. They have succeeded in unlocking vast amounts of previously locked in value, in Aeroplan and Jazz and eventually in other subs, and in so doing they are investing in new aircraft, paying into the pension plan and doing other things that will contribute to the company's long term health. I don't begrudge them the rewards of smart thinking. Like valuing Aeroplan a lot higher than Bay Street, like getting ridiculously low pricing on the Embraers because the Brazilians thought an Air Canada purchase would make an incredible statement to the marketplace, like investing in US Airways - the stock has more than doubled and AC can cash in next month." So... Here's what comes to my mind... You evidently feel that because some folks occasionally do their jobs reasonably well, it's entirely appropriate that they receive huge rewards.... while believing others should continue to receive less and less for the good work they do on a regular basis. "Smart thinking" that serves the whole company well seems to be what you consider worth rewarding...(?) So the question that comes to my mind is: Why should some brands of "smart thinking" be any more worthy of sizable rewards than the many daily examples of same that come from all levels of peons within the corp.? Is it because it's expected from the troops? Surely no more so than it should be expected from the brass? ...Is it because smart thinking from the brass impacts the share price? Smart thinking that results in the savings of large amounts of money is a regular occurrence among pilots and maintenance staff (for example), and it had better be! It's our job and we do it well... "you have to admire the handiwork" that regularly results in the saving of -- well, I'll avoid getting too heavy, but I'll presume you can gather the potential result of a lack of smart thinking by anyone in those two groups? A single hull loss, with contents, could bring the whole house down. So we have three examples here: -A high fallutin' exec who spent some time in business classes, and may or may not have spent some time in the field learning this particular trade... -A pilot who spent some time in classes and training, and has spent much time in the field learning this particular trade... -and an AME who spent some time in classes and training, and has spent much time in the field learning this particular trade... All three put their pants on one leg at a time... all three have red blood... all three can make the can stink pretty good when it's their turn... all three had to learn quite a bit to get to the jobs they have... all are expected to do their jobs well... all are capable of error... ... ... However; errors, both large and small, from one of those groups, which do happen on a regular enough basis are regularly absorbed with little impact, yet when they do their job well, ....hell, that's when you don't begrudge them some truly fine rewards! The other two groups also make small errors from time to time which are absorbed with little impact, yet larger errors had better not ever come!, and when they do their jobs well you evidently would "begrudge them the rewards of smart thinking." Can you explain what appears to be an apparent prejudice? I don't suppose it's one of your own creation... I'm sure it's just an example of a -so far- accepted inequity that you may not have given much thought to, but it truly does strike me as an imbalance....? Among Milton's many minions there are some duds, who, along with those who do fine work almost every day, have shared some truly remarkable rewards.... Yet out here in the trenches... those of us who do fine work every day are continually told - by you, among others - we expect too much and don't sacrifice enough. What's up with that? Link to comment Share on other sites More sharing options...
deicer Posted February 27, 2006 Share Posted February 27, 2006 G'day Mitch... Excellent points all. I wouldn't be holding out for a reasonable, or even logical answer if I were you Iceman Link to comment Share on other sites More sharing options...
Guest long keel Posted February 27, 2006 Share Posted February 27, 2006 Mtich thanks for redirecting this thread, and not letting the WJ thread be hijacked. Dagger said : "As for senior management and their rewards, you have but to see the structure put in place working like it is, and you have to admire the handiwork. They have succeeded in unlocking vast amounts of previously locked in value, in Aeroplan and Jazz and eventually in other subs, and in so doing they are investing in new aircraft, paying into the pension plan and doing other things that will contribute to the company's long term health. I don't begrudge them the rewards of smart thinking. Like valuing Aeroplan a lot higher than Bay Street, like getting ridiculously low pricing on the Embraers because the Brazilians thought an Air Canada purchase would make an incredible statement to the marketplace, like investing in US Airways - the stock has more than doubled and AC can cash in next month." That is their only job. Had they done their job well in 1999-2002 we may have never entered CCAA. To reward the same gang who performed so badly prior and lead us into the abyss, because they found their way out is a joke. An ACPA member's job is to safely fly airplanes from A to B without accident or incident, efficiently and on time. Imagine if in 1999-2001 they had four accidents, awful OTP, and then in 2004-2006 they had a perfect safety record, industry leading OTP, and the lowest industry fleet burn rates. Would they then qualify to be far better compensated than they were in 1998? That is what has happened with our managers. The took less of a personal hit than ACPA despite being the "leaders" who got us in this mess, and are all further ahead after the process. ACE may well be the next "tech bubble" on the market. Once they have sold off all the money making assets, with the executives and insiders all wealthier than ever, it may be the small investors and employees scrambling again getting pennies on the dollar in a few years time. I hope I am wrong. Link to comment Share on other sites More sharing options...
dagger Posted February 27, 2006 Share Posted February 27, 2006 Good mornin' Mr. Dagger sir... In another thread here the conversation shifted somewhat and I didn't want to contribute to that shifting there, but I do believe a few things you said are worth further discussion... It started thusly: Mr. Dagger said: "- the typical ACPA pilot response is to see only one side of a negotiation - they part where they go "gimme, gimme, gimme" without any concern for the health of the enterprise. " ...then there were a few responses reminding you that ACPA pilots had indeed given quite a lot up ... Captain Chico said: "let me assure you that the pilots at Air Canada have given TILL IT HURTS with a mind to ensuring the viability of the corporation. At the same time senior management has seen fit to line their pockets with huge rewards. The ACPA pilots have proven to be more than reasonable in negotiations and your comments are WAY off the mark." ...to which Mr. Dagger responded: "I don't disagree that peering over the abyss, the AC pilots made a significant sacrifice during CCAA. I do remind you, however, that you didn't find yourselves standing on that abyss because of sacrifice. As for senior management and their rewards, you have but to see the structure put in place working like it is, and you have to admire the handiwork. They have succeeded in unlocking vast amounts of previously locked in value, in Aeroplan and Jazz and eventually in other subs, and in so doing they are investing in new aircraft, paying into the pension plan and doing other things that will contribute to the company's long term health. I don't begrudge them the rewards of smart thinking. Like valuing Aeroplan a lot higher than Bay Street, like getting ridiculously low pricing on the Embraers because the Brazilians thought an Air Canada purchase would make an incredible statement to the marketplace, like investing in US Airways - the stock has more than doubled and AC can cash in next month." So... Here's what comes to my mind... You evidently feel that because some folks occasionally do their jobs reasonably well, it's entirely appropriate that they receive huge rewards.... while believing others should continue to receive less and less for the good work they do on a regular basis. "Smart thinking" that serves the whole company well seems to be what you consider worth rewarding...(?) So the question that comes to my mind is: Why should some brands of "smart thinking" be any more worthy of sizable rewards than the many daily examples of same that come from all levels of peons within the corp.? Is it because it's expected from the troops? Surely no more so than it should be expected from the brass? ...Is it because smart thinking from the brass impacts the share price? Smart thinking that results in the savings of large amounts of money is a regular occurrence among pilots and maintenance staff (for example), and it had better be! It's our job and we do it well... "you have to admire the handiwork" that regularly results in the saving of -- well, I'll avoid getting too heavy, but I'll presume you can gather the potential result of a lack of smart thinking by anyone in those two groups? A single hull loss, with contents, could bring the whole house down. So we have three examples here: -A high fallutin' exec who spent some time in business classes, and may or may not have spent some time in the field learning this particular trade... -A pilot who spent some time in classes and training, and has spent much time in the field learning this particular trade... -and an AME who spent some time in classes and training, and has spent much time in the field learning this particular trade... All three put their pants on one leg at a time... all three have red blood... all three can make the can stink pretty good when it's their turn... all three had to learn quite a bit to get to the jobs they have... all are expected to do their jobs well... all are capable of error... ... ... However; errors, both large and small, from one of those groups, which do happen on a regular enough basis are regularly absorbed with little impact, yet when they do their job well, ....hell, that's when you don't begrudge them some truly fine rewards! The other two groups also make small errors from time to time which are absorbed with little impact, yet larger errors had better not ever come!, and when they do their jobs well you evidently would "begrudge them the rewards of smart thinking." Can you explain what appears to be an apparent prejudice? I don't suppose it's one of your own creation... I'm sure it's just an example of a -so far- accepted inequity that you may not have given much thought to, but it truly does strike me as an imbalance....? Among Milton's many minions there are some duds, who, along with those who do fine work almost every day, have shared some truly remarkable rewards.... Yet out here in the trenches... those of us who do fine work every day are continually told - by you, among others - we expect too much and don't sacrifice enough. What's up with that? I suppose we are going to disagree over the concept of "doing their jobs reasonably well". You as an AME do the job for which you are trained. You create predictable and measurable value, maybe even a bit more in your personal case because you have a particularly strong pride in your job performance. Mitch isn't a clock puncher. He cares. Not every AME will share your strong work ethic, so unfortunately, in a unionized environment - one for all - your compensation and benefits are going to reflect a group worth associated with the supply/demand considerations of your trade and your overall productivity. In ACE's management, the achievements I alluded to are not those of the everyday, which would be to competently pilot the corporate ship. I am not a big believer in extraordinary benefits for ordinary achievments, but in extraordinary benefits for achieving well-above-average for shareholders. Employees who carp about management compensation fail to notice that ACE that is NOT paying out these "bonuses" from its profits - it's paying them in stock, which means the shareholders have elected to dilute their own holdings to pay these bonuses. ACE profits - along with a great deal of shareholder capital - is what is going into making up the pension arrears, buying new aircraft, upgrading older aircraft, etc. The truth is, ACE's jet purchases alone far exceed its current rate of profitability. That shareholder capital is greater than the amount of wage and lessor concessions, which, thanks mainly to the offset of rising fuel costs, was only enough to provide ACE with a decent $259 million profit last year. In other words, your concessions helped keep the boat afloat, but it didn't turn it into the Queen Mary 2. It's shareholder capital that is turning the widebody fleet into a beautiful new all-Boeing fleet worth billions of dollars - a more fuel efficient fleet at that which will help the airline's future profitability and your chances of wage and benefit improvements. The shareholders determined at the exit of CCAA that if the plan put together by Milton and his team and advisors was a good one, and achieved good results as measured by the stock price, they, the shareholders, would reward them with more stock. The shareholders were asked to risk capital on an industry that routinely destroys capital, and they wanted the best outcome possible from a shareholder perspective. That's the way it's going to work in this industry in future - shareholders are going to be a lot more demanding of management that they "Show me the money!" And they - not you - will provide the rewards for above average performance as measured by the stock price. The shareholder is your new canary in the coal mine. If you want a growing, vibrant airline, with a healthy pension plan, good wages and benefits, etc, you need to have happy shareholders because for the next few years at least, the capital markets will remain especially important to ACE. If ACE can raise capital off Jazz and Aeroplan and ACTS and from other investments, then it will be able to put more cash on all of those new Boeings and less debt. ACE's plan is revolutionary in some respects. IPOing a frequent flyer plan is unique in the industry. So are important elements of Air Canada's fare structure. While many airlines are getting out of maintenance, ACTS is expanding. Shareholders also know that creating success will require big onions. Gutsy decisions. Buying the Embraers didn't make ACE any friends in political circles, but it was the right move. The safe move would have been to buy A318s or CRJ-900s for mainline, but that wouldn't have been the smart move. It was still a gutsy move to go for the Embraers. So is the decision to add a Toronto-LAX-Sydney flight instead of focussing on a YVR-SYD nonstop (which may come, but not before YYZ-LAX-SYD) is a pretty gutsy move. A lot of politicos in Vancouver aren't thrilled about AC's strong Toronto growth focus, but it's absolutely where the money is. AC could pander to Vancouver, and it would be the conservative thing to do, but it wouldn't be the most profitable thing AC can do. These are critical strategic decisions, and if they work, and if ACE brings in some bright managers to replace dregs, and if it makes some smart moves like rapid China expansion, it can put AC into a strong position for decades to come. The shareholders are willing to back the plan with real incentives from THEIR holdings, and that's a pretty good deal for all ACE stakeholders. You get rewarded out of ACE's profits, be it profit sharing or wage increases that will be negotiated this spring and down the line. If you are a pilot, you can also look forward to the benefits of growth - moving up to larger planes sooner. You will see more new hires pad the numbers under you, so that layoffs in a downturn are less likely to hurt you than in the past. Finally, Mitch, I don't tell anyone that they didn't sacrifice "enough". Please don't put words in my mouth. I do tell you that you aren't sacrificing as much as your US colleagues. But that doesn't mean you have to sacrifice more IMO. My reference to the pilots was clear, if not in my first post than in my followup. AC got in the pickle of CCAA because the unions didn't believe that the gravy train was over, that the industry fundamentals were changing. I so remember the ACPA negotiations of 1998 and 2000. It's deeply etched in my memory. I remember how ACPA members bored us to tears with their comparisons of their poor state with those of United pilots in 2000. The big rallying cry was parity with UA - well, at least closing the gap. Why? Because if that's what the pilot world is paying, AC pilots should be paid accordingly. Of course, you don't hear that argument any more, and with good reason. No ACPA pilot, for all of their real and significant sacrifices under CCAA, would demand parity today with UA (or DL or NW or anyone else). ACPA pilots wouldn't want to be tied to that anchor. Link to comment Share on other sites More sharing options...
UpperDeck Posted February 27, 2006 Share Posted February 27, 2006 The only question I have is.....where in he** do you find the time to draft such an incisive and well-presented argument? Link to comment Share on other sites More sharing options...
mrlupin Posted February 27, 2006 Share Posted February 27, 2006 The shareholder is your new canary in the coal mine. If you want a growing, vibrant airline, with a healthy pension plan, good wages and benefits, etc, you need to have happy shareholders because for the next few years at least, the capital markets will remain especially important to ACE. If ACE can raise capital off Jazz and Aeroplan and ACTS and from other investments, then it will be able to put more cash on all of those new Boeings and less debt. Most shareholders today seem more interested in huge short term returns then in long term growth. If a CEO is to act only to satisfy these short term demands, the airline would find itself at an impass very quickly. Wouldn't it make more sense to vest the stock options over a longer period of time with a slighly higher strike price? That would be like giving the CEO a mandate for long term growth instead of one of immediate high returns. Both the interest of the employees as well as investors would be catered to with such a mandate. For anyone who can read french, a great book about the subject is called "les fous du roi" Les fous du roi Many CEOs today face huge pressures for immediate returns on investment. A 10% yearly return doesn't seem to cut it anymore. Investors want amazing rates of return and that forces many CEOs in making decisions that are very short sighted. I do however have to praise Mr Milton for choosing the income trust as his vehicle for raising capital out of the many parts of Air Canada. At least that sort of capitalisation is dependant on long term growth and recenue. Link to comment Share on other sites More sharing options...
moeman Posted February 27, 2006 Share Posted February 27, 2006 Well said Mr. Dagger. Link to comment Share on other sites More sharing options...
dagger Posted February 27, 2006 Share Posted February 27, 2006 Most shareholders today seem more interested in huge short term returns then in long term growth. If a CEO is to act only to satisfy these short term demands, the airline would find itself at an impass very quickly. Wouldn't it make more sense to vest the stock options over a longer period of time with a slighly higher strike price? That would be like giving the CEO a mandate for long term growth instead of one of immediate high returns. Both the interest of the employees as well as investors would be catered to with such a mandate. For anyone who can read french, a great book about the subject is called "les fous du roi" Les fous du roi Many CEOs today face huge pressures for immediate returns on investment. A 10% yearly return doesn't seem to cut it anymore. Investors want amazing rates of return and that forces many CEOs in making decisions that are very short sighted. I do however have to praise Mr Milton for choosing the income trust as his vehicle for raising capital out of the many parts of Air Canada. At least that sort of capitalisation is dependant on long term growth and recenue. Those stock options vest progressively over four years, an eternity in this industry. And while many investors in airline stocks have a shorter horizon - how can you blame them, we're not talking about bank stocks here - I would call the way AC is spending money right now very long term for this industry. The strategic plan, including the acquisition of EJets, Boeing widebodies, a new computer system, launch of a freighter network and the US Airways investment are hardly short-term measures. Link to comment Share on other sites More sharing options...
handyman Posted February 27, 2006 Share Posted February 27, 2006 The only question I have is.....where in he** do you find the time to draft such an incisive and well-presented argument? Have to agree with you on that one. Not in his fan club but it sure makes sense! Link to comment Share on other sites More sharing options...
CanadaEH Posted February 27, 2006 Share Posted February 27, 2006 Wouldn't it make more sense to vest the stock options over a longer period of time with a slighly higher strike price? That would be like giving the CEO a mandate for long term growth instead of one of immediate high returns. Both the interest of the employees as well as investors would be catered to with such a mandate. I do not want to turn this into the usual comparitive slagging match, but the above quote made me think about my own investment in WJA. There are, I think, a lot of positive changes being made within our company that are affecting the share price negatively short-term, but those changes are being made for the long-term viability of the company.... at least I hope. Dagger mentions "..AC is spending money right now very long term for this industry. The strategic plan, including the acquisition of EJets, Boeing widebodies, a new computer system, launch of a freighter network and the US Airways investment.." as long-term investments and I suppose it's up to you to decide whether or not they'll enhance the value of ACE. Lot's can go wrong between now and then but at the same time a lot can go right. Risk vs. reward. Link to comment Share on other sites More sharing options...
Don Hudson Posted February 27, 2006 Share Posted February 27, 2006 Dagger; Thanks...an excellent and very helpful perspective. The "short-term investor" question was one I had too. I think the strategies since CCAA have placed Air Canada in an exceptional and unique position within the industry and that has to be acknowledged by investors and especially employees. It is very hard sometimes to see beyond one's backyard. My other question has to do with what many might call the "strong" focus on costs perhaps to the exclusion or at least marginalization of other aspects peculiar to this industry. Mitch alludes to this in his post. The message constantly being received is that "cost is everything". We know that cost control is absolutely crucial in this industry because costs can run away so quickly and silently. That said, we also know that it costs a lot of money to run an airline and that many costs do not seem to have an immediate return for the investor. Quick and obvious example would be maintenance...people and parts cost millions yet the immediate return is not highly visible to investors. Information technology is another...software, networks and hardware again cost millions and the expertise to run them isn't cheap either. Flight safety is another area where costs are high but immediate return is again, not visible. In fact, the whole goal of flight safety is, "nothing happens"!, yet it is absolutely necessary. Can a flight safety business unit make a profit for the organization?, would be one question to ask and although I have some answers I would be interested in hearing how investors view this. My question is then, Do investors see those needs (which may be high cost with little "immediate" return) and accept them as part of the investment risk/reward process? How do they think of such things or research them when considering investing? Or are they looking at the "mountain tops" and leaving the details to management? I know that such research is part of the investing strategy and at this level, I would guess that most institutional investors know the leadership quite well...but again, not sure. I certainly take your comments regarding "short-term" and "long-term" investing and planning for airlines...an extremely difficult business because 787's can't just show up on the doorstep. Never a dull moment in this business... Don Link to comment Share on other sites More sharing options...
dagger Posted February 27, 2006 Share Posted February 27, 2006 Dagger; Thanks...an excellent and very helpful perspective. The "short-term investor" question was one I had too. I think the strategies since CCAA have placed Air Canada in an exceptional and unique position within the industry and that has to be acknowledged by investors and especially employees. It is very hard sometimes to see beyond one's backyard. My other question has to do with what many might call the "strong" focus on costs perhaps to the exclusion or at least marginalization of other aspects peculiar to this industry. Mitch alludes to this in his post. The message constantly being received is that "cost is everything". We know that cost control is absolutely crucial in this industry because costs can run away so quickly and silently. That said, we also know that it costs a lot of money to run an airline and that many costs do not seem to have an immediate return for the investor. Quick and obvious example would be maintenance...people and parts cost millions yet the immediate return is not highly visible to investors. Information technology is another...software, networks and hardware again cost millions and the expertise to run them isn't cheap either. Flight safety is another area where costs are high but immediate return is again, not visible. In fact, the whole goal of flight safety is, "nothing happens"!, yet it is absolutely necessary. Can a flight safety business unit make a profit for the organization?, would be one question to ask and although I have some answers I would be interested in hearing how investors view this. My question is then, Do investors see those needs (which may be high cost with little "immediate" return) and accept them as part of the investment risk/reward process? How do they think of such things or research them when considering investing? Or are they looking at the "mountain tops" and leaving the details to management? I know that such research is part of the investing strategy and at this level, I would guess that most institutional investors know the leadership quite well...but again, not sure. I certainly take your comments regarding "short-term" and "long-term" investing and planning for airlines...an extremely difficult business because 787's can't just show up on the doorstep. Never a dull moment in this business... Don I don't think there is an airline investor who doesn't understand the importance of being a safe operator and being perceived as a safe operator, and from what I understand, most airlines, except those with a culture that is accepting of cheating on safety, operate with a high degree of safety. I believe that if ACE had a poor safety culture, the way perhaps a Jetsgo or Alaska Airlines showed severe fault lines, that we would spend a great deal of time here discussing specific events and trends. I believe investors understand that there are costs associated with doing business, and so long as there is a reasonable degree of efficiency and productivity, those costs are jusitfiable. That includes investing in the product - whether that means installing an IFE at each seat, or refurbishing a ratty interior of a 767-300 with a state-of-the-art J-class suite. There are two other areas of cost, however, on which investors do focus. One is waste. Is a business productive, is the work being done effectively, or is the collective agreement maintaining featherbedding or other inefficiencies borne of an earlier era when high fares covered up such inefficiencies. A second area is cost associated with old and perhaps outdated ways of doing business. For example, is it cost-effective to maintain a fleet type with only a few units (like the 747-400s combis)? Should the airline maintain particular benefits or amenities, or charge more or offer less? Baggage issues and pet carriage fall into that category. I believe investors do understand the difference between what is necessary and what should be rethought or discarded. At AC, the biggest cost-side changes that I see - and admittedly, I don't get to peer into every department - are the product and process changes, which should be welcomed by all (except those losing their jobs) because it is in AC's best interest to be the most cost-effective it can without lowering its level of safety. I would suggest that from time to time, one should go look at the ACE financial presentations to the financial community that are posted on aircanada.com and probably on internal websites, too. On costs, I have seen all kinds of initiatives discussed, but never one that could be construed as pressure to reduce the commitment to safe operations. Link to comment Share on other sites More sharing options...
deicer Posted February 27, 2006 Share Posted February 27, 2006 There are two other areas of cost, however, on which investors do focus. One is waste. Is a business productive, is the work being done effectively, or is the collective agreement maintaining featherbedding or other inefficiencies borne of an earlier era when high fares covered up such inefficiencies. A second area is cost associated with old and perhaps outdated ways of doing business. Dagger I will apologise for the bit of a cheap shot above, I thought it would be more tongue in cheek, but it didn't come across as such. As for your view on cost, don't you think it has more to do with management in how efficiencies are maintained? I'll use the example of higher wages for employees. I agree that we all would like to be renumerated better, but I also understand that with that comes greater responsibility not only from the unionised worker, but the managers. If I expect to be paid more, then I personally understand that I will have to conduct myself to a higher standard. More productivity, higher level of safety, etc, etc. With that expectation from me, doesn't is also fall on managements shoulders to have a higher standard as well? I agree that there is a lot of deadwood in any company that is protected by unions, but the rules and regs are in place to combat them. Nowadays there is a definite lack in training due to cutbacks, but the other side of that, is even if you are "properly trained" there is no incentive to work harder. Please let me explain. As we have seen in the past, there is no proper form of discipline in the workplace. Rules are relaxed by management in order to achieve their "numbers" at any cost. Where they get caught is when something catastrophic happens and they then have to justify how they let it happen. Whether it is an collision, or abuse of time, the end result is a cost to the bottom line. If there were properly enforced disciplines in the first place, there wouldn't be as much friction with the unions. It would be understood by both sides that there are consequences to actions. So let me ask, who sets the the tone of the workplace? It seems that recently it is a big battle to get back ownership by management but how do they accomplish that? Mass firings? Even if they do discipline, they don't do it properly, so that when it goes to arbitration, it gets thrown out. This creates a sense of power in the unionised force in that they know that they cannot really be dealt with. This, in my opinion, leads to everyone working to the lowest common denominator because when you see that the bad employee isn't being disciplined for not doing his job properly, why should you put in the effort? I would like to suggest this. Everyone takes a step back, reintroduce the rules with the understanding that they will be enforced firmly and fairly, sort of a new way of doing business. Couple that with the fact that as a good employee, not only will you get a paycheque, there will be some form of incentive to be a good employee. It doesnt' have to be a huge bonus, something like the program they used to have for good attendance. Or an "A" priority pass, something that wouldn't really cost the company anything, but if working hard and safe will get you and your family to the head of the line for a vacation, but with no impact on revenue, isn't that a new way of doing business? I for one would like to see some form of this implimented, and I think that it would have just as great an impact for the Capital Investor. Your thoughts? Iceman Link to comment Share on other sites More sharing options...
Don Hudson Posted February 27, 2006 Share Posted February 27, 2006 Dagger; Again, thank you. I don't think there is an airline investor who doesn't understand the importance of being a safe operator, . . . . . . . I would suggest that from time to time, one should go look at the ACE financial presentations to the financial community that are posted on aircanada.com and probably on internal websites, too. On costs, I have seen all kinds of initiatives discussed, but never one that could be construed as pressure to reduce the commitment to safe operations. Well,... ok. I respectfully submit that there is a significant difference between understanding the importance of safety and understanding safety. That basic understanding is, and has been THE fundamental question ever since aviation became a business. Happily, the two should be as one, but experience tells us it can be otherwise. The examples you cite are cases in point and the results are clear for all to observe. There will always be a natural tension between those who must control cost and those who must advance programs which do not visibly demonstrate a "return" for the shareholders. The budget process for the hundreds of thousands of expenditures is a stringent one as we hope it would be. But where some programs do not (and should not) place cost at the top of the priority list, achieving comprehension of the reasons why becomes an organizational issue with which all airlines, managers and certainly investors must come to terms. The shareholder will naturally have quite a different perception and understanding than those who are actually running the show or doing the work. How that perception and understanding translates into pressure and how that pressure is then perceived and acted upon within an organization is the subject of many books on organizational behaviour. This is the reason I asked the question. It is an age-old one in aviation. Link to comment Share on other sites More sharing options...
Mitch Cronin Posted February 28, 2006 Author Share Posted February 28, 2006 Thanks for your response Dagger. "I suppose we are going to disagree over the concept of "doing their jobs reasonably well"". Reasonable supposition. Obviously your grasp of the financial structure and machinery at play here far exceeds my own, so I'll avoid the foolishness of argument, but mentioning a thought or two seems worthwhile to me... I gather when you speak of shareholders determining rewards and such, you're speaking of the major shareholders, not the sort of folks like everyone's neighbors who try to invest a little coin here and there to improve their own small holdings...? (My guess is that not many of those types would be investing in airline stock anyway) Are these shareholders completely unconcerned with how managers choose to manage their people? ...I guess they just have to trust that much is done at some minimum level of competency that will ensure continued productivity?... either that or they're completely unconcerned because they don't plan on hanging around long enough to watch the effects of continued pressure on "costs"... which is all we employees seem to be nowadays. You speak of above average performance, gutsy moves, and right decisions... IPO'ing anything that moves seems to be one of the keys... but I can't help wondering where that leaves AC itself after all these sell-offs are done?... But do all these shareholders care? ...or are they after the quick hit and run? You reckon the Embraers were the right decision?... You might rethink that if you get a look at the OTP results for that bird! Cheap airplanes may not turn out to be so cheap if they're always glitching. Sometimes you do get what you pay for. Who knows though, maybe those bugs will get ironed out eventually? I guess the shareholders, as well as management, expect all us "costs" to just keep on keeping on at the same, or improved level of productivity while being handed lemons for compensation, in some far flung hope that profit sharing will fill the cupboards at some point in the future.... while we watch as managers are handed plums, and shareholders are given ripe, red apples as gifts... Has it occurred to anyone that this profit sharing plan - the occasional 75 bucks added to a pay cheque here or there - really isn't convincing us those cupboards will be filled?... or does that too not matter since they're there for that quick hit and run? As you well know, I'm not a wizard of the ways of commerce and big business... I'm something of an idiot when it comes to the inner machinery of the makings of big bucks... but along with my colleagues, I've had my eyes open and I can't help but wonder these sorts of wonders when even I can see the kind of major troubles we face. I guess the big to-do over stripping the paint off an airplane to see if a few hundred bucks could be saved, while at the same time handing out a $300 million gift somehow missed making a point with me....? One thing you said struck me as being right on: "if ACE brings in some bright managers to replace dregs, and if it makes some smart moves like rapid China expansion, it can put AC into a strong position for decades to come." I'll hold out some hope that at least a few of the shareholders driving the ship will want to stay on board long enough to see those things happen. Sorry for "putting words in your mouth"... didn't mean to do that.. and I appreciate your clarification of that point. ...and again, thanks for taking the time to answer. Cheers, Mitch Link to comment Share on other sites More sharing options...
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