In a column in the April 29, 2012 Washington Post, Steven Pearlstein discusses how American Airline unions may have turned the tables on American Airline management’s plans to restructure the airline. American management’s plan focused on cutting costs, and in particular labor costs. Right now it appears that management is unlikely to implement their plan as American’s three largest unions have come to an agreement with US Airways that will involve fewer cost cuts and will focus instead on marketing synergies between the networks of US Airways and American Airlines in a way that will expand the merged airline’s ability to compete for business customers with United and Delta Airlines, which are much larger than either US Airways or American Airlines alone.
Advisor to National Association of Letter Carriers Advised American Airlines Unions
Lazard, the investment Advisor that supported the airline unions is the same Advisor that is working for the National Association of Letter Carriers and wrote an alternative to the Postal Service’s plan for profitability in the paper, “Delivering Change to Protect an American Icon.” The general outline of the business strategy that convinced US Airways that working with the unions could work is very similar to what Lazard outlined as an approach for return the Postal Service to financial viability.
US Airways Agreement With American Airlines Unions Limited Pain of Financial Restructuring
US Airways agreements with American Airlines still have significant cost cuts over the current contract but significantly fewer than what American Airlines management felt was necessary for it to remain as a stand-alone airline. Only 6,800 jobs will be lost under US Airways-union plan as opposed to 13,000 jobs American Airlines stated it would cut. Part of the cuts will come from voluntary buyouts worth $22,500 to employees 45 years old and older in the Transport Workers Union and unspecified buyouts to members of the Flight Attendants Union.
In addition members of Transport Workers and Flight Attendants Unions at American Airlines will see changes in work rules, 401-K retirement programs that lower unit costs. Employees will see small wage increases over the next few years that appear to be close to about equal to a cost-of-living increase. [Source Wall Street Journal] Pilots would see major rule changes that put American Airline pilots under the same rules that US Airlines Pilots operate which will increase the number of on-duty hours per month. All of these work-rule and compensation changes that US Airlines agreed to are significantly better than what American Airlines was planning to impose.
H.R. 2309 Is Similar to American Airlines Management’s Approach for Exiting Bankruptcy
H.R. 2309, which is being managed in the House of Representatives by Representatives Darrell Issa and Dennis Ross, would allow the Postal Service management to follow an approach that is similar to what American Airlines management proposed. H.R.2309 assumes that opportunities to grow revenue are minimal. By requiring the Postal Service to continue to manage its business under a legislative mandate that constrains its ability to fully exploit its capital, labor and intellectual property assets to gain new customers or increase revenue per mail piece by either adding extra value to the service or charging more rational prices. Therefore, the bill gives the Postal Service mandates to cut particular services, authorizes the Postal Service to cut other services, and creates mechanisms for abrogating labor agreements and forcing cuts in the network irrespective of the impact on service or the value of the mail to customers.
The Postal Service’s “Plan for Profitability,” includes most of the service changes that H.R. 2309 includes but does not include the abrogation of labor contracts. In many ways the Postal Service’s Plan for Profitability would implement service changes even faster than H.R. 2309 would require as it includes full implementation of the Network Optimization Initiative announced earlier this spring. Therefore, it is not surprising that the Postmaster General as effectively endorsed H.R. 2309.
S.1789 Doesn’t’ Provide a Business Plan Either
T
he Senate’s approval of S. 1789 did not put in place a coherent business model that would allow the Postal Service to develop a balanced plan to return to financial viability. The Senate made a number of small tweaks in restrictions in the ability of the Postal Service to broaden its product line but it kept in place many if not most of the restrictions that hamper the Postal Service from getting the maximum returns from its capital, labor or intellectual property assets or remove restrictions that continues to force the Postal Service to price its products irrationally.
While the Senate’s action is not a long term solution, it may provide enough breathing room for innovative management to prepare the Postal Service for a solution along the lines Lazard developed that helped American Airlines Unions convince US Airways to acquire American Airlines out of Bankruptcy and outlined in its paper for the National Association of Letter Carriers.
S. 1789 includes two provisions that could help Congress develop a rational postal policy that would allow the United States Postal Service to join all other national posts with charters that allow it to manage the enterprise as a service and customer focused business with the freedom to fully generate revenue from the value of its capital, labor, and intellectual property assets. The first is the requirement that the Postal Service have a Chief Innovation Officer with a broad mandate that includes areas that traditionally are not considered “postal services.” The second is the Strategic Advisory Commission on Postal Service Solvency and Innovation which if it has sufficient independence to develop strategies for national postal operators that clearly are successful for implementing innovation and making the national post solvent.
Postal Service Labor Unions Need Follow American Airlines Unions Example.
American Airlines unions that if creditors accepted the plan that American Airlines management proposed to bring the airline out of bankruptcy, they would face major losses in jobs, compensation, benefits and significant changes in working conditions. Instead of accepting those conditions, the unions hired outside financial counsel and found new owners for American Airlines that had a plan that significantly reduced the pain that employees would experience as the airline came out of bankruptcy.
The current owner of the Postal Service is the federal government. The creditor committee is also the federal government but more specifically it is the Congress of the United States. Right now the portion of that creditors committee that controls legislation in the House of Representative wants to implement a plan similar to what American Airlines management proposed for the Airline. The portion of the committee that is the Senate doesn’t have a plan but does believe that a plan focusing on service cuts and abrogating labor contracts will not solve the Postal Service’s financial problems.
What the unions need now is what American Airlines unions found.
- They need to find a new owner for the Postal Service.
- They have to convince the creditors committee (the House and Senate) that the new owner and its approach will pull the Postal Service out of its financial difficulties, maintain universal service including service to the remote and economically depressed communities and not burden taxpayers in the process.
The National Association of Letter Carriers has taken an important first step needed to find that new owner in hiring Lazard to develop an outline of an approach for bringing the Postal Service out of its financial distress. What they don’t have is sufficient meat on Lazard’s skeleton to attract a white knight similar to what American Airlines unions found in US Airways.
What is clear is that this white knight is unlikely to emerge as long as Postal Service unions only look for one that must come under the current ownership structure and the legislative framework that established a quasi-governmental Postal Service. Forty years of Congressional interference shows that government ownership with Congress as both shareholder and creditor imposes costs and payment schedules for obligations almost randomly, stifles innovation, and reduces the likelihood that customer and creates a more adversarial labor-management relationship.
As a white knight cannot emerge as long as Congress is both the owner and creditor, it must come from the private sector. While introducing private investment into the Postal Service has a large number of opponents among the rank and file of postal unions, the experience of American Airline unions illustrates that unions working with private investors can produced a better outcome for employees than what current Postal management and H.R. 2309 offers.
The first step in finding the outside investor that will free the Postal Service from ownership of Congress involves putting some meat on the skeleton that Lazard created for the National Association of Letter Carriers. This is clearly needed to prepare for the Strategic Advisory Commission on Postal Service Solvency and Innovation that the Senate included in S.1789. More importantly, the details are needed in order to help craft a legislative approach in the House that would both give the Postal Service short term breathing room and force serious consideration of a financial restructuring that includes a balanced business model that would attract new ownership that includes private investors.
Postal Unions and other stakeholders should have little confidence that any change in managment at the Postal Service coming out of bankruptcy. That new owner would replace existing Postal Serivce management and would also require removal of the Postal Service from restrictions imposed by Congress that
The Senate also included
S. 1789, the 21st Century Postal Act,
The USPS is not a business that is any way, shape , or form comparable to an airline. In fact the airlines have successfully lobbied congress to prevent the USPS to own its own aircraft, so as to subsidize airlines by paying them to transport mail instead. Furthermore, UPS, FEDEX, and the catalog industry have also lobbied congress to prevent the USPS from being a true competitor. The federal government has used the USPS to subsidize federal retirement accounts with enormous over funding since 1976. The entire problem is created by congress , the cash cow is dieing, and so is the overfunding.
We have failed as Letter Carriers. We took too long of breaks, lunches, and such. We became lax in our uniforms, and lost respect for our customers. It’s our own fault. I have been a Carrier for 29 years now, and witnessed our craft slowly take more profits, and give less service. Our union once had a respectable purpose, but now spends the bulk of their time defending the worst workers we have. I welcome privitization.
I have never laxed in my uniform.
h.r 2309 is biassed and so is its author and co’. OWNER for usps! feds, meaning all of us. we need to find a new owner! when did we think of selling our services?! and what is the need! let me guess….some one wants to make a quick profit. if we have to think of good service to all it should be to maintain servcies to ALL OF US. Nothing shor of that.
to mail today all you need is a stamp! and corner post office, it will be a pity to need a computer and smart phone for that servcie……ask a 5th grader which is easier, safer and cheaper….now that is what congress needs to focus on ( lower and upper togehter if it is for US!)
Congressmen Issa & Ross are not trying to save the post office, they are trying to privatize it.
They misstakenly believe that destroying the unions will bring costs down for large mailers.
It will not as 1st class mail subsidizes bulk mail. The Postal Regulator Commision found that 14 products offered by the Postal Service are not profitable.
Also there are many other problems that in my position I have to fine the solution so the machines used to sort mail run better. Most of these problems are that the mail will not run properly thru the machines, causing extra handling of the mail. These types of mail often get big discounts. When asking for help from management, they can not or will not do anything to fix the problem. Large mailers can and do ask for discounts at a higher level than the local office processing the mail.
The first thing that has to be done is reverse the overpayment of $5.5 billion to the retirement plans. Second offer incentives for early retirement to senior employees and replace them with new hires at a lower pay scale. Third the APWU and NPMHU need to combine into 1 union. Flexabilty of the work force it what the Postal Service has been asking for. When an operation slows down for the day, workers should be willing to work another area instead of sitting around the rest of their shift. Postal management has found more and more machines to speed up the processing of the mail. People have an advantage in that they can work many different types of jobs. The machines can only do one thing well. If a machine breaks, in most cases there is not another type of machine to take it’s place. The works have to realize being flexible is the greatest asset they have.
I disagree that they are trying to privatize the Postal Service. They bill provides the mechanism through which a cost-focussed restructing can be implemented. It is not clear if this strategy would make the USPS more attractive to a private entity. In fact the strategy is closer to what happens with libraries when budgets are cut and transit systems when budgets are cut. You cut services.
The alternative approach is what the NALC and Lazard is working on but I think it would require privatizatin to be fully implemented. I know that it souds kind of wierd that USPS employees could do better in a private corporation but until the USPS is removed from Congress’s thumb the approach that USPS management and Congressman Issa want to implement is the most likely direction the future of the USPS will take.
As someone who actually works at the post office and not in the back pocket of politicians and special interests, the current plan by Issa and Donahoe (which are almost identical) will not work.
The AMP studies that were to calculate cost savings were fake. Most every office scheduled to close would save the post office $11 million per office, no matter how many employees and machines each office had! Staffing differences could be several hundred employees and a dozen machines.
The office I currently work at processes about 2 million pieces of mail a day. Somehow management believes that they can move that mail an extra 70 miles, process the mail and send more than half the mail back to were it started. The studied claimed that transportation costs would be lower. When asked for specific dollar amounts by congress, the post office refused to show their data
The consolidations that have taken place so far have already caused delays in first class mail. If you receive any mail with tracking numbers, you will find that mail will be shown to be in large processing plants for over 24 hours. Mail, especially packages take 1 to 4 extra days already. We have already lost many customers do to late fees for bills not making to there destination on time.
The post office has been trying to privatize since 1970 when the name was changed from the Post Office to the United States Postal Service. The USPS became a quazi government department. The next big bill was the Postal Accountability and Enhancement Act in 2007. Congress (fully republican with Bush as the president) forced the PO to pay an extra $5.5 billion a year toward retirement plans. How does this make the post office profitable?
Currently I am being asked to work between 14 and 16 hours of overtime each week. Most of the time there is not enough work and more than enough coverage to get the job done. While I appreciate the extra money, and have been able to put some aside for a possible rainy day, most of this overtime seems to be office politics. It seems more of a way to justify closing my plant, to show it is not profitable.
If you read H.R. 2309 it actually says that assets will be sold off. Also this bill came out just after the P.O. signed the contract with APWU. At about the same time an internal letter to the employees of the PO was posted around our building was almost identical to Issa’s bill.
The real question is, did Issa and Donahoe talk before or after the contract was signed?
Lets Look at the HARD FACTS about the US Postal Service…
Lets compare the competition…USPS vs FED-X
Currently, a 45 cent stamp will get a letter from Houston to New York in two to three days. According to the FedEx website, two-day delivery of a similar letter to the same destination will cost between $20-30 dollars. I don’t believe America or ISSA wants to pay $20-30 for a stamp….NEXT!
Lets look at delivery at the USPS vs the Competition…
After Hurricane Andrew and Katrina, the US Postal Service delivered the mail….Fed-X and UPS did not!
After every major snow storm, the US Postal Service the delivered the mail….Fed-X and UPS did not!
After 9-11, every transportation system was shut-down for weeks, the US Postal Service delivered….Fed-X and UPS did not!…..NEXT!
Last year, the US Postal Inspectors opened over 52,000 suspicious packages. REMEMBER the Anthrax terrorist attack using the mail and people died……NATIONAL SECURITY ISSUE HERE!
I can find many more reasons why the US Postal Service is needed and necessary…You get idea, RIGHT?
The USPS is of course neccessary. The problem is that unionized employees will never get what they did before as the market has changed but they will get more than they are likely to get if the USPS remains a government enterprise if private capital can invest and grow the business.
MY position has always been how can the USPS ensure that the a national print communications and home-delivery parcel network thrives and how can that be done in a way that maximizes the ability of USPS employees to earn a solid income.