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CASE STUDY: Pilots of Northwest and Continental Airlines
Client
PJSC in two separate engagements represents the pilot groups of Northwest Airlines and Continental Airlines, the fourth and sixth largest domestic airlines, respectively.
Assignment
The major airline carriers are undergoing the greatest financial challenges in their history. Many of these carriers are under financial duress due to the competition of low cost carriers, a slumping business economy, overcapacity and the aftermath of 9/11. Accordingly, the major carriers are trying to reduce their expenses. As the largest component of an airline’s cost management has targeted labor to provide concessions. Pilots comprise the largest share of labor costs and are viewed as the leaders of the non-management employee groups.
PJSC was retained by the pilot groups of Northwest and Continental to evaluate the necessity and reasonableness of concessions in light of each airline’s financial circumstances. Challenges
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Evaluate the feasibility of each airline’s business plan in an extremely volatile operating environment. |
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Determine if concessions are necessary to preserve the long term viability and success of each airline. |
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If necessary, determine the appropriate amount of concessions in light of other cost cutting measures. |
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Determine the form and value of any consideration to be received in exchange for any concessions. |
Process
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In time sensitive circumstances, PJSC evaluated the business environment for both Northwest and Continental to determine if immediate concessions were necessary to help these airlines avoid bankruptcy. In this vein, PJSC reviewed and analyzed each airline’s short and long-term business plans and liquidity requirements. |
Outcome
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PJSC initially concluded that no immediate concessions were necessary at either airline. However, continued difficulties in the airline sector during the subsequent 12 months led PJSC to conclude that Northwest’s pilots should engage in concessionary discussions with the company. Conversations with senior management continue. |
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