R.W. Mann & Company, Inc.

It was one of those beautiful, must-have-a-window-seat mornings, Tuesday;
the World Trade Center towers shone in the sun as my USAir Shuttle flight
followed the path of the Hudson south, to a meeting in Washington.

We left LaGuardia for DCA about 45 minutes before the first incident,
and arrived about a half-hour before the Pentagon incident. My family
reached me with a cell phone call, a call that was strangely frantic at first,
with the World Trade Center news. Just as I was coming up out of the
subway, the Pentagon incident occurred. Time sort of stopped at that point,
and the rationale for the trip to Washington vaporized with the searing,
unforgettable television images.

Next I knew, I was taking Amtrak back to NYC, Thursday morning, as it
was clear DCA wasn't opening or Shuttle service re-commencing, any time
soon. No Amtrak security at Union Station, so some things hadn't changed;
I was carrying roughly forty pounds, one cubic foot, of paper products, but it
could have been anything, no one asked, and I wasn’t alone.

Tried to take a cab to LGA from Penn Station to claim the car, but got
stopped in an NYPD roadblock due to one of many bomb threats, so, bailed
and took the train home. Car can wait. Didn't like the idea of the known problematic
tunnels under the Hudson and East Rivers, but what choice do we have.

The last 30 minutes of the Amtrak ride along the NJ coast, one sees the
plume of smoke, steam and dust rising from the tip of Manhattan.
Surreal, is all I can say; so sad for all the lives that have been irrevocably
affected, living and no longer living.

Aviation is an inherently unforgiving business, but never in my life
would I have believed that anyone would use a civil airliner as
weaponry. Unfortunately, it appears we now live in a different world.

It will take months, maybe years, but we will rise above this. And it
may take just as long for the airline industry, unfortunately, with or
without Federal assistance. It has been clear for years that "airline
security" was a wink and a nod; everywhere else in the world I have
flown, airport security is a government function. Soon, here, too, I
guess, but hindsight is 20:20.

Guess I can't travel with my 1981, official Airbus Industrie-issue pen-knife
keychain any more. I never thought it (or myself) to be much of a risk. In fact,
that tool helped out numerous times when various inflight annoyances
needed to be dealt with. And, who knows, it might come in handy in this
tragic new world, with those among us who would render our next flights
weapons of mass destruction.

The industry was already in a difficult financial position, what was robust
revenue growth having turned into a precipitous fall. As an industry analyst,
I’ve been asked, “is this what it will take for 'XYZ' to offer concessions?”
Airline labor could work for free, and management forego their packages
and parachutes, and it wouldn't alter the short term picture -- a net revenue
outflow, cancellations exceeding bookings. That isn't a realistic alternative or solution.

No, what we need is for everyone out there who was planning a trip to go
out and take that trip, and another, and another. bin Laden be damned.

That will start the healing process, for those of us who are still around to
cherish life. I only wish that was still all of us who enjoyed the bright,
sunny morning of Tuesday, 9/11/2001.

What A Fine Mess We're In
(09/28/2001)

What a fine mess we're in. Let's try to remember that we're in it
together. We're going to need each other to help work through the
challenges to a workable solution.

One can in no way minimize the crimes against humanity that occurred on
9/11, nor their resulting effects on the airline industry and economy.
It is still simply unimaginable that a passenger aircraft would be used
as a weapon of mass destruction.

Though the toll in lives would no way approach the aftermath of 9/11,
some among us are in denial that to some extent, carnage was inevitable,
not in lives, but in jobs. Jobs were in peril. The revenue trend was
just that bad. Labor costs were rising, and energy costs persistently
high. Not all carriers would have ridden it out and survived, though
not all would be clinging to lifeboats, as is now the case.

Layoffs Were Inevitable and is $15 Billion Enough?

As they are wont to do, Wall Street would have applauded the first CEO
to react to the adverse revenue trend by cutting flying and announcing
layoffs. No takers until after 9/11, but Gordon Bethune of Continental
gets that award. Although, in standing up in his executive foxhole and
calling in a capital markets version of air strikes on his own head, he
managed to inflict collateral damage on all his ATA colleagues, the
thought, perhaps, being "If I go, we all go", an intended consequence.

Just to make sure the message got across, in a never before seen act of
Regulation FD-like bravado, Leo Mullin and later, Doug Parker of
America West issued wake-up calls to Congress and anyone else who would
listen, by by proclaiming "the sky is falling" and later, that "the
business model is broken". No kidding. And where were Stephen Wolf
and Jim Goodwin?

An objective recitation of the facts would have shown that the sky was,
a./ falling, and the business model was b./ broken, not to mention, this
was c./ well known, if not widely acknowledged, earlier in the year.

Now the only question is, will $15 Billion worth of lifeboats, grants
and guarantees for the airline industry be:

- too little? (marketplace/economy fail to recover; hey, we need another
trip to the trough, and cut the checks faster this time!)

- too much? (snuck in coverage for "pre-existing conditions"; option
gains and long-term incentive bonuses to the max!)

- just right? (all sides leave mad, but life, economy, industry soldier
on, hopefully recovering and growing)

And the answer is? We won't know for quite a while.

Many on Wall Street projected a near-record loss year for the industry,
well prior to the events of 9/11. A serious, but survivable, situation
for most carriers, even if not all would reach the lifeboats. The
furlough issue was being widely discussed as a follow-up to asset
impairment charges, and accelerated fleet retirements already announced.

Furloughs, downgauging and service reductions were only a matter of
time, had RASM and CASM trends continued as they were. The only
questions were when, and how much. We may recall, one CEO claimed in
Congressional testimony on "The Deal from Hell" that his carrier was a
failing enterprise. Others were, too, but their CEOs didn't advertise.

Revenue Problem or Cost Problem?

Jim Goodwin's "gift to the industry" of September 2000 has not yet been
applied to all crafts and classes of UAL employees, let alone across all
firms, though when it is, it stands to raise the majors' costs by more
than $4 billion annually, based on year 2000.

The problem that emerged in May 2001 was was more of a RASM (and RATM)
issue than it was one of high labor costs. As far as the airline profit
equation goes, it is quite clear that from May 2001, the revenue term
was under far more immediate pressure than either the labor portion of
the cost term, or the cost side as a whole. Blame this on evaporation
of the dot.com bubble, inflated corporate profits, rapacious pricing, the
business model, or sunspot cycles, but it was continuing through 9/11.

Prior to 9/11, there had been no major carrier call for layoffs, but it
was sunset for the most jurassic and least fuel-efficient of the US
airline fleet. Sayonara, round-dialed, tri-jets, we loved ya. As it
turns out, many younger than you will precede you to the desert.

The pace of the May 2001 problem and its resolution changed
dramatically, in the aftermath of 9/11. First, there was the
unprecedented total airspace shutdown. We've seen the grounding of the
DC10 fleet, the Gulf War period, questions and quick action on B737
rudder actuators and MD80 jackscrews, Pan Am 103 and TWA 800. All were
shocks, but this was an action that set traffic and revenue run-rates,
on the peg at Zero, for the entire industry.

A run on the (already factored) bank by ticket holders canceling
future travel plans, like nothing seen during the Gulf War, exacerbated
the industry's cash flow crisis. Rapacious insurance cost increases,
if it was available, drove the industry towards Title XIII/Chapter 443
coverage as a last resort.

Way beyond mere domestic softness, the possibilities of a global
economic downturn were magnified. With no apparent end to the spiral.

The events of 9/11 only exacerbated the revenue side problem, while the
shut-down caused a zero-divide error on the unit cost side, to be
followed by the usual unit cost bump that goes with retrenchment.

9/11 represented a life threatening shock to industry equilibrium,
financial stability and service plans. This triggered the overhanging
avalanche of furloughs we continue to see announced. Quantifying the
incremental impact was at the center of a Washington subsidy debate that
at one point looked as if it would be concluded only after the first
mega-airline filed for bankruptcy protection. It appears the only real
arguments on Capitol Hill were where to set the baseline, size and
composition of an industry package, since the street forecast the
industry to lose money under any circumstance, and at the last minute,
inclusion of a Chrysler-like equity kicker.

US carriers have nagged for years about subsidies given to foreign
carriers. Thus, it was ironic that, having over the past decade hosed
down all its suppliers (including employees and travel agents) for
discounts and subsidies, the airlines and ATA finally succeeded in
getting Congress to pull the subsidy lever. In an odd turn-about, the
EU continues to resist European carriers' similar pleas. The EU seems
to think failure **is** an option.

War on the Homefront

US carriers are leaving no stone unturned, invoking "force majeure" and
"National Emergency" as a means to "re-interpret" (an objective
assessment might be "abrogate") labor contracts. Interesting, in light
of none apparently having done so during the run-up to or during the
Gulf War. The closest anyone got to pulling the force majeure lever was
in the aftermath of Desert Storm and a faltering US economy, when one
airline CEO complained to the Secretary of Transportation that
"overpaid pilots are the single greatest issue facing the industry".

I suppose this is a logical extension of the trend seen during 1999 and
2000, wherein management began suing its employees for their "loyalty"
and "volunteerism", and asking the judiciary for spot interpretations of
contracts that have decades of bargaining history and past practice.

The newly-formed Congressional bail-out committee gets to decide who is
worthy, who is not, how to divide the pie, and when to cut the checks.
A few years from now, peruse Long Term Incentive Plan payouts and gains
on re-priced (now underwater) option grants as a proxy for who managed
to hoodwink the Committee, profiteer at a time of crisis, and by how
much.

Remember that in those "$1 salary" years, Lee Iacocca pulled down what
Chrysler later reported was $90 million in options gains, though in
fairness he also managed to help save the company.

My sense is this is just an accelerated and sadly, tragic, version of
"the Savaging of the Boutiques", foretold in October 1993 and then again
(repeating the cycle) in June 2001. Only this time, the taxpayer gets
to pick up the tab. Travelers will, too, but $15 billion divided by
125 million tax filers is $120 per filer in grants and guarantees.
Make sure you get your money's worth.

And let's not confuse what is shaping up as a series of symbolic but
somewhat hollow senior executive gestures -- people liquid enough to
"forego salary" (but significantly, not incentives, which dwarf salary)
-- while at the same time gorging on tens of thousands of equity shares
at bargain prices -- with the punishment/challenge they have laid down
on furloughed and remaining employees, most of whom are living paycheck
to paycheck and have few of the many executive benefits, including,
amazingly enough, Congressionally approved, multi-year parachute
payouts. What's with that, anyway? As a taxpayer, I'd suggest some of those
folks get the hook, not a parachute. At least they relented and agreed to pay
severance, when the court of public opinion frowned on them.

What about concessions? Well, why subsidize a failed business model?
Network carriers have evolved over the past decade into boutiques that
require a high-octane blend of ever-increasing full-fare business
travel, to produce unit revenues that can sustain what are largely structural
and resulting high unit costs. Though they undoubtedly should, none
is seriously considering a change to the network model, so why throw
bad money after good? Since there are only so many high fare coupons
out there (and there are few indeed, right now), the inevitable result
is fewer seats needed to carry fewer fares, and even smaller equipment
needed, if frequency is to be maintained. We know where this leads,
directly to the small jet battle.

So, other than the above-mentioned long-term executive option gains, how
is this going to shake out? The way the system is being re-engineered,
that's a valid question.

The New Deal: Will Anyone Want to Fly?

We're already seeing a total mind-set change in the area of aviation
security and related civil liberties. Some of this is necessary,
arguably overdue, but some approaches, if not properly thought through
and implemented, will radically diminish the desirability of air travel,
especially on short hauls.

If there is a silver lining here somewhere, maybe we will end up with
the long discussed "Single Level of Safety and Security". Hopefully,
it will apply to express/cargo carriers, as well as passenger carriers.
A 300,000 pound MTOW cargo airliner has at no time in the past been less
of a risk than the passenger variety, yet cargo aircraft standards are
lax by comparison.

The desirability and competitiveness of short haul travel by air could
be severely challenged. Unfortunately, some of the gains made by
innovative airlines that successfully "gave time back" to frequent
business travelers could be lost. Gone for the moment are last minute
show-up and gate check-in, for example.

While the reality may differ in the short term, with few people using
the system, the perception is one of slow, tedious and invasive, federal
security screening at airports, adding a perceived hour or more to all
trips. We have proposals that passenger compartments be locked-off,
flight crew armed, meals eliminated due to cost or security concerns
(or both), and that nothing sharp be allowed onboard.

One carrier has banned essentially all carry-on articles, requiring all
articles be checked and intensively scanned. The scanning is a good
idea, but the idea of **gasp** a post-flight trip to the final frontier,
dreaded carousel number 2, for your laptop and briefcase, is more than
most business travelers will tolerate. Another problem: most airlines
won't take liability for checked laptops, cameras, prescriptions, etc.
Read your contract of carriage.

Does any of this make sense? Maybe. From personal experience, on
those occasions where we have scanned both carry-on and checked baggage
for certain organic substances, we frequently found the contents of
carry-ons was far "badder" than what was being checked, and much worse
than imagined.

So, to the hour or so perceived security delay penalty, add another 30
minutes for the fastest bag delivery I have ever experienced, likely
longer, and the air traveler going ~250 miles or less will surely drive,
video conference or hop the company jet, to avoid the "new age" hassles.

I seriously question whether most short-haul business travelers will
accept the process that's being re-engineered, as it is perceived and
may in fact be (at full volumes, whenever that is, and whatever full
volume represents going forward). If this "stands", it's over for
convenient, speedy, short-haul air travel, which volumetrically,
represents a sizable chuck of activity, and a key piece of certain
carriers' franchises, such as the Shuttles and travel to DCA.

Let's quickly recap the New Deal:

- lengthy, pre-flight, invasive federal security checks,
- compartmentalized aircraft; depending on your perspective, the "lock-up" is forward or aft,
- armed guards, AKA your flight crew, "Sky King and Wyatt Earp" all-in-one,
- no meals, and nothing sharp allowed onboard -- no tweezers, nail clippers or files,
- no carry-on articles

It's "Con Air", right? Sure seems that way.

I won't even go into the reality of "shoot down" rules of engagement and
trial balloons involving remote control "saves" of errant aircraft.

As an industry, we've got to be able to do better than this. The
economy is depending on a robust airline industry for support of its
rebound, and the industry is depending on continued travel convenience,
though with enhanced security, at an understandable but affordable cost
in dollar, convenience and civil liberties terms.

"Con Air" won't cut it, nor will the status quo. We'll need the best
and the brightest to solve this one, but we can lick the problem
with a mixture of known, working technologies like INSPASS, plus
carriers' own CRM processes. "Knowing your customer" may take on new
significance as we move forward in the new environment. Keeping it
convenient to fly will be essential. Let's get to it, and start on the road back.

The Savaging of the Boutiques
(June 22, 2001)

   by R.W. Mann, Jr.
   President
   R.W. Mann & Company, Inc.

Interesting times in the airline business. Just as we saw in the period leading up to
and following the Gulf War, we are watching the savaging of the ‘boutique’, network
airline model, the clear beneficiary being Southwest. Present economic conditions
illustrate the fragility of this high-cost, limited productivity airline business model,
and the ‘all weather’ superiority of its structurally efficient, low-cost, high-pay antithesis.

Despite present appearances, the airline industry is less cyclical, as a result of a
decade of outsourcing, alliance-building and associated reductions in capital and
operating risk. Capacity control, with an wink and a nod from one Regulation FD
filing to another, has helped, as well. But it is just as clearly not immune to a debilitating
combination of the vagaries of the business cycle and a domestic market in decline,
an abrupt drop in RASM precipitated by a fall in business traffic, protracted high
energy costs that outlasted the longest duration hedge programs, and collateral damage
from labor expectations in the aftermath of the UAL pilot contract.

Why did RASM (and the air express business’ parallel, RATM) go over a cliff?
Falling corporate profits, of course, but the dot.com bubble contributed. In addition to
billions in IPO proceeds being turned into hideously bad advertising and “sock puppets”,
the Internet bubble produced a spike in demand for dot.com business travel and express
shipments at obscenely high, rapidly increasing and now clearly unsupportable prices.

The mantra “on internet time” frequently meant “cost no object” and translated to increasing
amounts of moment’s notice, “just in time” travel at full-fares, by people and express packages.
This was great business, while it lasted, reinforcing more flight frequency with smaller aircraft
size, and corresponding, rapid growth in the express business. Unfortunately, the bubble burst.

Since 1993 and the beginnings of the recent economic expansion, network carriers’ embracing
“boutique” business models has moved them to operating in an economic "coffin corner",
analogous to that high altitude flight condition where there is an extremely small margin between
the speeds at which Mach buffet and stall buffet occur. In the aerodynamic sense, it is the point
of maximum aerodynamic efficiency, so it is a sought-after, if fragile, condition for long-range cruise flight.

In fairness, the industry cruised profitably, undisturbed, for nearly a decade, in the coffin's cusp.
More frequency with smaller equipment, including commuter/regional aircraft, stimulated and
served more business demand at more times of day, producing less than proportional increases
in by-product leisure seats. Business fares and yields rose, as did overall load factors. RASM rose,
but the use of smaller, less efficient equipment drove higher unit costs. The margin between RASM and
CASM narrowed.

In the corner’s aerodynamic sense, the aircraft can't fly faster for structural reasons and can't fly
slower or it will stall and upset. So it must either maintain this precise speed or carefully maneuver
out of the optimal altitude, speed and efficiency flight regime.

In the corner’s airline analogy, the market won't accept present fare levels and carriers clearly
can't charge more. Faced with suddenly lower demand and load factors, the airline revenue
management suite is out of its “sweet spot”. Due to their high structural costs, network carriers
can't afford to charge less. So, the profitability stall buffet hits, and airlines experience an upset,
and rapidly move to losses.

Sooner or later, network boutiques face a need to recognize the inherent limitations in their
business models, and restructure and re-engineer for other than coffin corner conditions, which
means lower fares and lower costs -- a la Southwest. Unfortunately for the network crowd, years
of shedding low-fare business to Southwest has made it the industry’s fastest growing, highest margin,
highest market capitalization air carrier, which may within a few years surpass even Delta’s boardings.

Also interesting are the effects of “Economic Value Added”/alliance/code-sharing and low commission
distribution strategies on profit leverage. The former decrease fixed/variable cost ratios, while the
latter gives the appearance of doing the opposite. Since both of these structural evolutions were
viewed by Wall Street as "positive", it's interesting to note that they appear to push the industry
further into the coffin corner in a declining demand environment.

These adverse effects illustrate unintended consequences of theoretical efficiency. Similar to
the manner in which the California power crisis resulted from supposed economic efficiency run amok,
or that occasion when the plant must shut down the production line because the "just in time"
supplier -- doesn't. The parallel being the “just in time” passengers and express parcels who
all of a sudden don’t travel.

Where are those EVA, alliance strategy, ERP and "lean production" consultants now that the
stuff has hit the proverbial fan? No doubt, tuning up for the next engagement:
“re-engineering the airline boutique”. Hello? Southwest?

Aviation's Disturbing Trend
Published in McGraw-Hill's "Aviation Daily", March 13, 2001
and in Allied Pilots Association's "Flightline", March 2001

"DEPARTURES -- Opinions On Current Issues In Aviation
Aviation's Disturbing Trend
By Bob Mann, R.W. Mann & Company, Inc.

     It is the sort of trend that could lead to incidents that decades
of regulatory and safety work have attempted to avoid. Airlines are
suing their own employees, calling for the judiciary to interpret work
rules and regulations, an unintended consequence of which may place
safety in the balance.
     Pilots, mechanics and flight attendants are relied on to
"volunteer" for overtime. Management believes it is cost-effective to
staff the operation this way but paints itself into a corner with this
strategy. A significant amount of activity is dependent on volunteerism,
and we have all seen what occurs when volunteers elect not to.
     In response, management, backed by federal judges, tells employees
they cannot refuse overtime.   They must work, whether or not they feel
fatigued and unfit to fly, maintain aircraft or serve customers with the
degree of precision this industry and the flying public demand to keep
safety paramount.
     The airline industry's lobbying group publicly feuds with the
industry's safety regulatory body. The Air Transportation Association
chooses to interpret a plain-language, 16-hour daily duty limit as
"scheduled time," as opposed to "actual time." This interpretation has
the practical benefit to the employer of an open-ended duty day. At
least one carrier fired a pilot for refusing to fly beyond 16 hours
when, in his judgment, he was fatigued, which chills the likelihood that
the next individual will object, whatever his or her fitness for duty.
     Carriers have sought and been awarded temporary restraining orders
to enjoin mechanics from writing up aircraft defects. No doubt, this is
at least in part due to carriers' ability to share labor relations strategy and
"successes" through the Airline Industrial Relations Conference, AIRCON.
Despite labor groups' diligent efforts to counsel employees, it is
foreseeable that management's arguments will persuade judges to
turn TROs into permanent injunctions. This will chill the likelihood that
marginal conditions will be written up.
     Flight attendants fall asleep on their jumpseats on descent due to
the fatigue of long duty days. In some cases, they are mustered out on
the next departure in a version of "last in, first out" scheduling.
It's take that or be fired for refusing to volunteer for overtime.
     It is unfortunate that neither employees nor management comes to
judgment on these matters with completely clean hands. To some extent,
by their action or inaction, all parties are tarred by the same brush of
acrimonious labor relations.
     When does this counter-employee litigation and judicial
interpretation trend become more than just a bargaining and day-to-day
operations issue? When does it become a safety issue? One could argue
we have already reached that point.
     It is one thing for federal judges to "interpret" -- i.e. rewrite --
on the fly, labor contracts whose bargaining history dates back for
decades. These sorts of spot interpretations do nothing but inflame
already strained relationships between management and labor, entrench
bargaining positions and push both parties toward the counter-productive
brink, represented by the end stages of Railway Labor Act bargaining,
National Mediation Board super-mediation and what may follow.
   Management's saber rattling via calls for pre-emptive Presidential
Emergency Boards effectively terminates any need to bargain in good
faith and removes labor's ability to self-help via a legal strike.
Ironically, the PEB process all but guarantees patterning in imposed
contract terms, along the lines of the most financially generous, but
also the most contractually liberal, recent settlements.
     With all due respect, the judiciary skates on extremely thin ice
when the effect of its actions is to "interpret" safety procedures and
regulations. These checks and balances have been carefully put in place
over decades of airline, National Transportation Safety Board and FAA
work to guard against the well-understood "chain of failures" that can
lead to accidents.
     Gutting safety procedures and regulations via judicial interpretations,
even if it is an inadvertent and unexpected consequence, is a disturbing trend.

- Bob Mann is president of R.W. Mann & Company, Inc., an industry analysis firm
that advises airlines, pilot groups and industry-related firms.

Airline Quality Ratings Decline
Nothing new here.... Unfortunately.

"Remarkably, airlines continue to under-perform ever more modest passenger expectations."

- Bob Mann, in a Report on industry issues to then U.S. Secretary of Transportation, Sam Skinner
July 1992 (yes, nine years ago)

So, how much longer should the industry be permitted to self-regulate service quality improvement?

"Airfare Discounts Plentiful as Businesses Trim Travel", New York Times (April 2001)
Reports on recent unit revenue declines; more unremarkable news to those who saw this coming years ago.

"Unless P.T. Barnum was right, the last few people paying fares three, five or ten times the market
are actively looking for a deal. This is an intensely competitive industry, and inevitably, some carrier
offers such a deal, whether or not it has the costs to back up the low-price offer."

- Bob Mann, "Will You be Able to Affford to Travel?", April 1996

Collateral Damage of the UAL Pilot Contract?
In the Pittsburgh Tribune-Review, February 4, 2001

"Airline consultant Robert W. Mann says the labor agreement United Airlines reached with its pilots late last year,
granting raises approaching 40 percent over four years, could have far-reaching effects.

             United is now negotiating with its mechanics' and flight attendants' unions. They want lucrative raises, too. And
             pilots at American Airlines, Delta Airlines and Continental Airlines, the No. 2, 3 and 5 carriers, are seeking
             contracts to put them on par with United. Northwest Airlines mechanics reportedly want raises in excess of 100
             percent.

             Mann said: "If energy costs continue to be based on $30-a-barrel oil and the economy continues to stumble, and
             the effect of UAL's pilots' contract spreads to other employees at United and across the industry, the cost of
             which I estimate at more than $4 billion annually, then the industry will be hard-pressed to pass all these costs
             along to consumers. Something will have to give. Whether it be lower profit margins or labor-management
             stalemates is too early to tell."

Comair: What Next?
in McGraw-Hill's "Aviation Daily", May 26, 2001

Analyst Robert Mann of R.W. Mann & Company noted that Mesa's entry
into Cincinnati and the fact that other Delta franchise partners are
operating Comair assets "raise questions about the effectiveness of ALPA's
fragmentation and 'flying struck assets' policies." A group of Comair
pilots who make up the Regional Jet Defense Coalition recently sued ALPA
claiming it cannot fairly represent both mainline and regional pilots.
Mann contends that the suit raises the Duty of Fair Representation to
members "that for the time being appears to have ALPA frozen like the
proverbial deer in the headlights." He predicts the solution will require
realignment of regional and mainline wage scales, pay progressions,
benefits and work rules.

Air Rage, Delays, Rolling Power Blackouts and Related Myths
Comments on delays and larger issues; industry newsletter, August 8, 2000.

"The latest stories portraying United Airlines' schedule reliability difficulties
perpetuate some myths, and worse, signal that these sorts of difficulties have
become endemic to the airline industry. Snags have become an industry
norm, and will continue until customers and investors revolt.

In fairness, it's not just the airline industry that's affected. Wall Street and
many consultants goad airline managers and other "masters of the universe"
into alliances, consolidation and related investment avoidance schemes,
designed to generate higher returns on less invested capital, with less competition.
Or such is the intent.

Problem is, when these systems become overloaded, and customers,
and even Congress, understandably revolt, management seems to want to
wash their hands of any responsibility for their chosen business models.

Claiming airline management is blameless in the industry's present delay
morasse is as valid as saying a decade-long failure to invest in power
plants and power grid, resulting in this summer's brownouts and rolling
blackouts, is not the power industry's fault. Right, deregulation done it.

Tell it to those masters of the universe trying to use their PDAs and WAP phones
by candlelight, to rebook flights delayed or cancelled due to rolling blackouts."

- Bob Mann, R.W. Mann & Company, Inc.

Aviation Summit Seeks Ways To Tackle Delays, Gridlock
- comments to the Committee, February 2001

"At the end of the day, lack of runway capacity is the weak link and
the only relevant issue. No amount of new ATC capacity will permit
more landings and takeoffs at congested facilities, at which no new
capacity is planned. Grand plans such as "Free Flight" will simply
redefine the weak links. After all, "Free Flight" has been around since
Lockheed Electras using Sperry "4-D" guidance were the marvel of the
Eastern Shuttle. The solution to this problem is not in some of the
worst cases even readily apparent. There is already talk about
tunneling to Oakland as a fix for SFO congestion, and how do you add
runways at LaGuardia? Pave Rikers Island? (Not a bad idea, actually...)

Don't blame the FAA for a lack of runways; it's a geographic and
urbanization issue. Runways are a local government hot button and a
"Not In My Back Yard" (NIMBY) issue. Blame local legislators responding
to constituents, quite likely people like our neighbors, who probably
want more service (as the airlines say) but don't want more air traffic
routed over their neighborhoods, be these bucolic or urban. Once again,
don't blame the FAA, who in reality are trying to blunt the impact of
aviation noise by various means (see below).

"Corporatization" of ATC is not a panacea. This issue was last debated
in 1994 (and I was part of that debate, published as a special report by
Les Blattner of McGraw Hill), after the last debacle in which a prime
contractor (who shall remain nameless), could not deliver a multi-billion
ATC system improvement on time and within specs. The problem is partly
government purchasing policies, which needed streamlining and were, under
Al Gore's "reinventing government" initiative, and partly ever-changing
functional requirements, in some cases driven by airlines themselves.
This is a perennial problem that dates back to ARTS-III, two generations
of systems ago.

Don't blame FAA for not leaping to a satellite-based Navigation standard.
The last time they tried to leapfrog the industry towards new standards,
Microwave Landing Systems (MLS) that could provide variable, curved
approaches instead of the standard straight-in ILS and in doing so blunt
some noise impacts (above), the airlines would not go along because the
onboard/cockpit instrumentation was "too expensive". Twenty years
later, there are perhaps a few dozen such MLS approaches, only a few of
which are used by major airlines.

So, we are all in favor of solving the capacity and its directly related delay
issue, because this is indeed a problem that crimps economic activity at
each of the local, state, national and global levels. And we hate delays, too.

But this industry simply must stop bashing parties, in particular the
FAA, who are attempting to resolve these issues with some of their
greatest critics' stated self-interests in mind, and while attempting to
deal with what Don Carty and now Bob Crandall admit is an industry that
will continue to overschedule itself into even greater delays, apparently,
unless stopped by Congressional threat of passenger rights legislation.
FAA's objective is analogous to asking GM to try and change car
model features while the assembly line is running over its design
production rate, i.e. impossible. FAA's progress to date ought to be
recognized and supported as a miraculous feat, not criticized.

The delay issue mandates a cooperative solution. The airline industry
can't have it both ways, nor can the country or the economy."

- Bob Mann, R.W. Mann & Company, Inc.

The Heating Bill or That Trip To Boca - This Winter's Choice?
In "HOT FLASH", Aviation Systems Research, September 2000:

        "The oil and gas price trend is ominous, whether airlines are hedged or not.
        The general economy and home heating energy buyers in places like
        Flint, Michigan are not very well hedged ... and they are the ticket buyers out there".

- Bob Mann, R.W. Mann & Company, Inc.

UAL/USAir Merger in the Balance
In the Pittsburgh Tribune-Review, February 4, 2001

"Robert W. Mann, an airline analyst and consultant, said a recently released report by the Department of
Transportation indicates that regulators will be vigilant in protecting smaller airlines.

             Barriers to entry in the deregulated airline industry include limited takeoff-departure slots at airports and exclusive
             arrangements between big airlines and local airports to finance expansion - like US Airways' deal at Pittsburgh
             International.

"Southwest Airlines and new-entrant carriers are the only factor disciplining the majors' pricing. I think you will see
the JetBlues, Frontiers and AirTrans of the world guarded from overaggressive behavior (by the majors)," Mann said.

             As part of the American/TWA merger, American is proposing to buy 86 US Airways planes and leases, in
             addition to taking a half interest in the profitable US Airways Boston-New York City-Washington D.C. shuttle.
             Those moves are aimed at easing federal regulatory approval of both mergers.

             American also promises to provide competition on United/US Airways hub-to-hub routes, including Pittsburgh to
             Washington, D.C.-Dulles International. It will also pay $82 million to acquire a 49 percent stake in DC Air, a new
             airline that would take over US Airways' slots at Reagan International Airport.

             Mann said he doesn't anticipate more service from American out of Pittsburgh other than to Washington, D.C.,
             and existing service by TWA from Pittsburgh to St. Louis. "These guys tend to stick to their core hub-and-spoke
             support role," he said in reference to United and American."

In Dow Jones Newswire, September 8, 2000:

        "To be sure, UAL is willing to make whatever sacrifice is needed to complete its
        USAirways deal", said Bob Mann, airline analyst at R.W. Mann & Company, Inc.
        in Port Washington, N.Y., "Slots, facilities, DCAir, you name it."

He said wage increases the company granted pilots last month were intended to
ease pilots' concerns that the merger could jeopardize their jobs and compensation.

        "If they are willing to offer the pilot group the sorts of substantial wage increases
        that you saw in that agreement, understanding that these demands will reverberate
        across the rest of the UAL property, then management obviously believes there are
        huge revenue and contribution benefits associated with the deal," Mann said.

The tentative pact granted an immediate raise of up to 28.5% and 4% annual increases
over four years for UAL pilots.

Slots Given and Taken Away
In USAToday, November 2000:

"LGA represents the tip of the iceberg, figuratively speaking, a high
profile problem in what is in reality a growing sea of delays.

    Flight volumes continue to rise, as airlines schedule for competitive
    advantage. Legislators continue to grant slots and access, even when
    no capacity exists to accommodate such "pork". Small jet replacement of
    turboprops continues, placing further demands on already congested jet
    transitions and operating altitudes.

    As this trend continues, delays will worsen and more of the overall
    delay problem will become visible, that huge portion of the delay
    problem presently residing "below the waterline", the rest of the
    proverbial iceberg.

Just as all the rocks become visible at low tide, many more
airports will become gridlocked."

- Bob Mann, R.W. Mann & Company, Inc.

Turbulence Hits Industry
In the Dallas Morning News, November 2000:

    "Today's tight labor market and the airlines' own scheduling practices have
    given unions greater leverage at the bargaining table. Carriers are coping
    with shortages of qualified pilots, mechanics and flight attendants. And as
    United demonstrated, reliance on overtime continues to make them
    vulnerable to flight disruptions.

    "One after another, companies have painted themselves into a corner by
    over-reliance on overtime" said Bob Mann, an airline analyst based in
    Port Washington, N.Y.

DOJ v. Northwest/Continental:Northwest Blinked
On CBS Marketwatch.com, October 2000:

    Industry observers said Northwest might be motivated to give up its
    ownership stake in order to otherwise preserve its lucrative alliance with
    Continental, which allows the carriers to connect route systems,
    code-share, and craft a reciprocal frequent flyer program.

    "It looks like Northwest blinked," said Robert W. Mann, President
     of airline consulting firm R.W. Mann & Co. "There is a clear motivation on
     their part to maintain the revenue benefits they get from the arrangement."

Hawaiian Air Seeks Offers
In Hawaii Business Magazine, Honolulu Star Bulletin and Honolulu Advertiser,
at various times in November/December 2000:

   "Hawaiian Airlines’ earnings potential and as a result, its stock price, are limited by
     its duopoly position (with Aloha) in the overall island market and the nature of
     the markets it serves -- a mix of quasi-public service for islanders, and
     wholesale/leisure for tour operators and inter-airline clients desiring add-ons to
     mainland-Hawaii service," adds airline industry consultant Robert Mann with R.W.
     Mann & Company, Inc. "The leisure and public service mix overwhelms
     any business travel mix, thus yields and earnings tend to be punished."
    ...

    Robert Mann of R.W. Mann & Co., an airline industry analysis and consulting firm
    in Port Washington, N.Y., said the interest in Hawaiian is "more a function of the
    stock price being down around $2, and investors' desire for an exit strategy."

    There are other factors at work behind today's announcement by Hawaiian, he said.
    "No doubt, Hawaiian wants to stir up some interest in the stock, getting more than
    one party involved, perhaps causing a bidding war to erupt," Mann said.

    But Mann remains skeptical. "Unfortunately, at the end of the day, Hawaiian would
    have to find some mainland carrier that was interested in subsidizing inter-island
    service, for this to be of interest. And historically, that hasn't been the case," Mann said.
    ...

    "In my experience, the half-life of investment bankers with airlines is in the three- to
    four-year range," said New York-based aviation consultant Robert Mann. "So that places
    Smith Management in the position of wanting to have shopped Hawaiian and to have
    done a transaction by now."

The trend towards Business Elite and2-class versus 3-class International service:
In OAG Frequent Flyer magazine, June 2000:

    "A second reason why airlines are abandoning first class is, simply, that so few travelers
     are paying the high fares to fly in the front cabin. Truth is, most are there on either elite
     status mileage-based or complimentary upgrades. The airlines have been so liberal in
     their upgrade policies that, even with higher published fares, first-class cabins are less
     profitable than business class," explains Bob Mann, an airline industry analyst in Port
     Washington, N.Y.

"So, if you place your investment where the returns are greatest, it makes sense that airlines
are spending money to improve business-class service", he said.

On the impact of O&D Revenue Management
In the Wall Street Journal, October 1999:

    "Others suggest American, known for maximizing its revenue through advances in technology,
    is losing its edge. Two years ago, it began managing its mix of prices assigned to seat inventory
    based on where travelers start and end trips. American accurately predicted where and when
    people traveled, and managed its business and leisure fares accordingly.

    But now other airlines have caught on and copied the strategy. Earlier in 1999, UAL Corp., (UAL)
    parent of United Airlines and American's rival in Chicago, put a similar system in place. Also,
    corporations, tired of paying premium airfares, are aggressively renegotiating their airline
    agreements and dodging American's management system.

    "These factors could be contributing to American's unit revenue growth rate declines,
    said Robert Mann, a New York airline consultant. "American was earning a premium as the
    earlier adopter, which as others enter with competing technology, they are unable to maintain".

On "paid consultants" and alternatives thereto...

This just in:

"June 13, 2001

Wall Street Firms Endorse Ethics Standards for Analysts

By GRETCHEN MORGENSON

          Moving to counter the growing belief among investors that Wall Street research is biased, obfuscating or
          downright untrustworthy, the nation's largest securities firms announced guidelines yesterday to shore
          up the ethical and professional standards for their analysts and other employees.

          After six months of sometimes fractious negotiations, research directors at 14 Wall Street firms endorsed a set
          of practices for the industry covering broad areas like analysts' compensation, personal ownership of stocks
          by analysts and the objectivity of the reports themselves.

          "The concerns have been that research recommendations are biased, analyst conflicts undisclosed, their
          language confusing and their compensation skewed to investment banking," said Marc E. Lackritz, president
          of the Securities Industry Association, which announced the rules. "These best practices call for clear
          disclosure and will preserve the independence and objective judgment of Wall Street research."

          The mission statement is simple enough: "The integrity of research should be fostered and respected
          throughout a securities firm." But in an indication of how far the standards have fallen in recent years, Mr.
          Lackritz said the guidelines would require at least one change in practices at each of the firms that helped to
          write the standards.

          Robert Olstein, manager of the Olstein Financial Alert Fund and a critic of Wall Street research, called the
          guidelines "a step in the right direction," though they did not go far enough. "It's about time they stated
          that analysts' first obligation is to the investor and not to the firm or their own personal accounts," he said.

"June 12, 2001

Stock Analyst Conduct Code Due

by Bloomberg News

The Securities Industry Association is set to release a code of conduct for stock research today that will urge
Wall Street firms to limit ties between analysts and their investment banking businesses.

          The association, an industry trade group, is expected to make recommendations on the relationships between
          analysts and the investment banking arms of their firms as well as the compensation they receive. In addition,
          the group will also make recommendations on the ratings that analysts assign to stocks.

          The association is releasing guidelines two days before Congressional hearings into allegations that Wall
          Street research has been used to support investment banking business as opposed to providing investors
          with objective analysis.

          "Firms are upset that the credibility of their analysts has been reduced to such a level," said Roy Smith, an
          investment banking professor at New York University who ran Goldman Sachs Group's equity department in
          the 1980's. "This is an effort to contain the brush fire."

No kidding... Imagine that. It's about time.

- - -

Previously, a noted wag and aggregator ("waggregator"?) of airline press releases published in August 2000:

"There is a difference between an independent analyst, a Wall Street analyst, an analyst whose firm has
a major position in a stock, and someone who is paid as a consultant by a union, or an airline, to provide
research. I mean, this is not rocket science. You think a consultant is going to come up with a study or an
opinion that refutes the position that the person paying his or her fee holds? ... Always remember to
understand where the money is -- when listening to anyone's 'expert' opinion."
- PlaneBusiness, 8/14/2000

We could not agree more that due diligence is essential, when evaluating an opinion, whatever its source.
Particularly so, considering that opinions from Wall Street and on websites can inadvertently front-run an
institutional position, or a client's.

How about that fee-generating underwriting business that depends on favorable opinions, not to mention
fees from 'writing tickets' (buy, sell). Or the potential to front-run the opinion-maker's own position.
Are these fundamental recommendations, short-run trading or other 'special situations'?

More questions about Wall Street? Consider the fiasco in dot.com and internet equity valuation 'models'.
Target pricing in the stratosphere, P/E's of infinity, insolvency before breakeven. Say no more. Likewise,
those transparently self-serving reports emanating from 'think tanks' aligned with political and special interests.

Suggesting that independent analysis, be this from individuals or specialist firms, is tainted, simply because
the research is retained or compensated, is nonsensical. Odd, too, as the waggregator has on numerous
occasions literally begged^{1/ (see below)} to print our objective, independent (and compensated) research material
(see "The Sky's the Limit", among others). Our candid and passionately expressed opinions seem to have rankled
some (paid) subscribers, or potential (paid) subscribers, apparently resulting in the above 'follow the money'
comments. Wouldn't be the first time.... and we doubt it will be the last. We have always called them the way
we see them, independent of what a client wishes to hear. And have been thanked by the client for doing so.

What's the old saw? 'Free advice is worth what you pay for it.' In fairness, the converse can also be true.
One noted firm produced a report suggesting a proposed, major airline combination would produce annual
welfare to consumers that amounted to what we termed, in an independent review, and using their own numbers,
'one thin dime' per passenger carried.

If in doubt, take a look at the prescience, continuum of and the level of commitment expressed in an analyst's
or firm's opinions. That's why we publish ours here -- for potential clients' consideration.

As further consideration, review the sort of matters (if any) in which the individual or firm has been retained and
subsequently admitted as an expert. Our experience includes numerous expert engagements at the Federal,
State and Local level -- commercial litigation, mediation and arbitration.

We rest our case, and would be pleased to consider yours.

- Bob Mann, R.W. Mann & Company, Inc.

^{1/ Introductions to our research material, solicited
for publication in PlaneBusiness:}

^{"Editor's Note: This week we welcome well-known
airline industry consultant, Robert W. Mann."}
^{"Editor's Note: This week we welcome back Bob Mann...
Bob is a leading consultant in the airline industry...}
^{If you would like more information on Bob and his
consulting firm, you can access his website here."}
^{"Editor's Note--This week we are very pleased to
welcome back Robert W. Mann as a contributor...}
^{Today, Bob tackles the always-hot topic of the regional
jet issue. Bob's take on the issue is very different}
^{than that proposed in the GKMG study. You
can contact Bob directly at his firm, R.W. Mann & Company, Inc,}
^{or through us... We thank Bob for making his study
available... "}

On whistle-blowers

"We heard from Bob Mann today. Bob has contributed a number of columns to
PlanePerspectives, and can usually be found working in a consulting capacity
for some airline somewhere. Bob wanted to remind us of news that had been
released on Tuesday that we had not mentioned.

That news was that Bruce Hood, a former NHL referee, was just appointed the
"Airline Complaint Czar" by Canadian Transport Minister David Collenette.
According to Bob, one of our more astute hockey observers, "Hood was
(for my two cents worth) blind as a bat when he refereed. Perhaps he reads
better than he refs, but what good does Collenette suppose Hood can do
for the Canadian flying public?"

Bob closed with the comment that "I'll admit, the whistle act is cute, but then
again, the industry has always punished whistle-blowers..."

The 'whistle act' that Bob is referring to was a phrase that was used in the Reuters
story announcing Hood's appointment, which stated that Hood would 'have the power
to 'blow the whistle' on persistently substandard service by Air Canada'."

- Planebusiness, 8/3/2000 (same party that objects to "paid consultants")