Continental to Trim Jobs, Flights as Fuel Costs Rise

In the latest round of big cutbacks at major airlines, Continental Airlines Inc. said it will slash about 3,000 jobs and significantly reduce domestic flights in its battle against soaring fuel prices.

"These actions will help Continental survive the crisis," said a letter to the company's 45,000 employees from Chairman and Chief Executive Larry Kellner and President Jeff Smisek. The two executives said they would also forgo incentive pay for the rest of 2008. The company declined to comment further.

Continental is decreasing capacity by 11%, beginning in September. The Houston-based airline will remove 67 airplanes by the end of 2009. Continental officials estimate fuel will cost the company an additional $2.3 billion more in 2008 than in the previous year.

Harlan Platt, a professor of finance at Northeastern University in Boston specializing in airlines, says he expects capacity and staff cuts to continue as oil prices rise. He says oil prices need to be at $70 a barrel for most airlines to break-even or begin making a profit.

"It's not a situation where the airlines will go bankrupt next month, but they have got to begin conserving their cash," Mr. Platt says.

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Severe Jet Lag

FROM THE TRENTON TIMES

Airline industry forced to confront problems, changes

Larry Kellner hit the rivet on the head.

"The airline industry is in a crisis," the chief executive of Continental Airlines said yesterday.

Kellner made that assessment as he announced his airline, the largest carrier at Newark Liberty International Airport, would reduce aircraft, flights and staff -- just as other airlines have done. Continental is slashing 3,000 jobs as well as reducing the number of flights 16 percent this fall.

Houston-based Continental is following United and American airlines, which also are cutting back unprofitable routes. It is a tacit ad mission by the carriers their business model is broken.

"Everything is coming together at the wrong time for the airlines," said Kevin Mitchell, president of the Business Travel Coalition, an advocacy group for business travelers. "It means the end of the experiment of deregulation and the democratization of the industry."

But can the airline industry be saved? Analysts say Continental will be a likely survivor because of its competent management, financial strength and good labor relations. But if fuel prices continue to soar, some carriers will not survive, said Harlan Platt, a finance professor at the business school at Northeastern University who follows the airline industry.

"I don't think oil prices will stay at this level, but if they do, some will start to go out in 2009," he said.

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IBM studying impact of telecommuting

According to Salary.com, telecommuting has been one of the hottest compensation trends over the last few years. At IBM, more than 40% of their workers don’t come into the office every day. It is for this reason that IBM is evaluating the pros and cons of telecommuting through a study by Jay Mulki, a marketing professor at Northeastern University’s College of Business Administration.

According to Prof. Mulki, telecommuting presents two major challenges: a feeling of isolation and achieving a work-life balance.

“Isolation happens when telecommuters can't get the support they need,” Prof. Mulki said. “When face-to-face communication isn't possible, workers need a substitute -- and voice mail isn't it,” he said.
“The other aspect is a feeling that work isn't being recognized. Employees appreciate managers who ‘toot their horn,’” Prof. Mulki said. “And those who successfully manage telecommuters differ from traditional office managers,” Prof. Mulki added.
"Managers are not the traditional command-and-control managers; they're more like coaches," he said. "They say, 'Tell me what you need, and I'll go get it,' or they run obstacles for their employee."

“Mutual trust is key to this work situation,” Prof. Mulki said. “Employees resent managers who give the impression of monitoring them. And when it comes to work-life balance, working from home can be good -- or bad. On the employer side, when you're at home, you're always available," Prof. Mulki denoted. "On the employee side, you wanted to be there to pick up your kid, or whatever the case may be."

“When you're commuting to an office, the drive is a transition time,” he said. "When you're working at home, if you're not careful, you're never disengaged. You're always involved," Prof. Mulki said.

You can find Prof. Mulki’s bio here: http://cba.neu.edu/faculty/directory_detail.cfm?e=205 I have included the text of the executive summary of Prof. Mulki’s research below.

EXECUTIVE SUMMARY

The purpose of this research study is to examine the challenges that remote employees face and the use of personal and organizational coping strategies. This report represents the findings from the first exploratory phase of the study based on 34 semi-structured interviews with remote employees and managers. Twenty-eight of the remote informants are Company A employees. The following highlights the key findings related to two significant challenges: 1) workplace isolation and 2) work-life balance issues.

High Experiences of Workplace Isolation

Deliberate actions by employees and managers are critical to minimizing the effect of workplace isolation. In particular, the informants identified a lack of informal communication, face-to-face communication, and visibility to management as the key challenges associated with workplace isolation. Employees reported the use of technology to increase informal communication as a means to reduce feelings of isolation, to build camaraderie, and as a partial substitute for face-to-face communication. In addition, employees suggested increasing opportunities for face-to-face interactions as well utilizing their own personal social networks to help address isolation perceptions. Findings suggest that workplace isolation may be more of a concern with new members of the team. Newcomers should be matched with a mentor and/or a traditional office employee to assist them in being more effective in the remote environment. Our results suggest that managers should provide support, mentoring, training (conferences, teleconferences, workshops, etc.) and work on developing community activities to help remote employees to address isolation issues. It was specifically recommended that the manager should meet face-to-face with each remote employees at least once every year.

Challenge in Managing Work-Life Balance

This study demonstrates that remote employees find it more difficult to disengage from work and tend to work longer hours. This tendency to overwork results from the lack of boundaries between work and home life and the nature of remote work (i.e., increased communication/conference calls and working with team members/customers in different time zones.) We suggest that remote employees should set routines to establish a work structure enabling them to disengage from work. Remote employees should also communicate to managers and team members when they are not available. We also recommend that remote employees should create physical boundaries between work and home life. Managers should help remote employees limit overwork by setting priorities on tasks. Finally, we recommend that both managers and the organization set clear remote work norms (i.e., not working on holidays, child care).

In conclusion, our qualitative findings enrich our organizational understanding of the best coping practices to address the challenges of virtual work from both employee and manager perspectives. An empirical study with survey responses from a larger pool of respondents will help us validate the findings and to enhance the knowledge base.

Continental Airlines to cut capacity 11%

Continental Airlines became the latest U.S. airline to unveil plans to slash its overall capacity by 11% and cutting more than 3,000 employees. In a unique twist, Continental’s CEO and its president both said will not take salaries or incentive pay the rest of the year. Continental said it will announce next week which flights and destinations it will reduce or eliminate.

Continental also renegotiated its capacity deal with low-cost carrier ExpressJet. Its new deal calls for ExpressJet to continue flying the 205 regional jets it currently operates for Continental in the first year but allows Continental to scale back the fleet by 15 after that period. The new seven-year deal also allows ExpressJet to fly for other carriers and to continue the consideration of strategic alternatives, including the company's possible sale.

In a Wall Street Journal article, Harlan Platt, a professor of finance at Northeastern University in Boston specializing in airlines, says he expects airlines to continue cutting capacity and staff as oil and fuel prices rise. He says oil prices need to be at $70/barrel for most airlines to break-even or begin making a profit.

"It's not a situation where the airlines will go bankrupt next month, but they have got to begin conserving their cash," Platt says.

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iPhone: One year later

Apple's splash into the cell phone market proved consumers will pay for hip devices. Now the race is on to one-up the iPhone.

What a difference a year makes. This month, the hip iPhone celebrates its first anniversary, following its riotous launch last June 29. Its birth followed six months of prerelease hype that was ignited by Apple Inc. CEO and industry luminary Steve Jobs.

The company that brought you the Macintosh computer, and the fabulously successful iPod and iTunes, has jumped -- well, dive-bombed, really -- into the wireless phone business like no cell phone vendor before.

"As the innovation leader, the iPhone is currently facing fierce competition from look-alike and feature-alike products. Apple cannot let up on innovation, because its competitors certainly will not," says Gloria Barczak, professor of marketing at Northeastern University's College of Business Administration.

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CA tax law specialist comments on Snipes sentencing

As you cover the Wesley Snipes tax prosecution story, I thought you might be interested in the thoughts of Frank Doti, a California bar association tax law specialist and professor at Chapman University’s School of Law (you can find his bio here: http://www.chapman.edu/law/faculty/doti.asp):

“Obviously this case has garnered a lot of media attention because of the celebrity status of Wesley Snipes. Although the IRS does not say so directly, it is commonly known that it criminally prosecutes persons of notoriety. The IRS believes that the media attention, especially around tax filing season, tends to put fear in the minds of your average taxpayer to properly file and pay taxes. An unknown tax cheat will probably not have the same effect, if it's even covered by the major media,” Prof. Doti points out.

“Another example of the IRS prosecuting a celebrity is Richard Hatch, who won the first Survivor competition. He is still in prison serving his five year sentence for failing to file and pay taxes on his $1,000,000 winnings from the contest.

“Snipes and Hatch tried to blame others for their failure to file. Snipes used as the basis for his defense the advice he received from his "tax advisor." He alleged that the advisor told him the federal income tax is unconstitutional. Others have tried to use this defense in the past. In recent years the courts have not been sympathetic to these arguments. I recall being in court a few years ago for one of our clinical education cases and watching a women argue her own case claiming the income tax is unconstitutional based on advice she read in a book. The judge was very diplomatic, but ruled against her,” Prof. Doti states.

“The bottom line is that excuses about illegality of the tax code have been rejected over and over again. Swipes probably took the chance at a time when the courts had not yet imposed the severe civil penalties which they are imposing now. Also, he was probably advised that he would not face criminal prosecution because others were claiming the same defense. That was obviously a big mistake, especially because of his celebrity status,” Prof. Doti concludes.

United backs off US Airways deal

CHICAGO - United Airlines scrapped its latest attempt to combine with US Airways and create the world's largest carrier, formally backing away Friday from a deal that likely would have meant fewer routes and higher ticket prices for consumers.

Now the question for those and other U.S. airlines is how to make money with oil prices near $130 a barrel.

"The failure of United to find a merger partner is not surprising given the fact that no airline, Southwest included, can survive at $130-per-barrel oil," said Harlan Platt, a finance professor at the business school at Northeastern University who follows the airline industry closely. "Either prices must rise by $50 a ticket or massive layoffs and cutbacks are needed."

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UNITED TALKS DEAD

US Airways, flying solo, may struggle

Airline likely will cut flights, add fees to offset fuel costs, analysts say

With no money-saving merger on the horizon, US Airways customers likely will see fewer flights and even more fees as high fuel costs continue to strain the carrier's finances.

After filing for bankruptcy protection twice this decade, Charlotte's dominant carrier should have enough cash to avoid the same fate this year, airline experts say.

US Airways, like other major airlines, has cash in reserve. The cushion has shrunk from $3.5 billion last summer to about $2 billion this spring, but it's enough to get the airline through this year, said Harlan Platt, a finance professor at the business school of Northeastern University in Boston, who follows the industry.

United is in a similar situation, Platt said, which could explain why the two airlines held off on a merger. "The sense of urgency is not there," he said.

"This is not the 39-year-old who says I'm going to marry the next person I go out with," Platt said. "These companies are now about 30. They know the clock is ticking, but they've got time."

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Northeastern University International Business Program Ranked 13th In Nation By U.S. News & World Report

Program Moves Up in Ranking, First in New England

Boston, MA (Vocus/PRWEB ) November 10, 2008 -- Northeastern University's College of Business Administration (CBA) today announced that its undergraduate International Business program advanced in the ranking among "America's Best Colleges" by U.S. News & World Report, moving to 13th from its previous ranking of 15. It remains the highest ranked undergraduate international business degree program in New England. CBA's Bachelor of Science in International Business (BSIB) is the only degree of its kind in which students study overseas in the host school's language and work overseas, building upon Northeastern University's long-established strengths as one of the originators of cooperative education.

Helvetica, sans-serif; TEXT-DECORATION: none" href="http://www.cba.neu.edu/">The BSIB program has gained its national and international stature, in part, because it has been developed in response to our business partner's belief that students truly learn much more successfully when they are effectively prepared to experience life, study and work abroad

Established in 1994, the BSIB program is a unique, innovative and demanding curriculum that prepares students for positions of international responsibility. Students can earn a Northeastern undergraduate international business degree and a second degree from a partnering foreign university in Spain, France, Germany, Italy, Mexico or Ireland. The new China option started in 2007. BSIB students study at the partner university in the host school's language. Also students are required to complete a six-month work assignment in the host country, giving them the opportunity to gain valuable, hands-on business experience in the country's unique business culture and environment.

"The BSIB program has gained its national and international stature, in part, because it has been developed in response to our business partner's belief that students truly learn much more successfully when they are effectively prepared to experience life, study and work abroad," said Peggy Fletcher, associate dean, undergraduate programs at Northeastern University's College of Business Administration.

Students who earn the BSIB degree study international business extensively, in addition to functional business subject areas such as finance, marketing, and supply chain management. The international business curriculum requires courses that cover the global business environment, global social responsibility and ethics, culture differences and their impact on all aspects of a firm's international business involvement, global strategic issues, international marketing, international finance and global supply chain management. Along with the classroom learning, the program's overseas study and work component is designed to replicate what managers on a foreign assignment may experience. To this end, one innovative course, Living and Working Abroad, prepares the BSIB students for living and studying overseas in the classroom before their departure and online while students experience cultural differences. Upon their return to the US, the course's last assignment requires a reflection study on the student's study and work experience overseas.

Graduates of the BSIB program have been sought after by both global companies headquartered abroad as well as U.S.-based companies with international offices. In the last several years alone, more than 30 foreign-based companies in four European countries have hired BSIB graduates to work abroad. In France these companies have included Rexel, Societe Generale, Natexis Bleichroeder, Lexmark, General Electric, GE, Nissan Europe in Trappes and State Street Banque. Among the participating companies in Spain have been LaNetro Zed, HSBC, Warner Brothers, Price Waterhouse Coopers, Daimler/Chrysler, Fiat, Sony Computer Entertainment Espana, Accenture, Robert Bosch Espana, AIG Life, Coca Cola, Coldkit, UBS Investment Bank and Lufthansa. Companies in Germany have included Bosch, US Commercial Service at the US Embassy-Berlin, Landesbank Baden-Wurrtemburg, Open Business Club AG and Otto (GmbH & Co KG). Among the list of participating companies in Ireland have been Palm, BNP Paribas Group, Merrill Lynch-Dublin, Citigroup, eSpatial Solutions Ltd, Gamestop and Amas.
At the same time BSIB graduates have secured jobs with foreign firms and with international offices of U.S. multinational corporations. Such U.S. multinational corporations include Bain & Co., Bristol Myers Squibb, JP Morgan, Liberty Mutual, PFC Energy and Raytheon.

About Northeastern University College of Business AdministrationNortheastern University College of Business Administration, established in 1922, provides its students--undergraduate, graduate and executive--with the education, tools and experience necessary to launch and accelerate successful business careers. The College credits its success to expert faculty, close partnerships with industry and is emphasis on rigorous academics combined with experiential learning.

The College is highly ranked by several prestigious publications. BusinessWeek ranks the College 34th and #1 in internships in its "Best Undergraduate B-schools." The College's Bachelor of Science in International Business program is ranked #13 by U.S. News & World Report. The undergraduate program is also distinguished by Princeton Review and Entrepreneur magazine #14 of the U.S. top 25 entrepreneurship programs. For more information about Northeastern University's College of Business Administration, visit www.cba.neu.edu.