Airline Profitablility

[rjcap]

Bill,

I'll post that question again and see if you would like to take a stab at it.

Exactly how much revenue did you personally generate for Delta airlines last year ?

 

[enigma]

I think that the secret to the LCC's success is that they have been tightly focused on their market . They make no attempt to be "global", or even to serve every city in the country. They appear to care more about profit than market share, or market dominance. The money losing majors have focused on being all things to all people and on being the dominate carrier in their region. While AMR and UAL were trying to acquire TWA and Airways, SWA was only looking to add a few well researched cities and JetBlue was just looking at city pairs in which they could make money.

For those who want to blame the overpaid, arrogant pilots at the money losing majors, I say shame on you. In no case did the pilots choose the business structure of their employer or the market in which their employer choose to focus.

The economy suffers from a fairly regular cycle and most major airlines have choosen to build their cost structure on the revenues produced during boom cycles. SWA and other LCC's have choosen to build their business around the revenues available during the downside of the cycles. If the other majors saved the cash they made during the boom (instead of attempting mergers, etc) they could most likely survive the busts.

The only real losers in the latest shake ups (besides us airline employees) will be the citizens of smaller cities that loose service because they can't fill up a 737 ten times a day, or find themselves paying thousands instead of hundreds for a ticket because their city doesn't fit into a LCC's structure.

Some will say that RJ's allow service to those smaller locations, but I don't see any carrier willing to fly those runs outside of a major carriers umbrella. Which brings me to the second part of the original question. The regionals are making money, but they do so by using the good name of their major carrier affiliate/owner. It only takes fairly simple math to come to the conclusion that an RJ crew makes about as much per seat as does the mainline aircraft, so they don't really have a crew wage advantage. I would venture to guess that Johnny O would have already started a non-affiliated RJ only carrier if he thought he could make money by doing so. The costs of building a stand alone system (g.s.equipment, gate space, counterspace, reservation system, advertising, CSA's, rampers, etc) would far overcome the supposed advantage of 15% lower labor costs.

Bottom line. The customer is currently unwilling to pay for the services that the old style major carriers provide. Hopefully someday soon, the customer will decide that once again, he is willing to pay for seamless travel from podunk to paduca.

regards,
8N

 

[ClassG]

While I believe open debate over any subject is healthy, I agree with enigma.

We spend way too much time jealously defending our airlines, our airplanes, our salaries and our own egos. 5 years ago everyone wanted the coveted UAL or DAL brass ring, and we so admired the stature of those with the biggest paycheck. Those who made it to those lofty positions began to feel they were threatened by the LLC's, (&WO's and CC's) their airplanes AND their lower salaries. So while the unions were working to limit Major Mgmt. in terms of scope "expansion," those LLC's and contract carriers kept benefiting.

During all of this, how many of us can say that we had any control over the doings of management - at any of our airlines? Very few of you put any real, lasting pressure on our companies, and we only made ourselves out to be uncooperative and selfish - not the team players many have AGREED to be at the LLC's. So management helped to make failure a certainty. They mismanaged the business so well, that the majority of pilot positions will pay significantly less than they did 5 years ago, if they even exist anymore.

So what do we do? We start pointing our fingers at one another and blaming those who fly for less money (for taking the job that was available at the time) for ruining the industry. Now even the RJ pilots have become egomaniacs, believing they are the fresh, young trailblazers of the future of aviation. Many RJ pilots act like they are the stars of the industry, blaming majors pilots for trying to stop them from taking over the world.

And all the while none of you have any real control over the real state of the industry or where it will be in 5 years. You may just be lucky enough to still be flying (and paid for it) at a company that makes money. And if you thing go well for you, it still doesn't make any of you more important than the rest. So why not start relating to each other realistically. You're all aviation employees who, by luck or fate, are enjoying or suffering from the decisions of management and the state of our economy. Even you who partially OWN your companies could not stop management from spending away your destinies, which relegates your status to EMPLOYEE only, in my book.

Of course, many will just keep wishing that this constant whining and debating will bring back the past. Some of you will even think that defending your RJ from the tyrade of a disappointed 757 furloughee will somehow ensure your future in aviation. But, just like today is different from yesterday, tomorrow may be nothing like you expect. Good Luck!

Can anyone answer this question? Why is it that doctors and lawyers invest so much into their educations and (as a rule) make more than enough money for it to be worth it, while pilots tend to spend more each year on their education, then take longer and longer to pay it off? What is the difference in the influence WE have over our industry and THEY have over theirs that they (generally) seem to enjoy such a return on their investment?

 

[Publishers]

points made

There were a number of good points made in this thread, none more important than the last-- that the customer is unwilling to pay past a certain level.
In the end, the customer must support whatever cost structure or route structure you have. If they will not, it will make little difference what your labor contract says.

Secondly, this board always thinks in terms of pilot costs only when looking at the unionized work force. the fact is that it goes will past that point. FA labor costs, maintenance labor costs, CSR labor costs, and eventually management costs, will all be higher. Check things like health and benefit costs as well.

Buying power issues usually go to the majors, but to get them often calls for longer term agreements and reduced flexibility.

Complexity often hurts majors as they have to constantly be working on feed issues that ripple through the structure. LCC look more just to the route.

To me thinking that you determine what you deserve is pretty ludicrous. It is that conflict between market value, fitting into a cost structure, and labor contracts is always the battle.

 

[FL717]

The comparison of other "professionals" pay (in this case doctors and lawyers) to airline pilots pay is in my opimion a bad one. A doctor or lawyer is paid for individual billable hours devoted to an individual client. An airline piots salary is paid regardless whether the plane is empty or full, thus to justify a comparable salary, you have to have butts in the seat, period. To get butts in the seat you have to offer, an average product, with below average prices, minimum travel restrictions, and more point to point flying. The current Major airline business model does not support this IF a low cost alternative exists. Welcome to capitalism.

I still maintain that I would rather work for a less than "industry standard" wage (whatever that happens to mean right now), and see a career without furloughs (i.e. Southwest) than have that "industry leading" wage contract and be subject to furloughs and the inability for business leaders to wrestle the program year in and year out. I DO NOT support poverty wages that many regionals pay, but the pay at my particular company for pilots IS NOT poverty wages. I'm sorry if some feel we are dragging the industry down... but I disagree with that assessment and stand by our current contract, and future business viability, and that my friends is what is important to me in the brief time I have on this planet, more so than some other attitudes I have seen.

 

[100LL... Again!]

I agree that the LCC model is probably the wave of the future, but I also agree that comparing Jet blue and Southwest is not a direct comparison, for all of the reasons mentioned above.

Here's an idea:

Why did the American Revolutionary Army defeat Britain in 1776?

Mostly because this country wanted it more.

The survival oriented team mentality that 'success-at-all-costs' people bring to an organization CANNOT be discounted. I think it CAN be as big of a factor as labor costs. Why? A happy employee is an efficient employee. (Can I have some ice with that koolaid?)

But it is TRUE. If employees are happy, they will go the extra mile every time. The cost savings from this is HUGE, and is VERY difficult to quantify. This can lead to an interesting shift down the road when that 'close family' start-up gets big and some malcontents get in. (Or mgmt screws 'em.)

I would love to work at a small company with a bunch of happy misfits, making industry stadanrd or even a little less, and love to fly with the same folks over and over. As you can tell, I'm not aiming for the majors. I've met few pilots who are even remotely pleased with their current situation.

------
Rant alert!
Half the pilots I know I would classify as ungrateful and spoiled.

My apologies to the other half.

Sorry to anyone who is offended.

 

[Bill Mostelar]

LLC??

Those who made it to those lofty positions began to feel they were threatened by the LLC's, (&WO's and CC's) their airplanes AND their lower salaries. So while the unions were working to limit Major Mgmt. in terms of scope "expansion," those LLC's and contract carriers kept benefiting.

Very few of you put any real, lasting pressure on our companies, and we only made ourselves out to be uncooperative and selfish - not the team players many have AGREED to be at the LLC's.

Hey bud,

I like the discussion, but why are you refering to them as LLC's?

LLC generally stands for Licensed Legal Corporation, and LLP, Licensed Legal Practitioner.

I thought it was the LCC....Low Cost Carrier. Am I confusing your thoughts with something about a fear of lawyers? Maybe Doctors and Lawyers make what they are worth because they aren't willing to whore; and take themselves and the chosen profession more seriously?

I think pilots are their own worst enemy. Many of us are full of hot air, before we are full of facts.

Add to it the fact that places like the Comair Aviation Academy have bastardized the industry through high costs, low pay, and a picture of some kid in sunglasses saying "hired". Advertising it as realistic alternative to a tradtional education (alongside flight training).

Change is inevitable, but I don't like the direction the lower tier of our industry is taking.

FLY SAFE!

P.S. No personal shots meant by all of this.

 

[100LL... Again!]

----------------------------
Add to it the fact that places like the Comair Aviation Academy have bastardized the industry through high costs, low pay, and a picture of some kid in sunglasses saying "hired". Advertising it as realistic alternative to a tradtional education (alongside flight training).
----------------------------


Add to this the fact that a lot of pilots have been as guilty as anyone when it comes to convincing the new arrivals to the field that being a CFI is nowhere. Lots of pilots have a real disdain for the profession of instructing and paying dues, creating fertile ground for just the type of advertisement you mentioned.

You got A JET JOB at 500 hours?! What a SPECIAL PILOT you must have been!

The fact that these low time line cutters are regarded on the same level as a dues-paying CFI or 135 pilot who spends time learning all the facets of their craft, and goes to the next level with HONEST experience (not just a logbook with a bunch of time logged in it).

Our reaction to these pilots should be the same as if you learned that someone soloed at 2 hours: "Your CFI is a moron."

Congratulations, everyone - this attitude is what bred all of these Kit Darby Starry-Eyed Dreamers. (As someone on another thread so eloquently put it.) My plane is bigger than your plane.

No one wants to pay their dues, but everyone else better.

-----End of Rant------ VFR.. Wnd..

 

[FlyDeltasJets]

Bill,

Thank you for the defense. I don't really have the desire to argue with some people, so your input was appreciated. As for his question, I have no idea how much revenue I brought in for Delta last year, neither does anyone. Does A-Rod know exactly what percentage of the people in the stands came only to see him? Does any pilot know what percentage of his company's total revenue is earned by him alone. We could divide total revenue by number of employees, which would give us a ballpark figure. However, if we were to do that, than every employee at any company in the world would be paid exactly the same, which is why I called his a silly question in the first place. Furthermore, it had no place in this discussion. We are not talking about how much pilots are worth, we are talking about why some airlines are profitable right now and some are not.

Publisher is correct, the market will only bear a certain level of pricing. Obviously, those companies with costs below that level will prosper, and those with costs above it will not. I merely pointed out that the larget factor in those costs are employee salaries. It is a fact, and it is irrefutable if one takes the time to ivestigate. I am sorry if that offends people or makes me sound "arrogant."

P.S.
I am not trying to insult people, or accuse anyone of "dragging down the profession." I know that everyone in this idustry is doing what he thinks is best for himself, his family, and his future. However, it is hard to argue that low cost carriers have not put downward pressures on the average salary in this industry. It concerns me, and I know it concerns many others. After all, when we allow mgt to compete by undercutting salaries, it starts us all on a slippery slope. Please allow me to give a hypothetical that I think will explain my thinking. What if all of the legacy carriers were able to cut their employee costs (wages, pensions, benefits, etc.) to the level of the low cost carriers. What do you think that those low cost carriers would then do? It is clear that they would have to ask their employees for concessions, or lose thier competitive advantage. Where would it end?

I don't know what the solution is. But I do know that the real dollar wages of our profession are falling rapidly. That scares me. I sincerely think that we deserve the same respect, lifestyle, and remuneration that those who came before us enjoyed.

 

[Bill Mostelar]

Bill,

I'll post that question again and see if you would like to take a stab at it.

RJ Dude,

Your question is irrelevant due to the context. What would be more appropriate would be "How much revenue did the DAL pilot group generate? - since pay is group based and in the collective bargaining agreement......the debate we are having.

Either way, irrelevant. Our goal as pilots should be to demand the highest pay we can extract. Eventually the balance sheet must add up. Hopefully (for us), cuts will come in other areas and maximun efficiencies excercised before we take a cut. When all is extracted and rearranged, sure the numbers have to add up. Unfortunately, many times weak labor encourages mismanagement. There becomes no hard pressing reason to mange properly 100% of the time.

I'm not sure where your priorities are. Maybe you have or desire to cross over the line into management. If so, good luck to ya! A cold seat will be waiting for you back on the line. If not, my advice is don't try to manage the balance sheet. The day management lays all of it's cards on the table for truely honest negotiations, sure. But......that is a pipe dream and your kidding yourself if you believe otherwise in this day and age.

Fly Safe, Skipper!

B

 

[SDF2BUF2MCO]

Pardon me for butting in...
From FDJ:
"After all, when we allow mgt to compete by undercutting salaries, it starts us all on a slippery slope"
What some folks in management don't realize they benefit from a higher salary of their co-workers as well. If a company treats the "common" person like poop they'll do the same in a heartbeat to management (unless they're towing the line). The only ones safe are the ones in the inner circle/upper management.

We've gone nuts in this country....shipping decent jobs outside the USA (e.g., China), executives getting outrageous compensation, we'll pay any price to be entertained (sports or Hollywood), and the government wants more out of our wallets. I'm not advocating stick it to your employer but there is nothing to be ashamed about in wanting fair compensation for the skills and quals needed to get the job. Of course what the word "fair" means will be debated !

 

[enigma]

Publisher is correct, the market will only bear a certain level of pricing.

After all, when we allow mgt to compete by undercutting salaries, it starts us all on a slippery slope.

I don't know what the solution is. But I do know that the real dollar wages of our profession are falling rapidly. That scares me. I sincerely think that we deserve the same respect, lifestyle, and remuneration that those who came before us enjoyed.

FDJ
Some of your statements are almost contradictory. You agree with the Publisher about the market controlling prices, then you write this. "After all, when we allow mgt to compete by undercutting salaries, it starts us all on a slippery slope. " You must understand the the market controls wages as well as ticket prices. You don't want management to compete by undercutting saleries, but unless you manage to convince Congress to re-regulate the industry, you have absolutely no power over the labor rates at the other participants in the industry. In effect, by bargaining for wages that put most major airline pilots in the top 10% of wage earners, we have created a pot of gold at the end of the rainbow. That pot of gold is so enticing that it serves as a lure to new entrants into the career. Those aspiring pilots will do most anything in order to gain the necessary skills/experience to achieve a job at one of the majors. It is the glut of pilots that exerts downward pressure on your pay scale. Not management. I'm not fan of management, but I promise you that they are not choosing to compete by undercutting salaries; they are forced to compete by carriers that are accessing the cheap pool of labor.


There are only a coupla three ways presently available to drive/keep pilot wages up. We could come up with a union like the AMA that controls the number of pilots trained as a way to control supply, we could try to pass legislation that gives ALPA the right to control all wages scales industry wide, or we could re-regulate the industry. If we re-regulate, we will keep wages high, but there won't be very many total pilots working.

No conscientious manager will pay more for a product than he has to, and for the majority of years since deregulation, pilots have been willing to work for less than what the "legacy" majors paid. That's what's driving wages down. That's also why I railed so long and loud against pilots that bought a job. Unfortunately, the best way to dry up the labor pool is to drop the top wages enough to scare off the pilots who are willing to undercut you in a misguided attempt to get to where your level. That and find a way to muzzle the Kit Darbys of the world.


I agree about real wages falling, and I would dare to bet that the situation puts me in a bigger hole than it does you, so I'm certainly not happy about it. I just pray that they stay high enough for me to pay the bills. I've just about given up on ever making over $100K in this business, and it took me over ten years to even make over $40K.

regards,
8N

 

[FlyDeltasJets]

Enigma,

I don't see any contradiction. I pretty much agree with all of your points (except the one about cutting the top wages!). I wish that I had a magic solution, and I don't.

I do, however, know that the solution is not to bury our heads in the sand and be afraid to talk about the effect the low cost carriers are having on our profession. If that makes me arrogant, then so be it.

 

[mnboyev]

Well, this thread certainly got everyones attention! If allowed, I would like to make a couple of points as well.

The LCC's absolutely do not provide the same service as the majors... period. And I am not speaking in terms of peanuts and soda on the flight. Majors fly anywhere anytime in most cases and are able to provide travel to almost any destination on the planet. This is expensive to maintain. And salaries constriute to the expense. Just as Fly Delta has indicated.

This 'major business model' is different than flying point to point. I am certain that. I have worked at a Major and a LCC, in different roles, and can assure you they are much different.

I believe we should all continue to fight for higher wages, better days off, improved schedules and more complete benefits. Why wouldnt I wish for a United or Delta type pay schedule? However, you must live with what your carriers business plan can afford. America is in love with the Walmart style.. and thus the market has found a way to 'serve this up' in the airline industry.. lower prices.... Buy 3 get one free.

However, to assume the LCC's and W/O RJ's are creating an environment that reduce pay is incorrect. Ask any commuter pilot if he would like to get to a Major of his choice and he would take it given they are young enough and would benefit from the move in schedule, pay, and benefits.

At AirTran I am content with our pay given our current situation. I believe the SWA guys are happy, and believe the Jblue guys are pretty content. Do we LCC's work harder... probably. Are our benefits as good?.. H3LL no. Are we doing the same job? H3ll yes. Do we all want to grow our airline and negotiate a better contract next time? H3ll yes..

Here is the difference.. Our LCC systems are smaller, our entry level pay positions(stock clerks, CSA's,rampies) are underpaid(Fly Delta is right), there is definitely less overhead, Higher utilization of equipment, and fewer options for travel and FF programs at the LCC.

So which model will be around in the future? I believe both will be around......The question should be are the RJ groups going to stick together and stop cutting each others throat so they can negotiate an appropriate salary schedule for equipment.? And will the mainline guys allow them to become part of the team and less of a step child.? I believe the sooner the major guys embrace their younger siblings the sooner everyone will be better off. RJ's are here to stay.. The day of the Be 99 and the like are long gone ladies and gentlemen. Thanks for listening.. Good discourse.

 

[Tim47SIP]

FDJ's answer

MN stated it pretty clearly: So which model will be around in the future? I believe both will be around......The question should be are the RJ groups going to stick together and stop cutting each others throat so they can negotiate an appropriate salary schedule for equipment.? And will the mainline guys allow them to become part of the team and less of a step child.? I believe the sooner the major guys embrace their younger siblings the sooner everyone will be better off. RJ's are here to stay.. The day of the Be 99 and the like are long gone ladies and gentlemen. Thanks for listening.. Good discourse.

FDJ, This is how we fix the problem. Additionally, if ALPA continues on its current agenda, the spiral will continue. The RJDC is unequovocally not the answer so I am with you on that one. Mainline participation is however. Hope things work out and quickly.