Airline Profitablility

[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.

 

[enigma]

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.

Two points.

One I didn't call you arrogant in my post. If I have done so in some earlier string, I don't remember it; so I'm not sure why you bring that up.

Two, you just don't get my point about the marketplace. You wrote, "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." Brother, IT AIN'T THE LCC's that that are effecting our profession. (Even if they were, there isn't a thing that could be done about it. ) What is affecting our profession is customers who are no longer willing to pay for services offered by the full service carriers. As I said, I'm on your side about the dropping wages. I certainly wish I could make the money that I used to think was possible, but in todays market it seems unlikely. If you start arguing against pilots who are willing to work for nothing, or worse, buying a job, then I'll be right there beside you. BTW, the prototypical LCC, SWA doesn't exactly underpay its pilots, and on a per seat cost, neither do the RJ carriers.

regards,
8N

 

[FlyDeltasJets]

Enigma,

I am sorry that you misunderstood me. I know that you didn't call me arrogant, as you have always been a gentleman on these boards. My comment was in response to another poster who has a habit of calling me arrogant and egotistical.

As to your other point, the market has not recently paid more for the legacy carriers because other airlines can offer the same product for less money. The major reason that they are able to offer those prices is the fact that they pay their people less. And yes, SW is included in this group. Stock options are not pay. Ask the UAL guys.

I am not willing to concede that today's market prices are inelastic. I believe that most would pay higher prices to fly, if they had to. However, due to the lower cost structure (read:wages) of the LCC's. they do not have to. Why would they?

Some may be very happy with the above scenario, and I cannot say that I blame them. If I were working for a LCC and enjoying growth opportunities, I surely wouldn't quit in protest! However, it is important to realize the phenomina that they are creating. Many feel that in order for the big carriers to compete, they will have to cut salaries (see UAL and U). If those cuts are deep enough, eventually the LCC's will see their advantage disappear. As the larger carriers have better route structures, alliances, ff programs, etc, the LCCs will soon find themselves at a disadvantage. When that happens, they will have one choice to regain their competitive advantage...they will have to cut salaries. It is pretty easy to envision the resulting "race to the bottom." It concerns me, and it should concern every pilot (even the LCC guys) in the industry.

 

[Skank]

You guys are guilty of wishful thinking. Above, it is suggested that re-regulation = higher salaries. Regulation comes from the government. Do you really think that the government is going to help you to get those ridiculously high fares back (remember Senator McCain)? By the way, take a little credit for the crappy mess you've created, and quit trying to blame it on everyone else.

 

[Salty Dog]

I think a lot of people are missing the point on what it takes to return to profitability. Saving a whole 500 bucks on the crew in front ain't it! What is that, two, maybe three seats more out of the whole airplane? Riiiiight.

Right now, we got us a problem with excess capacity. Too many seats, not enough ticket buyers. So the airlines whose seats aren't full are cutting ticket prices in an effort to get something - anything - for the seats they are going to fly anyway.

This problem obviously affects some airlines more than others, but it does affect them all. Do you think Southwest really wants to charge a mere 39 friggin dollars for a ticket as I saw advertised earlier today?!?!

The real solution is to get the freaking gov't to let airlines consolidate, buy out, buy off, merge, whatever, so that they can efficiently follow trends along the demand curve. When Uncle Sugar denied Big U's purchase of USAir, the gov't prevented U+Air from overlapping route structures, phasing out inefficiencies from fleet types, training bases, mx, management, etc. so that two independent airlines were left fighting over a shrinking pie that no longer supported their individual operations.

Meanwhile, the LCC who has some of those efficiencies inherently by cherry-picking routes and smaller fleet size and makes a buck or two serving fewer people, shrinks the pie further by placing downward pressure on ticket prices, and looks oh-so-smart come 10K time because they made 4 cents on the dollar when two years ago the same market would have supported 20 cents.

Why do the WOs still make money? 'Cause their city pairs on average don't suffer from the same overcapacity that hub cities that have 300 bought-and-paid-for 757s/737s fighting over them has produced. THAT's why Wall Street will support an airline that is cutting back on near term capacity, driving further aircraft retirements and furloughs in the majors. (actually the end is near as demand is starting to pick up)

Pilot wages really don't mean d!ck in the long run, sorry to say.

 

[enigma]

Good post SaltyDog.

FDJ, you try to link wages to the LCC's low costs. I will agree that my seventy-eight ALPA negotiated dollars per hour to Captain a MD80 are significantly less than your DAL brothers get to do the same job. However, in terms of total cost to the buying public, my wages could go up almost 50% with only about a $2 per leg increase in ticket price. (I'm not exact with those numbers, but the detail guys in our group think they are about correct.) The level of service that we DON'T provide is the difference between Spirit and Delta. Here's, a short list of some of the differences.
1. Dirty airplanes versus your nice clean ones.
2. Miserable jetway temperatures versus your climate controlled jetways.
3. With no first class, we don't have to support an meal kitchen.
4. Our inflight entertainment is yesterdays copy of the UslessToday that the previous pax left, versus your overhead TV screens and ten channels of music.
5. Our seat pitch is so tight that a normal height mans knees touch the rear of the seat ahead of him, versus your pitch that almost allows one to get out of a window seat without disturbing his neighbor.
6. Did I say dirty airplanes yet? Not only externally, but internally as well. Our seat covers get washed at least once every 18 months whether they need it or not (more often I'm sure, but sometimes they look 18 months dirty), where yours get cleaned on a regular basis.
7. Our lavs are so old that I'd be afraid to sit on the seat for fear I might fall in, yours are all nice, modern, and in conformity with the rest of your fleet.
8. My pax go from a sweltering jetway straight to a sweltering cabin because the company is too cheap to ensure proper ground cooling carts at all of the stations, your pax go from a cool jetway straight into a cool cabin.
9. well by now you should get my point.

A few random points to toss out while I've got your ear. First, We use your (DAL) gates and staff at LAX, DEN, and ORD. It's a pleasure to go to those stations and be handled by real airline people. (in our defense, DTW and MYR are good stations). Second, I'm proud to be part of a pilot staff that has never suffered a serious crash. I wish I could say that I was proud of the way the airplanes are kept (cosmetically) and the image our airline presents to other professionals. Third, we are in contract talks and are presently fighting the good fight as we attempt to gain dramatic increases in pilot pay. Our FA's just signed their first contract. Fourth, FDJ don't be too worried about the race to the bottom. Once we all get there, some pax will realize that he wants more service and your carrier will be able to respond to that market. I doubt that mine will, because we never knew how to service that market to begin with. Fifth, I need to give kudos to Spirit m/x, our rate of deferals is usually only two per our 28 aircraft. Our maddogs are old dogs, but mechanically sound.

Finally, once again the LCC's low costs are not as linked to low pay as you think; and the pilots working there are not there specifically to undercut you. We are just working the best job we could get that fit into our needs. Please be very careful when making your argument so as to avoid potentially disparaging other hard working pilots.


regards,
8N

 

[FlyDeltasJets]

Salty,

You are correct in many of your points. It is naive, however, to ignore the massive difference in labor costs.

Does that mean that I think we should take concessions? Absolutely not! I think everyone else should get raises!

 

[FlyDeltasJets]

Enigma writes:
"Finally, once again the LCC's low costs are not as linked to low pay as you think; and the pilots working there are not there specifically to undercut you. We are just working the best job we could get that fit into our needs. Please be very careful when making your argument so as to avoid potentially disparaging other hard working pilots."

Enigma,

Thanks again for your post. As I said earlier, you are a gentleman.

As for your complaints about Spirit, you forgot one thing: You still have a job! I wouldn't trade my job with Delta for anyhing in the world, it has been the only thing I have ever truly dreamt of, and getting hired by them was my proudest moment. However, I would be lying if I said that I am not very upset with them right now. Spirit has kept you on the payroll, and there is something to be said for that.

I do have to disagree with you when you say labor costs are not heavily linked to low pay. I tried to demonstrate the effect labor costs have on total expenses in my first post...I used airtran, but the numbers work almost universally (I know, I was bored enough to check!) However, my intention was never to disparage other pilots. I think if you reread my posts you will see that I have tried to say the same thing that you did about every pilot doing the best he can. I know that no pilot intentionally sets out to undercut other pilots, I hope that I have not given that impression.

Nevertheless, it is naive to pretend that the lcc's have not had an effect on the wages of this industry. That being said, I wish you all the luck in the world on your upcoming contract negotiations. I hope that you get what you deserve. I'm sure that I don't have to tell you that you are worth FAR more than what they are giving you.

Thank you for the discussion.

 

[mnboyev]

The low pay problem is with the commuters. They can afford to pay way better than they do. There is no reason why a RJ Capt cannot make a decent living after 2-4 years.

The Low Cost guys ans gals are negotiating the best they can. Except for SWA few have 'bickererd' over 1 or 2 contracts. The pay is a product of many things as you all know. However, the commuter pay is exremely low from the past Ce414 commuter flying of days old.

FDJ, I do agree that lower wage pressure is a problem. But your focus on LCC's is somewhat off track. The commuters are the pilots biggest nemesis. They continue to raise the bar. Come on ... 18 bucks an hour for a new right seater? gimmee a break.. That hasnt changed in 8 years.. even less at some commuters...

Pay at WestPac, Midway(ORD), Peoples Ex, Tower, Sun Country, Mid EX, Bla Bla Bla... was all pretty fair given equipment and routes. If folks didnt get on with a big boy then they could live a pretty good life working for a charter or national carrier.. The LCC's are the same. None of the above folks ever made what a 767 pilot made... But they are not doing the same job, and certainly do not have the same clout as a big boy ie 50 years of contract negotiations.

I agree with Salty. A huge reason why we are all in a fix right now is CAPACITY. Too much.. everybody wants to start an airline.

 

[Publishers]

wages

There are cycles to everything. Wages got out of control a few years ago and this will bring them back in line to some extent.


The concern will still be the disparity between the regionals and the so called majors. This period will help in that adjustment.

One is never paid what they think they deserve, they are paid what the market will bear in the context of what the ultimate product is. Union contracts or other artificial things that impact on the natural swings only tend to cause the consternation that we now suffer.

 

[rjcap]

The Low Cost guys ans gals are negotiating the best they can. Except for SWA few have 'bickererd' over 1 or 2 contracts.

This is an excellent point. ASA is negotiating its first contract with current ownership - Delta. The prior owners were basically running a sweat shop while the airline operated turboprops. Now that the entire focus of the airline has matured into a coast to coast jet operator we are having to spend negotiating capital on basic work rules/scheduling changes while at the same time attempting to increase pay.

Its a long road ahead.