Airline Profitablility

[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.

 

[FlyDeltasJets]

Mnboyev,

As a former commuter pilot, I could not agree more. I mentioned the LCC's because that was what the public and media is focused on. Also, on a CASM basis, the costs of most commuters is not that low (although it is on a cost per flight basis). However, you are correct that their pay is awful, and it needs to be changed. I have ALWAYS told the cmr guys how much I admired their courage and dedication during their strike. I also believe that the better the commuters salaries are, the less incentive mgt has to farm all of our flying out to them, yet another reason why higher pay benefits us all.

Also, you mentioned high capacity and the fact that "everyone wants to start an airline." The two are symptoms of the same problem, and it exists because the new airlines are able to jump in and pay very few of the costs associated with a major airline (high pay, senior employees, pensions, good benefits, etc.) Many of them then get sweetheart deals with airports and city and state governments. Factor this in, and the reason for overcapacity becomes obvious. Of course, the major carriers could deal with these airlines if allowed, but the gvt insists on a sort of halfway regulation (see the recent ruling involving DAL/NWA/CAL as well as the denial of the U/UAL merger in the interest of "competition") and it becomes obvious why there is an overcapacity problem.

I also realize that it takes a long time and many contracts to get to a desired compensation level, which is why I have been careful not to blame any pilots for the current situation. Again, we are all doing the best we can. I simply pointed out a reason for the success of LCC's, and then mentioned the effect that they are having on compensation industry-wide. Furthermore, I wish them all the luck in the world on their next contracts. I hope that they get what all pilots are worth for the jobs we do.

P.S.
Publisher,
Wages were not out of control a few years ago. They were only starting to approach the levels that we are worth, and indeed the levels that we used to earn. Of course, one could argue that all factory workers should earn sweatshop wages in Malaysia, but I am not inclined to agree. I am a staunch conservative, and I know and respect the power of the free market, but I am not ready to let it rule without any constraints. If we did, your next flight from LGA to FLL would probably be flown by Korean Air pilots making $5 per day. Are you sure you don't want ANY constraints on the "free market?"

 

[Skank]

..so in other words, you can continue to advocate the free market when it suits your purpose, and at the same time, advocate constaints on the market, which also serve your purpose. And you can claim to be a staunch conservative and a union member. Now that's an uncomfortable paradox. Glad it works for you.

 

[FlyDeltasJets]

Skank,

It certainly is uncomfortable! It is not easy being a conservative pilot, as I think that the Dems are better for my career and the Reps are better for my country. However, my country is a lot more important to me than my job, so I always vote for the more conservative candidate.

Please do not run with this guys, I purposely stay out of political discussions on this board, as I would rather talk airline stuff here.

I commend skank on pointing out what seems to be an inconsistancy in my philosophy. I don't think that I was too inconsistant, as I have never advocated a totally free market. I do think that the government unfairly shifts the advantage to many new entrants, and in the long run, I think that hurts us all.

The point is, I fully support any constraints that benefit my profession, and if that be hypocritical, so be it. It is also smart to support those things which benefit you and your family.

Good catch Skank!

 

[mnboyev]

I guess Korean wont be a possiblility if I get furloughed...5$ ??

FL is new to the commuter thing.. I know alot of our guys and gals wanted to see our pilots working those flights. But our 'leadership' has kinda told us that it would be good for us if Air Wiskey operated the short haul stuff. I admit it makes sense to use our 717's in new markets and not tie up equipment on frequency. But once you sell your soul.....its all over..

Now this agreement signed with the fine folks at Air Wisc is a pretty long term deal.. I believe 7-10 years .. and quite a few aircraft.

My point... Our small carrier is following the same route as ATA and somewhat like the majors in the area of contract flying. Feeding into a hub, focus city.. whatever... Do I like it.... no... should the colors on the tail reflect the same pilot group... Yes...

Does this 'contract flying' make the airline more profitable in the end??? Probably. The gouge always comes down to who is flying what routes and who is operating the equipment. The 'gash' occurs when they start taking flight time away from mainline... I am worried about what might occur in the future ? Does this type of contract flying reduce our pay rates.. H3LL no.. It may reduce how many pilots we are able to accumulate on our list but it will not place any pressure (I believe) on our salary schedule at FL.

Gentlemen, the problem is still with management's use of contract carriers. It is not the pilots fault.. It is just pure economic sense. Scope is not the answer either... Look how well that is working.. I think the only real answer is for one list with some type of progressive pay schedule... Cradle to age 65...If we all had a plan for fixing this quagmire ... All pilots would be better off in the end.

Profitability will return to the big boys. And heaven help us little guys when they get their code sharing and mergers get worked out. Will it be good for the comsumer... probably not. .... Good discourse..

 

[FlyDeltasJets]

I'll say it again (at the risk of being called a jerk again!)

What could possibly go wrong?

Mn,

I think you meant to say 60, right? Right? I'm sure you meant to say 60!

Anyway, let's keep that discussion on a different thread.

I agree, this has been a good discourse. So far, only one guy has called me arrogant. For a post this long, that must be some kind of record!