Airline Profitablility

[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!

 

[SDF2BUF2MCO]

From mnboyev:

"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."

Hey mnboyev, as an interested spectator I'm curious, are you advocating one list within a company or one list within a union?

 

[Skank]

Deltajets, it's not just you, it's all of us. We, as a group, (I accept some blame here as well) want it both ways. We advocate the free market here, and bash it there. What is fair? Politics is the struggle for limited resources.
The argument I'm seeing is that "I am worth XXX,XXX dollars per year, market be **CENSORED****CENSORED****CENSORED****CENSORED**ed." Is that realistic?

 

[FlyDeltasJets]

Not only is it not realistic, it is not an accurate portrayal of my opinion. I think that the market is being manipulated by certain forces that I pointed out. There are steps which can be taken to combat those forces. Some may work, and some may not, but I am not naive enough to believe that we should ask for unsustainable wages. I simply don't think that we have reached that point.

 

[fletch717]

FDJ,

The salaries that are the biggest problem at most majors are ramp, catering, and fueling. These people are overpaid for unskilled labor. Out of 5000 AirTran employees only 745 are pilots, Our saleries do not make that much of an impact. Since you choose to use AirTran as your example, I'll use Delta. When Leo Mullen took over he evaulated each dept. This was in 1998.
His conclusion was that flight ops had roughly 2000 more pilots than it needed. ( I have a close friend in the training Dept at Delta.) If a senior Captain can bid reserve and fly less than 20 hours a month and recieve full pay, you are over staffed. In my 2 plus years at AT I have never seen anyone capable of holding a line bid reserve here. It's 5 on and 2 off and you will fly at least 70 hours. Delta is overstaffed in every area.
But lets get to the real problem, complete and total mismanagement of the Airline. He's a good example, Airtran was the only Airline serving Ft. Walton Beach (KVPS) 69$ one way fares. AirTran is making money on this route maybe 2 million a year, Delta decides it needs to come to Ft Walton Beach even though they have mainline jet service 50 miles away in PNS and no competition. So Delta is charging big money at PNS. Here comes Delta at VPS 3 MD-80's a day, thats 450 seats a day. at whatever Airtran is charging. At the same time PNS is in negoiations with At for service, Since PNS is bigger with more potiential and they put up cash we pulled out of VPS and went to PNS. Now Delta is losing 4 million a year in VPS and if they pull out the airport authority at VPS goes Bankrupt, a potential PR nightmare for Delta. Oh Yeah and Delta is now losing money at PNS too. This is just one example. What about Delta flying 767-400, MD-11, and 777 from ATL to MCO, TPA, JAX,RSW. What a waste of an asset. These are big money, long range airplanes and crews flying 1 hour flights. You need to look at your own company first instead of bashing the LCC.

Fletch

 

[FlyDeltasJets]

I have never said that Delta was perfect. They have made MANY mistakes (the most grievous being my furlough!). I pointed out that the reason that some are making money and some aren't is that some are able to make money on lower fares because of their lower costs. I then went on to demonstrate that the lower costs are directly related to lower employee wages and benefits. You argue that the industry overpays the unskilled labor. You may have a point, but then again, they might have a point that we are overpaid.

As to your assertion that we should use smaller airplanes on Florida routes, I could not disagree more. Florida is a comparitively low yeild market, and the ability to spread your costs over more seat miles should not be underestimated. It is one reason why 757's are replacing 737's in the FL to Northeast markets. I think it is a sound move.

P.S.
If Leo decided that we were overstaffed in 1998, why did we continue to hire pilots until July of 2001?

PPS
I don't recall "bashing" the LCCs. I pointed out an effect that they are having on our salaries. That is not a revolutionary thought, it has been mentioned by our mgt in every negotiation we have had since the advent of the first LCC. Now that they are growing so quickly, the effect if becoming more pronounced. Is it the only effect? No. But they do have an effect, and to ignore it would be irresponsible on our part.

PPPS

LOVE the avtar. Best movie ever made. It was criminal the way it got snubbed by the Oscars.

 

[mnboyev]

I wish I was in Pensacola right now... -1 deg F in MN. I'll take either PNS or VPS right about now.. Cant wait for the JAX overnite Thurs. When we come to town fares are cut in half! period. What consumer would want something else if the same frequency and connections are available? I'm with my AT brother on VPS/PNS.....what a shame.... Pure economics.

While in JAX I can dream of age 65 retirement..(I'll take 63). us little guys got to get all we can before they slam the door on us. Only got 20 right now.. got to pay for kids college, insurance, health care, new covering for the T-Craft. Bla Bla Bla.... just another greedy cheap pilot. You know us LCC guys dont seem to do as well as the big guys flying big jets. LOL All in good fun fellas.

I'm outa here, we beat this thing to death.. Both sides are right, Both sides are wrong.... in the end its all about the glamour ... yeah right.....The days of the big shot overpaid airline Capt starting at 22 yrs old and having a 35+ career are long gone.. so sad to see. Ahh the good ol days....

 

[Publishers]

No

No I am not advocating a totally free market.

What I am suggesting is that there were demands that would take pilot pay up a few years ago. What happens is more the effect of a contract and productivity rules when the industry goes through the down cycle or the market changes its flow.

The basic rules from many contracts alo. ng with the pay scales were the result of some time back. Let me see if I can use an example.

If we had contracts that were only two years in duration and had to be totally negotiated from scratch, would we have a different major contract than today. Of course we would.

The fact is that does not happen. There may be givebacks or rule changes, etc, but the contract will still be a product of a longer period of time.

The fact is what you are worth is not now nor ever relative. You are employed to produce a product and it has a value. If you cannot be utilized in such a matter that the product is saleable, it matters little what you are paid or supposedly worth.

You are not worth $300k a year becuase you say so or because you want that amount. A pilot that flies checks at night is not worth but the amount generated less profit and all other costs regardless of his thinking or he wants it no matter what level of experience or ratings he has.

 

[Salty Dog]

Regarding (political) conservatives and unions:

I regard myself as both a political and business conservative yet feel strongly that union representation is important and beneficial, yet suffer no cognitive dissonance in the process. How?

In a completely free and unregulated market, all wealth naturally tends to the few owners of large businesses. This is how we got the robber barons of the late 1800's. High barriers to entry, large capitalization requirements, and the ability to monopolize all lead to this natural outcome. This is not good for the vast majority of the American population.

There's two ways to fix this for the benefit of all: support free & open unions, or tax the living sh!t out of the corporations and/or their owners and hand out the money as welfare like a socialist state. By permitting the unions to negotiate the cost of labor inputs just like steel and rubber producers negotiate the cost of their input and the relatively free market works to the benefit of those in the population willing to take the steps to make themselves qualified to compete for the work.

This is what gives Americans upward mobility instead of creating a socialist welfare state. THAT is the motivation that continues to make this country the most productive, successful, and wealthiest in the world. I'll take unions over socialist revolts any day!

Yes, Flying the Line Vol II lambastes the Republican presidents of the 80's for not supporting the pilots' unions well enough, but in reality we are talking about where to draw the line - not whether or not there should be a line at all.

What Senator McCain is talking about in doing away with the Railway Labor Act is certainly alarming, but that's why ALPA and APA have lobbies just like the airline industry (ATA I believe). We are free to bargain for our rights just as those large, evil corporations, unlike most other countries in the world.

What I find interesting is that airline unions very closely align themselves with their companies, and it is in their best interests (because they are bribed into agreement w/higher pay) to shoot other airlines in the foot, unfortunately including their pilot brothers. Side letter agreements, permissive scope, etc. all are examples of airline unions helping one airline undercut another.

Who is the final arbiter in all this? The market. It's still a relatively free market and the costs of labor inputs can push a company into the hole. When it does, that airline will lose value, and should be able to be absorbed into another or simply go kaput to make room for new competitors.

I personally wonder why the pilot group (all of us) aren't in a single trade union like carpenters, plumbers, etc. that set minimum wages industry-wide. We would all truly benefit from that.

In any event, Unions do push a huge chunk of corporate wealth down into the hands of those who work to create it, in a much more efficient and motivational manner than would a socialist system. That is how I remain a conservative and pro-union w/out developing a split personality. Sure, some unions will suffer from corruption or pushing wages too high, but limited regulation and appropriate levels of government involvement in the market will correct it over time.

 

[Groucho]

RE Airline Profitability

To get back to the origional part of Bart's Post, Airline Profitability.

Pilots argue back and forth about the things we know about. Pilot stuff, contracts, pay and hours etc.

In the Text: Airline Management: Strategies for the 21st Century, the authors state that [ Deregulation has not resulted in increased industry, (major airlines) productivity. In fact, hubbing, the primary means of rationalizing the market after deregulation, appears to have reduced efficiency and productivity as measured by labor and equipment utilization, and fuel consumption. "In the twenty years after 1983, despite deregulation and intensified competition neither cabin crew nor flight crew productivity appear to have improved in North America." "The situaition on the ground side is far worse." .... " Support services labor productivity has plummeted due to the nature of hub and spoke systems." ... Large numbers of people standing around wainting for the next bank of flights, followed by a chaotic frenzy of activity followed by another lull." ... "This is not the way to achive productivity imrpovements."]

Jet Blue, Southwest and others understand this and don't utilize the hub concept. The have high labor productivity due to rationalizing their ground turns and traffic to keep everyone busy without being chaotic and thus quick turns and high productivity. The pilots enjoy little dead time and high utilization.

I have yet to meet a pilot who wouldn't love to fly short turns and get a full day of time and a full month in fewer days. We love to get paid to fly, not sit. Some productivity breaks are downright criminal. The next time you read about profitability and productivity look at your schedule. The major airlines have built a system that they origionally thought would yield more city pairs and preserve a yield advantage. They new from the start that hub and spoke was more expensive but it offered more yield and city pairs. We as a nation are now overhubbed, with the low cost carriers taking away the yield the only thing left is high hub costs.

 

[RFtech]

You only get paid what it costs to replace management to replace you.

 

[pilotyip]

Fares

My wifes employer will not let her fly non-stop from DTW to IND on a major. it costs $730 round trip, she can fly RT on SWA from DTW-MWD-IND for $230, and the Regional partner she can fly DTW-EVV for $225. It is not only the the person paying with their own money who are avoiding the the major cost, it also many small and medium companies who are strapped for cash. The LLC provide a equal service at a better price.

 

[FlyDeltasJets]

Pilotyip,

You are correct. The next question is "how?"

 

[enigma]

Pilotyip,

You are correct. The next question is "how?"

Wrong my friend. You too YIP, the LCC's DO NOT PROVIDE EQUAL SERVICE. The LCC's provide transportation, but the service they provide in no way equals the service of an old-style full service mainline carrier. See my earlier post about some of the differences.

Ford Motor company can sell you transportation ranging from a quarter million dollar AstonMartin VAntage Zagota (sp?) down to a lowly Focus. Saying that those two autos are equal is as ludicrus as stating that Spirit provides service equal to Delta.

You know, If Spirit payed me the same yearly wage as Delta pays an MD88 Captain, we would still have an advantage over Delta. I know that your (FDJ) figures indicate that such programs as fuel hedging, etc, should provide the advantage to DAL, and I can't answer with figures from NK because we are a private company; but I really don't think you understand just how much less we spend.

I'm off to the airport, later.

regards,
8N

 

[FlyDeltasJets]

Enigma,

With all of the cuts in our service and our small coach seats, I am not so sure that there is that big of a difference anymore. Chalk that up to anothermgt decision that I question. In their defense, however, the public has simply stopped paying extra for better service, so we are giveing them what they want. I like to think that our service is the best, but all the public cares about lately is getting from point A to point B.

P.S.
I hope that you do get our MD-88 captain rates. Good luck in your negotiations.

 

[FlyDeltasJets]

Groucho,

Good post. You are correct that the point-to-point model is more efficient. However, it is self-limiting as well, as not all points can be adequately connected, hence the need for hubs. Are we "over-hubbed?" Undeniably. But that goes back to the same overcapacity argument. I am not ready to accept it as an indictment of the entire hub concept. Every industry downturn the "experts" predict the end of the hub model. I think that the model still works, but it should be supplemented with more point to point flying. I hope that our efforts to do so will be successful.