Another Merger, Another Bankruptcy whens it gonna end!

[Lear70]

Unless the market won't bear it. Doesn't matter what you think you're worth. If there isn't someone out there to pay it, you won't make it. Scarcity vs. intrinsic value, i.e. the value of something decreases if everyone has it, not matter how much that "something" costs to produce.

This is what those OWS students are finding out. Bless their hearts. Five years ago, their degree was probably worth something. Now it's not, because no one is hiring. Five years from now, it might again, be worth something. Kodak, real estate agents and computer chips are related, yet seemingly incongruous examples.

Which brings us right back to deregulation.

The issue is that an airplane seat is not a perfectly elastic commodity, and deregulation allowed the airlines to flood the market with seats, thus depressing their value. Unfortunately, the airlines (with notable exceptions) don't seem to care if many routes are operated at a loss, therefore everyone involved loses... except the consumer... and management.

The whole idea that airlines would compete on customer service was, is, and will be in the future, completely ludicrous. Unfortunately, the people who get pinched aren't the consumer, it's the employee. If the company can't increase prices or decrease direct costs such as aircraft leases, gate space, etc, they'll squeeze the middle (read employee), and with unions being hobbled by the RLA (and a much weaker membership than decades past), there's nothing to stop them.

Notice how everything ELSE involved in running an airline increases equal to or more than inflation? Fuel, aircraft and equipment leases, interest rates, gate leases, catering, maintenance parts, taxes, etc, etc. Everything except labor rates.

Again, deregulation is a failure economically (as proven by just about every airline in existence for any length of time having been through bankruptcy court AT LEAST once - SWA the notable exception) and professionally (for the employees)... the only people who benefit are the public with their cheap seats and the senior management drawing large salaries and bonuses.

 

[suupah]

Successful for the economy? Debatable, once the costs of multiple trips into bankruptcy court has been included.

Successful for the average consumer through severely depressed ticket prices? Certainly. The average ticket price is down nearly 60% compared to pre-deregulation prices, adjusted for inflation.

The average traveler may rejoice. I shall not, until incomes are restored back to 1960's -era income levels, adjusted for inflation.

YMMV

Bankruptcies have been quite beneficial for Lawyers and Executives. This puts lots of money into peoples hands. they are people too. says Mitt Romney.

 

[Lear70]

*chuckle*

 

[learherkjay]

Which brings us right back to deregulation.

The issue is that an airplane seat is not a perfectly elastic commodity, and deregulation allowed the airlines to flood the market with seats, thus depressing their value. Unfortunately, the airlines (with notable exceptions) don't seem to care if many routes are operated at a loss, therefore everyone involved loses... except the consumer... and management.

The whole idea that airlines would compete on customer service was, is, and will be in the future, completely ludicrous. Unfortunately, the people who get pinched aren't the consumer, it's the employee. If the company can't increase prices or decrease direct costs such as aircraft leases, gate space, etc, they'll squeeze the middle (read employee), and with unions being hobbled by the RLA (and a much weaker membership than decades past), there's nothing to stop them.

Notice how everything ELSE involved in running an airline increases equal to or more than inflation? Fuel, aircraft and equipment leases, interest rates, gate leases, catering, maintenance parts, taxes, etc, etc. Everything except labor rates.

Again, deregulation is a failure economically (as proven by just about every airline in existence for any length of time having been through bankruptcy court AT LEAST once - SWA the notable exception) and professionally (for the employees)... the only people who benefit are the public with their cheap seats and the senior management drawing large salaries and bonuses.

I am not trying to stir the pot here, but I fail to see your logic. Without de-regulation, most of us on here would not have airline jobs.

Regardless, while you mention bankruptcy and lawyers making money from it, you are failing to see that bankruptcy, not deregulation, is the problem. We have a flood of seats in the market because we have carriers kept artificially alive through the bankruptcy system. Then, those carriers are allowed to shed their debt obligations, maintain piles of cash while not paying those bills so they can "compete" with other carriers who do not get to shed their debts. So now we have bankrupt airlines running fire sales on seats - that's unfair competition and is against the purpose of deregulation.
Deregulation would not be a problem if the government actually allowed the market to run its course. United, Delta, US Airways - they should have been gone 8 years ago. But, companies that do it right are punished by having to compete with carriers who are "too big to fail." Deregulation is not the problem; but we don't have true de-regulation - bankruptcy laws will not allow the market to run its course....

 

[The Prussian]

I am not trying to stir the pot here, but I fail to see your logic. Without de-regulation, most of us on here would not have airline jobs.

Regardless, while you mention bankruptcy and lawyers making money from it, you are failing to see that bankruptcy, not deregulation, is the problem. We have a flood of seats in the market because we have carriers kept artificially alive through the bankruptcy system. Then, those carriers are allowed to shed their debt obligations, maintain piles of cash while not paying those bills so they can "compete" with other carriers who do not get to shed their debts. So now we have bankrupt airlines running fire sales on seats - that's unfair competition and is against the purpose of deregulation.
Deregulation would not be a problem if the government actually allowed the market to run its course. United, Delta, US Airways - they should have been gone 8 years ago. But, companies that do it right are punished by having to compete with carriers who are "too big to fail." Deregulation is not the problem; but we don't have true de-regulation - bankruptcy laws will not allow the market to run its course....

Forget it, learhercjay,...our government's involvement in business decisions will work. We just need to give it time.

 

[outerlimits]

Forget it, learhercjay,...our government's involvement in business decisions will work. We just need to give it time.

That should be put on the 100 dollar bill.

 

[e=mc2]

Well with all the doom and gloom the best way to get a 2% pay raise is to dump ALPA. After all they only help management work out the details of the give backs.

 

[HalinTexas]

I am not trying to stir the pot here, but I fail to see your logic. Without de-regulation, most of us on here would not have airline jobs.

Regardless, while you mention bankruptcy and lawyers making money from it, you are failing to see that bankruptcy, not deregulation, is the problem. We have a flood of seats in the market because we have carriers kept artificially alive through the bankruptcy system. Then, those carriers are allowed to shed their debt obligations, maintain piles of cash while not paying those bills so they can "compete" with other carriers who do not get to shed their debts. So now we have bankrupt airlines running fire sales on seats - that's unfair competition and is against the purpose of deregulation.
Deregulation would not be a problem if the government actually allowed the market to run its course. United, Delta, US Airways - they should have been gone 8 years ago. But, companies that do it right are punished by having to compete with carriers who are "too big to fail." Deregulation is not the problem; but we don't have true de-regulation - bankruptcy laws will not allow the market to run its course....

Beat me to it. I might add, that if we return to a regulated industry, the ramifications to our economy as a whole would make this "recession" persists or worsen for a decades, until it's modified again.

Certain congressional districts who are represented by very powerful members are deemed "to important" to not have a major airline hub. This, as well as other things, will keep the RLA from changing. A managed liquidation of AMR will help the industry as a whole, but it will decimate those employees financially. I kind of see Pan Am, the airline, and maybe TWA of the Icahn days being repeated here.

 

[CRAWDADDY]

Ill add that the reason for such high payrates in the 60s was due to the pilot pay formula established in arbitration back in the 40s. As aircraft productivity went up, so did the pilots pay rate. When larger faster jets were introduced, naturally the pay sky rocketed.

Pretty well explained in Flying the Line Vol 1

 

[Lear70]

And then, if bankruptcy were allowed to work properly and weed out the companies that couldn't run an airline properly, we'd STILL be out of work.

It all works around the same premise: to many seats in the air at too cheap a price, brought on by the fact that there's no accountability for bad business decisions and labor is the only party that has to pay the consequence.

 

[Jon Rivoli]

While all of the above is true, the cost of fuel today is perhaps the largest impediment today to higher pilot wages. Back in 1999, jet fuel was about $.40/gal., today it's around $3.30/gal. A decade ago fuel expense was about 15% of operating expenses, today it's about 35%.

Until fuel prices come down, there will not be money to pay higher wages. And, to those who say to 'just raise ticket prices', higher ticket prices mean fewer passengers. Lower load factors mean schedules get reduced, planes get parked, pilots get furloughed. RJ's are another response; rather than abandoning routes or cutting frequency to one or two flights per day, the small jet allows marketing to adjust the number of seats in a market in more precise increments. A full RJ will always be more profitable than a 150 seater with 50 empty seats. Those who focus only on the higher unit cost of the smaller jets are ignoring half of the equation (Boyd).

About a third of the increase in the cost of oil is due to the FED inflating the money supply in the name of stimulus. If jet fuel were only $2/gal. we could all be making a lot more money and buying a lot more stuff. I like that kind of stimulus much better than the kind that funnels money to OPEC.

 

[HalinTexas]

"And then, if bankruptcy were allowed to work properly and weed out the companies that couldn't run an airline properly, we'd STILL be out of work."

As it should be. We would also be less likely to accept work on a sinking ship. At least when a company ceases to exist the stronger thrive. There would still be more seats available, and stable jobs, than under a regulated environment. I'd rather be susceptible to the free market than to the whims of the political cycle.

"It all works around the same premise: to many seats in the air at too cheap a price, brought on by the fact that there's no accountability for bad business decisions and labor is the only party that has to pay the consequence."

False statements, all. Your premise, as you've stated, is about your job and the income it "should" provide you. If there are too many seats than the market will bear, then the market will/should weed out the weak. The market should not be artificially created, propagated, via regulation. See Solyndra and the others that have failed recently. I agree that there isn't enough accountability for poor management decisions, but there is some. It's all depends on what the BOD negotiates with the officers, and what is negotiated with the creditors. The BODs are the ones that truly should be held accountable in the end. As to the last point, Boeing as well as all the other contractors either don't recoup what is owed in BK court, or receive much smaller amounts of income (less or no profitability) than before BK. These are deemed the "secured creditors." This might result in lost jobs on their end, as well.

 

[Lear70]

While all of the above is true, the cost of fuel today is perhaps the largest impediment today to higher pilot wages. Back in 1999, jet fuel was about $.40/gal., today it's around $3.30/gal. A decade ago fuel expense was about 15% of operating expenses, today it's about 35%.

Until fuel prices come down, there will not be money to pay higher wages. And, to those who say to 'just raise ticket prices', higher ticket prices mean fewer passengers. Lower load factors mean schedules get reduced, planes get parked, pilots get furloughed. RJ's are another response; rather than abandoning routes or cutting frequency to one or two flights per day, the small jet allows marketing to adjust the number of seats in a market in more precise increments. A full RJ will always be more profitable than a 150 seater with 50 empty seats. Those who focus only on the higher unit cost of the smaller jets are ignoring half of the equation (Boyd).

About a third of the increase in the cost of oil is due to the FED inflating the money supply in the name of stimulus. If jet fuel were only $2/gal. we could all be making a lot more money and buying a lot more stuff. I like that kind of stimulus much better than the kind that funnels money to OPEC.

I don't agree with much of the above. If the RJ was such a great idea, you wouldn't see the 50-seater being eliminated just as fast as they can put them to pasture and companies like PCL with dozens of the things with stock prices just barely above where they're going to be delisted.

In addition, we ARE seeing fare increases. Slowly, incrementally, but they're there. And the load factors aren't falling off with the increases. What that tells me is that there's still plenty of room to raise prices before we hit a push-back in terms of lower bookings. The trick is to get ALL the carriers to raise them, which consolidation helps accomplish.

We're seeing an adjustment that should help us in the future. I do, however, agree with the pitfalls of our Dollar being devalued so rapidly... if it's not put in check, it's not going to get better in terms of fuel prices.

 

[Lear70]

False statements, all. Your premise, as you've stated, is about your job and the income it "should" provide you. If there are too many seats than the market will bear, then the market will/should weed out the weak. The market should not be artificially created, propagated, via regulation. See Solyndra and the others that have failed recently. I agree that there isn't enough accountability for poor management decisions, but there is some. It's all depends on what the BOD negotiates with the officers, and what is negotiated with the creditors. The BODs are the ones that truly should be held accountable in the end. As to the last point, Boeing as well as all the other contractors either don't recoup what is owed in BK court, or receive much smaller amounts of income (less or no profitability) than before BK. These are deemed the "secured creditors." This might result in lost jobs on their end, as well.

You have your opinion, I have mine.

Mine centers on primarily wanting the company to be profitable; it doesn't help anyone to have great wages at a company that goes out of business or files bankruptcy with an 1113(c) filing and guts the contract along with it. After that, my next immediate thought is the advancement of our career value back to what it was when I made the decision to get into this industry.

My concern regarding the passengers' ticket prices is a very, very distant 5th behind my coworkers increasing their pay and benefits as well as shareholder value. Again, all within the premise that the company primarily has to be profitable while accomplishing this.

I'll work to make my passengers happy; that's part of my job, but I expect the company to do its best to wring every available dollar out of them until ticket prices (and compensation levels) adjust for inflation from what they used to cost and what we used to make. It's a business... not a charity.

 

[waveflyer]

I think what's being missed are the underlying politics-
Both R's and Ds want a vibrant economy- cheap airline tickets stimulate business on a macro scale. We have to know what we're up against and do our best to vote our interests. Something we don't do well as pilots.
Any thought that we aren't still regulated is a bit ridiculous to me. This industry is taxed and regulated arguably more than any other.