Asa Alpa Hypothetical

[Medeco]

So, in other words there is no incentive to shrink ASA!

As the CNC has said in road shows, the TA/contract as a whole package offers us protection in all kinds of places.

Looking at each section word by word gives the impression that it is weak, but I dont believe it is.

Medeco

 

[USCtrojan]

No don't go to NetJets. All they do is clean lavs and load bags all day. It is way below the level of the mighty RJ. Stay at SkyWest/ASA where mgmt will take care of you. Rumor has it the pilots at NetJets might have to pay for insurance after 2016 and they are restricted to 4 crew meals a day. Stay far far away.

Everyone I talk to from NetJets is miserably happy. Sounds awful! Treated well is a completely foreign concept to us at ASA who've been beaten down for numerous years!

Trojan

 

[Speedtape]

Simple.... The no furlough clause only protects those on the property as of the signing. Within a year, there could be around 300 pilots who are not covered by the no furlough clause. If 30 pilots leave each month, then you can retire 3 airplanes per month and not have to furlough....

Skywest wouldn't want to do it quickly...... it would be a slow process...... I'm not saying that JA WILL DO IT..... but HE COULD do it.... The scope clause doesn't prevent it and is largely useless.....

Keeping the costs close to Skywest is more protection than anything you will find in section 1....

He could cash out of both airlines and put his money in something that returns more than 4-5%.

We could "What If" this thing to death. What if he just leaves things at status quo and keeps bringing in barrels of money? What if he buys Comair and operates it separately?

There are two ways Skywest can make more money on the fee structure that brings in their revenues.

The first is to continue to find ways to lower cost. This will be done by converting inefficient aircraft (E120 and Cr200) to more efficient aircraft (Cr700/900 and large turboprops.) Another way is to continue to grow and bring in lower paid employees. To add to this, because of attrition at both ASA and Skywest in the amount of at least 60+ pilots a month, pilots are replaced with lower cost pilots.

The second is to increase the number of units that create the revenue--more departures. This can easily be done by purchasing Comair. Moreover, there is at least one or more regionals that may not be in business in the near future. Skywest, Inc., with their strong financial position, will be there to capture new opportunities of those failed regionals.

We are headed for a recession. The home building industry is down. Car sales are in the basement. Increased fuel prices are fueling inflation. The value of U.S. dollar on an international comparison is at all time low. China is about to dump billions of U.S. green backs in favor of a more stable currency which will further drive the dollar down. There will be massive layoffs. Home Mortagage defaults are at a all time high with larger increases to follow as more consumers lose their jobs.

And last but not least, domestic load factors will fall, fall, fall! Ticket prices are already at historic lows, based on inflation. Yields are razor thin and depend on volume--which will decrease. Increasing airline ticket prices is countered by inelastic demand.

This holiday season will see much less demand for air travel with lower volume. United is already talking about parking 100 airplanes after the first of the year. "D" had a large post bankruptcy order in place but was never executed because of rapidly deteriorating economic conditions.

Bankruptcy laws have changed. Depending on the depth of the recession, some airlines will fail, without government intervention. Consolidation will occur.

Skywest Airlines and Inc. have exposure due to their revenue structure with their mainline partners, mainly United. Should United fail, Skywest, Inc. will be in jeopardy. Should United further reduce operations, Skywest may see some opportunities with that partner.

On the "D" front, they should be a survivor as they have one of the best cost structures in place of the legend carriers. However, they still have too much debt, which has to be serviced. Falling domestic revenues will not help. More opportunities will be created for Skywest due to lower demand on domestic mainline routes. "D" has excercised constraint at this crucial time and has directed available resources to International routes. This move will help buffer them as International traffic will remain strong. Our dollar is weak and the European currency is strong. European travel to the U.S. will remain strong. "D" has the edge here.

Our industry is dynamic and will be more so in the coming months and years. Skywest, Inc. is well positioned for growth opportunities with a strong balance sheet. There is no reason to turn the apple cart upside down by eliminating ASA. Skywest, Inc. has tremendous flexibility. This part of the industry has always grown in bad economic times.

 

[USCtrojan]

He could cash out of both airlines and put his money in something that returns more than 4-5%.

We could "What If" this thing to death. What if he just leaves things at status quo and keeps bringing in barrels of money? What if he buys Comair and operates it separately?

There are two ways Skywest can make more money on the fee structure that brings in their revenues.

The first is to continue to find ways to lower cost. This will be done by converting inefficient aircraft (Cr200) to more efficient aircraft (Cr700/900 and large turboprops.) Another way is to continue to grow and bring in lower paid employees. To add to this, because of attrition at both ASA and Skywest in the amount of at least 60+ pilots a month, pilots are replaced with lower cost pilots.

The second is to increase the number of units that create the revenue--more departures. This can easily be done by purchasing Comair. Moreover, there is at least one or more regionals that may not be in business in the near future. Skywest, Inc., with their strong financial position, will be there to capture new opportunities of those failed regionals.

We are headed for a recession. The home building industry is down. Car sales are in the basement. Increased fuel prices are fueling inflation. The value of U.S. dollar on an international comparison is at all time low. China is about to dump billions of U.S. green backs in favor of a more stable currency which will further drive the dollar down. There will be massive layoffs. Home Mortagage defaults are at a all time high with larger increases to follow as more consumers lose their jobs.

And last but not least, domestic load factors will fall, fall, fall! Ticket prices are already at historic lows, based on inflation. Yields are razor thin and depend on volume--which will decrease. Increasing airline ticket prices is countered by inelastic demand.

This holiday season will see much less demand for air travel with lower volume. United is already talking about parking 100 airplanes after the first of the year. "D" had a large post bankruptcy order in place but was never executed because of rapidly deteriorating economic conditions.

Bankruptcy laws have changed. Depending on the depth of the recession, some airlines will fail, without government intervention. Consolidation will occur.

Skywest Airlines and Inc. have exposure due to their revenue structure with their mainline partners, mainly United. Should United fail, Skywest, Inc. will be in jeopardy. Should United further reduce operations, Skywest may see some opportunities with that partner.

On the "D" front, they should be a survivor as they have one of the best cost structures in place of the legend carriers. Howerver, they still have too much debt, which has to be serviced. Falling domestic revenues will not help. More opportunities will be created for Skywest due to lower demand on domestic mainline routes. "D" has excercised constraint at this crucial time and has directed available resources to International routes. This move will help buffer them as International traffic will remain strong. Our dollar is weak and the European currency is strong. European travel to the U.S. will remain strong. "D" has the edge here.

Our industry is dynamic and will be more so in the coming months and years. Skywest, Inc. is well positioned for growth opportunities with a strong balance sheet. There is no reason to turn the apple cart upside down by eliminating ASA. Skywest, Inc. has tremendous flexibility. This part of the industry has always grown in bad economic times.

Excellent post SpeedTape. I'm wondering how the pilot shortage will affect the industry as well, as the Fractionals pick up steam.

Trojan

 

[CFI2766]

Looking at each section word by word gives the impression that it is weak, but I dont believe it is.

Medeco[/quote]

Isn't a 'word by word' examination exactly what any competent legal team (the kind contracted by management) would do in the event of SKYW enacting a plan to shrink ASA?

I know it looks passable now, but I strongly believe that the TA as it stands now has ambiguity that would allow ASA to be 'right-sized'.

 

[CFI2766]

There are two ways Skywest can make more money on the fee structure that brings in their revenues.

The first is to continue to find ways to lower cost. This will be done by converting inefficient aircraft (E120 and Cr200) to more efficient aircraft (Cr700/900 and large turboprops.) Another way is to continue to grow and bring in lower paid employees. To add to this, because of attrition at both ASA and Skywest in the amount of at least 60+ pilots a month, pilots are replaced with lower cost pilots.

Inaccurate: supply and demand in the labor market. The market is already showing signs that it needs to increase labor costs to function. Reference the overall pilot shortage and the trend of increasing first year FO rates and first year signing bonuses. At the moment, (granted this could change literally, overnight) the current cost structure, combined with labor group politics at the local levels, does not make an airline career an attractive option to a prospective pilot. In today's landscape, there will be no 'swapping' of the labor group from a more expensive one to a cheaper one by the various managerial teams.

[There will be some natural turnover due to career advancement, but I think that it's effect would be extremely difficult to quantify on the P&L. As well, factor in the increased training costs with hiring lower experienced, cheaper pilots.]

The second is to increase the number of units that create the revenue--more departures. This can easily be done by purchasing Comair.

Purchasing Comair, et al., would increase revenue. However, when the additional entity is acquired, the additional costs of that entity are acquired as well. You can't buy the revenue of a going concern without buying at least some, if not all of its costs. Usually, if the profit margin of the going concern was acceptable, it wouldn't be for sale.

I agree strongly that to move forward, the regional airline model needs an overhaul. The winner, 20 years from now, will be the managerial team that redefines how to produce revenue in the transportation industry. Note, I did not specifically say the airline idustry.



We are headed for a recession. The home building industry is down. Car sales are in the basement. Increased fuel prices are fueling inflation. The value of U.S. dollar on an international comparison is at all time low. China is about to dump billions of U.S. green backs in favor of a more stable currency which will further drive the dollar down. There will be massive layoffs. Home Mortagage defaults are at a all time high with larger increases to follow as more consumers lose their jobs.

It's difficult to tell if the VSI on the overall economy is racing toward the bottom of the case, or, more likely, in my opinion, quietly reversing trend.


Our industry is dynamic and will be more so in the coming months and years. Skywest, Inc. is well positioned for growth opportunities with a strong balance sheet. There is no reason to turn the apple cart upside down by eliminating ASA. Skywest, Inc. has tremendous flexibility. This part of the industry has always grown in bad economic times.[/quote]


I really like this post and agree with its tenor. Overall, I agree that there is no current reason to park the apple cart to kick ASA out.

I really prefer sharing ideas in an intellectual manner as opposed to calling skynation names.

 

[Speedtape]

There are two ways Skywest can make more money on the fee structure that brings in their revenues.

The first is to continue to find ways to lower cost. This will be done by converting inefficient aircraft (E120 and Cr200) to more efficient aircraft (Cr700/900 and large turboprops.) Another way is to continue to grow and bring in lower paid employees. To add to this, because of attrition at both ASA and Skywest in the amount of at least 60+ pilots a month, pilots are replaced with lower cost pilots.

Inaccurate: supply and demand in the labor market. The market is already showing signs that it needs to increase labor costs to function. Reference the overall pilot shortage and the trend of increasing first year FO rates and first year signing bonuses. At the moment, (granted this could change literally, overnight) the current cost structure, combined with labor group politics at the local levels, does not make an airline career an attractive option to a prospective pilot. In today's landscape, there will be no 'swapping' of the labor group from a more expensive one to a cheaper one by the various managerial teams.

[There will be some natural turnover due to career advancement, but I think that it's effect would be extremely difficult to quantify on the P&L. As well, factor in the increased training costs with hiring lower experienced, cheaper pilots.]

Speedtape's First rebuttal
There is only a labor shortage until the first or more airlines fail. Then there will be plenty. The present situation with labor could be temporary. However, there were only about 300 commercial licenses issued last year, so, yes, there were much fewer new pilot entrants which will create the long term problem until there is an incentive. But for today, when a pilot leaves Skywest, Inc. he is replaced with a new hire at lower rates. When the airline grows, they are hiring more pilots at low rates. This is part of the benefit that SOUTHWEST has enjoyed with their growth--lower average labor costs.

The second is to increase the number of units that create the revenue--more departures. This can easily be done by purchasing Comair.

Purchasing Comair, et al., would increase revenue. However, when the additional entity is acquired, the additional costs of that entity are acquired as well. You can't buy the revenue of a going concern without buying at least some, if not all of its costs. Usually, if the profit margin of the going concern was acceptable, it wouldn't be for sale.

I agree strongly that to move forward, the regional airline model needs an overhaul. The winner, 20 years from now, will be the managerial team that redefines how to produce revenue in the transportation industry. Note, I did not specifically say the airline idustry.

Speedtapt's First response

I will gladly agree with your first 3 sentences. However, you failed to mention, in addition, the net profits of the acquisition are also acquired. Increased profits are the goal. I would respectfully dispute the assumption in the fourth sentence, however, YOU did use the word "usually," which lets you off the hook of making an absolute statement!


ASA had very respectable returns before their sale. Delta needed cash to enter bankruptcy and so they were sold because there was value to the purchaser and seller. Comair had to weather bankruptcy which brought their costs down--to about the same as Skywest (not a coincidence.) Comair was making money before Delta's bankruptcy. For a variety of reasons, Delta still needs Cash.

As Grinstein said, Delta does not need to own Comair or ASA to get the benefit. Comair will be sold because Delta needs all the cash they can garner with looming economic concerns.

NOW, that having been said, Skywest Inc. has drastically lowered costs at ASA. They have eliminated every administrative costs that they could and still operate a separate certificate. In addition, because ASA had much higher MTC costs than Skywest (somewhere around $80 per block hour higher), Skywest, Inc. has modeled ASA's MTC staffing and processes to mirror that of Skywest Airlines (Best and Cheaper costs). Today, ASA has benefitted from lower costs processes, which should raise net profits.

Skywest could achieve the same if not better cost savings if they purchased Comair. How does Delta benefit? First, they receive needed cash from the sale. Secondly, they turn over the management of Comair to Skywest, Inc. to achieve similar if not same cost savings that they achieved at ASA. Third, Delta still receives the same benefit without ownership. Unlike ASA, Comair is a well run company from an operational perspective. There would not be the same amount of challenges operationally with a Comair purchase.

But, Skywest Inc. could greatly reduce the admininstrative expenses by running the administrative side under one roof. Labor costs at Comair are probably the same or cheaper than Skywest Airlines. Skywest, Inc. could greatly increase revenues and enhance their value to Delta without Delta losing the benefit of the Comair feed.



We are headed for a recession. The home building industry is down. Car sales are in the basement. Increased fuel prices are fueling inflation. The value of U.S. dollar on an international comparison is at all time low. China is about to dump billions of U.S. green backs in favor of a more stable currency which will further drive the dollar down. There will be massive layoffs. Home Mortagage defaults are at a all time high with larger increases to follow as more consumers lose their jobs.

It's difficult to tell if the VSI on the overall economy is racing toward the bottom of the case, or, more likely, in my opinion, quietly reversing trend.


Speedtape's first rebuttal:

One other thing that was not mentioned was the war debt. The war debt has increased our national deficits. It will not go away soon--the war or the deficit spending. Study what happened in the economy in the years near the end and aftermath of the Vietnam War. Oil prices rose steeply in the late 70's and early 80's. The economy went into a recession and many airlines went bankrupt.

Today, we find many of the same factors. In addition, the developing Chinese economy is placing upward pressure on fuel costs. Increasing and unstable fuel costs drive inflation. The cost of a gallon of gas will soon be that of a cost of a gallon of milk--$3.50 to $4.00 per gallon! Oh yeah, how many people drive SUV's? They want be able to give an SUV away soon!


Our industry is dynamic and will be more so in the coming months and years. Skywest, Inc. is well positioned for growth opportunities with a strong balance sheet. There is no reason to turn the apple cart upside down by eliminating ASA. Skywest, Inc. has tremendous flexibility. This part of the industry has always grown in bad economic times.

I really like this post and agree with its tenor. Overall, I agree that there is no current reason to park the apple cart to kick ASA out.

I really prefer sharing ideas in an intellectual manner as opposed to calling skynation names.[/quote]

 

[CFI2766]

Very good point on the fact that at the Regional level, and perhaps the major, as well, this pilot 'shortage' is one complete liquidation from being a non-issue for management.

A sudden glut of qualified, current pilots could tide the HR departments over until the next downswing of the airline industry.

I agree that this is a challenging, dynamic time for the airline industry. I think that the advent of the Regional airline industry has made tremendous changes to all aspects of the people moving airplane business.

Moving forward, however, I think that new creativity is necessary for the people moving business to serve the people that patronize it. At the moment, the airline industry, in large part, serves itself, not its customer.

Oh yeah, Skynation is a B!tch.

 

[JoeMerchant]

He could cash out of both airlines and put his money in something that returns more than 4-5%.

We could "What If" this thing to death. What if he just leaves things at status quo and keeps bringing in barrels of money? What if he buys Comair and operates it separately?

There are two ways Skywest can make more money on the fee structure that brings in their revenues.

The first is to continue to find ways to lower cost. This will be done by converting inefficient aircraft (E120 and Cr200) to more efficient aircraft (Cr700/900 and large turboprops.) Another way is to continue to grow and bring in lower paid employees. To add to this, because of attrition at both ASA and Skywest in the amount of at least 60+ pilots a month, pilots are replaced with lower cost pilots.

The second is to increase the number of units that create the revenue--more departures. This can easily be done by purchasing Comair. Moreover, there is at least one or more regionals that may not be in business in the near future. Skywest, Inc., with their strong financial position, will be there to capture new opportunities of those failed regionals.

We are headed for a recession. The home building industry is down. Car sales are in the basement. Increased fuel prices are fueling inflation. The value of U.S. dollar on an international comparison is at all time low. China is about to dump billions of U.S. green backs in favor of a more stable currency which will further drive the dollar down. There will be massive layoffs. Home Mortagage defaults are at a all time high with larger increases to follow as more consumers lose their jobs.

And last but not least, domestic load factors will fall, fall, fall! Ticket prices are already at historic lows, based on inflation. Yields are razor thin and depend on volume--which will decrease. Increasing airline ticket prices is countered by inelastic demand.

This holiday season will see much less demand for air travel with lower volume. United is already talking about parking 100 airplanes after the first of the year. "D" had a large post bankruptcy order in place but was never executed because of rapidly deteriorating economic conditions.

Bankruptcy laws have changed. Depending on the depth of the recession, some airlines will fail, without government intervention. Consolidation will occur.

Skywest Airlines and Inc. have exposure due to their revenue structure with their mainline partners, mainly United. Should United fail, Skywest, Inc. will be in jeopardy. Should United further reduce operations, Skywest may see some opportunities with that partner.

On the "D" front, they should be a survivor as they have one of the best cost structures in place of the legend carriers. However, they still have too much debt, which has to be serviced. Falling domestic revenues will not help. More opportunities will be created for Skywest due to lower demand on domestic mainline routes. "D" has excercised constraint at this crucial time and has directed available resources to International routes. This move will help buffer them as International traffic will remain strong. Our dollar is weak and the European currency is strong. European travel to the U.S. will remain strong. "D" has the edge here.

Our industry is dynamic and will be more so in the coming months and years. Skywest, Inc. is well positioned for growth opportunities with a strong balance sheet. There is no reason to turn the apple cart upside down by eliminating ASA. Skywest, Inc. has tremendous flexibility. This part of the industry has always grown in bad economic times.

In general, I agree with your points..... Wouldn't it be nice if we could get ALPA to negotiate on a "brand scope" basis? Certain things are turning our way.... a truly unified brand ALPA could be something I support....... isn't it time to quit this bidding within a brand and within a union?.... Let's fix this part of ALPA..... Will you work with me Speedtape?

 

[Speedtape]

In general, I agree with your points..... Wouldn't it be nice if we could get ALPA to negotiate on a "brand scope" basis? Certain things are turning our way.... a truly unified brand ALPA could be something I support....... isn't it time to quit this bidding within a brand and within a union?.... Let's fix this part of ALPA..... Will you work with me Speedtape?

Joe,
Your ideas are ideal and noble. Show me the plan!

 

[JoeMerchant]

Joe,
Your ideas are ideal and noble. Show me the plan!

I and others have laid out "plans" before..... The ALPA cheerleaders say that they are "unworkable".... That may be true, but if it is, then we need to dump ALPA and compete with everyone else for the flying...

If we want to try and stop it, then we need to do the following....

1. True "Brand Scope" in the mainline agreements that eliminates any further portfolio members and limits growth to the higher paying union carriers.

2. Single lists for all airline corporations. Currently this would include Alaska/Horizon, DAL/CMR, USAir/PDT/PSA, and NWA/Mesaba.

3. Minimum contract standards, including not allowing mainline pilots to underbid the industry leading RJ rates..... as they are currently doing.

4. Aggressive lobbying to raise the minimum requirements to be a 121 pilot.... the current requirements are too low... and it is a safety issue.

5. Start working towards a national ALPA list.... it will take some time, but it will be necessary so that people are willing to make lateral moves..... a luxury that every other profession enjoys.

Now to Rez. and the rest of the cheerleaders who come on and say this is "impossible", then my answer is: Fine, fire ALPA and compete to get as much flying as you can.....

It's time to either control the flying and regain leverage, or time to give up on this absurd notion that we are really a union....

 

[PCL_128]

Classic. "If you don't like my ideas, then screw ALPA!" Great attitude, Joe.

 

[JoeMerchant]

Classic. "If you don't like my ideas, then screw ALPA!" Great attitude, Joe.

Hey if my union doesn't consider my job a "career job" as you pointed out and if my union can't stop it's own members from undercutting each other.... then it is time to fire ALPA before they screw me even more.... Unlike you, I admit that I am looking out for ME.... not for YOU.... If you ALPA cheerleaders want to reform ALPA, then I may get back on board.... until then, I will look out for my best interests..... as will most of us.......