Buffett Bites Back at NetJets Pilot Complaints

[FamilyGuy]

As for all that blather about bankruptcy and such, it has no relevance. All those bankruptcies occurred due to the economy, not the contracts.

All that blather about bankruptcy is relevant. History is littered with the carcasses of companies that were forced into bankruptcy, some of which were due to too expensive contracts. I'm not saying that is the number 1 concern in this situation, but both sides should be focused on reaching a middle ground that is sustainable in the long term. The economy is relevant and will go through its up and down cycles. The contracts should anticipate those cycles and be sustainable through the peaks and troughs of the economy.

The company's position of concessions in the midst of record profits is laughable, as is the demands of some on this board to match mainline airline pay. The best agreements are where both sides compromise and find a middle ground that neither side is entirely happy with but it works for each.

If we're going all in on this one, we need to push ahead with as little fear and as much confidence as we can muster.

There's nothing wrong with fear. It makes you more aware of the situation and the dangers inherent to your position. Don't ignore the downside risks....acknowledge them and plan accordingly. Plan for the worst and hope for the best.

 

[fischman]

My passengers who experiences a rapid decompression at 39,000 were glad to be alive when I safely got them on the ground. Also, when the thrust reverser deployed at 24,000 and 300 knots, I think I got a few "atta boy"

Fisch -- I will give you 2 attaboys for those. Great job. (But I am not sure if I want to fly with you for your amazing abilities or not fly with you because of the frequency you need to use your amazing abilities -- NOTE TO ALL -- read sarcasm in those comments).

Make the owners aware of these situations without "killing to golden goose". Honestly, that is why the owners want you in front. Like that old presidential election commercial -- "Who do you want to answer the hotline in the White House if it rings at 3 a.m". -- Who do you want flying your plane when sh!t happens??? - This is part of making the owners knowledgable about what you guys do and why we should demand you. Not just picketing saying "I don't like that I have to pay more for healthcare". Owners will respond (and pressure management) for the former -- and generally don't give a crap about the latter.

I think 2 incidents in the +10 years and +5000 hours I've been with the company are pretty good odds. You'd be hard pressed to find a pilot with as much time as me with fewer inflight "problems". You want to fly with me. I'm awesome.

I agree about the picket messages and will pass along the info.

 

[fischman]

The company's position of concessions in the midst of record profits is laughable, as is the demands of some on this board to match mainline airline pay. The best agreements are where both sides compromise and find a middle ground that neither side is entirely happy with but it works for each.

Ok. Since Mr. Scully doesn't want to answer my question, I'll ask you. Why am I worth less than a Delta pilot?

 

[NJAowner]

OK Fisch -- I will fly with you.

Realityman -- does your analysis change if the EMT says to owners that during the strike (which they would say will result in lower fees with o change in service) you will pay 1/2 for all your flights. Then how long do you think most owners will be pissed at the EMT - BH can do this for a year or more and it would just be a rounding error in results.

 

[gunfyter]

The company's position of concessions in the midst of record profits is laughable, as is the demands of some on this board to match mainline airline pay. The best agreements are where both sides compromise and find a middle ground that neither side is entirely happy with but it works for each.

You didn't think we could get the pay we have now last time...

 

[FamilyGuy]

Ok. Since Mr. Scully doesn't want to answer my question, I'll ask you. Why am I worth less than a Delta pilot?

First, let me state that I don't think NJ pilots are worth less than Mainline airline pilots. You perform a job that I would be the first to argue is more demanding than an airline pilot. You work unscheduled, on demand, you are expected to perform more functions than an airline pilot, and you get a lot more unusual demands from the customers (owners) than an airline pilot.

That said, as NJAOwner observed earlier, there are countless examples of people in the same profession getting paid differently. I've known for years that I could make more money if I wanted to live in New York City, but I frankly have no interest in doing so. Even lawyers will get paid differently based on the firms they choose to work for. People choose career paths that result in different outcomes (both financially and qualitatively) all the time.

I chose to work at NetJets when I left the airlines, even though the pay wasn't the greatest. I was happy with that choice for many years, as working at NetJets was much more rewarding than the airlines. I knew I could make more money elsewhere, but didn't want to leave, that was a personal choice. Now I also question that choice - the current EMT has turned this place on its head and NetJets is no longer a great place to work.

That's why we are seeing so much turnover in the employee ranks - people know what they are worth and are willing to leave for higher pay now, even though they turned it down in the past. They've come to the conclusion that if they are going to be miserable and hate their job, they might as well get paid top dollar for it. That's where RTS was brilliant - he created a place that people loved so much that they were willing to accept lower pay to work there - quality of life trumped pay. The current EMT is quickly learning that they are having to pay much more to attract people.

I suspect the pilots are no different than the non-unionized employees. Your quality of life has deteriorated significantly under this EMT and many of you have come to the same conclusion - if you are going to be miserable at work, then you might as well get paid top dollar to stay here.

I totally understand that line of thinking and wish you the best in getting everything you can get. I frankly question why anyone is staying given the current course charted by the EMT. Each of you will need to make that decision yourself whether it is better to stay here with the diminished QOL or make the jump to a major.


All that said, while I agree with you and want you to be paid well, I do see some major structural differences between the legacy carriers and NetJets, which will likely set an upper boundary on what the company can pay. Where that upper boundary is located is obviously up for debate.

Simply put - Mainline airlines carry far more passengers, fly many more flights per day, and can spread their costs over a much larger base than NetJets can.

Delta Airlines (Mainline) AVERAGES approximately 7.5 flights per day per aircraft. Each Aircraft has an average capacity of 177 passengers and their load factor in 2014 was 84.7%, which means they averaged over 150 passengers per flight. Extrapolate that out and you'll find that each aircraft's daily cost of a pilot is being spread across more than 1,100 passengers.

NetJets aircraft average 1-2 flights per day and have an average capacity of approximately 8.6 passengers, but actually carry just 2-3 passengers per flight on average. This means each NetJets aircraft daily cost for a pilot is being spread across roughly 4-5 passengers.

Yes, NJ owners are much more affluent and willing to pay more, but there are limits to everything.

Even Delta Airlines acknowledges this reality in their payscale, which is graduated by AC type and capacity - http://www.airlinepilotcentral.com/airlines/legacy/delta_air_lines

In addition, NetJets costs are much higher than an airline because they have to operate on an adhoc, unscheduled basis into far more airports than an airline. The airlines get the luxury of planning their schedules six months in advance, which allows them to negotiate rock bottom prices for everything, while NetJets schedule is determined 24-48 hours in advance and we pay the prevailing rates that day. Economies of scale also impact this equation as airlines like Delta are buying 10-20 times more than NetJets for everything from hotel rooms to fuel. This allows them to negotiate better rates and achieve lower overall costs.

All of these differences add up and make it very difficult to use legacy airline pay as the benchmark. Its apples to oranges in terms of operating models and revenue/cost structures.

Obviously none of this counters the argument that you are all ATP rated and should be paid similarly. I think that comes back to the lifestyle choice that each of you are going to have to make.

I'm all for you guys getting a pay raise and putting the brakes on this management team, but at some point both sides need to be realistic in their demands.

Good luck.

 

[FamilyGuy]

Realityman -- does your analysis change if the EMT says to owners that during the strike (which they would say will result in lower fees with o change in service) you will pay 1/2 for all your flights. Then how long do you think most owners will be pissed at the EMT - BH can do this for a year or more and it would just be a rounding error in results.

Great question.

I think the answer can ultimately be summed up with a quote - "The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory."

I think the owner base has many different types of owners in it. Some will be willing to put up with the inconvenience of being delayed hours or days if the price was cut in half, others would not. How many owners are in each group is tough to estimate. Since you are an owner, I'd love to hear your thoughts on the subject - how many of your peers would be willing to suffer through extremely poor service for half the price?

I can tell you that NetJets losses in such a scenario would dwarf the $700M loss in 2009, which prompted Buffett to replace RTS. The difference is that many of those losses were on paper, i.e. - aircraft write downs as we had to mark to market the aircraft being returned. These losses would all be operational.

While that size of loss would be a rounding error for Berkshire, Buffett has also repeatedly said that each business in the portfolio should stand alone. Will he be willing to write the check to cover a loss of over $1 billion to address the "union problem"? That cost would far exceed the cost of the option the company had to extend the pilot agreement for another 3 years.

 

[realityman]

Great question.

I think the answer can ultimately be summed up with a quote - "The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory."

Some will be willing to put up with the inconvenience of being delayed hours or days if the price was cut in half, others would not. How many owners are in each group is tough to estimate. Since you are an owner, I'd love to hear your thoughts on the subject - how many of your peers would be willing to suffer through extremely poor service for half the price?

NJAOWNER, I was going to stay off of here for a bit. Everything posted here, including my stuff, is pretty much just mental masturbation. But replies keep showing up in my email, and I always enjoy your reasoned discussions. So here I am again.

Anyway, FG basically summed up my response to you with his above quote. Interestingly, it's basically the same thing I asked you a number of posts back. If there's only one thing I'm CERTAIN about in all of this, it's that barring a large percentage of our pilots being scabs, there simply isn't enough supplemental uplift available to cover all our flights. So as I and FG have asked, how many hours long, even DAYS long, delays will you be willing to suffer through even at half price?

I have no doubt that some clients will put up with it for great prices. But even then, for how long? Do you believe the majority of you will wait an entire year for a resolution if service is in the crapper?

And while Netjets may try to keep you on with great prices, that has its limits too. Unless you dump your share, you will still have monthly management fees, even if reduced, because your plane will still need to be maintained (hangar, insurance, mx, etc...). So your costs won't be all that low. You may pay bargain basement prices for the charter, but you'll still have to add in your monthly management fee. If Netjets decides to waive those during a strike, then it will be Netjets eating those costs, which makes it even uglier for them. It's not going to be pretty for anyone if a strike happens.

At any rate, if only 30% of you turn in your shares it's going to be a massive hit to Netjets. And I have no doubt some of you will have lawyers going after Netjets if they aren't providing the contractually agreed to service.

I stand by my assertion that a strike won't last long here. Yes, I'm relying on my admittedly faulty crystal ball, but I still like our odds.

 

[pilotyip]

I'm all for you guys getting a pay raise and putting the brakes on this management team, but at some point both sides need to be realistic in their demands. Good luck.

Very good post that goes beyond the standard 10250 battle cry.

 

[Diesel]

Don't listen to pilotyip he's lived his career on his knees and wouldn't fight for a nickel if it made him look bad in front of his employer.

He's management and spends more time on message boards saying how great a third tier freight operator is and how unions are the devils spawn.

Every argument out of his mouth is you'll lose your job and go broke.

I guess it could be worse. You could be head of standards at USAjet.