Buffett Bites Back at NetJets Pilot Complaints

[PCL_128]

I disagree with your assessment.

The reason that we are under the NRLA is the government does not want a strike/labor striff to interfere with national interests/commerce. A nationwide railroad, or airline strike could have major impact on the economy/national defence, etc.

NetJets is a tiny operation. If it is permanently grounded it would have virtually no effect on the national economy. Warren Buffet could ride on Southwest, or a part 135 jet.

I suspect the NMB will get a little political pressure from the money-boys and NetJets will be released quickly and we will be locked out sooner than anyone is even guessing.

We are definitely better off preparing for a lockout rather than discounting it out of hand.

If Hansell gets 20% of the NetJets pilots to accept his terms (lots of money to be made by those who cross the picket line!), he can limp along with sell-offs and contract pilots (even EJM pilots on their off days) for long enough to hire and train our replacements. Generally NetJets' customers are not pro-union and will be quite patient if they think it will get rid of those "awful unions".

The key to a successful strike/lockout situation is the savings of the individual NetJets pilots (that's you and me!). If you haven't got savings that will last you and your family for 6 months, you need to. We'll need 100% of the pilots on our side of the picket line.

If the lockout doesn't happen, you've built up a nice nest-egg and gotten your financial house in order. Start saving!

First, there's no such thing as an "NRLA." There's the NLRA, and the RLA. Two different Acts with different rules. You fall under the RLA.

And as someone who spent many years dealing with the NMB, I'll just say that your analysis leaves much to be desired, and you're likely to be quite disappointed. I wish you the best, though.

 

[FamilyGuy]

No, but there will be enough sell-off lift available to cover the trips. EJM, TMC and other 3rd parties, and don't forget Options/Flex fly charter through KR's broker company. And you can't count on the Options/Flex pilots spiking the trips - they won't even know these are NJ owners they're flying. It'll just say Mr & Mrs Smith or XYZ Corp on the manifest. NJ's not the operator in the case of a sell-off, they just act as a charter broker, to the crew never need know where it came from. And you can be sure the pax will be briefed not to reveal it, either, if they don't want a departure time break.

So in the event of a strike, a Frax pilot union has even less leverage than an airline union. At least with an airline, lost trips = 100% lost revenue. With a Frax, monthly management fees are still coming in, the company just loses the hourly trip charges. That'll still be an expensive proposition for NJ, but if they're determined to break a strike and Hansell has WB convinced that it's a cost saver long-term, they'll probably be willing to burn cash for a while. As already stated, could get real ugly, real fast.

There is not enough lift out there to cover all of the NetJets demand. NetJets struggles right now to get enough lift to cover their sell offs, let alone the entire fleet demand. And the cost would go through the roof if they tried.

As for the monthly management fees, it didn't take long for the Avantair owners to refuse to pay their monthly management fees when Avantair stopped delivering service. I don't think the NJ owners will be willing to pay for service they are not receiving.

 

[BlueNose]

There is not enough lift out there to cover all of the NetJets demand. NetJets struggles right now to get enough lift to cover their sell offs, let alone the entire fleet demand. And the cost would go through the roof if they tried.

As for the monthly management fees, it didn't take long for the Avantair owners to refuse to pay their monthly management fees when Avantair stopped delivering service. I don't think the NJ owners will be willing to pay for service they are not receiving.

There are a lot of operators out there that NJ would never consider using given their current standards. That would change in a labor strife situation. When do you think a lockout would start - Thanksgiving weekend, or maybe after the spring break season as the summer lull begins? What's the percentage lift required April-May vs Nov-Dec? And the cost structure for charter is a lot different when covering a departure time break with a charter than, say, contracting with a company to provide a guaranteed 100 hrs a week for the next 6 weeks. Not to mention contracting charter with their current frax competitors - something that would never happen today. Yes, it's still a money drain for the company, but at that point it's a contest to see who can hold out the longest (see Mooneymite's posts).

Avantair was shut down by the FAA, clearly didn't meet their contract requirements, and were pretty much criminal in their conduct. If NJ is substantially meeting their contracts and covering 60-80% of their trips during a lockout, that's a completely different situation. I'd love to see whether the force majeure provision of the owner contracts includes in-house labor strife.

But why am I having this discussion, this is FI. Burn that mother down! STFD! They can't touch you, we've got your back!

 

[T-1GUY]

Never said or meant to insinuate that you should. Who here wants to see any other pilot's wages cut? Like I already said, best of luck to you. But how you plan and how you shape your message between now and the eventuality of a lockout makes all the difference. I just disagree with those who seem to think they can't be replaced. I tried to point out that they might not have all the leverage they think they will when the time comes, and so should plan accordingly.

Dude, Where have you been? This $hit has been going on for years now. I think the pilots of Netjets are well prepared by this point.

 

[BlueNose]

There is no way this side of Hell that the insurance companies will let a junior birdman fly a plane full of rich idiots around. If you don't have at LEAST four thousand hours, no well insured highly thought of outfit will let you see the left seat. As it should be.

Now, back to my popcorn!!!

No way could NetJets (BRK subsidiary that they are) find someone who might be willing to provide pilot insurance during a lockout when Uncle Warren's trying to break the union. No way.

 

[Mooneymite]

And as someone who spent many years dealing with the NMB, I'll just say that your analysis leaves much to be desired, and you're likely to be quite disappointed. I wish you the best, though.

Well, let's just connect some dots....I bet you can come up with others, but I can think of these right off the top of my head.

. Hansell is still the accidental CEO after two years. His only expertise is in labor law. There's been plenty of time to replace him since Sokol's departure, but he hasn't been replaced. It is reasonable to think that B-H wants his expertise in place.

. Hansell could have extended the present contract for virtually "no cost" and ensured a stable work force for several more years. He didn't. Not because he wanted to give us more, but because he wants us to have less.

. None of the unions at NetJets have gotten a contract despite years of effort. Hansell has not made a single significant concession to organized labor. He has stuck with his "pillars". It is reasonable to think that he will stick with them to the end of the negotiating process.

. Hansell's "pillars" will not even be passed onto the membership by the union. Hansell knows this. No one expects labor to accept concessions during times of profit. Labor is faced with "take it, or go to self help". For Hansell, self-help = lockout.

. Even though NetJets can handle a lot of flights without sell-offs, there are light days where there are lots of sell-offs. Because NetJets is hiring, there is no restriction on sell-offs and we're seeing a large number. NetJets is lining up and fattening "alternate lift" for a time when needed.

. The NetJets customers are being "accustomed" to non-NetJets operators operating their flights through the large number of sell-offs.

. Notice how many ACP's are floating around all of a sudden? Ever wonder why these useless individuals are at all the hubs instead of in cockpits helping with our pilot shortage? Hansell's team is hoping these individuals will be "management pilots" during the strike/lockout.

Okay, I have no idea how this will play out, but it sure looks like Hansell is going to do his best to bust organized labor. If I'm wrong and we get a juicy contract, I'm happy. However, if I'm right and we are not mentally, financially, strategically prepared for a lockout, we don't have a chance.

Let's hope for the best, but be prepared for the worst.

How do we plan for a lockout?

Sticking our heads in the sand and saying "it can't happen" isn't a plan.

On an individual basis, get your financial house in order, shop for alternative health insurance and get those job applications out there. You don't want to be the last guy in line for a "new job".

 

[BlueNose]

Dude, Where have you been? This $hit has been going on for years now. I think the pilots of Netjets are well prepared by this point.

I wish you guys the best, and I hope you're right. Seems to me, though, that a number of the posters on here are underestimating what management can and will do if push comes to shove, and that's not a good sign. Hopefully we won't need to find out.

 

[FamilyGuy]

I agree that you can probably expect release and a lockout if this continues on to that point. Hopefully it doesn't come to that, but you have to prepare just in case. My guess is Hansell's looking at the Northwest AMFA strike in '05 as the model. That was an independent union that struck in the face of concession demands. The mechanics thought they were too highly trained and valuable to the operation to be replaced. NWA management proved them wrong - they prepared, increased outsourcing while they hired/trained replacements, and ended up breaking the strike. The mechs took a bigger pay cut when they settled than the proposal they struck over. The cleaners & custodians got outsourced, most didn't get their jobs back at all. Effectively killed the union.

Hope your leadership is looking at this as a case study and preparing, I'd bet Hansell and his team are. Selling off lift while hiring and training replacements is all to viable a strategy, and from what you all say it doesn't look like he understands or cares that this would destroy the brand that you and RS built over the years. Maybe you can make the owners (customers) understand that before it progresses too far. There's a reason they chose frax over charter in the first place.

It had occurred to me as well that Jordan may be looking at the NWA-AMFA strike as a model.

If he is, there are a number of important differences that could lead to a totally different outcome:

1 - Outsourcing maintenance is completely different from outsourcing the pilots. Maintenance is largely transparent to the paying customers. They don't see the mechanics and have no idea who they are or what they do. Replacing the pilots, particularly for a fractional where there is a lot more interaction between the crews and the owners, is not transparent and would likely lead to a lot of concern from the owners.

2 - In 2005 there was still a lot of excess capacity in the economy and particularly with the airlines. NWA was able to hire and train a lot of mechanics in the months leading up to the strike. This was well advertised in the months leading up to the strike as AMFA was picketing at their training sites. There isn't enough excess capacity (aircraft and pilots) to handle the NJ demand currently, and the training lead time would be even longer. There is also no sign that NJ is training a pool of replacement pilots on the side.

3 - NJ Sales has been selling the product for over 20 years by telling the owners how highly trained the pilots are and how their safety is never compromised because they have pilots only fly one type of aircraft. I suspect many owners will question what they are paying for if NetJets suddenly relaxes its "standards" in an effort to find pilots to fly the aircraft.



I hope Jordan isn't foolish enough to believe the NWA-AMFA model will work in this situation, but I know he is arrogant enough to try. There have already been plenty of examples where he has totally ignored his own internal industry experts and charged headlong into losing situations.

Knowing that, your advice and the previous posters advice to prepare and get your financial house in order is wise.

 

[BlueNose]

It had occurred to me as well that Jordan may be looking at the NWA-AMFA strike as a model.

If he is, there are a number of important differences that could lead to a totally different outcome:

1 - Outsourcing maintenance is completely different from outsourcing the pilots. Maintenance is largely transparent to the paying customers. They don't see the mechanics and have no idea who they are or what they do. Replacing the pilots, particularly for a fractional where there is a lot more interaction between the crews and the owners, is not transparent and would likely lead to a lot of concern from the owners.

2 - In 2005 there was still a lot of excess capacity in the economy and particularly with the airlines. NWA was able to hire and train a lot of mechanics in the months leading up to the strike. This was well advertised in the months leading up to the strike as AMFA was picketing at their training sites. There isn't enough excess capacity (aircraft and pilots) to handle the NJ demand currently, and the training lead time would be even longer. There is also no sign that NJ is training a pool of replacement pilots on the side.

3 - NJ Sales has been selling the product for over 20 years by telling the owners how highly trained the pilots are and how their safety is never compromised because they have pilots only fly one type of aircraft. I suspect many owners will question what they are paying for if NetJets suddenly relaxes its "standards" in an effort to find pilots to fly the aircraft.



I hope Jordan isn't foolish enough to believe the NWA-AMFA model will work in this situation, but I know he is arrogant enough to try. There have already been plenty of examples where he has totally ignored his own internal industry experts and charged headlong into losing situations.

Knowing that, your advice and the previous posters advice to prepare and get your financial house in order is wise.

Those are all good points. I agree that a lockout using the NWA-AMFA model would do great destruction to the brand, for the very reasons you listed. But from what you guys have said here, you have an aggressively anti-union CEO with no understanding of the industry, who sees private lift as a commodity and pilots as replaceable cogs. I think it's tempting for a guy like that to give it a try. I've long since given up being shocked by the greed and arrogance of any American CEO.

But we disagree in that I believe there's enough charter lift available (not quality lift, but lift) to make him think it might work, with a plan to hire replacement cogs - er, pilots - in the medium term. And there's never a shortage of pilots if you're willing to lower your standards enough. Remember the hiring pace at the Frax back in 99-2000? Don't know about NJ, but we ended up with some real winners at FO, same at RTA. Knew one FO new hire whose most complex plane flown was a C-182. An RTA guy ended up being a bank robber. The companies were able to sell new owners on our pilots' experience and safety back then, so I'm not so sure most owners are educated enough in what we do to know the difference. That's one area where a union education campaign might prove effective.

 

[jtf]

NetJets can't even hire and train enough pilots to keep up with current attrition and demand. No way they can train up pilots fast enough to break a strike. Even with massive lift availability, the customers would revolt. Why would they be willing to pay NetJets prices for charter they don't want? They wouldn't put up with sell off after sell off unless it was comped of severely discounted and then NetJets just hemorages money even faster. No way management really wants a strike to try to break us- but it looks great on news releases in our battle against them. I have a hard time believing we would ever get released anyway, though I personally relish a strike ASAP to get this thing settled quickly. I am financially prepared now to go all in, even if we STMFD. I began preparing when the furloughs were announced, though at the time it wasn't a strike fund- just a fund in case furloughs went deeper. I honestly would prefer to STMFD and start over than accept a POSTA.