It's a race, but where is the bottom?

[Singlecoil]

United announced today that they want to be able to operate more regional jets because the costs are so much lower than mainline.
As we all know, that is certainly nothing new. It is probably cheaper for them to run two CRJ-700's than one B-737.
Of course a huge part of that is labor costs. I'm not aware of any RJ operator that offers retirement to its pilots, and Southwest and Jetblue don't either.

My question is this: Is company paid retirement going to be a thing of the past? Or is it more likely that the pendulum is swinging right now to RJ's and LCC's, but once people realize that they are going to be there for an entire career, they will demand higher pay and benefits, thus driving costs up at those carriers and making the majors more competitive?

I know, if we were all plumbers or electricians we would all be in the same union and wouldn't have this discussion, but we're not nor will we be in the future.

What are some forward thinking ideas about how all of this is going to end up? I don't think the ATC system can handle the flood of RJ's that the CEO's would like to unleash in the next five to ten years. Is more, smaller jets the wave of the future?

 

[ceo_of_the_sofa]

company sponsored retirement...that must of been nice...I don't think I'll ever get that gold watch and a wooden plaque, no matter what industry I am in...

 

[cessna_driver2]

What about boieng and airbus. Will they be able to switch from wide bodies and start building smaller crj?

I think when we see them do that, The big boy days will be over.

just .02

 

[46Driver]

It is very difficult to write this being completely distracted by the photo beside FlyChicago but the thing to add is that the customer prefers the convenience of Delta (or airline of your choice...) offering RJ flights morning, noon, and night instead of 1 flight per day with a 737, take it or leave it. Thus another reason for the spread of the regionals.

 

[I.P. Freley]

I'm afraid I will have to agree with the above...

It's official. FlyChicaga is my hero.

 

[bobbysamd]

United plans

From MSNBC.com

United unveils transformation plans

Carrier to launch separate low-cost unit with cheaper fares

CHICAGO, Feb. 5 — Bankrupt United Airlines on Wednesday revealed some of its plans for transforming itself, including intentions to launch a completely separate low-cost unit with cheaper fares for leisure travelers.

UNITED IS STICKING BY its plan for a low-cost “airline within an airline,” first discussed a few months ago, even though its unions have criticized the notion of a legally separate division.
The so-called “transformation plan” being unveiled is separate from a plan of reorganization, which will be needed to emerge from bankruptcy protection. That will come later in the process, United said on a telephone hotline to employees.
Elk Grove Village, Illinois-based United, a unit of UAL Corp., filed for bankruptcy in December, the largest airline ever to do so. It followed smaller US Airways Group’s Chapter 11 filing in August.
Public information about the plan has been scarce as United begins negotiations with aircraft lessors, suppliers and workers about concessions to turn the carrier around.
Details of the “transformation plan” were presented to unions on Tuesday. UAL’s board of directors glimpsed it last week and issued a statement in support.
Included in the plan are continued mainline jet service, a new low-cost carrier that is an entirely separate entity with a single fleet, continued use of United Express regional service with 70-seat regional jets, and alliances, the airline said on the hotline to employees.

TOTALLY OPPOSED

Paul Whiteford, head of the United branch of the Air Line Pilots Association, said in an interview Wednesday that he remains totally opposed to a separate legal entity that could be spun off, with separate pay scales and seniority lists.
“It was a PowerPoint presentation,” Whiteford said of the union briefing Tuesday. “It’s hard to describe it as a business plan—there aren’t fiscal targets for labor to negotiate.”
Whiteford said that, if United insists on creating a separate entity, a judge will ultimately decide how to proceed since ALPA will not go along with the proposal.
The International Association of Machinists, meanwhile, said it continues to negotiate with the airline and will not release a position on the low-cost carrier plans.
United said its transformation plan — created under new Chief Executive Glenn Tilton — was designed to meet four different criteria. It must transform the airline, meet the changing needs of travelers, build a cost-competitive airline, and reengage investors.
UAL’s common stock was trading Wednesday at 94 cents a share after being above $100 in the late 1990s. The company’s chief financial officer has said in court the shares are likely to be worthless at the end of the bankruptcy process.
United said its network is “central to the plan for transformation’s success.”
“The goal with the main (air)line is to meet the needs of the core business traveler while maintaining the lowest costs among the network carriers,” it said. “The company is in discussions with its unions on wage and work rule changes, renegotiating its aircraft lease and mortgages and restructuring its fleet, with the goal of saving $500 million.”

LOW-COST CARRIER
United said it faces low-cost competition in 70 percent of its markets. It had its own shuttle service on the West Coast, but shut it down after the Sept. 11, 2001, attacks slashed the demand for travel nationwide.
The company is currently discussing the structure and size of the low-cost carrier, but said it has proposed a completely separate entity with its own management, uniform fleet, separate workforce and access to capital.
“While it would remain separate in these key areas, it would be fully integrated into United’s hubs and network, as well as its frequent flyer program and brand,” it said.
Joseph Schwieterman, a transportation expert at DePaul University in Chicago, said he was less skeptical than other analysts about the low-cost carrier’s viability.
“It will lessen the pressure on making draconian changes throughout the airline,” Schwieterman said. “It will allow United to compete for travelers who want rock bottom prices, while protecting its premium product for business fliers.”
United also said it is falling behind the competition in regional service to smaller communities and that it needs 70-seat regional jets to beef up that sector.
“The 70-seat jet falls nicely into the fleet, filling a significant hole between the 50-seat (regional jets) and the 100-seat airliner,” said Doug Hacker, UAL’s chief strategic officer.

What a surprise. Watch the spinoff turn into an alter-ego. <sigh>

Sounds like the regionals are the place to be and where most people will stay, unexpectedly.

 

[Illini Pilot]

it really does make sense, with the decrease in demand for huge airliners to smaller, more efficient CRJs, etc. I think flexibility, convienence and quickness will be the focus of the airline industry, not how big of an airplane can be created to shuttle 500+ people around at a time. security and the global focus on efficency and speed (i.e. email/electronics/internet are replacing snail mail,etc) will create the demand for more flights, but not necessarily a huge increase in passengers. this appears to be a good thing for pilot demand, because 1 crew flying a 747 will be cut into 3 crews flying 757s, 737s, A320, CRJs, etc(depending on the length/demand of route). however, i dont think the 200,000+ salaries will continue to exist, rather leveling out at a southwest-esque pay scale...which certainly aint bad! speaking of southwest, the "no frills" approach to airfare definately appeals to the masses, people no longer treat flying as a special event, like a cruise or whatever, they want to go to the airport, walk onto the airplane, and then get off within a few hrs. just my opinion tho

 

[flywithastick]

Re: CRJs

You can't make that much revenue on 50-seat jets. You can make a lot more with 150, 200, 300 seats.

I think I see what you're saying... they're loosing money with their current business model. So maybe they could just make it up with increased volume!?

I know we're all in a love-fest with the CRJ, but it just isn't the Godsend we're making it up to be.

IMO, RJ's (ERJ or CRJ) are here to stay in a big way.

This is a bad sign for United.

With respect to the folks who did and still work at UAL, if the airline can't make it in the 21st century in their current form, then so be it. Adapt or move out of the way.

As long as were discussing it, I predict a strike at UAL by some group in the next few months. They'll try and endure for a month or so then liquidate. Hope not. But if I had to bet, this is where I'd put my money.

Back to the top... singlecoil said SWA didn't offer a retiremant plan. I find this kind of hard to believe. If this is the case, there must be stock purchase, 401K matching or other savings benefits available to their people - a better solution than traditional retirement plans actually, IMO. More portable.

my 2¢

 

[flywithastick]

Re: CRJs

No, I'm not saying that increased volume will help

That was a joke... You can't make any more profit on something you're selling at a loss by upping the volume!!!

 

[PBRstreetgang]

Hey,
All of the above is partially correct. If one looks at the ratio of flight crew to ground personel it is roughly between 8to1 at the majors and 4to1 at the regionals. Factor into the mix the average ramper at a regional makes little more than minimum wage and the mainline ramper makes somtimes 4to5 times that amount. Employee wages are the variable that managment seeks to exploit. Shift the jobs to the regionals, this eliminates the mainline jobs and sets the longivity reset button. ie 5th year ramper,mechanic, f/a, pilot at the mainline looses job, job opportunity opens at the regional because of the shifting of the flying. The dream of corperate america managment, the ability to reset employee pay to lowest possible amounts.
This is not unprecedented, look at the explosion of the temp agencies during the '80s-90's. Oh yes I was not picking on the rampers, this analogy applies to any hourly employee at an airline.
See ya
PBR