JetBlue to land in ATL

[CatYaaak]

[BHowever, LCC's are successful because they are able to offer seats at fares that they can make money on but the competition can't. They can do this PRIMARILY because their employee wages and benefits are far lower. If you disagree with me, I challenge you to provide a more significant cost savings. I invite you to visit each airline's investor relations page for the SEC reports. A breakdown of costs can be found there.

I commend jetblue on their success, and I wish their employees the best. You do a fine job. However, you cannot pretend that you are not putting downward pressure on the compensation packages for this profession. It is not something to gloat about, and I hope that my airline does everything we can to curb your growth. [/B]

I'd say being bankrupt or heading that way puts a far greater downward pressure on compensation packages.

But now I'm REALLY confused. Repeatedly I've read on these threads from those that defend high pilot wages in the face of concessions the declarations that "labor costs have no bearing on the bottom line", and " concessions can't save an airline from bankruptcy"? Here however, you invite people to read the investor relations page SEC reports as evidence to show that exactly the opposite is true.

So what you are saying now is that labor costs (and therefore pilot salaries) DO INDEED have a bearing on whether a company stays in the black?

 

[FlyDeltasJets]

I have never said that that employee wages did not have a bearing on a company's bottom line. Wages and benefits are by far the largest expense, so of course they have an impact.

However, I HAVE said that concessions alone cannot save an airline. Look at TWA, EAL, PAA, etc for proof of this. I have always said that concessions MAY be needed, and if so, they will be given. However, I do not support giving money to inept mgt so they can pi$$ it away. Concessions must be temporary, well thought out, and only given as part of a sound business plan. Keep in mind, however, that if we did give concessions, it would not be long until the lcc's would have to follow suit, or risk their competitive advantage. One would imagine that most pilots would be rooting for us to maintain the standard. It appears that is not the case.

In the meantime, if you have proof of me saying that labor costs have no bearing on a company's bottom line, I invite you to post it. If not, I have no intention of defending posts made by other people.

 

[SpeedBird]

WARNING: Long Post

FDJ:

I'll take a crack at your assertion that jetBlue is successful only to the degree that it pays low wages to its employees. Here's your post for reference:

*************************************

"When employee salaries and wages make up only 1.87 cents per ASM, it is not hard to see why you are making progress against airlines whose employee costs are about 4.2 cents per ASM. Lower wages and benefits are the majority of your cost savings, and to assume otherwise is to ignore reality.

There is no "secret" to the success of the lcc's. It is simple. It is not cheaper airplanes, good customer service, tv's, innovation, etc. All those things certainly help, and I commend you for them. However, LCC's are successful because they are able to offer seats at fares that they can make money on but the competition can't. They can do this PRIMARILY because their employee wages and benefits are far lower. If you disagree with me, I challenge you to provide a more significant cost savings. I invite you to visit each airline's investor relations page for the SEC reports. A breakdown of costs can be found there.

I commend jetblue on their success, and I wish their employees the best. You do a fine job. However, you cannot pretend that you are not putting downward pressure on the compensation packages for this profession. It is not something to gloat about, and I hope that my airline does everything we can to curb your growth.

**********************************

Your post about low wages is one that is brought up frequently by the casual observer, but is essentially incorrect.

First of all, it has been refuted many times that jetBlue pays at, or above, industry wages for an airline that's only been in business for three years. Now every pilot coming on board at jetBlue knows what they're buying into. We've been told by many inside the company that we can expect pay and benefits to mirror what is found at SWA under a mature pay and benefits scenario.

Is it industry leading? No, but for the business model that jetBlue pursues, it is properly established, and anything but "low."

This is an important point. For you to say that jetBlue brings down industry wages is invalid. You can't compare wages that Delta pilots earn to wages earned by jetBlue pilots. The reason is simple,while both airlines operate under a 121 certificate, they are vastly different in how they serve their markets, evidenced by their vastly different business plans. One (Delta) bases its business plan on its ability to generate high revenues, while the other (jetBlue) bases its plan on maintaining low costs primarily through efficiency and high utilization of high cost assets.

For you to compare wages at Delta and jetBlue on a one for one (hourly) basis is to compare apples and oranges. This rationale would also apply to regional pilot wages as well. Of course no one expects them to paid major airline wages.

While we may fly similar airplanes from the same airports, we operate on entirely different tracks, driven by different operating priorities established by our respective business models.

What you fail to understand about jetBlue's ability to make money is that it is driven by outstanding efficiency. This is evidenced by its perrenially high gross margins. For 2002 it was 16.5%. When you look at jetBlue's fleet a couple of things standout in stark contrast to the rest of industry.

First, jetBlue flies its airplanes almost 13 hours per day (12.9). Second, jetBlue earned over $635 million dollars in revenue for 2002 with an average fleet size of 30 airplanes. That comes out to a revenue per aircraft basis of $21.2 million dollars. When you compare this to the industry gold standard, SWA, jetBlue maintains a sizeable advantage over SWA in these two categories (>than %21). Add to this greater average seat # size, and speed over the B737NG and that racks up some serious ASM generating capacity for a relatively small fleet of aircraft.

So what's my point?

At $45-50 million per airplane, the highest cost to an airline are its airplanes, not its employees. Once again, when compared to SWA, jetBlue is able to generate comparable ASMs with 25% fewer aircraft. Not only does that mean fewer airplanes, but less fuel, less employees, less maintenance, less overhead, etc., etc., etc.

Now that's what jetBlue's advantage is over SWA. Now, just imagine what it is over a hub-and-spoke carrier like Delta.

So Delta now wants to field its own low cost alternative in Song. This creates a problem for Delta management based on my earlier statement above. If they want to play in this new arena, they must change their basis from revenue generation, to low cost, high efficiency.

What side of the fence will DALPA fall on?

They will not be able to have their cake and eat it too over the long-term if Delta management pursues a larger role for Song vs. its mainline operations. Today's annoucement by jetBlue will only put further pressure on this situation.

Industry wage deterioration is not the fault of jetBlue, but your own airline's (read: management) decisions to alter its traditional business model and undercut the contractual commitments made to you during a period where the airline operated solely under a revenue generation scheme. The implementation of Song now puts that into serious question.

Is it right or wrong? I don't know the answer, but I can tell you its far more complicated than you suggest, and certainly not the fault of people flying jetBlue A320s around this country.

 

[FlyDeltasJets]

Re: WARNING: Long Post

**********************************

Your post about low wages is one that is brought up frequently by the casual observer, but is off the mark.

First of all, it has been refuted many times that jetBlue pays at, or above, industry wages for an airline that's only been in business for three years. Now every pilot coming on board at jetBlue knows what they're buying into. We've been told by many inside the company that we can expect pay and benefits to mirror what is found at SWA under a mature pay and benefits scenario.

With all due respect, who cares how long you have been in business. Your employee wages and benefits are lower, and they ARE having an effect on the profession. The evidence of this is everywhere, but mostly in company negotiations.



Is it industry leading? No, but for the business model that jetBlue pursues, it is properly established, and anything but "low."

This is an important point. For you to say that jetBlue brings down industry wages is invalid. You can't compare wages that Delta pilots earn to wages earned by jetBlue pilots. The reason is simple,while both airlines operate under a 121 certificate, they are vastly different in how they serve their markets,evidenced by their vastly different business plans. One (Delta) bases its business plan its ability to generate high revenues, while the other (jetBlue) bases its plan on maintaining low costs primarily through efficiency and high utilization of high cost assets.


That is patently untrue. They do not achieve low costs "primarily" through efficiency. They get their low costs partly through efficiency, but "primarily" through labor costs. Look it up.


For you to compare wages at Delta and jetBlue on a one for one basis is to compare apples and oranges. This rationale would also apply to regional pilot wages as well. Of course no one expects them to paid major airline wages.

While we may fly the similar airplanes from the same airports, we operate on entirely different tracks, driven by different operating priorities established by our respective business models.

I think that you are overestimating the differences between the two airlines. We both fly people from the same airports to the same airports on the same size airplanes.



What you fail to understand about jetBlue's ability to make money is that it is driven by outstanding efficiency. This is evidenced by its perrenially high gross margins. For 2002 it was 16.5%. When you look at jetBlue's fleet a couple of things standout in stark contrast to the rest of industry.

First, jetBlue flies its airplanes almost 13 hours per day (12.9). Second, jetBlue earned over $635 million dollars in revenue for 2002 with an average fleet size of 30 airplanes. That comes out to revenue per aircraft basis $21.2 million dollars. When you compare this to the industry gold standard, SWA, jetBlue maintains a sizeable advantage over them in these two categories (>than %25). Add to this greater average seat size, and speed over the B737NG) and that racks up some serious ASM generating capacity for a relatively small fleet size.




You are very efficient. I commend you for it and have never denied it. However, our revenue per employee is higher, our revenue per airplan is similar. You do not corner the market on efficiency. More importantly, any advantage you may have in this criteria is not nearly large enought to explain the difference in CASM. You have almost a 3 cent advantage here. That is huge, yet many seem to want to understate it.



At $45-50 million per airplane, the highest capital cost to an airline are its airplanes, not its employees. Once again, when compared to SWA, jetBlue is able to generate comparable ASMs with 25% fewer aircraft. Not only does that mean fewer airplanes, but less fuel, less employees, less maintenance, less overhead, etc., etc., etc.

Now that's what jetBlue's advantage is over SWA. Just imagine what it is over a hub and spoke carrier like Delta.


While airplanes may take the greatest initial capital outlay, employee wages are still more expensive. For comparison purposes, in the third quarter, your costs for aircraft rent was .45 cents per ASM (half what you paid for fuel, an airlines second largest expense). Your cost for depreciation and amortization was .31 cents per ASM. Compare that to 1.87 for employee wages and benefits and you will find that you are greatly mistaken when you say that airplanes make up the greatest cost. I am not trying to be rude, but please read your 10k. I think that it will better explain what I am trying to say.



Now Delta wants to field its own low cost alternative in Song. This creates a problem for Delta management based on my earlier statement above. If Delta wants to play in this new arena, it must change its basis from revenue generation, to cost efficiency.

Delta has always competed on a cost basis, as opposed to U, UAL and AMR. DAL, CAL, and NWA always were cost conscious, which explains why they are hurting less than the others. Song will be an extension of that philosophy, not a departure from it. Delta was the most cost conscious in the industry even before Neeleman was born. You are incorrect when you assert that they concentrate more on revenue generation.


What side of the fence will DALPA fall on? They will not be able to have their cake and eat it too. Industry wage deterioration is not the fault of jetBlue, but your own airline's (read: management) decisions to alter their business models and undercut the contractual commitments made to you during a period where the airline operated under a revenue generation scheme. The implementation of Song now puts that in question.

Once again, your portrayal of Delta's business model is incorrect. Just because someone undercut our costs does not mean that we are not cost conscious. My take is that SONG will be a success. Time will tell.


Is it right or wrong? I don't know the answer, but I can tell you its far more complicated than you suggest, and certainly not the fault of people flying jetBlue A320s around this country.

I never said that it was their fault. But to pretend that the lower costs of JBLU do not come largely from employee costs is incorrect, and to claim that those costs do not put downward pressure on other pilot contracts is naive.

 

[SpeedBird]

FDJ:

Well I tried to answer your original post with the facts and numbers, as you demanded. If you want to ignore them and tell me that I don't know what I'm talking about that is your privilege.

However, if you think that Delta operates its hub and spoke business model based on a low cost basis, then you have a serious lack of knowledge about the airline industry and how your company operates.

I've read the jetBlue 10Ks many many times and feel very confident saying that know them far better than you. Since I don't expect you to know this I won't hold a grudge, but I own degree in accounting and also a MBA, so please don't attempt to "educate" me on how to read financial statements.
Sheeesh, I've probably forgotten more about them than you'll ever care to know.

So, since you seem to have a good handle on how things really are, and since I'm rather tired of trying to make reasoned response with you, I'll just leave you to your own and agree to disagree with you on this issue.

Have a good day.

 

[rapidD]

Guys,

This is a great discussion on the current state of OUR industry.

Sorry to say, but it's a marked departure from what I read most often on these posts. I, too, salute JB and SWA and Air Tran, etc. For anyone pushing the throttles up for a US carrier to think that they are treading new ground is, in my experienced mind, naive. We are all related in some form or fashion. I happen to be with one of the "dinosaurs" who is attempting to change their strategic vision. I see the need for change also...more than most of you can imagine. Again, though, if you are a card carrying member of our elite group of pilots you must understand that what success or failures we individually experience, apart form management snafus, we share the joint future. Whether you at JB understand this or not, you are indeed the recipients of "your brothers" previous success and failures. Some day, you'll want more. It will come in the form of comparisons to others, just ask the long-term SWA guys. You won't be happy. Then, you'll turn to the advantages of others and claim that you're doing the same job. You know what? You are. Just ask the boys and girls at Eagle, Comair, ASA, etc. That's when you'll understand that you are a member of a larger community. Don't let short-term success or job security blind you. Whatever success or failure any company has DIRECTLY affects us all. The evidence is there. Everyone fly safe and keep your eye on the ball.

rapidD

 

[canyonblue]

Originally posted by FlyDeltasJets However, you cannot pretend that you are not putting downward pressure on the compensation packages for this profession. It is not something to gloat about, and I hope that my airline does everything we can to curb your growth.

It is the job of your Negotiating Commitee to deal with the company when determining wages relevent to your peer group. The low cost airlines do NOT fly the same aircraft to some of the same places that most "network" carriers do.(ie:International) For ALPA or any other union to go into negotiations with the company using SWA, jetBlue, Airtran, or ATA as a "peer group" is a problem that your membership should address to your MEC. As a former Negotiation Commitee member at an ALPA carrier I remember the company trying to lump us in with "different" model carriers. We would throw up the BS flag and put a halt to that crap, perhaps so should alot of other Majors. If pilot pay is being dictated by LCC's, you're airline is in alot more trouble than you think.

 

[AlbieF15]

Let me tell you about 3 pilots know....2 at DAL and 1 at JetBlue.

DAL pilot # 1 is a good bro from F15 days and still flies in the ANG. Hired fall of 99'. Now on bubble for furlough. Made GREAT money for a while as a 757 FO. Displaced now to MD 88 FO, on reserve, hoping to last 8-12 months more prior to the F-word.

DAL pilot # 2 was hired in Jul 01....last class prior to hiring freeze. (any other Delta wannabes like me remember Plato's "60 a month forever" predictions?) Never made it to the line before furlough. Likewise...troughing in the ANG (thank God for those jobs!)

Third pilot was Eagleflip. I use him as an example since we were to be classmates at JB in Jan 02. If he's not a Capt now he's close.

Now...my question. Guess which one of these guys made the most money last year? DAL pilot 2 beat Eagleflip, but with min line guarantees going down during furloughs the advantage wasnt' a big as you might think. Next year...different story! I'd venture to say with profit sharing a young JB captain will make 135-160k...perhaps as early as year 2.

Remember furlough math, too. Great contract, plus no job, equals ZERO income. Pretty good contract, plus work, equals pretty good income.

There is more to being happy at work than money, but since that is the unit of measure in this thread I'll just stick to the finances.

My point to this is two-fold. First...everyone acts like working for JB or SWA is selling your soul. Dudes...I am making 61 bucks an hour on the panel at the premier freight company right now, so I will be making HALF of what I could have made this year at JetBlue. I sit sideways flying rubber dogcrap in the middle of the night listening to the Captain drone on about how hard it is to get a good contractor to put the finishing touches on his $750,000 waterfront dream house. Does that mean I'm doing the brotherhood of airline pilots a disservice by hanging out making less money on the panel? Long term, perhaps it will even out once I upgrade--but if you read the FedEx threads you will see that things are looking a bit stagnate over at the mighty purple. (sidebar...I DON'T want to the guy who stays 5-6 years on the panel in the last 10% of the seniority list the whole time...but it could happen!) Guys who work at JB are making more money than anyone on furlough right now, and I'd venture to say a 2-3 year guy at JB is making more than a 2-3 year guy at about about any major right now due to wage givebacks (United), less hours of flying, and the rapid upgrade from the right seat. So...explain to me again how these JB guys are sticking it to us--especially to those of us in ALPA?

Second--some of you may remember the late Sam Kinison's line on the famine in Eithiopa..."maybe what you people need to do is MOVE TO WHERE THE FOOD IS!" Right now, the "food" is at SWA and JetBlue, and to a lesser extent Frontier and AirTran. Those companies are making money right now in tough times by catering to the public that demands lower fares in order to be cajoled back into flying. Guys are going to work there because...well...they are hiring! You can scream about "selling out" your flying brethren all you want, but this ALPA member will remind you that unless someone is willing to pay to stuff your plane with either people or cargo, the best contract in the industry in meaningless without the fresh flow of capital into your company's coffers.

Go read the ASA guy's post again about trying to fly home to get a feel for what the general public, not us airline pilots, feels when trying to travel. I can go online, get a fare for less than 300 bucks about anywhere on SWA, Air Tran, or JetBlue. For example...I had a one way FedEx RSW-MEM trip pop up in open time, and decided to price tickets to TPA. One day prior, I could get an AirTran flight from TLH for less than $150 bucks. US Air, however, wanted $550 for the trip from my local base. Those low fares invite travel and encourage people to purchase--and in fact build a market. The higher fares encourage you to do what I did--rent a car, suck it up, and drive on down. (Yes...I could have jumpseated but I HAD to be in RSW in time for trip check in. Getting bumped wasn't an option...)

Anyway...I will gladly trade my 61 bucks an hour, my B fund, and benefits for the period 1/2003-12/2003 with any 2 year JetBlue captain that wants to trade the sum of our paychecks in December. What? No takers? I thought you guys were underpaid and were screwing us over? I'm not here to poor mouth FDX...its a great job, and I know that my 61 bucks an hour on year 2 pay isn't bad compared to what many people, other airline pilots included, are making. However...if you are telling a guy who made captain in 2 years, makes six figures, and is sitting on $150,000-$300,000 in stock options he's screwing you over and taking food out of your mouth....well...I just don't see it that way.

 

[rapidD]

Canyonblue

No, what I'm saying is YOUR pay is being dictacted by the failure of the majors. My airline is fine. Your are the one suffering the loss.

 

[FlyDeltasJets]

I've read the jetBlue 10Ks many many times and feel very confident saying that know them far better than you. Since I don't expect you to know this I won't hold a grudge, but I own degree in accounting and also a MBA, so please don't attempt to "educate" me on how to read financial statements.
Sheeesh, I've probably forgotten more about them than you'll ever care to know.

Then why did you say that airplanes were the airline's biggest expense? Perhaps you should brush off the books.

I don't mean to be rude, and I didn't mean to be rude earlier, either. I didn't try to "educate" you on anything, all I did was suggest you reread the 10k, because your opinions seemed to be in conflict with what was printed there. I have tried to remain civil, I am sorry if you were unable to do so.

P.S.
Congrats on the resume. I would caution you, however, not to make assumptions about other people's knowledge or education.