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Cincy Enquirer Nov 2

At Comair, sentiment yields to dollars
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Analysis: 'In a commodity business, the low-cost producer wins'

By James Pilcher
The Cincinnati Enquirer


Comair is making money, yet asking for concessions from its pilots and flight attendants, more than two years after a pilots' strike almost killed the Erlanger-based airline.

What is this latest development doing to the internal fabric of one of the Tristate's home-grown business successes of the last 25 years?

More important, what does it say about the changing nature of the airline industry nationally?

The answers are interconnected, and all point to one thing: Comair now is just another airline, as painful as that is for long-time local executives and employees to accept.

Still a major player in the national aviation scene, Comair no longer is the golden star for either parent company Delta Air Lines or of the regional industry nationwide.

The reason? It no longer holds a near-monopoly on regional jets, which revolutionized the industry but now are commonplace throughout the country.

In fact, Comair is only one of a host of options for its owner, Delta Air Lines, which is looking to cut costs at every turn.

That imperative is at the center of the situation at hand.

Comair has gone to its flight crews, asking that their current contracts be renegotiated so it can lower costs. The company says Delta is dangling as many as 83 new planes - some from other carriers - and a lot of new routes over the next three-plus years to Comair if it can cut labor costs.

Yet Comair is turning a profit, a rarity in the airline industry nowadays. It earned more than $30 million in the second quarter, according to statistics released by the federal government.

Adding to the complexity: Both the pilots and flight attendants at Comair are the highest-paid in the regional industry, and neither workgroup is going to give up much without a fight.

That's doubly true for the pilots, many of whom vividly remember their 89-day strike in 2001 that almost killed the company.

Different environment

One Wall Street airline analyst goes so far as to say he thinks what is happening at Comair shows that Delta made a mistake in buying the company for $1.91 billion in early 2000.

Robert Ashcroft of UBS Investment Research says it would be much easier for Delta to squeeze a contracted carrier for lower costs than its own kin.

Ashcroft, who specializes in regional carriers, says the regional sector as a whole "is a divide-and-conquer industry now."

He says regional carriers merely contract with the big airlines to just do the flying, while the mainline airlines call all the shots.

The entire industry is cutting costs at every turn in a mad scramble to recover from the ever-lingering effects of the Sept. 11 terror attacks.

The larger companies, including Delta, are whipsawing, pitting one regional carrier against the other over the cost of what has become a common commodity: regional jet seats. (There are more than 1,200 regional jets in operation in the U.S. alone.)

"And in a commodity business, the low-cost producer wins," Ashcroft says. "The mainline carriers are pitting them against each other to get the lowest price.

"So when a mainline like Delta looks to award new jets and new flying, the only thing they care about is who has the lowest price. And our data shows that Comair pilots are among the best-paid in the industry, which is a handicap for Comair."

Different company

It wasn't like this even as recently as five years ago. Comair was the first airline to fly regional jets in the U.S. when it introduced them 10 years ago.

Comair earned profit margins unheard of in the airline industry and was on its way to becoming a $1 billion company in terms of revenue when Delta bought it. Many local workers and officials prided themselves on having started in the Tristate, and the Erlanger campus has always been like one big family.

Many workers have been there since the beginning, in 1977, and most know the other on a first-name basis.

But now, company executives have had to supplicate themselves to the pilots for one of the first times in company history, possibly reopening wounds that are just barely healed after the pilot strike.

In addition, the Delta officials who run the airline's regional network now make those decisions from Atlanta, as compared with three years ago, when Delta Connection Inc. shared offices with Comair locally.

That means there's not a lot of sentimental value attached to Comair starting the regional jet revolution 10 years ago.

Others struggling, too

Comair is not the only carrier in this situation. Northwest Airlines is squeezing Minneapolis-based Mesaba Airlines, which last month announced layoffs at its maintenance center at the airport here and is asking for major cuts from its pilots. United Airlines, still in bankruptcy, is reworking its deals with its contracted regional carriers.

Comair has always prided itself on being different from the rest, even being an innovator in that it was the first major regional airline to take a major strike.

Now, however, the situation is nearly as touchy as that tense spring for the company, its workers and its unions, who all now must decide whether to keep the status quo or change once again.

Only this time, change would mean just keeping up with the pack.

 

[jetflyer]

WHIPSAWING hurts Mainline Pilots

If I were a mainline pilot, which i wish i were, I would hate to see what is happening with the whipsawing. I COULD NOT BELIEVE that Delta pilots were asking Comair pilots to take pay cuts. THIS ONLY HURTS THEM. LET ME EXPLAIN......

One thing we're starting to see is that the low cost option seems to win. So when the cost of the Regional jets is low, like MESA, CHQ, etc. and getting lower at other regionals then they become more and more profitable than a mainline plane and the RJs numbers will grow more and more.

If I were a mainline pilot I would hate to see the pressure to make the REGIONAL PILOT'S PAY LOWER and would want the Whipsawing to end now. It is creating a downward spiral for all Regional's pay and LOWERING RJ costs which is only going to make mainline jets the second option at every airline.

IF the RJ costs were higher, MAINLINEs would be the ones growing right now. We need to increase RJ RATES NOT lower them to help preserve the integrity of the ENTIRE INDUSTRY for current and future PILOTS.

LOWERING RJ RATES only puts MORE DOWNWARD PRESSURE ON MAINLINE RATES now and in the future.
This entire thing is pretty retarded.

JUST when the regional industry was going forward and contracts were getting better, everyone now is going backwards or staying low in pay ON PURPOSE to gain growth. This Whipsaw Thing is going to adversely affect MAINLINE and CONNECTION carriers for a long time if we allow it to continue and if MAINLINE PILOTS continue to ENCOURAGE IT!! STUPID! STUPID! STUPID!

Jet

 

[TWA Dude]

This thread is a definite improvement over the usual "let's hate the pilots at other carriers" banter. The big picture gradually comes into focus: Management holds the upper hand right now, and except for brief periods of unusual prosperity they always will.

Airline pilots are highly-trained, highly-skilled professionals. I often compare our profession to that of doctors for illustrative purposes. Y'all know what's going in the medical industry, right? Everybody respects a doctor but nobody wants to pay full price for medical care. The end result: doctoring isn't as highly paying as it used to be and it's also a lot less satisfying. Not that it'll happen, but if doctors could organize into labor unions would that really help them? Costs would rise and somebody would have to pay for it. It's a vicious cycle.

We're all in this together, yet it's also every-man-for-himself. Just because we all deserve better pay doesn't mean we're going to get it. It's satisfying to a lot of pilots to talk about unity and how we can "raise the bar" but such successes prove to be fleeting. It's market conditions and the relative incompetance of airline management that determines our prosperity.

Like the old joke goes, "People complain about the weather but nobody does anything about it." Well, our unions are today trying to change the weather and but for a few short-lived cloud-seeding successes are facing a near-impossible task. Forgive me if I sound pessamistic; I prefer to call it realism.

Reading the threads on this MB these days gives the impression that all pilots hate each other based on who they work for, and that's a darned shame. Truly we are more alike than different regardless of which airline we fly for. Getting angry at your peers is a choice you make and it says a lot more about you than it does about them.

Dude

 

[jaxson]

Consider that airline seats have become a commodity. i know everyone screams supply and demand...I agree but it seems like the situation mirrors the reverse economics of agriculture. When farmers create more food the price goes down so they grow more food further driving prices down ad infinitum et bankruptum. Pilots are the same. If we lower our prices for growth the growth will require lower prices. No one will ever be able to corner the market. Consider the prisoner's dilemma of ratting out his partner to save himself not knowing if his partner has ratted him out. Three possible out comes....both hang, one hangs, both go free. If each pilot group (including the unhired) chooses to fly for less and less they, in effect, hang the other pilots. If that pilot group also decides to fly for less then they both hang. Is this making sense to anyone?????

 

[surplus1]

TWA Dude,

I like your post. While I don't agree completely with everything you've said I appreciate the objectivity of the thought process. It's a refreshing change from what I usually read. Here are some comments re yours. I hope I can be as objective.

This thread is a definite improvement over the usual "let's hate the pilots at other carriers" banter. The big picture gradually comes into focus: Management holds the upper hand right now, and except for brief periods of unusual prosperity they always will.

Sometimes the rock throwing does get out of hand and I confess I've been guilty of some. While my own emotions don't border on "hate" of other pilots, I admit that the attitudes of certain groups are very frustrating to me. Whether mainline or regional the focus of most (at least those that post) often seems to be so narrow and short term that it escapes me. "Sound bites" on highly complex issues never get to the core and the span of attention mirrors that of a teenager, where video games, 30 second TV clips, MTV and movies of the Terminator bypass the real world. Management does have the upper hand. What I see as unfortunate is the concept that there has to be an "upper hand" at all. The adversarial relationships with management do us no more good as a whole, than the adversarial relationship with each other. Peace and prosperity will not come to us by emulating the Israeli/Palestinian conflict.

Airline pilots are highly-trained, highly-skilled professionals. I often compare our profession to that of doctors for illustrative purposes. Y'all know what's going in the medical industry, right? Everybody respects a doctor but nobody wants to pay full price for medical care. The end result: doctoring isn't as highly paying as it used to be and it's also a lot less satisfying. Not that it'll happen, but if doctors could organize into labor unions would that really help them? Costs would rise and somebody would have to pay for it. It's a vicious cycle.

I can't argue with that. I see it all as the same malady that allows the general public to buy more and more from company's like Wal-Mart and Tyson Foods, impervious to how they treat people like the one's doing the buying. We seem increasingly unaware of what is really going on around us. Thus the prosperity of the HMO, the gouging of the Medicare and Medicaid programs, and 20 billions to rebuild Iraq, while there are literally sick people without care and hungry people without enough food in our own communities, right here in "super power America". The "god" of money (or the pursuit of it) that we now worship as a society has not done much that I would call "good" in the development of our culture as a people.

We're all in this together, yet it's also every-man-for-himself. Just because we all deserve better pay doesn't mean we're going to get it. It's satisfying to a lot of pilots to talk about unity and how we can "raise the bar" but such successes prove to be fleeting. It's market conditions and the relative incompetance of airline management that determines our prosperity.

Three cheers. When do you think we might start to explore strategies that deal with the "market"? I'm not so sure that airline management is "incompetent" though. I think that perhaps what we see as incompetence is our own failure to recognize that today's airline managers are not like those of yesterday. There objective is not to run a "successful airline", it is to make money for themselves and move on. A very different concept from those that developed the airlines that we pilots fly for. This is not limited to the airline industry, it's everywhere.

Like the old joke goes, "People complain about the weather but nobody does anything about it." Well, our unions are today trying to change the weather and but for a few short-lived cloud-seeding successes are facing a near-impossible task. Forgive me if I sound pessamistic; I prefer to call it realism.

I don't think you're pessimistic, the unions aren't doing well. However, we may have different ideas as to why. I don't think they are really trying to change the weather, at least not the current weather. What they are doing is trying to perpetuate the past. The people that run the unions are at the top of the professional pilot ladder and will do anything they can to keep themselves there, even if it means risking the destruction of the very profession that got them there. They have ignored the changes that are all around us and refuse to respond to current realities. Their objective is to keep it "the way it was/is" at whatever point in time they find favorable to their personal interests. Not very different from the behavior of the "managers" they criticize.

Reading the threads on this MB these days gives the impression that all pilots hate each other based on who they work for, and that's a darned shame. Truly we are more alike than different regardless of which airline we fly for. Getting angry at your peers is a choice you make and it says a lot more about you than it does about them.
Dude

Point well made. Unfortunately we live in a world where "survival of the fittest", "self-preservation is nature's first law", "dog-eat-dog", "instant gratification" and similar cliches mirror our every-day lives and are the focus of our thought processes. In fact they have become our "way of life". The predominance of "ME" is far more important to most of us than anything else. Ethics is an old-fashioned word that has little if any meaning to the majority of the masses today. Integrity has become passe'. That doesn't apply only to pilots, it's the American way. If that is true, we should not be surprised by what we see.

Today, the worth of a man is measured only by the balance in his bank account or the "limit(s)" on his platinum credit cards. How much money he has is far more important than how he got it, how he thinks, what he is, as a human being. We still believe in god, but he/she is not the same God of old. The pictures of god now look like this $$$.

I guess I'm pessimistic too, but I see myself as less of a pessimist and more of a "cynic -- a blaggard who sees things as they are, rather than as they ought to be."

Haven't seen you on the "board" for awhile. Nice to have you back. I have pleasant memories of our former political discussions.

Regards.

 

[Vortilon]

Jetflyr,

Just for the record, the DELTA PILOTS did not ask COMAIR PILOTS for wage concessions.....COMAIR MANAGEMENT did.

One position, however, that the Delta Pilots have is that they should not be the only ones to take pay cuts and concessions...something Delta management disagrees with. The Delta pilots didn't point at other groups and say "lower their pay"...they are merely saying "we are all in this together, are we not?" DAL Management doesn't think so.

So even with all the whipsaswing issues everywhere, DALPA is currently holding the line at this point.

On a side note, its pretty sad that COMAIR could ask for concessions from its pilots....what exactly could a $19/hr FO contribute? Gee...that 80-160 per month really helps the bottom line. Even more disgusting is that Comair is in the black AND they asked for concessions. At least the silence from the Comair MEC in response is deafening!

 

[TWA Dude]

Management does have the upper hand. What I see as unfortunate is the concept that there has to be an "upper hand" at all. The adversarial relationships with management do us no more good as a whole, than the adversarial relationship with each other.

Surplus1:

It's tough to find much to disagree with in your post as well. Of course pilots agreeing with each other doesn't make for very interesting reading.

We all know that the captain sets the tone in the cockpit. So too management sets the tone vis a vis the unions. If it's a competition to them it necessarily must be to us. Why most airline managers can't figure out something so fundamentally obvious, I don't know, but that's why I fly airplanes instead of managing them.

The "god" of money (or the pursuit of it) that we now worship as a society has not done much that I would call "good" in the development of our culture as a people.

My turn to be the cynic. What's the alternative? We can create a theocracy where "moral" law = common law but I think history has proven that to be a far worse alternative. Was it Churchill who said, "Democracy is the worst form government, except for all the rest."

I don't think you're pessimistic, the unions aren't doing well. However, we may have different ideas as to why. I don't think they are really trying to change the weather, at least not the current weather. What they are doing is trying to perpetuate the past. The people that run the unions are at the top of the professional pilot ladder and will do anything they can to keep themselves there, even if it means risking the destruction of the very profession that got them there. They have ignored the changes that are all around us and refuse to respond to current realities. Their objective is to keep it "the way it was/is" at whatever point in time they find favorable to their personal interests. Not very different from the behavior of the "managers" they criticize.

I view the expression "destroying the profession" with much skepticism. I feel the profession will ebb and flow with the market pretty much regardless of the lastest union contract, PFT, ab-initio programs, or what have you. I agree with your assessment of top union officials up to a point. What would differ if ALPA National officers were very junior? I'm not going to touch the Small Jet vs. Mainline Jet issue since I've already agreed that there is a conflict of interest there in ALPA.

Haven't seen you on the "board" for awhile. Nice to have you back. I have pleasant memories of our former political discussions. Regards.

Oh, I've been around. I've just lost patience in jumping into all the mudslinging. A year after my furlough and I'm finally back in the cockpit, so maybe I'll get angry enough to jump in more often.

Take care.

 

[belchfire]

If they are looking for cheap, I gotta
number in tn for them to call!!! Have
to be 19 seats though, that's all we
can afford!

 

[jobear]

It is refreshing to see a civil discussion on the state of affairs of the airline industry. One point I think we could interject here is that a Large portion of all US mainline carriers were Very heavily leverged before 9-11-01.
All carriers were overpricing there tickets and Buying/Leaseing new A/C and ungodly rates, one tragic event did not put some airlines into Bankruptcy. (hastened yes)
Any thoughts on this line of reasoning or am I being dumb again?

Jobear