Scope, RJ's and unions

[surplus1]

goldentrout,

Some interesting ideas and, as to be expected some interesting comebacks.

From my perspective, when you refer to ALPA and wonder why it does this or that and doesn't do this or that, you all seem to overlook something, i.e., who and what is ALPA?

The entire organization is owned, operated and run by pilots from the major airlines and their support staff. Yes, "other" types of airlines are members of ALPA, but they really have nothing to say about how ALPA is run or what ALPA does or doesn't do.

If you look at ALPA from the perspective of the folks that run it, then its doing just fine. It belongs to major airline pilots and is operated for their benefit. That's all there is to it.

And by the way, the people that are in power are not junior major airline pilots. They are senior and will take care of themselves first.

 

[Kaman]

Hello,
I have to disagree about the premise that the major airline business models (UA,DL,AA,etc...) aren't flawed. If the premise is made that the airline travel industry is highly cyclical, would it not be logical to design a corporate strategy that allows an airline to survive and grow it's business and marketshare. The airlines have lived by the motto, "Grab what you can now, because labor is going to kill you later on". All businesses go thru ebbs and flows that affect the bottomline. However, airlines seem unable to adjust quickly enough or even appear to have a strategic vision in down times that will still yield a consistently profitible business.
I do have a theory though. Just like California real estate in the 80's, the airline industry is overvalued. The amount of infrastructure that exists simply cannot be supported with the current traffic levels/revenue/cost structure. Labor costs are also out of line with the wages in other sectors of the economy. I am not bitc#ing, but the wage and compensation in the so-called "mainline" airlines are huge compared to what I make. Seems like the same thing is going on with the pilot group. I cannot for the life of me see how ALPA can justify 100K/ annum for a 100-seat jet when a 50-seat CRJ pilot might make about half that. The same argument holds true for the top pay of CSRs at $22.00/hr at mainline vice 12.00 at the WO(top pay). Both are doing the same job, and to top it off it takes a heck of a lot longer to make it to top dollar...HOWEVER, just like the pilots the regionals are still hiring CSRs, pilots, etc...mainline is facing lay-offs of ground personnel and you can forget about them hiring full-time CSRs off the street for like, oh the next century at least where I work.
I think the gentleman that said that we are all out for what we can get for ourselves and protecting what we have is accurate, it's basic human instinct (fault?) to do so. I don't know whats going to happen in the end, but rest assured that the pain is not nearly over and this business is NOTHING like it was when I began in it 23 years ago. After working for 2 years (EAL 78-80), serving 20 years in the military. Returning to the airlines in the midst of this mess has been a culture shock. It's a great thing to fly, but I think I'm going to leave aviation professionally (full-time anyway) and try something else...

Good luck,

ex-Navy rotorhead

 

[Rvrrat]

history repeated

Not trying to start an arguement, but look at it the other way. Isn't the explosion of the RJ taking prospects and job security at the majors?

The current conflab over the RJs appears analogous to the '46 strike against TWA. In the same way that the strike was partially precipitated by old animosity, so then is todays anti RJ scope precipitated by....money. It seems to be no secret that the higher wages of the mainline pilots has put more $ in the union till.

"ALPA's principal concern in the immediate postwar years lay in writing new employment contracts to cover operation of the new four-engined aircraft, which had been perfected during the war, and which were entering domestic service by early 1945. The airlines were vigorously advertising travel by four engined aircraft, and Behncke, with an eye to publicity, believed that a strike over higher wages for flying the new aircraft would not only win public approval but also shore up his shaky relations with the rank and file.
Partly because he harbored ancient resentments against TWA from ALPA's early organizational days but mainly because TWA was operating more four-engined aircraft than any other airline, Behncke singled it out for a strike."- Epilogue, The Airline Pilots- A Study in Elite Unionization; George E. Hopkins

 

[goldentrout]

Here's an intersting tidbit.

RJs being flown at Air Whisky, ACA, Comair, etc. are the highest cost per seat mile jet aircraft to operate based on current crew pay rates.

However...if the airlines fill those planes up...or even half fill them up...they are making money. Now there might be a lower cost per seat mile for a full 737/757/Airbus, etc...but if you can only get 40-50 people consistently on a route, then that 737/757/Airbus is actually losing money, even though the cost per seat mile is lower.

That's why we are seeing the explosion of RJs...because that's what the many markets can support. A full 737, even at mainline pay rates, is more profitable than a full RJ. If management could put a 737 on a route and make money...they would!

The problem with ALPA is that they consistently blame management for the financial woes of the airlines, and deny the fundamental market realities of the airline industry. Yes, in the past, I'm sure some airline managers have made dumb decisions and cost airlines millions. But the post 9/11 reality is that the airline market is radically different than pre 9/11.

Until ALPA faces this reality...all of us are going to suffer...except the senior, major airline guys, who run ALPA, and who have virtually no chance of being furloughed...unless of course their companies no longer exist...and they're even willing to risk that at the expense of the possible demise of their companies...unbelievable.

 

[csmith]

The problem with ALPA is that they consistently blame management for the financial woes of the airlines, and deny the fundamental market realities of the airline industry. Yes, in the past, I'm sure some airline managers have made dumb decisions and cost airlines millions. But the post 9/11 reality is that the airline market is radically different than pre 9/11.

This has been hashed many times over on just about every board imaginable. I will concede that 911 was an undeniably THE premier tragic event in aviation. More than the event itself, however, are the events which have arisen in the aftermath. Govt bureaucracy, the recession strengthening, and imminent war have contributed to the down cycle which rears its ugly head every 5-10 years. In my opinion, it is this which has sparked the business traveller's abscence--as it ALWAYS does. Management has grasped this opportunity, as it ALWAYS does, to increase the downward pressure on wages, keep the laborer down, and yet find the $$$ to give themselves large bonuses while keeping their outdated pricing models intact.

Is the market THAT radically different? That is the question which only time will answer. The rumblings say no, it isn't. My personal opinion is no, it isn't. People are back, and even more are showing up. When times are good, as always, the business traveller will be back. The budgets will once again allow for the travel, and upper management will get their perks again afgter the 15 minute hoopla is gone. There is NOBODY on these boards, myself included, who I consider a reputable source in airline economics.

Until ALPA faces this reality...all of us are going to suffer...except the senior, major airline guys, who run ALPA, and who have virtually no chance of being furloughed...unless of course their companies no longer exist...and they're even willing to risk that at the expense of the possible demise of their companies...unbelievable.

What reality is ALPA not facing? Salaries are inflated? Says who? Mr. Mullin has not come to the Delta MEC asking for anything. He has furloughed. Again, however, the rumblings indicate that this furlough has limited life? I ask you, as objectively as you can muster, as a furloughee would you want to take a year off with no pay and have the very job you left to come back to? Or would you rather your union offer to gut the contract to which the company agreed in order to "save" X amount of jobs. I can tell you what EVERY furloughee I have talked to has told me. If the airline is overstaffed, it is overstaffed. As it turns out, the airline is not overstaffed. In fact, the manager of crew scheduling has gone on record as saying that he cannot staff the airline should the company hold its word on the number of furloughs.

Or are you speaking of the scope limitations, lawsuits, dissention among the different groups in ALPA? All I can say is that this has been hashed numerous times. As far as the Delta pilots go, I am very happy with the way things have been handled to this point. Without the insight of what is actually happening behind the scenes with regard to recent activity within ALPA, I'm afraid that people are just shooting from the hip with accusations, judging via press releases, and are forming opinions without having real insight of confirmed information from the source itself.

CS

 

[Rvrrat]

Without the insight of what is actually happening behind the scenes with regard to recent activity within ALPA, I'm afraid that people are just shooting from the hip with accusations, judging via press releases, and are forming opinions without having real insight of confirmed information from the source itself.

CS, oft-times the weight of public opinion regarding an issue is greater than the actual language contained in a bill/law/contract/directive. The need for containment/secrecy of specifics is understood and has been written about quite directly with eloquence in another thread by a man who has earned my respect. Even so, the public discourse on any subject will continue while specifics of an issue are hammered out. Where ALPA is concerned, precious little unadorned factual content has been presented to the public at large; therefore, one who is outside of the actual process is prone to making use of the information available.

 

[goldentrout]

Csmith

I'll admit I'm not an airline economics expert. However, I believe ther are a few things that make this downturn very different than the previous downturns.

1. RJs. The advent of RJs...especially the 70 seaters (already on the property) and the 90 seaters (they'll be on the property soon), has already and will continue to change the employment picture for airline pilots. These aircraft from 40 - 90 seats fit perfectly (and profitably) into many markets that were previously money losers or marginally profitably with 727s/737s, etc. At my regional company, we've taken over many big city shuttle routes previously flown by mainline shuttle routes. The regional offers the same speed in a jet, but much more frequency of flights, at a lower overhead cost to the company. That's where the growth is now, and based on projected aircraft orders for the next 5-10 years, that's where the major growth is going to be. If I'm in charge of ALPA, I'm trying to see how I can get in on some of this action, rather than keep my boys on furlough tyring to "preserve the profession."

2. The extent of the "downturn" is much greater than before. According to the book "Flying Through Time," American Airlines lost 240 million and 475 million in 1991-1992. Last quarter, AMR lost 495 million in one quarter! Even adjusted for inflation, 495 million in one quarter is an astronomical loss.

3. There are many upcoming and strong lost cost carriers against which the big three must compete, which were not around during the last downturn (1990-1993) Frontier, Jet Blue, etc. These competitors will put a big crunch on ticket prices/revenues, which, in my opinion, will force the big four to compete using the lowest cost option available...i.e. RJs. I've heard the president of my company say it more than once, "passengers loads are up...but revenues are down."

I just checked Orbitz for round trip MCO/LGA, 23-26 Sep. You can do on Spirit airlines for $195. You can do it on AirTran for $223. AMR wants $275. All the others want $300 or above. This is for a trip leaving less than seven days from now, without a Sat. night stay. Normally the majors would be charging 700-800 dollars, maybe even a $1,000 for such a ticket. Now they only charge $300-$400. There's no way the major airlines can sustain their business model charging $300-400 for tickets that a year ago were $700-$1,000 dollars. That's why you're going to see many, many more RJs which can make money at those ticket prices. With AirTran, Southwest, Frontier, Jet Blue, etc. around, the days of gouging the business traveler are pretty much ended.

4. If you look at the yearly profitability of Southwest, they've never had a "downturn." They've even made money since 9/11. They're hiring and expanding. Why? Because while their top pilots make $150,000 or so a year, they don't have exorbitant employee overhead which crushes their profitability, and they operate planes which fit the markets they go into.

Just seems to me that this downturn is more severe and more pronounced than many of us want to believe. If things are getting better, why have AMR, Delta, and Northwest annnounced more furloughs?

True, I don't know what's going on behind the scenes, but I firmly believe there is no magic solution out there that is going to fix the plight of the major airlines/major airline pilots on furlough.

Your thoughts?

 

[9rj9]

things are much worse

you are right, things are much worse than anyone wants to admit.
Its not just a downturn, the industry is changing. ALPA better get their shiet together.

 

[~~~^~~~]

I just checked Orbitz for round trip MCO/LGA, 23-26 Sep. You can do on Spirit airlines for $195. You can do it on AirTran for $223. AMR wants $275. All the others want $300 or above. This is for a trip leaving less than seven days from now, without a Sat. night stay. Normally the majors would be charging 700-800 dollars, maybe even a $1,000 for such a ticket. Now they only charge $300-$400. There's no way the major airlines can sustain their business model charging $300-400 for tickets that a year ago were $700-$1,000 dollars. That's why you're going to see many, many more RJs which can make money at those ticket prices. With AirTran, Southwest, Frontier, Jet Blue, etc. around, the days of gouging the business traveler are pretty much ended.

I agree with everything else you wrote, but you misunderstand the economics of the RJ. Many people do.

The aircraft is not a low cost solution. Costs per seat mile are as high as a 737-200, or 727, even higher on short routes. What the RJ does is increase yield per seat mile because there are fewer seats to sell. Based on supply and demand, the RJ limits supply on a given route, increasing demand. The business travellers still fly and the excusion fares either drive, or fly a low cost carrier.

The RJ is not a threat to a mainline jet given a constant revenue per seat mile. The mainline jet has lower cost per seat mile and many more seats to generate revenue.

All this talk about mainline jets returning to routes when the loads justify bigger equipment is true - management is telling us straight about that.

What ALPA needs to figure out is that there is no practical difference between a revenue seat mile produced by me in a CRJ700, or produced by mainline in a Boeing jet. We are operationally identical as far as the company and the consumer are concerned. If ALPA wants to promote disparities in our profession, management is only too happy to exploit ALPA's flawed thinking.

 

[csmith]

1. RJs. The advent of RJs...especially the 70 seaters (already on the property) and the 90 seaters (they'll be on the property soon), has already and will continue to change the employment picture for airline pilots. These aircraft from 40 - 90 seats fit perfectly (and profitably) into many markets that were previously money losers or marginally profitably with 727s/737s, etc. At my regional company, we've taken over many big city shuttle routes previously flown by mainline shuttle routes. The regional offers the same speed in a jet, but much more frequency of flights, at a lower overhead cost to the company. That's where the growth is now, and based on projected aircraft orders for the next 5-10 years, that's where the major growth is going to be. If I'm in charge of ALPA, I'm trying to see how I can get in on some of this action, rather than keep my boys on furlough tyring to "preserve the profession."

I agree with you to the extent that the 40-90 seat jet market reset demand in the way that people get a jet over a turboprop, but the RJ is just another tool. I don't know what you are getting at exactly when you are talking about 90 seaters on the property soon. While your people may be telling you one thing, I wouldn't put a whole bunch of faith into their remarks. The management of DCI is probably barely in the loop at best. The union officials along with the RJDC folk are in a big recruitment drive at the current time. Delta management has publically admitted that they are actively searching for a >70 jet which will be flown by mainline pilots. It just so happens that I spoke with one of those in charge of ALPA yesterday. It would appear that the premier growth is going to be in the >70 seat market, and yes the Delta pilots will be in on that growth. "Keeping our guys on furlough" is a petty statement. It makes for an interesting cheap shot, but that's about it--especially as these guys will come back with full longevity, retirement, medical, etc. Our position, fully supported by the furloughees by the way, is to give them a great job to come back to. Some interesting things ae in the works as we speak. More to come.

2. The extent of the "downturn" is much greater than before. According to the book "Flying Through Time," American Airlines lost 240 million and 475 million in 1991-1992. Last quarter, AMR lost 495 million in one quarter! Even adjusted for inflation, 495 million in one quarter is an astronomical loss.

I agree it is astronomical. Nobody is saying it isn't. What I am saying is that we are all taking losses, and when airlines take large losses they account in such a manner to make them seem even larger--in order to give labor their beatings. The more times you go through this, the more you realize. Don't believe me, go ask an accountant. Delta's labor costs are high, I don't dispute that. Somebody has to be in the lead. Again in speaking with DD, #2 at ALPA, taxes, surcharges, and other governmental expenditures are what is killing this industry. He was quoted as saying every quarter on the dollar goes to taxes or surcharges for our enhanced security. Fuel has crept back up. There are many other factors which play into this whole equation, and affect it more, than pilot costs. Did you know that back in your 91-93 time period, the Delta pilots could have flown for FREE and Delta STILL would have lost money.

3. There are many upcoming and strong lost cost carriers against which the big three must compete, which were not around during the last downturn (1990-1993) Frontier, Jet Blue, etc. These competitors will put a big crunch on ticket prices/revenues, which, in my opinion, will force the big four to compete using the lowest cost option available...i.e. RJs. I've heard the president of my company say it more than once, "passengers loads are up...but revenues are down."

Passenger loads are down a bit and revenue is definitely down. Do you know the market share of Frontier and Jet blue? Minimal. Southwest is a biggie. Southwest pilots are going to be a bit closer to Delta when their contract matures in '05, but Southwest has the built in efficiencies, which make them profitable when others are not. It's NOT about pilots compensation and it's way too much to go into unless you want me to go on for 4 pages. Nonetheless, it would seem that Delta is coming up with a competitive model--at least for the southeast. It largely has to do with planes larger than currently on express.

4. If you look at the yearly profitability of Southwest, they've never had a "downturn." They've even made money since 9/11. They're hiring and expanding. Why? Because while their top pilots make $150,000 or so a year, they don't have exorbitant employee overhead which crushes their profitability, and they operate planes which fit the markets they go into.

You said you were not an economics expert and I believe you. Pilot costs do not crush the airline. As I am no expert, but have spoken to a few experts, I can tell you that this is not a true statement. Would Delta like to get its pilot costs down? Of course. They also want to get their fuel costs down. Every one of our groups is the most highly compensated in their field and we are the LEAST unionized of the majors. Does that tell you something? Delta is furloughing pilots because of several reasons: cost containment, union bashing, control, and not the least of which uncertainty. The situation is changing so rapidly, that most of our leadership is confident that there is not more than a 2 or 3 month business plan right now. Furloughed pilots can be brought back within time periods with minimal training. Cuts are coming in other areas as well--including inflight, and ACS. The control issue is huge. Our union officials have seen the proposed code share agreement. Although they could not reveal what it contained, they did say that the new "circumstances for which the company has no control" definitions, AKA Force majeure, were about a page long. Tells me that this time the company wants to cover their bet a bit more. Many, many factors are at play here.

Just seems to me that this downturn is more severe and more pronounced than many of us want to believe. If things are getting better, why have AMR, Delta, and Northwest annnounced more furloughs?

Delta signed this contract knowing full well we were going into a recession. Yes, I agree it's bad. Other things are in play here. Even not paying ticket agents. These businessmen are forced to go online now to find tickets. Why wouldn't they take a few extra minutes and shop around a bit. Sometimes Delta cuts off their nose to spite their face. At any rate, the union leadership has the information, and they have determined that now is not the time to offer up concessions. Do you think they are doing to see just how close we can get the company to bankruptcy? I highly doubt it.