goldentrout said:
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.