Part 1 of 2
JBcrjca said:
A question for Surplus1 or General Lee:
I know we all agree that this SkyWest TA stinks, but besides voting no, what's your opinion of what SkyWest pilots can do to stop the 'downhill slide'? Here's why I ask:
OK, I'll give it a shot. Before I begin, please understand that I'm just like you and opinions like the one you are asking for are subject to error. The possibility exists that I could be wrong in what I'm going to say. I do not see myself as a guru or an expert. However, I do have a strong background in airline labor relations, considerable training in negotiating techniques, and enough hands-on experience with airline pilot contracts to be more than a novice. Nevertheless, Caveat Emptor. Of one thing you may be certain; in trying to respond I will not say to you anything that I would not say to my own pilot group.
This whole situation is extremely complex. I agree that there are differences between regional carriers that are wholly owned subsidiaries of a major airline holding company and those that are so-called independent sub-contractors to one or more major airlines. However, I do not think that those differences are the key variables in this equation.
In my considered opinion, the "key" elements are the unity and resolve of the pilot groups, their education and experience in the industry, the knowledge of their leaders and the courage of their convictions. Courage is not the absence of fear; it is the ability to act prudently and decisively in the face of fear.
There is one element that you did not mention which I think is a major factor and the real operative in the differences that you outlined, but it is still not
the key. That element is the "fee for departure" system. It is in place already and we must deal with it, but I believe that acceptance of this concept by the management(s) of the so-called independent regionals was a mistake. While it did provide what they apparently presumed was a guarantee of profitability and the elimination of risk, it also removed completely their so-called independence. Today they are realizing that the security they perceived it would guarantee was fools gold and the system little more than a noose with which they could readily be manipulated and even bankrupted. Much like they are asking pilot groups to make concessions today, they themselves made a concession that has come back to haunt them. They conceded their independence and relinquished control of their own destiny. To put it bluntly their peers at the major airlines duped them. I trust that we pilots will not follow in their footsteps and permit ourselves to be duped in turn by them.
United or Delta may not own SkyWest (and the other independents you mentioned), but they are totally controlled by both. This is far worse than being a wholly owned subsidiary. Both the wholly owned subsidiary and
the fee-for-departure carrier exist for the same purpose and are equally dependent on the Parent/Contractor. However, the Contractor makes no capital investment and may easily dispense with the services of the fee-for-departure airline. When the controlling carrier is bankrupt and therefore unable pay the subcontractor the agreed rates, it may default or cancel the contract, leaving the subcontractor up the proverbial creek with no paddle . Bankruptcy of the subcontractor may follow shortly if it is unable to carry on in its own right or find other sources of revenue. This is the case with SkyWest, ACA, ARW and, by the way, Mesa..
In the case of the wholly owned subsidiary, a bankruptcy of the Parent Company will almost certainly result in a simultaneous bankruptcy of the subsidiary regardless of its own profitability, especially if the financials of the subsidiary are "consolidated" with those of the Parent, as is the case of Comair, and ASA.
If you take a second look at all of that it may appear that the wholly owned subsidiary is "better off", but actually it is not. The subsidiary has zero options in the event of bankruptcy of the Parent. The subcontractor will undoubtedly suffer a great loss if it loses the contract, but it does have the option to continue in operation if it can find a different source of revenue or operate in its own right without the contract. The option is there; not so for the subsidiary.
For these reasons I see little difference in the dilemma of a SkyWest and that of say Piedmont. While it is true that a PDT or a Comair does not have to "bid" for its flying directly, both Delta and USAirways also have multiple subcontractors, in the case of DAL SkyWest and ACA among them. USAir Group has its three regional subsidiaries (now four) and a veritable menagerie of subcontractors. If you don't think that Comair has to be "competitive" with SkyWest or the other subcontractors, think again. Just note that Chautauqua recently took over a Comair domicile in Florida and joined the Delta Connection brand. I can pretty much assure you that CHQ became a component of DCI for one reason only. They bid to do the Florida based flying and they bid less than Comair. While the internal "bids" of the subsidiaries may not be public knowledge, don't kid yourself into believing that they do not exist.
In the case of a subcontractor, the "fee-for-departure" system eliminates many of the variables that affect the cost structure of the carrier. A majority of the costs are "fixed" and the one predominant variable that remains outstanding is labor costs. This is what increases the pressure on the subcontractor vs. the subsidiary, rather than the actual ownership of the airline.
A Comair, Horizon or ASA can juggle a variety of expenses in an effort to change its overall cost structure. A SkyWest is pretty much limited to changing its labor costs.
Seriously, what should the pilots at the independent regionals do? We all want to keep the payscales up, but we don't want to go out of business in the process. Surplus1, General Lee, anyone, anyone??? I'd love to see some ideas.
The current situation has provided the management of the major airline and that of its affiliates to raise the flag of fear and threaten the subcontractors with loss of business if they are not the "lowest bidder". In turn the subcontractor demands concessions from its employees (in these cases apparently only the pilots). The pilots caught up in the fear of losing their jobs, rush to give management all or even more than it wants.
The very same strategy is employed by the Parent against the wholly owned subsidiary. It threatens to shutdown the subsidiary, sell it off, move the flying to another subsidiary, give it to a subcontractor or all of the above, if the pilot group does not do as it wishes.
The pilot groups have to weigh their options carefully and choose a response. Will the "Parent" Company/Major airline really cancel the contract? If it does, what are we talking about? Will UAL simply give up their feed? If they do, UAL will be in Chapter 7 in a heartbeat. If what they really wanted to do was liquidate they would have done so already. They are not likely to create a situation that would take that out of their control and force Chapter 7. Probability = very low. Can they "move the flying to Mesa"? Over a period of time they can, but that time frame is both lengthy, costly and very risky. Can they afford the training costs; can Mesa itself afford those costs? How long would it really take to accomplish this? Does Mesa have a working plan in place to accomplish such a transition? Can United really afford, risk wise, to place all of the flying now done by three stable an successful carriers like ARW, ACA and SKYW into the single basket of a Mesa, whose past performance (for them) was somewhat less than satisfactory? The 3 carriers mentioned are not little Great Lakes operations. They are large, well managed, reliable and operate hundreds of jets. Mesa is, sorry to say it, none of those things.
Are the differences between the potential Mesa bid and the respective bids of SKYW, ARW and ACA so great as to be make-or-break for United Air Lines? What happens to United if Mesa bids so low, to "get the contract", that it can't operate and subsequently goes bankrupt? Is Mesa management so much better than the management(s) of the other three as to make Mesa immune to failure? If Mesa becomes unreliable during the process can United, already in dire straits, withstand the negative impact on its schedules? How much risk is UAL willing to take to save what amounts to (for them) a few dollars? We as pilots do not really known the answers to these questions, but in the interest of our own survival we too must make some logical presumptions and take certain calculated risks.
I can only offer an opinion, but I do not believe that United will cancel any of the 3 contracts to place all or a major part of its already fragile eggs in the Mesa basket. Mesa may well get some "new" flying, but that will not place the big 3 UAL feeders in jeopardy.
Mesa's labor costs have always been at the bottom of the industry barrel. That did NOT happen with the signing of this new contract. What is the total combined value in $ of all the pilot concessions proposed? Do you know? Do your leaders know? If not, shouldn't they have known before agreeing to anything? Can Mesa reasonably be expected to under bid the 3 of you combined and provide greater savings to UAL? Will they survive if they do?
Continued in Part 2
