So was B19 right or wrong?

[gunfyter]

Blue,

I believe your description of what happens is accurate.

However the magnitude of the numbers is as I described before....

This effect is in the 8 figure range as opposed to what I believe negative Cash Flow from buy backs certainly have to be a 10 digit number. It is not reported but I have to deduce that because write downs are in the 9 digit loss range as reported ... only possible if we paid Near or over $1B in buybacks.

I think if any negative cash flow generated because of CBA protections of furlough by seniority were the only losses ... BRK would simply eat those losses and Santulli would still be in charge of NJ ... and there wouldn't be ANY furloughs ... Ground would have been broken on the new Training Campus and all the support people would still be on the property.

Its really silly to insist the CBA caused these furloughs and other RIFs. It was all caused by the reduction in flying and sales and the negative cashflow due to Buy Backs as guaranteed in the owner contracts.

Believe me, I know the company would prefer to save an 8 figure amount of cash ... but protection by seniority is why we have unions and CBAs and Its a Good Thing.

 

[imacdog]

Our training is done by contract, therefore the cost of retraining crews to compensate for furloughed crewmembers aren't particularly high.

I'm not sure how many times we have to keep saying "It's the economy, stupid", but....

 

[B737Dvr]

Realityman,

Thanks for giving me some insight into the model at NJ. When I made comments before and relayed them to historical happenings at the airlines I knew fully well that the 2 business models were world's apart. However, what is the common thread here is the economic relationships between the economy and the aviation industry. When times are great people fly...period. They fly on Delta, they charter, they buy a quarter share, they acquire a whole aircraft. The relationships between boom times and times like now have the same impact across the board (generally speaking and also allowing for proportional differences)

Corporate aviation is a high yield low volume model while the airlines are the opposite. You pointed out just why the furloughs are occuring. Too many pilots for airframes/owners and the management fees no longer being able to support the entire list. Whether people stop taking a trip on UAL or sell their share equals the same economic effect on both companies. There have been enough owners that have left(not renewed whatever you want to call it) NJ to warrant 495 furloughs!!!! There is supposedly a rumor going around in the union that another 200 or so might get furloughed in the later half of 2010.
The point I simply wanted to make is that no one here should think that NJ is immune to economic conditions that do not warrant further examination by ALL sides. If NJ loses more clients then something will have to give....just like if in some time they start getting a bunch of new share owners while maintaining high owner retention.....something will also have to give (more hires and possibly more pay depending on the pilot pool then)
Fact is aviation is a tough industry in the long run. NJ, Airlines, charter companies and even flight departments are all dependant on the state of the economy.

 

[gunfyter]

The good thing is the CBA is not amendable till 2013.... If the economy isn't back up to speed by then ... we will have bigger problems than worrying about our CBA....

 

[realityman]

B737,

Well, I can't argue with anything you said in your last post. This is definitely a tough industry.

Gun, agreed. Let's hope things pick up to a point where we can be negotiating for RAISES!:beer:

Blue, I think you made some good points. As I said in the very beginning of my post, there are many more factors involved than what I brought up. I was just trying to show B737 how are costs are NOT structured like an airline. However, I don't think it's exactly as you pointed out either. Sure, the folks being furloughed are all F/O's, so it does skew the crew ratios to being more captain heavy. However, I believe our management fees actually cover that scenario. What I mean is, the management fees charged to our owners don't differentiate between captains and F/O's. If two owners each buy a quarter share of a Citation X, and then 2 more come along and buy quarter shares of the same plane, I doubt the company will charge the first two higher management fees to cover captain costs, and the second two lower fees because they only have to cover F/O costs. Everyone pays the same. And while I don't have the exact numbers to back it up, I'd bet a lot that the company simply charges the higher captain's rate into the management fees, and then was able to bank the extra left over from only having to pay two captains and two F/O's. So ending up with more captains than F/O's per airframe is probably still covered. Naturally, this is all speculation on my part. I'm not privy to exactly how they've structured the management fees to cover a certain captain/co-pilot ratio. But knowing how they typically used to do things (previous management team), it's a pretty good guess that's very close to how it went down. As for training costs, eh, they're likely going to do a lot of captain/captain pairings rather than do a bunch of re-training. Not to mention, I'd bet we probably pay a fixed fee to FSI for a certain number of training spots in each aircraft each year. With 495 furloughs, it's likely there's a lot of excess training capacity that's paid for that we could use for re-training. Again, all guesses, but is probably likely how it's set up.
And I believe it's a great thing to have the protections our CBA provides us.
So like I said, you could be very right. you've made some excellent points and observations. But it may not be like you think.

 

[brokeflyer]

like I said, they can AFFORD a CBA that is twice as much as the current one.

room to grow.

 

[B19 Flyer]

Get the facts straight...

B19 blames all the industries woes on unions. I think it's pretty clear from the numbers above that he is wrong and is just a union hater.

This statement is not true.

I have never blamed all of the industry woes on unions.

I am not a union hater. I've repeatedly stated, if you want to work for a union, go to work with a company that has one. However, don't force a union on a company that doesn't have one and doesn't want one.

I am realistic on the negative impacts unions bring to any company, airline or otherwise. When times are good, unions are great and everybody is happy.

I've always said, when the economy tanks, that is where unions fail. They don't react in a timely manner and drive companies into the ground twice as fast as what would have happened if a union wasn't there. Management can 't react quickly enough when a union is restricting them.

The financial model that keeps getting thrown around is meaningless. It's how the union acts that is the issue. B737, you are spot on with your observation, and what you have stated is what I believe. All of these NJ guys have touted how what is happening now will never happen.

It has happened, and the cycle will continue all the way through like it always does when times are tough. The union will sit there while the company sheds elsewhere until there is no more to shed, then the union will force the company to burn cash at a rate that is not recoverable until somebody's hand is forced to do something. The union will never step up to the plate on it's own.

Get the facts straight on my opinions.

 

[B19 Flyer]

Cost structure is meaningless.

B737Dvr,

You make some excellent points. However, you're missing at least a couple good ones yourself.

The biggest point you're missing is that we are NOT an airline. Our costs are structured quite differently. There are lots of areas I could talk about here, but considering what this thread is about, let's just focus on pilot salaries and bennies.

Pilot salaries are built right into the management fees we charge our owners. It really is that simple. And our management fees do not go up and down with the economy (as airline prices typically do). Therefore, as long as they're collecting the management fees with the pilot costs built in, our salaries are not a burden for the company.

So why are we furloughing? Easy, because we have lost many owners, and therefore the management fees that went with them to pay the pilots. The choice then becomes get rid of the pilots that we aren't collecting management fees to support, or everyone takes a big pay cut so that the remaining management fees will still pay for all the pilots. The latter choice seems viable at first, until you remember that with the loss of owners, we also lose airframes, and a need for pilots to crew them. So while everyone may now be making less, there still really isn't a compelling reason to keep enough pilots to crew, say, 500 aircraft when we now only have 400 aircraft. We're still paying pilots to just sit around, even if it would be at half salary, or something along those lines.

So we furlough the pilots we simply don't have work for. But what about the remaining pilots? Well, if the furloughs are done correctly, the remaining pilots are now proportional to the number of owners paying management fees. And since our salaries are built into those fees, there is no reason for any paycuts or concessions. The revenue stream that covers our salaries remains constant, in good times and in bad. Again, I don't mean number of owners, I just mean the amount of the management fees the owners pay.

Now compare that to the airlines. The revenue stream they generate the money to pay pilots from is NOT constant. Sure, passengers come and go, same as our owners, but the AMOUNT the remaining passengers pay varies greatly, depending on the economy, time of year, competition, etc.....So sure, during times of sustained economic downturns, the airlines lose money like crazy, and they furlough pilots, same as all of us. But trouble is, the remaining revenue stream will also fluctuate, usually in a down direction (lower airfares) when there's a lot of need to get people back in the seats, so there's less money available to pay pilots with.

We, at Netjets, do not suffer from that same problem. Our remaining owners' management fees do NOT go down.

Now, once the furloughs occur, will we make money again? That remains to be seen. Whether the company makes money or not simply is not dependent on what our salaries are. If the company needs to subsidize its operations by asking the pilots for donations (ie, concessions), then there are far bigger problems than what our CBA provides us.

Anyway, for now, this is all a moot point. Management has NOT approached us for concessions. Some of you would add "yet". Fine. I'm a never say never kind of guy myself. Anything is possible. But because of the way the management fees are structured to cover pilot costs (based on appropriate crew ratios to airframes), I think it will be much harder to get concessions thru than it would be at the airlines.

Just IMHO.

The method of revenue is meaningless in the conversation.

What is important is that the union will not react in a timely manner, NJ will shed everything else it can first while the union stands idle. If the union shed costs with the rest of the company it would be different, but we both know it's not going to happen. Cost is cost, revenue is revenue.

It's how the reaction to fix it occurs, and the union will act identical to the airline unions, you watch and see if it doesn't.

 

[B19 Flyer]

Obviously you have no clue about what happened at Eastern. Lorenzo was stripping assets from Eastern to his other holdings (Continental particularly). Eastern was already doomed. The pilots decided to die fighting rather than let Lorenzo gut the company and then kill it. Management had decided that Eastern was not going to survive long before the end.

It's clear that you don't have a clue as to what happened at Eastern either. The only true statement you make is that Eastern was already doomed before Lorenzo got there.

The only chance Eastern had for survival was Lorenzo. He would have done the exact same thing as he did with all the other airlines that are still flying today. Lorenzo had success too, nobody ever talks about that.
How many pilots are at CAL now? Every one of them can thank Frank for saving the airline along with all the other ones that were folded into it.

 

[B19 Flyer]

I guess I did forget what the title of this thread was!! Thanks for reminding me. I just read some very interesting posts from some who are very ready to dig in their heels and thought that I would offer some words of caution. I don't think that unions are the reason why a company will go down. Unyielding positions that fail to take into account economics are the reasons why companies fail. The eastern guys stood for what they believed their worth to be to the very end and basically ensured the demise of the airline. To be clear, there were many other factors and some horrible management, but in the end only a certain union there refused to give one inch forcing the inevitable. Whether or not they were within their right or were right is not my point, just simply what they chose to do in light of the economics at the time. Period.

Can a union negotiate great lofty wages and working conditions? yes it can. Is it merited? Yes it is. However, what is not debateable here is that aviation is highly cyclical and when times get tough (these times are horrendously tough) the strain of industry leading wages will cause un-intended consequences when the revenue streams cannot support it indefinitely. Perhaps NJ thought things would turn around by now and delayed this decision until its cash position could no longer support it, I don't know. In the absence of being able to negotiate, the company has no choice but to cut costs and next to fuel, labor is the highest cost there is. If the contract were a crappy one, perhaps less would be laid off, but layoffs nonetheless are inevitable great contract or not. What is debateable here is whether or not industry leading pay excaserbated these conditions. The union is not at fault here. Times simply have changed and what the company's management as well as what the union does GOING FORWARD is what is critical. Could this turn into round 1 of many or simply be it and things turn around.....that depends on the proactivity of all parties involved in sitting down for the mutual benefit of all.

I can't think of any previous time where there were this many corporate guys laid off in a single time. This 495 number is similar in scope to airline numbers. Make no mistake about it everyone......this big number has the potential to turn pilot layoffs into a multi-year event for alot of people. We are all going to be affected here.
BTW, I am not ex-AT&T. I am ex-too many freaking place to list and getting tired of it.

What I stated has materialized, pretty much exactly as I said it would if the economy tanked, which it has.

Don't believe all the crap they are saying about my opinions. What you have stated in your posts is nearly identical to what I've been saying that they all said couldn't happen.

As far as the title on the thread, the answer is yes I was right on the money with what has happened.... I stated that the union wouldn't react in time and before it was over, the contract would be opened again.

That's the cycle, a union is a union and they are all the same. None of the "Industry Leading Contracts" signed by the majors still exists, and I don't believe the NJ one will either. We'll see, but that is the last piece of the puzzle. The question is, when will it happen... after the threat of bankruptcy or after the bankruptcy actually occurs. If the union isn't proactive, more jobs will be lost and the union will be the one to blame. Oh, and the jobs I'm talking about will be non-union as well... You know, those ones that had choices to be pilots like NJW said? Those rank and file workers? Yeah, they will get hurt too.

Speaking of which, boy... where is NJW now???

Boy, did she bail out when she found it she was wrong.