So was B19 right or wrong?

[B737Dvr]

Wow!

I haven't been around this board in some time but reading this thread has prompted me to chime in with some thoughts.

First off, let me state that I am laid off from my left seat job on the falcon 2000 for a private operator. In addition to part 91, 135 experience I also have 121 experience.....in short I have no dog in this fight. However, I do have quite a diverse background and having flown with many different types from many different places I can say that this thread is just a repeat of many many heated conversations that have taken place for decades. NetJets is not unique here.

What I hear are very passionate people defending their union and the long term outlook of their company. On the other side is a voice of dissention, and I believe that the delivery is quite caustic which is causing quite a negative reaction. There are valid points on both sides, however if the delivery causes people to take offense then the message is lost.

There are posters who have posted that the pilot group will not be paid one cent less than they are worth and if NJ cannot do business with its current cost structure then it is time for everyone to move on. I caution people that think like this. This is what caused the demise of Eastern.

Think the 800lb gorilla is too big to fail or come down? Pan Am was a much more storied global name with incredible history behind it. It no longer exists.

Someone on here said that no BRK company has ever filed for Ch11 and I believe this to be true, however, BRK has never owned an air carrier before, and let's put aside subjectivity here for a minute.....air carriers do not have a good long term track record. Fact is, when there are economic downturns aviation takes it pretty hard. This downturn is deeper than most and thus the hit aviation has taken and I believe will still continue to take will be proportionally as hard.

To be clear, I am not against NJ or its union. I was a union pilot before and I believe unions are a necessary evil against exploitative management. B19 points to a relationship between industry leadng contracts and resulting furloughs and or company malaise. I think that is a small part of a bigger collective picture here. All in all, it is the collective effect of management decision making that afffects the most important asset to have during a severe economic downturn. Cash. We all know that you can get creative with accounting, take things off the balance sheet here, increase net losses there, defer income here, speed up depreciation here etc.... but at the end of the day Cash or the lack thereof rules.

NJ guys, I know that your very livelihoods are at stake here in addition to your loyalty to the union as well as company pride. I would just caution any of you that think NJ is too big to fail, that uncle warren will have your back, that you should put your foot down and not conceded one red cent. Pleas reference history and heed its lessons. I got out of the airlines because I believe that its consolidation is not yet over, and the industry as a whole has just gone down the crapper. The economics aren't there and Southwest airlines has done a masterfull job of bleeding the majors to death while the industry as a whole has lon ago lost its pricing power.

NJ has done an incredible job of opening up a major new market and has given many many people a chance at a nice living and career. However market conditions have changed and are still changing. Please guys, take a hard look at long term projections, keep subjectivity out of this for your sake and do what is in the best LONG TERM interests of your family, your career and your present job. Do not think for one second that NJ is unique or indestriuctible for any reason or that digging your heels in on any POSSIBLE future negotiations is the appropriate response in the name of pilot worth. It is one thing to lose a battle it is quite another to lose the war.

I believe NJ has a strong base, critical mass and scale of economies in its corner. Hopefully cool heads at all levels will prevail here in showing how a big company can move ahead while minimizing the impact on the rank and file.

Godspeed everyone. In the interest of unity lets try and keep this objective and voice our opinions better. I many not work for NJs, but I am smart enough to know that whatever happens at the 800lb gorilla, will affect EVERYONE in the corporate world, so I am hoping for the best for you guys, we certainly don't need anymore unemployed pilots adding to the vast amounts already on the street.

 

[gunfyter]

B737Dvr

Good post. But remember the question on the thread is whether B19 was right.

The reason there are losses and furloughs in the industry? The economy. Not whether the pilot labor is union or non-union as 19 insists.

Sorry to hear you are laid off... (AT&T?) agree we don't need any more unemployed pilots out on the streets looking for jobs. But this does show that furloughs are not a function of whether there is a union

 

[dime line]

I haven't been around this board in some time but reading this thread has prompted me to chime in with some thoughts.

First off, let me state that I am laid off from my left seat job on the falcon 2000 for a private operator. In addition to part 91, 135 experience I also have 121 experience.....in short I have no dog in this fight. However, I do have quite a diverse background and having flown with many different types from many different places I can say that this thread is just a repeat of many many heated conversations that have taken place for decades. NetJets is not unique here.

What I hear are very passionate people defending their union and the long term outlook of their company. On the other side is a voice of dissention, and I believe that the delivery is quite caustic which is causing quite a negative reaction. There are valid points on both sides, however if the delivery causes people to take offense then the message is lost.

There are posters who have posted that the pilot group will not be paid one cent less than they are worth and if NJ cannot do business with its current cost structure then it is time for everyone to move on. I caution people that think like this. This is what caused the demise of Eastern.

Think the 800lb gorilla is too big to fail or come down? Pan Am was a much more storied global name with incredible history behind it. It no longer exists.

Someone on here said that no BRK company has ever filed for Ch11 and I believe this to be true, however, BRK has never owned an air carrier before, and let's put aside subjectivity here for a minute.....air carriers do not have a good long term track record. Fact is, when there are economic downturns aviation takes it pretty hard. This downturn is deeper than most and thus the hit aviation has taken and I believe will still continue to take will be proportionally as hard.

To be clear, I am not against NJ or its union. I was a union pilot before and I believe unions are a necessary evil against exploitative management. B19 points to a relationship between industry leadng contracts and resulting furloughs and or company malaise. I think that is a small part of a bigger collective picture here. All in all, it is the collective effect of management decision making that afffects the most important asset to have during a severe economic downturn. Cash. We all know that you can get creative with accounting, take things off the balance sheet here, increase net losses there, defer income here, speed up depreciation here etc.... but at the end of the day Cash or the lack thereof rules.

NJ guys, I know that your very livelihoods are at stake here in addition to your loyalty to the union as well as company pride. I would just caution any of you that think NJ is too big to fail, that uncle warren will have your back, that you should put your foot down and not conceded one red cent. Pleas reference history and heed its lessons. I got out of the airlines because I believe that its consolidation is not yet over, and the industry as a whole has just gone down the crapper. The economics aren't there and Southwest airlines has done a masterfull job of bleeding the majors to death while the industry as a whole has lon ago lost its pricing power.

NJ has done an incredible job of opening up a major new market and has given many many people a chance at a nice living and career. However market conditions have changed and are still changing. Please guys, take a hard look at long term projections, keep subjectivity out of this for your sake and do what is in the best LONG TERM interests of your family, your career and your present job. Do not think for one second that NJ is unique or indestriuctible for any reason or that digging your heels in on any POSSIBLE future negotiations is the appropriate response in the name of pilot worth. It is one thing to lose a battle it is quite another to lose the war.

I believe NJ has a strong base, critical mass and scale of economies in its corner. Hopefully cool heads at all levels will prevail here in showing how a big company can move ahead while minimizing the impact on the rank and file.

Godspeed everyone. In the interest of unity lets try and keep this objective and voice our opinions better. I many not work for NJs, but I am smart enough to know that whatever happens at the 800lb gorilla, will affect EVERYONE in the corporate world, so I am hoping for the best for you guys, we certainly don't need anymore unemployed pilots adding to the vast amounts already on the street.

Ok, your so banned, for thinking like a normal, rational person!

 

[brokeflyer]

it has been proven that b19 opinion is incorrect. They could afford a CBA that costs twice as much as the one in place right now. They choose not to pay for that. Why pay more for something than you really have to? Im no real big fan of unions but if the company came out and offered a fair salary, you wouldnt need a union.

If you look at current events, you couldnt get a job at mcdonalds right now. It has nothing to do with unions or cba's. It has everything to do with sales, or lack thereof.

The CBA they have is so cheap its not even a joke. With all the recent cuts I think you guys should be asking for raise now.

Corporate greed and poor management is at a level never before seen in history. The economy needs to fixed at it's weakest point, the top.

its sad really, the workers do the work and managers jerk each other off until nothing is left then move on. Kinda like a virus, where is Agent Smith when you ned him?

back to vacation from retirement....bye all

 

[B737Dvr]

oops!

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.

 

[BlueNose]

Excuse me ... The CBA is the same now as it was when NJ posted large profits... Absolutely true, but the economy is different - it is a shambles compared to when the CBA was inked. That's my point.

The CBA did not cause the financial crisis... which caused people to fly less or turn in aircraft shares. True again: the CBA didn't cause this crisis, the union didn't cause it, and management didn't cause it. Yet here we are smack in the middle of it, like it or not, and the union and the company must do what it takes to work their way through it or face failure. That's true for every company in our industry - there'll be no gov't bailouts or stimulus dollars being thrown our way. And unless you've got your ruby red slippers on, wishing otherwise won't help a bit.

Uncle Warren says...

Warren Buffett: The financial panic is over - Forbes.com

The Berkshire report also predicts NJ profits in 2010.
​

Wall Street Profits will resume ... People will be flying their private jets again soon ... The value of jets in the NJ inventory will INCREASE again and be reported as PROFIT instead of write down in 2010. Cash flow will reverse from negative to positive as aircraft shares sales increases again.
I think Buffett has to say that whether he believes it or not - I'm sure you're aware of the size of their holdings in the financial sector (GS, USB, Moody's, etc)? You paint an even rosier picture. I'm a lot less sanguine. I hope the next year proves you're right and I'm wrong, but I don't believe it will.

You obviously think we're coming off the bottom of a deep V-shaped recession; I think we're in the middle of a W. The Fed's helicopter money to wall street program (they call it quantitative easing) can't last much longer. They've already sown the seeds, spread the manure and watered the fields - then they'll act surprised when the crop starts to sprout. The bond market will tank and inflation will come. That's what I fear. You have to be old enough to remember the 1970's to realize what that's like. I just pray disco doesn't make a comeback.

So we must conclude ... There will be no concessions or contract re-negotiations before the contract becomes amendable in 2013. Again, time will tell. One or both of us will be proved wrong, but I agree with B737 that it's way too early to be digging your heels in. His historical lessons are spot on. Demanding a larger share in the boom times then refusing to adapt to the lean times has been a consistent union approach across time and industries, and I believe that approach has hurt both the long-term interests of their members as well as their companies. This time is not different (see below).

So I am issuing a STRONG BUY recommendation on NetJets stock right now....

Let me recommend a book to you:
This Time is Different: Eight Centuries of Financial Folly
The authors do a great job of showing what led up to this crisis, why "this time is different" are four of the most dangerous words in the english language, and why prolonged massive debt inevitably leads to even greater, more prolonged crisis and sometimes even national decline. I think history will show once again that this time is not different.

Again, best of luck to us all.

 

[brokeflyer]

the cba has nothing to do with the state of the economy. Regardless of the economy those pilots have to do the same job they did when the economy was strong.

this statement will end the discussion.

When the economy goes down the pilots dont have the option to fly less safe.

 

[gunfyter]

Well ... lets see if Citation Air gets pay cuts. Last time I checked which admittedly was some time ago ... their pay was $1000 more a year than NJ pay....

 

[BlueNose]

the cba has nothing to do with the state of the economy. Regardless of the economy those pilots have to do the same job they did when the economy was strong. And they fly the same planes they did when the economy was strong - but the market now says those planes are worth about 20-30% less. The charter operators are providing the same service they did, but for 15-20% less. Yet NJA is somehow immune?

this statement will end the discussion. So you're wearing your ruby red slippers? Otherwise, I don't think that's your call.

When the economy goes down the pilots dont have the option to fly less safe. NJA is a quality operator, so I believe that's true (unfortunately the shadier operators in the industry will pursue exactly that option to cut costs, and the Feds somehow can't see it while the rest of us can). But your business faces the same two options that every living creature does when its environment undergoes radical change - adapt or die. That goes for our entire industry in these days.

Death before disco!

 

[gutshotdraw]

As a wise man has said previously in this thread...

"...Netjets as a company has the critical mass of clients to get to operational profitability within the next 6-8 months. Sales will eventually rebound and provide the profit gravy that BK is looking for...."

--GutShotDraw--

​

So I am issuing a STRONG BUY recommendation on NetJets stock right now....

​

Thanks for that Gun. Not sure I deserve the description of "wise" but I do call 'em as I see 'em.

I actually agree with 737drvr that we are in the midst of a "W" shaped recession. The ridiculous fiscal policy of this Administration on top of the only slightly less ridiculous fiscal policy of the previous Administration means several years of stagnant employment followed by rising inflation followed by rising interest rates. I posted months ago that this is Carter Part II and I have seen nothing to change that assessment.

The good news is that, in my view, Netjets' business model CAN BE modestly profitable even while the economy bumps along across the bottom now that the tough cuts and tough decisions are being made. Then it becomes a waiting game in the hope fiscal sanity once again returns to the two big white buildings in D.C. at some point in the future.

 

[brokeflyer]

so what does all that have to do with pilot salaries? nothing.


the point being the cba caused the furloughes, otherwise they would just be fired. the cba protected those and all the other pilots from managements errors. Like i said b19's opinion is incorrect. proven. question answered.

Employments contracts should be required by law.

 

[amaineiac]

Demanding a larger share in the boom times then refusing to adapt to the lean times has been a consistent union approach across time and industries, and I believe that approach has hurt both the long-term interests of their members as well as their companies.

With all due respect, this is a two way street. What about the unions taking massive concessions, then when things turn around, instead of relaxing those concessions, management gives themselves bonuses. The unions are now forced to bargain for things that they already had, but gave away to help the company survive. Lets not just tell half the story.

 

[BlueNose]

With all due respect, this is a two way street. What about the unions taking massive concessions, then when things turn around, instead of relaxing those concessions, management gives themselves bonuses. The unions are now forced to bargain for things that they already had, but gave away to help the company survive. Lets not just tell half the story.

I agree with you there, it does go both ways - not always (on either side), but too often it's a case of competing greed. And it always seems that the contract becomes amendable out of sync with the economic cycle, so that whichever side is demanding their concessions is doing so to make up for the past couple of years when they felt they were (and may have been) getting screwed, and get their way just as the economy turns and makes it unfair for the other side.

I think that's a great argument for a profit-sharing plan that covers labor, too, but SWA is the only successful one of those I'm familiar with in aviation. It should be even more effective on our side, where the pilots really are the face of the company to our customers, and have to take a lot more initiative to get the job done successfully - thus having the ability make a big impact P & L. Seems to me like a good way to let all groups share the risk and reward that go with the business.

 

[gutshotdraw]

so what does all that have to do with pilot salaries? nothing.


the point being the cba caused the furloughes, otherwise they would just be fired. the cba protected those and all the other pilots from managements errors. Like i said b19's opinion is incorrect. proven. question answered.

Employments contracts should be required by law.

You must have missed the earlier post while on your permanent vacation broke. I pointed out that pilot salaries and benefits (whether union NJA or non-union NJI) were not the problem. Overstaffing for the given flight demand was. We all KNOW b19 is wrong. The discussion shifted a bit to whether the business model is viable. I believe it is when properly managed.

 

[BlueNose]

Pearls of wisdom

the point being the cba caused the furloughes, otherwise they would just be fired. the cba protected those and all the other pilots from managements errors. Like i said b19's opinion is incorrect. proven. question answered.

Never mind

 

[gutshotdraw]

With all due respect, this is a two way street. What about the unions taking massive concessions, then when things turn around, instead of relaxing those concessions, management gives themselves bonuses. The unions are now forced to bargain for things that they already had, but gave away to help the company survive. Lets not just tell half the story.

Also a good point. The better half is a (thankfully) retired NWA pilot. During a tough time more than 10 years ago, their union agreed to a pay cut with a "snapback" provision once certain financial targets were met. When they were, the company refused to give the "snapback." It took months and a handful of lawsuits to get it. I'm not comparing NJA's management to Northwest's (thank your favorite deity) and I'm no union cheerleader but I would be reluctant to agree to concessions.

 

[Helmsalee]

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.

 

[HA25]

Using the numbers from airline pilot central:

Shares has 20% on the street (non union)
Flex has 18% on the street (non union)
FLOPS has 40% on the street (non union)
XO Jet has 23% on the street (non union)
NetJets will have 17% on the street (union)

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.

The idea of blaming anything in aviation on unions when the pay and workrules are bare bones is so laughable that it's not even worth taking part in. At least on the Pilot end. I can entertain the idea that FA's, CSR's and other "unskilled" labor is over paid, but pilots and mechanics just to name two are anything but.

 

[realityman]

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.

 

[BlueNose]

B737Dvr,

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 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.

But it isn't really that straightforward, is it? If the company had the discretion to fully realign crews to match the remaining fleet as owners exit, there would still be significant extra costs because furloughs are by seniority, but fleet reduction is by those aircraft no longer needed - so you need to shift pilots between fleets and pick up extra training costs. You would also demote a number of PICs to match the new number required.

But the CBA puts strict limits on the company's ability to do those things, right? So there won't be downgrades and the company will pay for more captains than are built into the model you described. And the switching between fleets will also be more convoluted and thus limited. So Netjets ends up not furloughing as many pilots as business conditions alone would dictate, because it's now actually cheaper for them to pay extra pilots to sit around than to truly realign the pilot force to match what the lower revenues now support - because of the way the CBA is structured. Plus you still have the extra training costs for those who do move. Bottom line, Netjets is now paying more to crew each airplane than they have built into their revenue model from management fees, and they will have to live with those continuing losses until 1) the economy recovers enough to boost your fleet size back up, or 2) they can remove some of the restrictions in the CBA. Correct?

Don't take this the wrong way - I'm not saying the union is evil because they demand conditions in a CBA that protect their members' jobs - that's what they get paid to do. But I also think it's disingenuous to pretend that those same conditions do not add to the company's negative cash flow in times like this. And negative cash flow can only continue for so long. If my reasoning is wrong, I'm certainly willing to listen and learn.