So was B19 right or wrong?

[gunfyter]

Understand what you are saying Caveman.

I am just pointing out that 19 is WRONG because he says disaster will strike because there is a Union and a CBA.

 

[Caveman]

Understand what you are saying Caveman.

I am just pointing out that 19 is WRONG because he says disaster will strike because there is a Union and a CBA.

On that you and I agree. A union/CBA in and of itself is not the primary reason for any financial misfortunes a company may have. If that were true any and all other contracts the company has with other vendors are equally to blame. Pilots cost what they cost just as paper towels cost what they cost. It's up to each party to agree to terms. If the company bit off more than they can chew, shame on them.

 

[gunfyter]

The "$181M is write downs" isn't quite right. The $181 million includes writedowns of a/c and downsizing costs. Downsizing costs includes amounts set up to cover layoffs, mtx on idle a/c, etc. The market for used a/c has recovered slightly since early this year so it is unlikely that much of the $181 million is a/c write downs.

Again, All of those costs have nothing to do with the presence of a Union or CBA ....

Not sure where the $40 millon is coming for furlough savings. Wouldn't you have to add in the head count reduction from June, 2009? Asuming an average cost per pilot of $135K/yr (including benefits), a savings of $135 million per year would be realized if overall headcount is reduced by 1K.

The average cost of the 495 most junior pilots I doubt is that high. The $40M was calculated by people who know.... Perhaps taking your estimate of employee cost and subtracting the cost of furlough and downsizing it is the net savings per year of the furlough.

Union, or no union, the losses are there and they have to reduce all expenses to make up for decline is revenues. Revenues are down over 40%, so costs have to come down by at least that much. Given the business has a large fixed cost base (i.e. a/c), variable costs have to decline by more than 40% and what is the largest expense component in the variable expense area? Employee costs.

What the $181 M includes "exactly" isn't the point I am making. What it DOES NOT include is the Profit or loss from OPERATIONS. Why is that the point? It is the point because it shows 19 is wrong. It is not the union or the cost/benefit of any of the RIFd employees to include the non-crew support people who were let go that caused:

...Any of the factors that are included in the $181M quarterly loss ... or the negative cash flow associated with people opting out of aircraft shares.
​

Still a $2M loss is a LOSS.... But is about 1% of the problem. To listen to 19, one would think Unions and the CBA were destroying the industry and the company. Not so.

 

[7777]

Damn, now this is an education. Thanks fellas. Keep up the solid posts. This is strange for this site indeed, but much appreciated.

 

[BlueNose]

BRK.A 3rd Quarter 10-Q

"In 2009, NetJets’ revenues declined $471 million (41%) for the third quarter and $1,495 million (42%) for the first nine months as compared to 2008. The declines reflected a 79% decline in aircraft sales as well as lower flight operations revenues primarily due to a 24% decline in flight revenue hours. NetJets produced pre-tax losses in 2009 of $183 million for the third quarter and $531 million for the first nine months. The pre-tax losses in 2009 included asset writedowns and other downsizing costs of $181 million for the third quarter and $436 million for the first nine months. NetJets owns more planes than is required for its present level of operations and further downsizing costs will be incurred in the fourth quarter. However, management believes that NetJets is likely to operate at a modest profit in 2010, absent any further deterioration in the U.S. economy or negative actions directed at the ownership of private aircraft."

Sales is the only profitable side of the business for most fracs, so a 79% sales decline is a helluva hit. We're not privy to the numbers, but cash burn has to be a huge concern now and into the forseeable future. Our entire sector of aviation is in the crapper, has been since last spring, and may well remain there until well into 2011. I'm afraid we'll see both of the "absent any" conditions they list above throughout the next year, and so find it hard to believe they can swing to a profit in 2010, even if they pull most of the restructuring costs forward into this quarter. I'm not wishing anyone ill, and only time will tell, but a $531M loss on $2.065B revenue (figured from the decline of $1.495B being a 42% decline as stated) equals a negative 26% gross margin. That doesn't get turned around by small cuts and hoping for the best, and Sokol's not there to make friends. Just sayin.

 

[BlueNose]

BRK says NJ will turn a profit next year. Bankruptcy with profits?

I agree that BRK won't take or even threaten the bankruptcy route. I don't believe any of their businesses has ever gone bankrupt, and it would be a huge blow to their reputation if that happened, so they'll inject the cash needed to keep the company viable. That doesn't mean there won't be a drastic leaning out of every aspect of the business, however, including labor costs. And if Uncle Warren concludes that the business model isn't viable any longer (or is too expensive to salvage), you might very well wake up one morning and find yourself sold. And the best time to do that would be once the company has been returned to "a modest profit." None of us, even the once mighty, can feel very secure in today's environment.

- Pride goeth before destruction, and an haughty spirit before a fall.

 

[gunfyter]

I agree that BRK won't take or even threaten the bankruptcy route. I don't believe any of their businesses has ever gone bankrupt, and it would be a huge blow to their reputation if that happened, so they'll inject the cash needed to keep the company viable. That doesn't mean there won't be a drastic leaning out of every aspect of the business, however, including labor costs. And if Uncle Warren concludes that the business model isn't viable any longer (or is too expensive to salvage), you might very well wake up one morning and find yourself sold. And the best time to do that would be once the company has been returned to "a modest profit." None of us, even the once mighty, can feel very secure in today's environment.

- Pride goeth before destruction, and an haughty spirit before a fall.

My Response:

If there are Aircraft Sales and flights booked ... there will be Pilot Jobs ... IF NOT ... There will be furloughs.

Was 19 right? ... he said there will be furloughs BECAUSE there is a Union and CBA. Why then, were there furloughs at non-union and shops without CBAs?

IF we did not have a union or CBA ... Are you saying NJ management and Berkshire Hathaway would carry the expense of Extra Crewmembers? Or would they furlough and fire people?

Concessions? ...

"Integrity requires one to Honor one's commitments ... even if they are inconvenient."

CONFUCIUS
​

 

[BlueNose]

My Response:

If there are Aircraft Sales and flights booked ... there will be Pilot Jobs ... IF NOT ... There will be furloughs.

Was 19 right? ... he said there will be furloughs BECAUSE there is a Union and CBA. Why then, were there furloughs at non-union and shops without CBAs?

IF we did not have a union or CBA ... Are you saying NJ management and Berkshire Hathaway would carry the expense of Extra Crewmembers? Or would they furlough and fire people?

Concessions? ...

"Integrity requires one to Honor one's commitments ... even if they are inconvenient."

CONFUCIUS​

​

If we're linking fun news stories:
Airline Cuts Costs by Becoming a Terrible Airline

Not saying B19 is right (or wrong), and also not saying that management would carry extra pilots but for the big bad union. Every frac has furloughed, and may again if things don't turn around. Won't be surprised if one or two don't survive this downturn.

It'll be up to your union and its members to give concessions or not if it comes to that. Two ways to reduce labor costs - reduce workers or reduce cost of compensation per worker, which can mean changing contract stipulations or work conditions rather than pay (they usually ask for increased productivity measures first). But if things don't get better I do think you can expect that topic to be broached within the next year. Only you guys can decide what's the right response.

And my last quote in my previous post wasn't aimed at you, but at anyone who thinks their company is somehow immune from market conditions. None of us is safe nowadays. Fly safe, and best of luck to us all.

 

[imacdog]

The pilots at NJA will be paid what we are worth and nothing less. If the company is unable to produce profits with this cost then it will be time for all of us to move on.

 

[gret]

Nice in theory, but almost impossible in practice. Too many people out of work already and if they can't make it work, they might as well shut it down.

Who wants to own a busines that doesn't make money?