So was B19 right or wrong?

[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.

 

[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.