Support for other pilots and Simple Math

[ultrarunner]

AND FU###ING DELTA is planning to cut ANOTHER 2-3% next year. I would love to Punch Anderson in the teeth. Airports are SLAMMED, planes are stuffed like a college dorm room closet and these dipsh!ts continue to cut capacity when there is a MARKET DEMAND for more capacity....

Only demand for cheap tickets. At some point, capacity will be reduced to the point that EVERY SEAT SOLD generates a profit!

Keep reducing that capacity, price goes up, profits go up....

I'm ok with that!

 

[GhettoBeechjet]

I get the economics. Consider the following.

1. For the first time maybe ever the entire airline industry is being run like a real business. Despite a crappy economy and oil in the 90-100 range the industry is profitable.

2. The high fuel costs are acting as a bar to new competition. Cheap labor from a start up doesn't provide enough of a CASM advantage to offset high start up costs.

3. Load factors across the industry are in the 80 percent range.

4. Industry productivity per employee and airframe is at a very high level.

5. The industry carrier to carrier CASM is in a historically tight range.

6. Short haul is basically already dead. Customers that are within practical driving range of destination are driving.

The above all combine to give the industry pricing power it has never enjoyed in the past. There isn't enough excess capacity or even the ability to create that capacity quickly to greatly affect any carrier's market share. This is why the vast majority of recent fare increases have "stuck" and have been matched industry wide.

 

[Dan Roman]

I get the economics. Consider the following.

1. For the first time maybe ever the entire airline industry is being run like a real business. Despite a crappy economy and oil in the 90-100 range the industry is profitable.

2. The high fuel costs are acting as a bar to new competition. Cheap labor from a start up doesn't provide enough of a CASM advantage to offset high start up costs.

3. Load factors across the industry are in the 80 percent range.

4. Industry productivity per employee and airframe is at a very high level.

5. The industry carrier to carrier CASM is in a historically tight range.

6. Short haul is basically already dead. Customers that are within practical driving range of destination are driving.

The above all combine to give the industry pricing power it has never enjoyed in the past. There isn't enough excess capacity or even the ability to create that capacity quickly to greatly affect any carrier's market share. This is why the vast majority of recent fare increases have "stuck" and have been matched industry wide.

I agree with you here and you are right. The game of musical chairs in this industry is finally coming to a halt. All the airlines left no longer have to fight over market share as the seats out there are all in demand. There is no room left for any airline to liquidate like in the old Braniff, EAL PanAm etc days when one airline could pick up the slack if another disappeared.

AA can't go away, to much demand for what they fly. At worst, if they hypothetically couldn't come up with a reorganization plane, their planes and employees would have to be deployed somewhere (merger). AA/USAir is the only option left for any real kind of consolidation. May or may not happen, but the bottom line is every airlines routes and equipment are now in demand.

 

[pilotyip]

Unfortunately beech 's premise kind of shows why pilots should fly airplanes and managers should manage. If you pay a pilot, say 10% more per hour, it's not just the pilot flying that get's it, everyone is getting 10% more. The pilot sitting at home not making min guaranty the pilots on sick leave, the pilots on vacation etc. So.....if you give the pilots a 10% percent raise and your pilot payroll is 500 mil per year, it costs the airline 50 million a year.
Beech you work for SWA, you guys succeeded because of the consumer that puts saving a few dollars as a very high priority. People will often times go to the cheapest no matter what the airline. You of all people should understand LCC economics.

Nice touch of airline reality, the only thing that will really raise pilot's wages is for pilots to refuse to fly for the present wages. However considering most pilot in the majors are in the upper income brakets of US wages earners there will be lot of people looking at those high paying wages.

BTW we could always go back to regulation. Life was good for a few pilots under regulation. There are probably 4-5 times as many pilot’s jobs now as there was in 1977. Back in reg time it was about 90% military that went to the majors. Dereg opened up a lot of airline job to non-military pilots. To return to regulation would raise ticket prices, reduce the number of passengers, and therefore reduce the number of pilots needed. But it would be good for a few senior guys and bad for everyone else.

 

[GhettoBeechjet]

So what does the above mean to us as labor? In short that there is room for us to take back some of what has been taken from us in the last 10 years. Basically in the present environment if carrier x raises fares to cover higher labor costs carriers y and z will most likely raise match those raises because it will more positively effect their bottom line than selling what few seats they have left at the old lower price. This of course has some rational end because at each increase a few will choose not to travel at all.

 

[GhettoBeechjet]

Nice touch of airline reality, the only thing that will really raise pilot's wages is for pilots to refuse to fly for the present wages. However considering most pilot in the majors are in the upper income brakets of US wages earners there will be lot of people looking at those high paying wages.

BTW we could always go back to regulation. Life was good for a few pilots under regulation. There are probably 4-5 times as many pilot’s jobs now as there was in 1977. Back in reg time it was about 90% military that went to the majors. Dereg opened up a lot of airline job to non-military pilots. To return to regulation would raise ticket prices, reduce the number of passengers, and therefore reduce the number of pilots needed. But it would be good for a few senior guys and bad for everyone else.

A strike by definition is pilots refusing to fly for present wages. That is what it may take to move wages up. I don't think it will take anything as drastic as returning to regulation.

 

[pilotyip]

A strike by definition is pilots refusing to fly for present wages. That is what it may take to move wages up. I don't think it will take anything as drastic as returning to regulation.

But what about the non-union airlines, and if the price raise enought for a start -up with first year wages only. The public only wants cheap ticket.

 

[snow-back]

My point is that in the big picture pilot pay is a very small percentage of an airlines operating cost.

I don't disagree with you totally, but the above statment is pretty ignorant.

What does Delta have now...12000 pilots? A rough guess would be almost $1.5 billion/year in straight salary...probably more. That's no chump change. Add in health insurance, retirement, etc. and you get a fairly sizable percentage.

 

[BigMeat]

Reading the last few post between pilot yip (management) and scab Roman make me sick. You guys are truly the enemy.

 

[pilotyip]

Reading the last few post between pilot yip (management) and scab Roman make me sick. You guys are truly the enemy.

Where have I ever posted an untruth? I am only posting my reality of 45 years in this business where I ended up at a non-sked at KYIP as the best job I could find. From what I read pilots are attempting to distort reality to fit something that can not exist, like liquid water with an atmospheric pressure of zero. I have never resorted to name calling, degrading, or any of the famous FI retorts. I try to present a different view in an open discussion, again based upon my reality of the industry.

 

[Andy]

GhettoBeechjet, you are extremely naive if you think anything you mentioned will drive pilot wages higher. Let's go back to Econ 101 - supply and demand. Find yourself a supply demand curve on the internet machine.
Now find a graph where supply (label it S1) shifts to the right (S2). That's exactly what raising the pilot age to 65 did to pilot wages - wages shifted downward (inflation adjusted) from P1 to P2. I explained this in detail prior to age 65 passing but many were unable to grasp the negative economic impact of raising pilot retirement age.

You want to increase pilot wages? Shift the pilot supply curve to the left and/or shift the pilot demand curve to the right.
Your 'solution' of raising airFARES would result in a shift to the left of the pilot demand curve and result in lower pilot wages.

 

[IBNAV8R]

I still find it ironic that airline execs hue and cry over any thought of increasing labor costs or government fees by a couple of bucks that will (obviously) have to be passed on to passengers. Passengers will refuse to pay it and we'll all be out of business.

Yet, these same execs have no problem gouging $25 to check a bag, $100 for cabin pets, $150 to change a ticket, etc. And there appears to be no shortage of lemmings eager to pony up the extra dough for what essentially costs the airlines nothing.

 

[GhettoBeechjet]

GhettoBeechjet, you are extremely naive if you think anything you mentioned will drive pilot wages higher. Let's go back to Econ 101 - supply and demand. Find yourself a supply demand curve on the internet machine.
Now find a graph where supply (label it S1) shifts to the right (S2). That's exactly what raising the pilot age to 65 did to pilot wages - wages shifted downward (inflation adjusted) from P1 to P2. I explained this in detail prior to age 65 passing but many were unable to grasp the negative economic impact of raising pilot retirement age.

You want to increase pilot wages? Shift the pilot supply curve to the left and/or shift the pilot demand curve to the right.
Your 'solution' of raising airFARES would result in a shift to the left of the pilot demand curve and result in lower pilot wages.

Andy your textbook explanation doesn't explain why after at least 6 FARE increases this year load factors are in the 80 percent range. The textbook answer to that would be that the demand is much less elastic than it has been in the past. If the demand is relatively inelastic a price increase will have little effect on demand.

 

[GhettoBeechjet]

But what about the non-union airlines, and if the price raise enought for a start -up with first year wages only. The public only wants cheap ticket.

There is of course some limit to how much prices and wages can rise before a start up gains enough cost advantage to make sense.

 

[GhettoBeechjet]

I don't disagree with you totally, but the above statment is pretty ignorant.

What does Delta have now...12000 pilots? A rough guess would be almost $1.5 billion/year in straight salary...probably more. That's no chump change. Add in health insurance, retirement, etc. and you get a fairly sizable percentage.

As a percentage of total operating cost which is what I was talking about it is historically low.