Support for other pilots and Simple Math

[Andy]

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.

Specifically, airfares were raised on which routes? Elasticity of demand is not uniform across all city pairs. If you really want to get into the weeds of elasticity of air travel, read this: http://www.iata.org/SiteCollectionDocuments/air_travel_demand_summary.pdf

However, the topic that you were discussing was pilot salaries. I was using the supply-demand curve example with respect to pilot supply, demand, and salaries.
Simply put, if there are less pilots than demand for pilots, salaries will increase. If there is a surplus of pilots with respect to demand for pilots, salaries will decrease.
In the real world, changing pilot retirement age to 65 has resulted in a surplus of pilots and keeps wages depressed. Similarly, pilot contracts which increase pilot productivity have the same negative effect on wages.
Raising the minimum pilot requirement from commercial license to ATP to fly part 121 will result in a smaller pilot pool and will result in higher wages.

 

[pilotyip]

Raising the minimum pilot requirement from commercial license to ATP to fly part 121 will result in a smaller pilot pool and will result in higher wages.

and we could raise the requirements to get an ATP to an ACT score of 29, about the same for academy admission. That would certainly cut down the ATP numbers.

 

[Jetjockey]

You guys realize that passengers will change airlines to save that 2 dollars per hour right?

Yet they line up around the corner to buy a frappecino whatever with whip cream from Starbucks for $4.

I'm done believing that bs from managment.

 

[pilotyip]

Yet they line up around the corner to buy a frappecino whatever with whip cream from Starbucks for $4.

I'm done believing that bs from managment.

Yes and over on another site, is a pilot wanting to know how to the cheapest fare to take his girlfriend to Sun n' Fun.

 

[GhettoBeechjet]

Specifically, airfares were raised on which routes? Elasticity of demand is not uniform across all city pairs. If you really want to get into the weeds of elasticity of air travel, read this: http://www.iata.org/SiteCollectionDocuments/air_travel_demand_summary.pdf

However, the topic that you were discussing was pilot salaries. I was using the supply-demand curve example with respect to pilot supply, demand, and salaries.
Simply put, if there are less pilots than demand for pilots, salaries will increase. If there is a surplus of pilots with respect to demand for pilots, salaries will decrease.
In the real world, changing pilot retirement age to 65 has resulted in a surplus of pilots and keeps wages depressed. Similarly, pilot contracts which increase pilot productivity have the same negative effect on wages.
Raising the minimum pilot requirement from commercial license to ATP to fly part 121 will result in a smaller pilot pool and will result in higher wages.

Andy
1. According to AMEX the average FARE across the industry is up about 8 percent this year. http://about.americanexpress.com/news/pr/2011/airhotl.aspx .
2. Your link while interesting appears to be from 2007.
3. Since there has never been a shortage of qualified applicants wages at the major airline level have been determined by contract not supply and demand . I think your statements about increasing productivity and age 65 have affected wages at the regional level since those pilots are now trapped due to a lack of upward mobility.

My original point was that with that amendable dates coming due on the latest round of concessionary contracts and we need to realize that the industry can afford to increase our wages based on current industry health and conditions. We need to change our perspective from Southwest is paid too much to Delta is paid too little.

 

[GhettoBeechjet]

Yes and over on another site, is a pilot wanting to know how to the cheapest fare to take his girlfriend to Sun n' Fun.

YIP the public loves cheap tickets and management loves cheap labor. In general consumers want the best deal. However if there are no cheap tickets people only have the choice of not flying or paying the higher fare.

 

[pilotyip]

We need to change our perspective from Southwest is paid too much to Delta is paid too little.

Why it looks like you have all the answers, you to need move over into management and save the airline industry. Why, you could work for a $1.00/yr to show how you are not ripping off the workers. You can just ignore all of those markets forces, those consumers of airline tickets, and start up airlines. When the traveling public sees how a $100K/yr airline pilot struggles to make ends meet, why they will leap up and gladly pay an additional whatever to ensure pilots are happy with their pay.

YIP the public loves cheap tickets and management loves cheap labor. In general consumers want the best deal. However if there are no cheap tickets people only have the choice of not flying or paying the higher fare.

True, but back to Andy's curves, if you raise the price, there will be fewer purchased. So with higher prices, fewer passengers, fewer flights; fewer, but better paid pilots. As in all solutions to this dilemma, it is good for a few senior people and not so good for everyone else. BTW How do we keep start ups out of the market as they see opportunities to undercut and make a profit because all of their employees are on first years wages. Ah! Yes back to regulation. Again good for a few senior people and not so good for everyone else.

 

[GhettoBeechjet]

Why it looks like you have all the answers, you to need move over into management and save the airline industry. Why, you could work for a $1.00/yr to show how you are not ripping off the workers. You can just ignore all of those markets forces, those consumers of airline tickets, and start up airlines. When the traveling public sees how a $100K/yr airline pilot struggles to make ends meet, why they will leap up and gladly pay an additional whatever to ensure pilots are happy with their pay.

I don't claim to have all the answers. You keep mentioning start ups. The reason that there aren't any to speak of is because labor is at such a small historical percentage of CASM. With that being the case the cost advantage a start up would enjoy isn't big enough to overcome the high start up costs. Instead of me moving into management how about you start up an airline and sell ultra cheap tickets with ultra low pay for your employees. That worked out really well for Skybus.

True, but back to Andy's curves, if you raise the price, there will be fewer purchased. So with higher prices, fewer passengers, fewer flights; fewer, but better paid pilots. As in all solutions to this dilemma, it is good for a few senior people and not so good for everyone else. BTW How do we keep start ups out of the market as they see opportunities to undercut and make a profit because all of their employees are on first years wages. Ah! Yes back to regulation. Again good for a few senior people and not so good for everyone else.

Andy's curves miss the elasticity of demand. As I pointed out if this were accurate then we would not be seeing continued load factors in the 80s in the face of the FARE increases this year. The highly elastic demand has already been priced out of the market. I don't think we need to return to regulation. That wouldn't be good for the consumer or even most of us. Besides which now that the airline buisness is actually being run like a buisiness it is somewhat self regulating. I think there is room in this market to continue to give the consumers a good deal, pay labor at WN rates, and make money for the shareholders. I agree that if FARES go up too much due to labor then we could end up in a position where a start up would make economic sense and demand would drop off.

 

[pilotyip]

I think there is room in this market to continue to give the consumers a good deal, pay labor at WN rates, and make money for the shareholders. I agree that if FARES go up too much due to labor then we could end up in a position where a start up would make economic sense and demand would drop off.

We agree that airlines are now being run more like businesses, no more chasing market share no matter what the cost. But there are flaws in WN model, their costs continue to rise as pilots move up the pay scale and deliver the same product at a higher cost, how long can this go on? The SWA model was based upon we can always grow and bring in new people at the bottom of the pay scale. That model has reached its limits.

 

[scoreboardII]

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.

By making this statement that supply essentially exceeds demand, you acknowledge that the next round of LCC entrants will quickly emerge with pilots flying retired busses and madogs and guppies for sub RJ wages funded by anyone with a full bank account (GE capital.).