The problems with the Airline Industry

[shon7]

Was reading a very interesting article regarding an interview with some Airline Managers and the EU Bi-lateral agreements (I guess this Aired on C-Span a while back).

One of the questions brought up was - why the industry in spite of being one of the most technically advanced - operates under such low proifit margins & strained labor relations; and why the overall business is suffering. Most of the management argued:

1) excess capacity within the system
2) unions (a point brought up was that the pilots union is very strong and largely unsupervised!)
3) the advent of the low-cost revolution.

This is the management perspective. I'd like to get the pilots perspective (hopefully a rank I will join in the future).

Personally - this is just my view - we have finance guys running airlines. Eg: CEO's/ Charimen of most U.S. Majors etc. so they tend to overlook the service aspect of this industry. Accordingly, the numbers influence the decisions (cutting costs mostly).

Ironically, the airlines run by the non-finance types have prospered (SWA, Jet Blue, Virgin etc.). That is not to say that they do not understand finance, or that they are not as smart/savvy as the others - just that they understand the service aspect of the business better.

What are your views on this topic. What are the reasons why the industry is floundering?

 

[46Driver]

Draginass,
You have it wrong: the bottom began to drop out of the economy and then Bush was elected. And no, I am not blaming Clinton anymore than I am blaming the Republican House and Senate at the time - the economy has always been cyclical. The biggest fact was the tech bubble - itself built on speculation and irrationality - burst.

And yes, the unions need to take their shame of the blame as well. For example, remember the "Summer of Love" when United passengers were stranded everywhere? Who did - or should - the passengers blame for being stuck and having vacations ruined?

The airline business, like any other business, can be very Darwinistic at times. Quite a few companies were unable to adapt - and quite a few more were able to spring up and take advantage of the new reality.

 

[Redtails]

The airline industry and the economy were already in a slide prior to 9-11. AAL lost $500 million in the second quarter of 2001. I'd have to agree with the fact that the economy is extremely cyclical and that no ONE president can influence it one way or the other. The market has had it shares of junk bond salesmen and companies that cook the books. When the giants of Enron and Worldcom implode mainly due to a few greedy individuals, it underlines how our society has degraded as a whole in just fifty or so years. Sailing ships gave way to steam, stage coaches gave way to trains which gave way to highways and cars as will high cost airlines to LCCs. Sometimes things just change, because people do.

 

[EngineOut]

The airline industry and the economy were already in a slide prior to 9-11. AAL lost $500 million in the second quarter of 2001.

And our profits were WAY down in the first quarter. Remember the profit-sharing checks?

 

[Ty Webb]

Even if ALL the airlines were Southwest or JB clones, we'd ALL be losing money because there is about 25% too much capacity in the national system . . . . . and a lot of smaller cities would NOT be served.


I disagree . . . . because if all were LCC's, then there wouldn;t need to be as many seats filled at the current pricing to produce profits.

Plus, the lower costs stimulate travel demand, so more people would be flying . . more seats filled . . . . and mor profitable companies.

 

[Falcon Jet 1]

DRAGINASS,
Youre name should be im a 0-6 and im the typical dumass the af puts out because you cant think for your self. No offense to the good guys the af puts out, but a few slip out here and there.

 

[P3-Adub]

All LCCs ???

Just a new bar set that would be undershot by someone who starts a RLCC ( Really Low Cost Carrier ) The writing is on the wall and before long, pilots will have to pay for the great opportunity to flying Boeing and Airbus aircraft, what a wonderful trend !!!! Self destructive group we are. OK Not self destructive, just eager to jump on the next employment opportunity. Any projections of what an A320 Captain at Jet Blue will make in 10 years ?? Not just the current schedules but what the pilot group will be asking for with years of profits and success ? With all of the growth, how long before a union comes in for representation ? Just curious. Don't see it being an LCC for ever. A SWA captain making 200K won't remain competetive for long either.

 

[jhill]

Capacity is not the problem, yeild is the problem. Load factors are at all time highs but with fuel high and yeild down trunk carriers are hurting like they always do when the economy slows. Throw in 911 and you have a real mess. Presidents and congress don't have sh*& to do with it with the exception of airline welfare. Necessary only because of pathetic management and outrageous security cost increases.

 

[Publishers]

one

1. More rapid swing in business than the industry could absorb
2) Yield Management
3) Productivity
4) Security Costs instant not melded in.
5) Instant devaluation of fleet over last several years
6) Inability to distingish products.

 

[greyhound]

Poor management....
Poor Management...

 

[Publishers]

Management

When you have events such as have gone on over the last few years, management is not the catch all answer. Businesses run over time, long time, and mistakes or successes still take even more time to be seen.

The success of Southwest during this period was the result of years of having a company in good shape. The things that Herb did years ago payed off today.

 

[VADriver]

Re: Management

When you have events such as have gone on over the last few years, management is not the catch all answer. Businesses run over time, long time, and mistakes or successes still take even more time to be seen.

The success of Southwest during this period was the result of years of having a company in good shape. The things that Herb did years ago payed off today.

Aren't these two paragraphs contridicting?

 

[Muddauber]

Mr. Bush and his rich CEO buddies want to break the unions while the sun-shines, and they're doing it.

Unbelievable! Spoken like a true Euphorian. Sad - a former Air Force Officer, apparently with a very short memory, that has gone over to the Dark Side.

Kum Ba Yah

 

[FMR_RGNL_PLT]

Mr. Draginass is right about his conclusions.

Bush and his CEO buddies are looking to break unions in the airline industry and elsewhere,,,,,,,,,,,,,,, why do u think they made it almost impossible for the airlines to be able to qualify for the post 9/11 loans? It was to give the airlines additional leverage to coerce consessions from the labor groups........

And he's right about the future of air transportation in this country,,,, people already aren't happy about having to pay extra for their meals on some airlines,,,, and things don't look like they are gonna improve anytime soon!

 

[Muddauber]

Mr. Draginass is right about his conclusions.

Bush and his CEO buddies are looking to break unions in the airline industry and elsewhere,,,,,,,,,,,,,,,

Do you know how ridiculous you sound? Is this the BS your union is feeding you. Big Bad Bush out to bust the unions. Absurd! The industry is changing. Companies have to cut costs to remain competitive with the new paradigm or die. This isn't Bush - it's more like Kaynes, Samuelson or Adam Smith - it's basic economics.

It was Karl Marx that said, "Workers of the world unite, you have nothing to lose but your chains", not Washington, Jefferson or Adams. How do you think Communist / Socialist thought about organizing workers helps a Capitalist society to prosper? All I hear from you is the typical union mantra that I've heard so many times from the IBT, "How can we do less for more money?" This is particulary ignorant in a time when we should all be pulling together to help our airlines make it.

Muddy









.

 

[Tim47SIP]

What are you talking about?

Draginbut,
I often wonder what changes a very once respectfull patriot like yourself to ignorant liberal name calling. A little common sense helps when looking at the big picture rather than your personal greed. As stated earlier, the economy was in the tank three quarters before Bush even took office and 911 certainly didn't help. With your proud background, I would have thought that you would have seen things for the good of the country, not your pocket book.
I still remember getting a letter from ALPA with a list of political candidates. They had names like Boxer, Fienstien, etc. They were all individuals that were supposedly pro labor. When I called the representative on the letter and asked about the candidates other political issues that were detrimental to the country (like continuing to cut military funding), the response was simply that there is no concern for other political issues other than the building of power for the unions. Sorry, but for me, the country comes first, i.e the rebuilding of our drastically reduced military.


B]FMR_RGNL_PLT[/B]
Bush and his CEO buddies are looking to break unions in the airline industry and elsewhere,,,,,,,,,,,,,,, why do u think they made it almost impossible for the airlines to be able to qualify for the post 9/11 loans? It was to give the airlines additional leverage to coerce consessions from the labor groups........

Both of you guys sound like a cult. You start ranting the same crap over and over. The crap you are throwing out certainly does not help your credibility. I am sure you are right, there was probably a meeting of the minds in the oval office that set up the loan process specifically designed to hinder the labor unions. Ya OK.

If you can remember back that far ( I know it is a long time), you should recall that the loans were based on the solvency of the individual airlines. They had to be able to survive before the funds were provided. This required a thourough financial plan that some airlines could not provide. It was not designed to break Unions. That is protecting our tax dollars. There was no mandate from congress to demand concessionary agreements with the Unions. It was purely economical.

P.S. have a nice day, both of you.

 

[enigma]

Tim.

Ditto

regards,
enigma

 

[Publishers]

people

There are a bunch of people who attibute success or failure and all kinds of power to the president. Frankly, I do not think that the president gives much of a care about most of this. Secondly, you highly over rate his ability to control things like our economy or business playing field.

This is the same group that thinks management sits around all day in conversations and planning on how to screw the labor groups. Having been involved with airlines for many years, somehow I managed to miss all those in depth conversations. Like every thing else, management attempts to get the best deal economically they can. Same thing with Union Management. For the most part, all the rhetoric is bull.

As to the contradiction in my example, you are right. On the one hand, it is the management that came before that often makes the difference. That said, timing can mean everything as well. Herb did not predict Spetember 11th or a failing economy. His company was in good position to take advantage of the situation so he gets points for management accountability. In many other cases however, the current management did not create the problem, they were brought in to solve it. These uncontrolled events often place them in impossible positions.

 

[rtaank]

Order in which things affect an airline


1.yeild(directly connected to ATF prices)
2.over capacity
3.poor mgmt.
4.unions(not really)

 

[VADriver]

Draginass,

And yes, the unions need to take their shame of the blame as well. For example, remember the "Summer of Love" when United passengers were stranded everywhere? Who did - or should - the passengers blame for being stuck and having vacations ruined?

46Driver,

Did U ALPA tell UAL to fix their staffing and not count on pilots picking up over time?

Is that kind of staffing model sound management...counting on individual pilots to fly extra. Gee..piss them off and still expect them to fly extra.

Then managmeent and the media spin to make it all labors fault...