UAL Files CH 11

[goldentrout]

Now...as for who's responsible ALPA or management.

I must admit that some of what you've said, and more specific info about the UAL contract from Marko, have made me realize that some of my assumptions for my position were wrong, namely

1. ALPA asked for a 22-29% raise.
2. ALPA is where the buck stops at an airline. Acutally, the buck stops with the CEO and his management team. The success or the failure of the airline has to rest squarely on his shoulders...as it should in any business/organization/team.

The CEO and management are ulitmately responsible for the financially solvency of a company.

Smarter managers/CEOs (much like at SWA), would approach their decisons with a team approach...taking into account advice from all the major players, and involving them in the decision making process. The history of airline management has been, generally, as you said, adversarial with labor.

However...the top brass at ALPA has been around long enough to know how the game is played.

Economic growth began to slow down in early 2000, and had significantly slowed by the end of 2000.

Slower economic growth means less business travel...which, especially for UAL, means less revenue.

The UAL MEC and his team had to know that a 22-29% increase in pilot wages, along with a soon to follow mechanics' wage increase, would not be sustainable in a declining economy.

Which leads me to hypothesize the following:

The UAL MEC knew that a 22-29% pay raise was not feasible over the long term. But, in keeping with true ALPA tradition, they figured they'd take care of the top of the list first. If that meant furloughs for 1000 or so guys at the bottom of the list during the upcoming downturn..so be it...they'd be "preserving the profession."

But things turned out worse than projected. They figured it'd be some furloughs at the bottom of the list...not 25% of the list, with a 20% pay cut and bankruptcy.

So I still say that the ALPA compensation stragegy of "max pay to the last day" is a flawed strategy.

A better strategy is the SWA model...a base salary that allows the company to weather bad times, and a profit sharing program is good times.

You can't deny that SWA is a model for the rest of the industry. Good wages, good benefits, good management/labor relations, safe, efficient, reliable, 20 straight years of profit.

Re-regulation of the industry is not the answer. Taking some lessons from SWA would be a much better long term solution.

Until SWA and the other low cost carriers start crashing numerous planes into the ground, there will never be a public outcry for re-regulation of the airline industry.

So rather than sitting around and wishing for that pipe dream to happen, we'd be better served by figuring out how to compete with and beat SWA/AirTran, etc.

 

[PCL_128]

You keep saying that SWA has a better system because they pay their pilots less. The fact is, SWA pilots don't really make that much less anymore than what the pilots at other majors make. Sure, they're not making 300k a year, but neither is the Delta 737 captain. If you compare pilots at SWA with pilots at the other majors on the same equipment you won't see that much of difference in compensation. SWA pilots are pretty close to the same pay rates. The salaries of pilots cannot account for the success of SWA. They use a completely different business model and don't treat their employees as nothing more than a necessary evil. When you treat your people good they will respond by doing a better job on the line. There are many things that make SWA a profitable company, but pilot compensation is not one of them.

 

[PCL_128]

PCL128

You say

"If an airline was having trouble turning a profit, the CAB would authorize an increase in fares on those routes. Since the airline didn't have to compete with lower fares from other carriers, only the pax were bearing the burden, not all taxpayers. When the airline returned to profitability, the fares on those routes would be lowered usually. That's smart business. If you can't turn a profit at current prices, then you must raise the prices of tickets to make up for it. It worked great under regulation, but without the protection of regulation it's virtually impossible to raise fares. There is just too much competition out there. "

Now...before I critic this statement...let me say that my next post will be admitting that some of what you've said before about the responsiblility of management is sinking in, and I'll explain in my next post.

However...how can you call yourself a conservative/supply sider with you above statement?

The paraphrase of your statement is essentially

"The government should limit the amount of airlines that are allowed to fly and how much flying they can do, so that fares can be raised, and we can all go back to the good ole days of luxury sport cars, beach houses, and Rolex watches."

What is really bizarre is "the pax were bearing the burden...There is just too much competition out there."

So the consumer is supposed to pay higher prices to subsidize your and my bloated salary, that is artifically kept high by government regulation and government price control?

That's exactly the definition of socialist economics!!!!!!!!!!!

That is the total, 100%, absolute anti-thesis of what our free market system is about.

SWA is providing safe, efficient, reliable air travel at a price usually about 50% less than it's competitors... that's somehow bad for America???

You think the millions upon millions of airline ticket buyers should be forced, by government regulation, to pay higher prices...just so you and I can have the salary we think we "deserve."

Never, ever, ever will I ask the hard working consumers of this country to pay artificially inflated prices just because I think I "deserve" to make more money.

Shame on you for calling yourself a conservative!

I realize that my position on regulation flies in the face of my normally far-right wing fiscal beliefs, but there are just some things that need the protection of regulation. Again, when safety is a primary concern I don't trust the lowest bidder. That's why the latest proposal about the privatization of ATC has me so worried. I don't want to be flying around in congested airspace knowing that the guy in the TRACON is working for the lowest bidder the gov't could find. When the safety of the travelling public is of concern, the gov't needs to step in and regulate.

Believe me, I didn't used to feel this way. I used to think like you about unions and letting the market work things out. Then I went to work for a non-union airline. The aircraft were in such poor shape that engine failures were happening weekly. Sometimes twice a week, and these were PT-6 engines (very reliable for those not familiar). When turbine engines are failing so frequently there is a problem with the maint program. I was forced by mgmt to take an aircraft that had cracks around the base of the prop blades. We were told that there would be disciplinary action if we refused to take the aircraft. That's called "pilot pushing", and thanks to ALPA I don't have to worry about it at the airline I now work for. This industry is very different than any other. When mgmt tries to skimp on costs on certain things to increase revenues, then people can get hurt or even die. I'm sorry, but safety trumps the free market in my book every time.

My job is to get people from point A to point B safely. It is not to uphold the free market. Go read "Flying the Line, Vol 1." Read about mgmt in the 30s and 40s. About E.L. Cord who escorted his pilots off his property at gunpoint because they wouldn't agree to his concessions. About planes crashing because the airlines wouldn't pay to train the co-pilots to proficiency on the aircraft for when something happened to the captain. About mgmt forcing pilots to fly aircraft with no instumentation into solid IMC. These are real stories. Don't say that kind of thing wouldn't happen today. If we did as you say and just let mgmt walk all over us for the sake of the free market, then these kinds of things would be reality again.

I've said it before, and I'll say it a thousand times more: "Thank God for ALPA."

 

[goldentrout]

I reviewed my post.

I can't find where I said SWA makes less than the other major airline pilots.

Here we agree 100%

"The salaries of pilots cannot account for the success of SWA. They use a completely different business model and don't treat their employees as nothing more than a necessary evil. When you treat your people good they will respond by doing a better job on the line. There are many things that make SWA a profitable company, but pilot compensation is not one of them."

Take care of the people, and they'll take care of the mission.

Let's look at SWA vs UAL compensation, same equipment, same seniority. My info is from Air Inc's pilot survey.

737-300 Capt, 12 yrs seniority (year 2000 numbers)

UAL / SWA

monthly salary 16,000 / 12,300

a fund 1.5% x FAE x yrs of service / none

b fund 11% / none

401 k match none / 100% on first
7.3%

per diem 2.20 / 2.15

ESOP none / 10% discount off
market price

profit share none / up to 15%


estimated 18,000/month / 13,200/month
monthly total
(per diem+salary+b fund+401K)

annual salary $216,000 / $158,400

that's a 27% difference between what a SWA and a comparable UAL Capt make...about 57,000/yr per pilot.

UAL in 2000 had 158 737 300/500s.

you figure 10 pilots per plane, that's 1580 737 pilots.

$57,000 x 1580 pilots = $90,060,000/yr more at UAL than at SWA to do the same job.

And let's not forget about the A-fund retirement plan at UAL...which was not used in my calculations.

So while I didn't say SWA pilots made less,I can show some certainty that SWA pilots make good money, but significantly less than their UAL counterparts.

The only caveat to my numbers is the SWA profit sharing...which for a 12 year Capt in 1999 was $21,000.

That brings a 12 yr SWA Capt up to about $180,000/yr...which is still great money, but about 17% less than the $216,000/yr UAL 12 yr 737 Capt.

17%

and what percentage pay cut were the UAL pilots looking at before bankruptcy?

...about 18%...gee...what a coincidence

 

[goldentrout]

PCL-128

This is not the 1930s/1940s.

There is no doubt ALPA has made significant improvements for the airline pilot profession since its inception.

However, you're argument about safety needs some support.

If I understand you correctly, you say regulation is needed to guarantee people's safety.

Has safety in the American airline industry gone down since deregulation? Hardly...it has remained stable or improved based on incidents per flying hours every year since deregulation.

When was the last major airline accident in the US. American up in New York about a year ago. Other than that (excluding 9/11), I can't remember the last major airline accident.

When was the last time a SWA jet was a smoking hole? Can't remember, if ever.

The argument that the airlines need to be regulated for safety is not supported by any factual data, and is more accurately refuted by safety stats since deregulation.

It is inherently self defeating for an airline to be unsafe, because customers would not fly on an airline that consistently crashed planes.

Your experience at Pinnacle, while horrible, is not the standard at the major or any of the national/large regional airlines in the US.

As for ATC...it is a transportation infrastructure control function, and is inherently governmental.

Flying people to business meetings and weddings and vacations is not an inherently governmental function. It should be done by a business...and in the USA, businesses compete on the open market and live or die by the competitiveness of their product.

SWA is living...UAL and the others are dying, some quicker than others...and that's what ALPA apparently refuses to deal with.

 

[208pilot]

PCL do you fly for United or a subsidiary?

Management is paid big bucks to make airlines successful; not guide them through bankruptcy.

Are the UAL pilots going to be happy with their 1 award winning salary year followed by who knows how many years of furloughs or would continuing employment at say Southwest type salaries be easier on the mind.

I do for sorry for the vast majority of those guys but a half year ago I thought for sure they would get their act together. It's disappointment that they didn't.

Its not just management's fault and its not just the pilot's fault. It's United's.

 

[SDF2BUF2MCO]

Golden, some good logical thoughts. Some of your posts a few weeks seemed to be leaning towards blaming labor first. Stating the obvious it takes two to tangle. The relationship between labor and management is kind of like the chicken and the egg meaning who started it? Historically though, it has been management.
Even though I am in management myself, I still to this day do not understand the condescending/adversarial relationship some managers have towards people (and vice versa). My take is most managers dislike their jobs and take it out on the people who work for them. They need to take up flying...great for the soul .
Keep your guard up and be wise as serpents and harmless as doves.
Good luck to the ALL the folks at United.

 

[DaveGriffin]

It is inherently self defeating for an airline to be unsafe, because customers would not fly on an airline that consistently crashed planes.

Thank you for your logical comments and thoughts. ALPA’s claim that they are the primary drivers of safety is nothing more than propaganda BS.

Nothing makes sales and marketing’s job more challenging than a crash. We all know how CNN, as well as the other news organizations, love to give aviation accidents and disasters BIG coverage. Nothing affects the passengers’ decision to fly more than concern for their safety and lives. Just look at the effect of the attacks of 9/11.

To listen to some of the pilots on this board (such as DL mainline pilot csmith) one would have to believe that crashing airplanes and killing customers and crew somehow saves or makes the company $$…….and it is only the diligent efforts of the pilots that prevents management from crashing planes on a regular basis to improve the bottom line.

I still laugh to think how ALPA fought the introduction of the two pilot 767, insisting on the addition of an FE. They insisted that their concern was safety but it was clearly the old practice of union featherbedding at work.

 

[Birdstrike]

Let the Fat Lady Sing

Have to say that from the observer's gallery, Golden's arguments appear to me to be carrying the day. Kudos to both Golden and PCL for a great discussion.

Here's my take: under capitalism, companies that are badly run for whatever reason need to be allowed to fail and go out of business. Period. All the contortions to keep US Air and United afloat when they should be long gone just continue the agony for all.

Who says we need 5 major airlines? If the two sickest go out of business, yes it's certainly tragic for all affected and their families, but isn't that America? Life goes on. There is risk in business.

Companies that fail should go away so that the survivors can be survivors, collect the spoils, and live to fight another day. The government should get the heck out of the bailout business and let the true market forces work.

No company should be allowed to "restructure" (read walk away) from their debts and "emerge" from bankruptcy 18 months later. The right thing to do is to liquidate the company, sell the assets to the creditors, and that's all she wrote. 'Believe the industry would be far better off in the long run under that scenario than the one we are into now.

 

[PCL_128]

I reviewed my post.

I can't find where I said SWA makes less than the other major airline pilots.

Here we agree 100%

"The salaries of pilots cannot account for the success of SWA. They use a completely different business model and don't treat their employees as nothing more than a necessary evil. When you treat your people good they will respond by doing a better job on the line. There are many things that make SWA a profitable company, but pilot compensation is not one of them."

Take care of the people, and they'll take care of the mission.

Let's look at SWA vs UAL compensation, same equipment, same seniority. My info is from Air Inc's pilot survey.

737-300 Capt, 12 yrs seniority (year 2000 numbers)

UAL / SWA

monthly salary 16,000 / 12,300

a fund 1.5% x FAE x yrs of service / none

b fund 11% / none

401 k match none / 100% on first
7.3%

per diem 2.20 / 2.15

ESOP none / 10% discount off
market price

profit share none / up to 15%


estimated 18,000/month / 13,200/month
monthly total
(per diem+salary+b fund+401K)

annual salary $216,000 / $158,400

that's a 27% difference between what a SWA and a comparable UAL Capt make...about 57,000/yr per pilot.

UAL in 2000 had 158 737 300/500s.

you figure 10 pilots per plane, that's 1580 737 pilots.

$57,000 x 1580 pilots = $90,060,000/yr more at UAL than at SWA to do the same job.

And let's not forget about the A-fund retirement plan at UAL...which was not used in my calculations.

So while I didn't say SWA pilots made less,I can show some certainty that SWA pilots make good money, but significantly less than their UAL counterparts.

The only caveat to my numbers is the SWA profit sharing...which for a 12 year Capt in 1999 was $21,000.

That brings a 12 yr SWA Capt up to about $180,000/yr...which is still great money, but about 17% less than the $216,000/yr UAL 12 yr 737 Capt.

17%

and what percentage pay cut were the UAL pilots looking at before bankruptcy?

...about 18%...gee...what a coincidence

Your figures are well thought out, and I don't disagree on most of it. However, I do disagree that this small difference in labor costs is breaking UAL. You say the difference over a year for 737 pay that UAL is forced to pay is $90m. Well guess what? United is burning through about that much every 3 days. (22m a day latest estimate from mgmt) How can labor account for that? A few quick calculations will show that UAL pays about half a billion more than other carriers each year for labor. That equates to just over a million a day. How do you account for the other 21m a day that UAL is flushing down the toilet? And how about comparing UAL to DAL? DAL is losing about 3 million a day compared to UAL's 22m. Why is that? The labor costs are pretty much identical. (12 yr 737 CA at DAL makes 15.7 a month, UAL makes 15.2 a month) Where is the difference here? The difference is mgmt. While DAL mgmt certainly isn't the best, they've done a much better job than UAL mgmt. Overall, labor costs are much higher at DAL, yet DAL is in a position to be the last major standing. They're losing less money than the other majors and they have larger cash reserves. How can this be? According to you labor is breaking the backs of these airlines. How can the highest paying major be in the best financial position of the traditional major airlines? Doesn't seem to make sense using your theory of pilot pay bringing down an airline.