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.

 

[PCL_128]

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.

First off, my point of that post was not to say that safety is impossible without regulation. My point was that ALPA can be thanked for the safety guarantees we now have. That is why I referenced my experience at a non-union carrier (It wasn't Pinnacle by the way. Pinnacle has a great maint staff. It was my previous job) Without regulation or ALPA, the ailine has no one to hold them accountable for these things. And don't tell me the FAA looks into these things. It took them till 1 year after EAL went under to finally discover that EAL mechanics were doctoring logbooks to show that planes were fixed when in fact they weren't.

Don't get me wrong. I don't think reregulation is the only answer. I think that better mgmt is certainly another solution. In the 1970's airlines starting having guys like Frank Lorenzo and Mr. Icahn of TWA head their airlines. These men had no idea how to run an airline. And the guys running the show now don't either. That's the problem. We need people with airline experience with a successful track record to run these airlines. Instead, what happens? DAL hires a former Midway executive to head their new LCC. Midway failed terribly!! We keep going back to the same failures to run airlines. That's the problem here. If UAL's mgmt thought that the new pilot contract would bankrupt the company, why did they agree? I'll remind you that labor can't force mgmt to do anything. UAL mgmt agreed to the contract, and they should be held accountable. Pilots are not financial experts and aren't supposed to be. Airline mgmt is. They should know better.

I'm still not agreeing that labor pay is the cause of the problem. I'm just saying that if you think that it is, mgmt is the one responsible because they signed the dotted line on the contract. For the life of me, I can't understand how you can defend these morons running airlines.

 

[surplus1]

Interesting comments and theories. For my two cents, I see basically two extremists jousting with each other.

One (calling himself a "conservative", whatever that is) is a pure capitalist. The other is essentially a pure socialist.

I contend that the truth is somewhere in between. History seems to indicate that pure capatilism is a total failure. Pure socialism is equally a total failure. Somewhere in between lies the equitable solution. I just can't think of what name to give it.

One accuses "unions" of being the demise of the industry, but makes no mention of executives who milk the companies for hundreds of millions of dollars to feather their own nests and who assume that the company is "theirs" to do with as they please, when in fact they too are "employees" of the company. Unfortunately in most cases, they are also employees who don't do their jobs well. The real owners, i.e., the shareholders, take it in the shorts.

Capatilism doesn't work. Neither does Socialism. Conservatives and Liberals are equally full of it ...... 90% political BS and 10% reality, each pursuing his own "interests" at the expense of the body politic.

Any new ideas? Seems like we sure could use a few and I'm not smart enough to produce them.

Orgainized labor certainly has its failings but I would argue that the excesses of organized management by far exceed those of labor and are essentially responsible for business failures. Companies like Enron, WorldCom, etc. (there are hundreds more that we have yet to "uncover") are all basically non-union. That certainly didn't seem to "save" them. Blaming organized labor is an atipical "conservative" ruse designed to cover the malfeasance of the "executive class" who convieniently call themselves conservatives and play to the ignorance of the masses.

If we have to affix blame it appears to rest squarely on the shoulders and failure of management, not labor. As for the alleged greed of the major airline pilot, yes, it exists. That is because he "thinks" he is management not labor and merely emulates the boss. The "professors" of greed are in the management ranks, not labor. The laborers are just good students of the managers. Don't blame them for the curriculum.

Total regulation is not a good thing. Total deregulation isn't either. Without "rules" society cannot function in an orderly manner. That is true of business as well as other endeavors. Human nature doesn't lend itself well to honesty and fairness. Remove all the laws and we revert to the survival of the fittest that dominates the rest of the animal world.

The so-called "free market system" doesn't really exist and never has. It's a myth. If it did, we would all revert to total anarchy and the already artificial economy would collapse completely. Take away the plastic and our high flying life style would soon become the equivalent of Haiti. I'm not against playing the "game" but at least we should recognize it for what it is.

Probably shouldn't have said any of that but oh well, just one more vegetable shouldn't have much impact on the flavor of the stew. I wish us all "luck". In the absence of a viable plan it appears to be the only option.

Maybe Dick and George (the order is no accident) will save us all from ourselves but I'm not going to hold my breath.

 

[cocknbull]

Last night here in Cincinnati the news reported tat Delta's CEO was in Washington talking with law makers. He said that if the government did not pay for airport security that almost every other major airline would declare bankruptcy.

In my opinion that is brilliant, but the government should have been doing this along time ago. Airports and their security is a matter of national security. That means it is a negative claim right and should be supported by tax payer dollars. I think anyone Republican or Democrat could agree with that. I also think the government should not charge such high landing fees at all of these airports. Do truckers pay huge highway fees to use the highway. I don't believe the government should just hand out corporate welfare when ever a company hits hard times. But I do think the airlines have to pay for alot of unecessary stuff. And what the heck has that 7% airport tax gone to.

 

[PCL_128]

Last night here in Cincinnati the news reported tat Delta's CEO was in Washington talking with law makers. He said that if the government did not pay for airport security that almost every other major airline would declare bankruptcy.

In my opinion that is brilliant, but the government should have been doing this along time ago. Airports and their security is a matter of national security. That means it is a negative claim right and should be supported by tax payer dollars. I think anyone Republican or Democrat could agree with that. I also think the government should not charge such high landing fees at all of these airports. Do truckers pay huge highway fees to use the highway. I don't believe the government should just hand out corporate welfare when ever a company hits hard times. But I do think the airlines have to pay for alot of unecessary stuff. And what the heck has that 7% airport tax gone to.

Very good points. The gov't should immediately illiminate all taxes on airlines until business picks up. This includes landing fees, reimbursement for sales taxes they have to pay on fuel and other products, removing the taxes pax pay on fares so that we can keep fares the same prices but make more revenue off of each ticket, etc... The airlines are having enough problems without having to pay the ridiculous corporate taxes that are forced on companies.

Security is the really big one. This is an unbelievably expensive item. The gov't should be paying for this type of security just like they pay for the police force, the military, the national guard, etc... I remember watching Donahue on MSNBC a few weeks ago when they were discussing this issue. The NBC travel editor had this to say: "The airlines need to be spending more money on security, but they're just too cheap." This kind of statement shows the ignorance of the media on aviation related issues more than anything. Airlines are filing for bankruptcy left and right, yet this moron wants them to pay for more security. It has to stop somewhere!

P.S. Nice comparison to the truckers and the roads.

 

[TXCAP4228]

Surplus1, you are obviously a very experienced and wise pilot and I am obviously not. In that spirit I am replying to a couple of things you said.

Capatilism doesn't work. Neither does Socialism. Conservatives and Liberals are equally full of it ...... 90% political BS and 10% reality, each pursuing his own "interests" at the expense of the body politic.

I don't guess you could ride the fence any more than that. I don't know if its possible to be any more cynical than that either.

Capitalism does work. Market forces will define those who succeed and those who don't. Is there a place for safety regulation? Sure. But that doesn't means that market forces don't succeed. This is what is happening with United - the marketplace will be better for the consumer either way.

The so-called "free market system" doesn't really exist and never has. It's a myth. If it did, we would all revert to total anarchy and the already artificial economy would collapse completely. Take away the plastic and our high flying life style would soon become the equivalent of Haiti. I'm not against playing the "game" but at least we should recognize it for what it is.

I don't think I have ever seen a broader more sweeping statement. How do you get to total anarchy from a free market system? How do you get to complete economic collapse?

You're making some huge sweeping statements with little support. I'm not buying it, but I'd be happy to hear (read) your explanation.

 

[TXCAP4228]

There is just too much competition out there. As a supply sider, I never thought I would say such a thing, but at some point you have to realize that the price wars are not working. Can you imagine the difference it would make if just 50 dollars was added to the price of every ticket? The difference in revenue would be unbelievable. But the airlines can't do it because SWA will just drop their fares another 10 dollars and advertize that they are dropping fares while everyone else is raising them. It's an endless cycle using the current system.

I can't belive you're a supply sider.

In some of your other posts you have almost completely ignored that fact that demand for some goods and services are VERY elastic. Now you actually say that if you could only force cosumers to pay you more the airlines would do better!! Do you realize what you said????????

For crying out loud! If I (as a consumer) don't want to pay $50 more bucks I won't freakin fly!!!!!!

Practical example. I live in Dallas and my family is in Houston. I could drive down to see the for the Holidays or I could fly. SWA will fly me round trip for $120bucks give or take. For that, I think I would fly and avoid the hassle of driving 4 + hours each way. However, for $170 bucks I might just drive - heck, I might just stay home!

The statement you made above demonstrates that you have completely lost touch with the purpose of the whole exercise. Airlines exist to provide a service to customers at a cost they are willing to pay.

 

[PCL_128]

99% of the flying public would not even notice if fares went up 50 dollars. It's a big stretch to say that 50 bucks would cause the number of pax to drop off. A friend of mine bought a ticket this summer from MIA to LAX on United with a stop in DEN I believe. This ticket sold for 290 dollars! How are we supposed to make profits when tickets to go cross-country are selling for under 300 dollars? If you had a 757 completely full at this price, the flight would pull in about 50k in revenue. That doesn't even come close to paying the operating cost of the a/c, let alone paying for ground support, landing fees, employees, etc... This is out of hand. I don't care what you say, most people would gladly pay a little more for this ticket than to do a 3 day drive to get there and then another 3 days back.

 

[surplus1]

Surplus1, you are obviously a very experienced and wise pilot and I am obviously not. In that spirit I am replying to a couple of things you said.

I'll take that at face value, with a grain of salt. Though I acknowledge having more than a few hours of flight time, that should not necessarily be confused with "experience". One may have 10,000 hours of experience or 1 hour of experience repeated 10,000 times; a distinction we seldom make but often should. As for wisdom, that has always managed to elude me. I'll admit to lots of opinions but whether or not they are "wise" is left to be seen. I certainly don't claim that they are.

I don't guess you could ride the fence any more than that. I don't know if its possible to be any more cynical than that either.

Although it may appear that way I really don't mean to be riding the fence. That concept appears to assume that capitalism and socialism (in true form) are the only choices. That's definitely not my intent and I don't subscribe to that idea. Just as I don't subscribe to the idea that if you're not a "conservative" then you must be a "liberal". We Americans seem obsessed with the need to label all ideas into neat little sound bites and stereotypes. I don't sign on to that. I'm much to independent to be willingly "labled" and filed.

Perhaps my views are cynical, I won't deny that. Someone said that a cynic is [but] "a blaggard who sees things as they are, rather than as they ought to be." If that's true, guilty as charged.

Capitalism does work. Market forces will define those who succeed and those who don't. Is there a place for safety regulation? Sure. But that doesn't means that market forces don't succeed. This is what is happening with United - the marketplace will be better for the consumer either way.

I don't think I have ever seen a broader more sweeping statement. How do you get to total anarchy from a free market system? How do you get to complete economic collapse?

First let me say that I don't buy the safety cliche as a true factor in this debate. While of primary importance, I don't think safety of flight (as separate from security or air travel) is relevant to the industry's current economic problems.

I would agree that market forces should define, to the extent possible, those who succeed and those who do not, but there must be limits; particularly in essential services such as food production, transportation, utilities, education and law enforcement to name a few of many. As one example, if the agrarian portion of the economy was left to true market forces we might still have food but few of us would be able to buy it and certainly not from American farmers.

The true devil lies in the details. Reality is that true Capatilism does not exist even in this country or anywhere else. While our system is more capitalistic that socialistic. true capitalism is severely modified by a myriad of governmental interventions in every element of the economic system.

If the market were truly left to itself the highly cyclical component inherent in capitalism would eventually result in total chaos and economic stability, even on a limited basis, would not exist. Our economy is far more regulated than we choose to admit or perhaps than the majority of us realize.

There is really not enough space to elaborate in detail. However, if you think the economy is volatile now, just try true Capitalism. The booms and busts would be so frequent that only the Mafia would survive.

By the same token Socialism, if left to its own devices, is equally doomed to ultimate collapse as has been repeatedly proven even in the most democratic societies, let alone the Marxist brand.

Of the two systems, regulated capitalism is by far superior. However, we must avoid confusing the modified capitalism that we practice with the real thing.

Whenever the socioeconomic system collapses that's how we get to anarchy, i.e., political disorder and confusion. The practice of pure capitalism would, in my opinion, ultimately lead to just that.

You're making some huge sweeping statements with little support. I'm not buying it, but I'd be happy to hear (read) your explanation.

I appreciate your reading and don't ask you to accept what I say. It's not doctrine, just one of many opinions.

With respect to the airline industry, many argue that the consumer has benefited by deregulation. That may be true in the short term in that prices are currently lower. However, if all the airlines fail as a consequence of the unfettered "competition" and free market that have produced prices below cost of the product airlines could go the way of the passenger railroad in the US.

The often used example of SouthWest's success ignores the fact that SWA essentially has little or no competition. They operate in a nationwide niche. When other carriers duplicate the SW business model and produce real competition, the consequence of too many players in the same market will come to light again, just as it now has in the hub-and-spoke conventional airline model. Meanwhile, our international services will all go to the socialist modeled foreign competition.

Just as the traffic today cannot support the number of mega airlines in the market, it won't support a plethora of SouthWests either. There are finite limits to how low the cost of producing the product can go. As each company tries to lower its costs more and more to "meet the competition", the so-called "free market" will ultimately implode. There is room for one SouthWest, maybe two, but certainly not six. At that point, those that remain unwilling to pay that extra $50 will in fact have no choice but to drive, for there will be no airlines.

That alternative is not really an acceptable option. Therefore, the government will ultimately intervene and create the Amtrak of the airways. Personally, I would prefer to see a modest dose of renewed government "regulation" before we evolve into state-owned airlines.

While it is true that Wal-Mart has become a successful giant and serves a purpose, heaven forbid that I should have to buy all my clothing from Wal-Mart, my citrus from Brazil, my electronics and automobiles from Japan, my oil from Saudi Arabia, my steel from the EU or my airplanes from Airbus.

Until the entire planet is on an equal footing (which I won't live to see and I suspect you won't either) "free markets" will remain the myth of our political rhetoric. I just don't think we should permit the demise of our airlines in an effort to pursue that theory.

 

[goldentrout]

"However, if all the airlines fail as a consequence of the unfettered "competition" and free market that have produced prices below cost of the product airlines could go the way of the passenger railroad in the US."

While this statement sounds intelligent and well thought out, it has one huge, glaring fallacy.

Free markets cannot, by their nature produce prices below the cost of a product.

If a demand exists for a product, then companies will set a price. If they do not get the expected sales, they might lower the price to entice customers. However, if a company cannot charge a price and make a profit, then that product will not be produced, i.e. there will be no market for that product.

What the heck would be wrong with 3 or 4 SWA look alikes flying all over this country, with totally refundable fares at and below $300...and...the companies actually growing, hiring, and making money?

I fail to see how

a. lower fares
b. flexible fares
c. profitable airlines (i.e. airline stocks that actually appreciate in value)
d. stable, secure, good (not excessive) paying jobs

are bad things for the American public or airline employees.

"Unfettered" competition has done exactly what is is supposed to do.

It has produced companies that can offer a safe and reliable product at a reasonable price.

If that means that some airline pilots are going to have to drop from the top 1% (300k/yr) of wage earners to maybe the top 5% (175k/yr), that is just the basic laws of economics operating exactly as they're supposed to.

I'm not going to ask Grandma to pay $600 instead of $300 for a ticket at Christmas to see her grandkids, just so I can "preserve the profession."

 

[goldentrout]

Surplus1 says

"Until the entire planet is on an equal footing (which I won't live to see and I suspect you won't either) "free markets" will remain the myth of our political rhetoric. I just don't think we should permit the demise of our airlines in an effort to pursue that theory."

1. The entire planet will never be on equal footing...unless you believe in communist utopian theory, because that is exactly what Marx says is the end game of dialetical materialism.

2. We are not permitting the "demise" of our airlines. What we are permitting is the end of a failed business model, that, when it all pans out, will provide more efficient, lower cost air travel for the American public.

3. Your free market "implosion" theory is interesting. I've never seen, heard spoken of, read about, or witnessed a product market "implode."

It is by nature and economic law, impossible for a market to "implode." Either there is a demand for a product at a price that can make a profit, or that product is not produced. Until we can beam people around like in Star Trek, there will always be an airline market...ergo there will always be demand for airline tickets...and what's happening right now is that we are seeing what the consumer is willing to pay for an airline ticket...about $300...and SWA and others are making money with those fares.

"Market implosion," is an oxymoron. If I've missed this economic theory somewhere, someone please enlighten me, and I'll be more than happy to admit the error of my statements.

US Air did not see its "demise," nor will "UAL." They are using bankruptcy to get out from under crushing bills from their failed business model. They are and will continue to fly, and hopefully become profitable...much as Berthune did with CAL after their bankruptcy.

I don't see this as the demise...I see it actually as a rebirth of the airline industry, where management and employee groups will be forced to cooperate to survive or they will perish.