Writing on the wall for major airlines

[Skyboss]

Is this some kind of joke?

Give it up.

 

[jarhead]

Nimtz

I fear you still don't get it. The airline business is not about you, or any pilot. What you, and others who are employees do to build your career is laudable. Great, make it the best it can be through your unions, associations, and individual effort. But, no matter how hard you try to elevate your pay, and reduce your work rules, increase your pensions, and raise your quality of life, there will always be a governor set on that engine. It can only run so fast, before the limit is reached. That limit is the market as a whole, and the prospect for success of the enterprise, that you are an employee of. Competition is that governor. I see so many airline pilots blindly rushing into the tide, thinking that they can turn it back. The LCC will be, and are the equalizers, and they will grow, because there is a market for them.

You know, I can just imagine, a hundred years or so ago, the employees of Acme Buggy Whip and Horse Shoe Company, writing letters to each other, extolling that this new fangled horseless carriage is just a flash in the pan. The public would soon tire of flat tires, getting stuck in a snowdrift, availability of gas stations. "You'll see, as soon as the next business cycle turns around, we'll be working overtime to crank out all the buggy whips the public will need"

 

[Skyboss]

You know, I can just imagine, a hundred years or so ago, the employees of Acme Buggy Whip and Horse Shoe Company, writing letters to each other, extolling that this new fangled horseless carriage is just a flash in the pan. The public would soon tire of flat tires, getting stuck in a snowdrift, availability of gas stations. "You'll see, as soon as the next business cycle turns around, we'll be working overtime to crank out all the buggy whips the public will need"

Great analogy.

 

[nimtz]

You know, I can just imagine, a hundred years or so ago, the employees of Acme Buggy Whip and Horse Shoe Company, writing letters to each other, extolling that this new fangled horseless carriage is just a flash in the pan. The public would soon tire of flat tires, getting stuck in a snowdrift, availability of gas stations. "You'll see, as soon as the next business cycle turns around, we'll be working overtime to crank out all the buggy whips the public will need"

Actually this analogy is a bit off. Yeah the automobile replaced the horse, so then you should be arguing something should be replacing air travel. Hey skyboss, jump right in here! Sorry but the LCC are not going to replace the mainlines, instead what we have is a more complicated dynamic to the competition then existed in the 80's.

A better analogy would be a new business opening up a competiting store across the street from Acme Company. Say that the competitor brings with him more efficent means of production by for example having new tools that don't wear out as quickly as Acme. So the competitor is thus able to keep his costs low and the price low. Since to the average person, every horseshoe is about the same, the competitor forces the Acme Company to change its tactics. It's not possible for Acme to simply replicate the business plan of the competition, because Acme has too much overhead already invested in his plan. Maybe the Acme owner starts offering repeat customers future horseshoes for free or whatever else.

The point is the competition forced Acme to change tactics, not simply go out of business. The mainlines staved off the LCC before through IT and yield management. While this advantage has finally been nullified after almost 15 years, it does not mean that the mainlines can't come up with another answer in the future.

I 'm not arguing that my profession's compensation and benefits need to be increased (other then in-line with inflation), I'm arguing that it doesn't have to fall just because everyone gets 'Peanut' Fares right now. Besides, if the day ever came where LCC pay was industry standard, then the next downturn every airline manager would seek 15% pay cuts from that to 'keep in line with what the market supports.'

'What the market can support' is management's favorite catch phrase during give backs, but somehow it is conviently forgotten when the company is making record profits as the majors where in the Mid 90's. As always, the speed of the governor was hidden from those who were deserving of a higher speed. This industry has survived with pilot compensation at its current levels and worker compensation had nothing to do with the current plights at American, United, and US Air. Heck even Delta has seen positive cash flows with their 'greedy, unrealistic' contract. At the same time compensation is not the biggest reason for the short-term success of Air Tran and Jet Blue. So while looking at the worst of the downturn in the rear view mirror, why then should I believe that LCC compensation is the wave of the future for this profession?

 

[Clownpilot]

OK

I am now 63 years old, and know far more than you might expect, as to the laws of economics, and how to run a business. Kind of amazing how I could do that, being an idiot, and such. However, if it makes you feel good, you certainly can reduce your argument to calling someone you never met, "an idiot" Far from irritating me, I actually get a chuckle out of your ranting.



Thank god for that. I'd hate to be the one responsible for giving you a heart attack old timer.

BTW why are you here?

Although it did ease my mind to know passengers don't have to take their chances with you.

 

[jarhead]

clownpilot

And the clown asks,

"BTW why are you here?"

Why, to irritate you, of course............no other reason.

And now (drum roll please) the clownpilot has the dubious distinction, of being the second moron to be added to my "ignore list". What a wonderful tool that is. I won't even be aware of his anticipated response to this post, as the ignore list in the user cp allows me such bliss. Because the door has been slammed in the clown's face forever, never to be seen by me again (sigh), we will no longer be able to exchange these pleasant moments with each other.

Good bye forever, clown (sob, sniff) I will dearly miss your sociopathic posts, but alas, I find I can no longer take the time to even see, let alone read your rants, much less waste my time responding to them.

Buh-bye

 

[WrightAvia]

Nothing like a nice warm cup of "S.T.F.U.".

 

[Dieterly]

Picture Jarhead having an argument with somebody (face to face); "LA LA LA, I CAN'T HEAR YOU!!!

 

[daviator]

Did you know that JetBlue has already dropped some of its ATL-LGB routes?

 

[Skyboss]

Did you know that JetBlue has already dropped some of its ATL-LGB routes?

LGB is cursed. I can't believe they are running LGB-OAK. Southwest couldn't even make that route work. No less than 6 airlines have tried that route, all failed. As for ATL. Please, they are surrounded by DL at LAX and SNA.

 

[TXCAP4228]

Of course, starting with $100 million covers up quite a bit of what would have been significant losses. It'll be interesting to watch. Long haul flying is pretty efficient.

Do you know how to read? Look at the June 30 2003 10Q for Jet Blue. Regardless of how much money they started with, their income from operations is more than enough to cover all current obligations and CMLTD. Their cash flow is outstanding.

You have no clue if you think Jet Blue's start up capital is "covering up" losses. Jesus Chr!st they're a freakin' cash cow.

 

[TXCAP4228]

Re: STFU

What you understand about how the airline industry works could fit in a dimple on a thimble. Stop airing your complete ignorance. It annoys me. And no, its not as simple as supply and demand or simply having a good business plan. It's a lot more about adapting to the changes as they come. When the economy recovers and air travel booms again we will see large profits at the airlines that survive now. Not just the LCC. They arent going to be the only model in existence. In fact, in an up economy they are the low profit makers.

United was by far the biggest profit maker in the last up cycle.

Look at them now. Their model hasn't adapted to the conditions. But it must work cuz they were top dog. But when things changed they didn't. Guess what?? Things will change. And then things will CHANGE ........AGAIN........then they'll change......again after that.

You may be a good pilot, but you have no clue how to evaluate a business. I hope you have a good financial adviser.

Do you really believe this: United must work because when EVERYBODY was making money hand over fist they were too?? This is a perfect example of a failed business model that is too entrenched to adapt.

You want to pull out the financial statements and defend what you said? Bring it on.

SWA has maintained sustainable and continued growth. If you really think United must be a better company because they recklessly pursued revenue (**WHEN EVERYONE IN THE INDUSTRY WAS DOING WELL**) without positioning themselves properly in the market, then I encourage you to buy up all the United stock you can and see what happens.


Here's a clue. People who bought LUV stock 10 years ago have done very well. People who bought United?? Well.... Uhhh..... they're broke now.

 

[Skyboss]

Do you know how to read? Look at the June 30 2003 10Q for Jet Blue. Regardless of how much money they started with, their income from operations is more than enough to cover all current obligations and CMLTD. Their cash flow is outstanding.

You have no clue if you think Jet Blue's start up capital is "covering up" losses. Jesus Chr!st they're a freakin' cash cow.

Yes, they are today, but their first couple of years would have put them out of business had they not had that kind of cash.

See page 9 below...

Also noteworthy, considering managements money grabbing...Neeleman's base salary is $200K plus a bonus of $90K and options of $37K... Far less than the millions we've all seen elsewhere.


http://media.corporate-ir.net/media_files/NSD/jblu/reports/2001prospectus.pdf

Also, during the last up cycle, United generated the most revenue, not the most profit. Delta was #1 in profit, followed by American which was#2 in revenue and profit. This is according to ATW.

 

[goldentrout]

If anyone thinks the huge technorlogy bubble of the 1990s (and the huge amounts of paper money and speculative investment) that went with it will return soon, or ever, they're out in left field.

Additionally, the LLCs are now a much bigger player, and will continue to gain market share. If you look at the post above from a business traveler, he specifically states that unless he's going international, it just ain't worth the money to pay for anything more than the cheapest coach seat.

The airline industry IS about supply and demand. The demand for air travel in the 1990s was much higher than it is now and the LCCs, other than SWA, were not a big player. Ergo the majors could charge high prices because demand was high and supply was limited.

With the entrance of the LCCs, supply has been significantly increased...and will continue to increase, based on the hundreds of airplanes the LCCs are projected to buy over the next 5 years.

So supply is up, demand is down...and guess what...even though flight loads are up at the majors, revenue is down...because the price they can charge for a fare is down, due to increased supply and smaller demand.

And even when demand returns somewhat, the majors still won't be able to charge 1990 fares, because of the increased supply from the LCCs.

That whole argument that UAL etc. were making big profits and therefore they had a good business model is just rubish! UAL/US Air were making money in the 1990s, and now they are bankrupt! AMR barely avoided bankruptcy, and NWA/DAL employees are probably going to have to take 15-30% paycuts, no too mention tens of thousands of layoffs.

A good business model takes advantage of the good times (i.e.) profit share, while maintaining overhead that is capable of riding out the inevitable economic cycles, without having to fire thousands of employees or almost go bankrupt.

It seems that it might be possible to run an airline where the pilots make well into six figures...even in the bad times, have a decent retirement and health benefits, profit share in the good times, never furlough, and still make money year after year.

That is the model of the future ladies and gentlemen...Jet Blue and Air Tran and SWA and Frontier have all made money since 9/11. Imagine what they'll be able to do when the economy turns around.

I've yet to talk to an Air Tran or Jet Blue or SWA pilot, especially after 9/11, that isn't extremely pleased with his company and his job.

The writing is on the wall. The question is can ALPA and the major MECs read it.

 

[Singlecoil]

Wow, this is such a great thread. I had forgotten that the United MEC insisted that the company buy back company stock when it was $80 a share, losing millions. I had forgotten that the United MEC insisted that the company start Avolar and order millions of dollars worth of corporate jets.

Those darn unions and those darn greedy pilots. Management deserves those golden parachutes for having to pick up all the pieces and clean up the messes of the pilots.

 

[Wats]

That aside, tell me: exactly how much should a "top" airline pilot earn? Don't you think $150+k/yr is excessive? Hell, many surgeons don't net that much in a year. Few lawyers do, either. Besides, why should a top airline pilot earn 3 times what a pilot of comparable skill earns at a regional? Does his experience/seniority really warrant such a higher wage?

You're complaining about people like jarhead destroying the airline pilot profession. The people who destroy it are those who demand such exorbitant wages that when the airlines aren't filing bankruptcy, they're furloughing pilots because the union wages aren't reasonable. These same people bar qualified pilots who are willing to work at a major for less than the union rate. I see exactly who's destroying what .. [/B][/QUOTE]

Secks,
Who cares what Dr.s or lawyers make. They are not pilots. Larger jets are more productive. They generate more revenue so the pay is higher. That is a valid economic argument and I am an RJ driver so don't accuse me of protecting my turf. If you want to bump up RJ pay, woohoo! I'm all for that, but don't knock down LJ (large jet) pay to get to parity!

 

[Clownpilot]

Re: Re: STFU

Reading comprehension isn't your strong suit is it?


UAL didn't just make money when everyone else did.
They were BY FAR THE LARGEST PROFIT MAKER DURING THAT TIME.
They weren't the largest airline either. They were largest by one market share point over AA but were smaller in terms of number of planes and employees.

Their model worked well then and would work well again in an up economy.
It didn't adapt. Thank you for restating that after I said it in my original post.

You know why they failed? Because they felt that they could wait out the down cycle and take advantage of their VERY SUCCESSFUL MODEL AS THE ECONOMY SWUNG UP AGAIN.

Well, that didnt happen. The economy didn't come back fast enough and when 911 happened it was all over. 911 itself added years to the recovery. Years that they didn't have the cash to wait out.

I operate 2 businesses independent of each other. They both make money. I have lots of help to make them work.

And I have a decent financial adviser.

You sir, probably have trouble breathing.......unless you were smart enough to drill a hole in your belly button.

You may be a good pilot, but you have no clue how to evaluate a business. I hope you have a good financial adviser.

Do you really believe this: United must work because when EVERYBODY was making money hand over fist they were too?? This is a perfect example of a failed business model that is too entrenched to adapt.

You want to pull out the financial statements and defend what you said? Bring it on.

SWA has maintained sustainable and continued growth. If you really think United must be a better company because they recklessly pursued revenue (**WHEN EVERYONE IN THE INDUSTRY WAS DOING WELL**) without positioning themselves properly in the market, then I encourage you to buy up all the United stock you can and see what happens.


Here's a clue. People who bought LUV stock 10 years ago have done very well. People who bought United?? Well.... Uhhh..... they're broke now.

 

[Clownpilot]

Re: clownpilot

Darn, I'm really going to miss you.

I am very sorry I offended you so deeply.

My guess is that your doctor probably ordered you to stop reading my posts.

Take care my geriatric friend. I will think of you often.........

If anyone sees ostrich geezer please tell him no offense intended and to please pull his head out of the sand every now and then to take his senility medicine. Ah, never mind. Leave him be.

Good bye Old Friend. Snifffffffffffffllleeee.

And the clown asks,

"BTW why are you here?"

Why, to irritate you, of course............no other reason.

And now (drum roll please) the clownpilot has the dubious distinction, of being the second moron to be added to my "ignore list". What a wonderful tool that is. I won't even be aware of his anticipated response to this post, as the ignore list in the user cp allows me such bliss. Because the door has been slammed in the clown's face forever, never to be seen by me again (sigh), we will no longer be able to exchange these pleasant moments with each other.

Good bye forever, clown (sob, sniff) I will dearly miss your sociopathic posts, but alas, I find I can no longer take the time to even see, let alone read your rants, much less waste my time responding to them.

Buh-bye

 

[HoursHore]

"That aside, tell me: exactly how much should a "top" airline pilot earn? Don't you think $150+k/yr is excessive? Hell, many surgeons don't net that much in a year. Few lawyers do, either. Besides, why should a top airline pilot earn 3 times what a pilot of comparable skill earns at a regional? Does his experience/seniority really warrant such a higher wage?"

What other job do you get paid for about half the time you are actually at work?

Do Doctors and Lawyers spend 18 days a month sleeping in a hotel?

150K a year isn't excessive, Its a bargain

 

[dogg]

So lets see.... Lets all rush out and agree to concessions because.. hmm.. Mgmt says that if we do we will grow and be just like SouthWest( no I dont think so. They are getting a raise) or yippee like the latest fad airline JBLU. Wall St. likes them so ..... so what, they are ( no offense taken ) a pimple on SouthWest's A!!S. Been around all of what three years. Who cares... Or we can be just like ValuJet.. I mean AirTran... Again, don't take offense but most of the traveling public has not heard of either airline..... Or we can tell MGMT to stuff it and show us,, the investors with no return How there new plan is going to work...... So blow me.. I think that 180,000-220,000 a year for a major Airline Captain is reasonable and affordable and 90,000-130,000 a year for an FO is OK too.... So dont whine about the miserable wage that pilots flying 50 seat jets make because they have themselves to thank for gettin there shorts in a wad and gettin all drippy just to fly a jet.... After you fly a jet you realize that it is boring as hell and you wish for the good old days when you actually flew for a living.........ah screw it maybe I should quit and give someone with a better attitude a chance....... But I will say this.. the job ain't what I thought would be.......................................