GL - you wrote:
"Gordon Bethune was recently quoted saying that anyone could make money in this business if they could start over every 5 years with a new employee group and have new airplanes with little or no maintenance issues. Would you like to try that also? Let's keep everyone's pay down, except management's of course! You guys fail to recognize that many management decisions have really hurt these airlines, and the result is LABOR really paying for their(management) mistakes. How about more managemet oversight?"
Firstly -- Bethune is right on. Ever think WHY he is saying airlines could make money in this business if they could start with a new employee group every 5 years?
Also, with regards to management pay -- yes it is high (compared to the pay for labor); compared to other industries -- the pay is right down at the bottom. However, I agree that the golden parachutes, retention packages and bonuses (at a time when the airlines were suffering and labor was being asked for concessions) were RIDICULOUS, UNETHICAL and EVEN IMMORAL. Pay should be based off performance and stock options that way are justified.
As publishers pointed out, "The point, if there is one, is that management is not out here trying to screw labor." HOWEVER, MANAGEMENT HAS SCREWED UP. BECAUSE -- what has happened is, you have these financial types running airlines and this is not really a business where you can apply management techniques that you do in a manufacturing based environment. They are looking at the business from a "nuts and bolts" perspective, applying their optimization, productivity, yield and deep lean models to a people business. And these types have consistently failed (Carty, Mullin, Goodwin, Dutta ...). The managers who have understood the importance of culture, morale and managing labor in general are the ones who have succeeded (Neeleman, Kelleher, Bethune, Branson).
The majors are in a situation where management does not know where to begin. Poor labor relations, LCCs, fuel prices, hub and spoke systems, aging fleets... where does one start.
The problem is -- first and foremost, this is a service business and with poor service the majors will not be able to increase revenue let alone retain existing accounts/clients. However, with poor management decisions and contentious labor relations, employees cannot provide good service and are not motivated to do so. Revenues decline and management looks for the ONLY other way to show a profit (cut costs). Fuel for the most part is a fixed cost (you can hedge your bets but buying options too costs money). So basically management is looking at labor costs. Items like fleet rationalization, training etc. are overlooked because unless you have a manager who has had time in the industry they are not going to understand any such aspects. Similarly, other expenditures like relocation etc. are overlooked. I remember UAL just after declaring bankruptcy had a few base closures and relocated employees. Managers at UAL never looked at their vendor for relocation (the most expensive vendor out there). UAL could have easily saved $1mil+ on this alone and this is a very conservative estimate at best. Not a lot of money in the grand scheme of things -- but items like this add up.
The Airline industry is UNIQUE. Not everyone can run an airline. New technology, the internet, real-time streaming data etc. might help make airlines more efficient -- BUT unless they create robots for customer service the airlines who DON"T GET THE SERVICE ASPECT OF THE BUSINESS ARE DOOMED TO FAIL.
"Gordon Bethune was recently quoted saying that anyone could make money in this business if they could start over every 5 years with a new employee group and have new airplanes with little or no maintenance issues. Would you like to try that also? Let's keep everyone's pay down, except management's of course! You guys fail to recognize that many management decisions have really hurt these airlines, and the result is LABOR really paying for their(management) mistakes. How about more managemet oversight?"
Firstly -- Bethune is right on. Ever think WHY he is saying airlines could make money in this business if they could start with a new employee group every 5 years?
Also, with regards to management pay -- yes it is high (compared to the pay for labor); compared to other industries -- the pay is right down at the bottom. However, I agree that the golden parachutes, retention packages and bonuses (at a time when the airlines were suffering and labor was being asked for concessions) were RIDICULOUS, UNETHICAL and EVEN IMMORAL. Pay should be based off performance and stock options that way are justified.
As publishers pointed out, "The point, if there is one, is that management is not out here trying to screw labor." HOWEVER, MANAGEMENT HAS SCREWED UP. BECAUSE -- what has happened is, you have these financial types running airlines and this is not really a business where you can apply management techniques that you do in a manufacturing based environment. They are looking at the business from a "nuts and bolts" perspective, applying their optimization, productivity, yield and deep lean models to a people business. And these types have consistently failed (Carty, Mullin, Goodwin, Dutta ...). The managers who have understood the importance of culture, morale and managing labor in general are the ones who have succeeded (Neeleman, Kelleher, Bethune, Branson).
The majors are in a situation where management does not know where to begin. Poor labor relations, LCCs, fuel prices, hub and spoke systems, aging fleets... where does one start.
The problem is -- first and foremost, this is a service business and with poor service the majors will not be able to increase revenue let alone retain existing accounts/clients. However, with poor management decisions and contentious labor relations, employees cannot provide good service and are not motivated to do so. Revenues decline and management looks for the ONLY other way to show a profit (cut costs). Fuel for the most part is a fixed cost (you can hedge your bets but buying options too costs money). So basically management is looking at labor costs. Items like fleet rationalization, training etc. are overlooked because unless you have a manager who has had time in the industry they are not going to understand any such aspects. Similarly, other expenditures like relocation etc. are overlooked. I remember UAL just after declaring bankruptcy had a few base closures and relocated employees. Managers at UAL never looked at their vendor for relocation (the most expensive vendor out there). UAL could have easily saved $1mil+ on this alone and this is a very conservative estimate at best. Not a lot of money in the grand scheme of things -- but items like this add up.
The Airline industry is UNIQUE. Not everyone can run an airline. New technology, the internet, real-time streaming data etc. might help make airlines more efficient -- BUT unless they create robots for customer service the airlines who DON"T GET THE SERVICE ASPECT OF THE BUSINESS ARE DOOMED TO FAIL.
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