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The Quandary Of "cost Cutting" For Airlines  
User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
Posted (10 years 3 months 2 weeks 18 hours ago) and read 11095 times:

For a number of years we have heard about how airlines have needed to "cut costs" in order to stay out of bankruptcy - or even to emerge from it. We have all fallen into the mindset that "LCC" is the same thing as saying "profitable" or "successful". Yet, when the time comes for an airline to do so, many people are quick to cry foul when labor is targeted as a method of reducing expenses. But really, what are the options? Looking at the big expenses...

Fuel: Can you really just choose to pay less for fuel as part of your "cost cutting?" Not really. You can hedge fuel - but that is something that is necessarily done ahead of time and only when an opportunity presents itself.

Maintenance: Can you really just choose to cut down on maintenance? Even people here have made insidious remarks about how one airline or another is only succeeding because they are practicing unsafe maintenance procedures in order to cut costs. Certainly that's not something that can or should be done in order to lower expenses and be profitable.

Aircraft purchase/lease: Unlike many industries where you can just start buying less expensive machinery and see an immediate turnaround, airlines cannot just start buying cheaper planes and see an overnight benefit. These aren't office supplies we are talking about. If you need to cut your costs over 6 months, we are only talking a few aircraft (if you happen to be receiving new ones at all during that time) and the additional costs of changing to a less expensive type would likely offset the purchase savings.

Marketing: While airlines in many markets don't have to worry about "brand awareness" (like in hub markets) and in other situations let the internet booking sites or travel agents do the talking for them, there is still a lot of money that needs to go into putting your product in the forefront. There may be more leeway here in an emergency than in other places, but is this something that you really want to cut back on?

Gate Space/Landing Fees: Some things are just necessary for operation and can't be cut or are not in the direct control of the airline anyway (landing fees). However, there can be some adjusting here and there. De-peaking a hub (rolling hubs) means that an airline can get better utilization out of gates and ground assets - therefore needing less of them to serve the same number of flights per day... but that's simply a matter of degrees.

That just leaves us with the biggest expense of all for an airline. Labor. We can all agree that an airline either can't reduce or shouldn't reduce expenses in other areas... at least not to a level that is going to make a difference. But LABOR can be negotiated, trimmed, deferred, massaged, etc. It is certainly true that the airline can't run if the people don't work - something that unions make very clear to management once in a while through tactics ranging from subtle suggestion up to strikes (or worse). However, the reverse is never that apparent until the 11th hour - that the people can't work if there is no airline.

When that realization occurs, it is often disguised or recast by the cries of "it's not fair that all these people should lose their jobs!" Well, that may seem true, but really it has nothing to do with whether or not it is fair - it just is. One would think that the airline would rather stay in business and pay its employees than fold. Of course, it is even blamed on management by claiming "its not the employees' fault that the airline is in trouble." Well, that is true as well to an extent. There are usually too many factors to pin down what or who was at fault which makes that a rather pointless effort anyway. However, some of the blame can be placed on those people that are narrow-sighted enough to insist ONLY on the alleged well-being of the employees rather than in the success (or even survival) of the company as a whole. Those people, of course, are union leaders who, by nature of their position, are ONLY interested in furthering the position of their charges (the employees). The result is that labor is now being put into the same "untouchable" category of other expenses such as maintenance, fuel, etc.

Therein lies the quandary.

If a struggling airline:

  • Can't cut maintenance for fear of government penalties, public backlash or, at worst, planes falling from the sky

  • Can't cut fuel costs (for obvious reasons)

  • Can't cut aircraft expenses either enough or in time to matter

  • Can't cut marketing for fear of obscurity

  • Can't cut other expenses such as fees and gate leases for operational reasons

  • ... and can't cut labor costs or staffing levels for fear of retribution by zealous unions...


  • ... then what is there for them to do?

    Every time debt is forgiven through bankruptcy or renegotiation of terms, it hurts the economy as a whole. In short, it is money or product that has been given away for free (or very reduced rates). That is someone else's labor that has gone uncompensated. That is someone else's paycheck in a different industry entirely that is going up in smoke. That may mean someone else's job working for some parts manufacturer in the supply chain is now in jeopardy - or even gone entirely. That is someone's potential new job opportunity that has now evaporated because the airline didn't pay its bills - and a judge somewhere said that it was "OK" for them not to do so. Do we weep for these people? Is there a huge outcry of "there are thousands of people out of work or taking pay cuts because the airlines are bankrupt!"? I haven't heard it.

    We complain about the idea of laying off 1000 flight attendants. We never notice the damage that would be done by continuing to pay them.

    We despair about the "latest round of concessions" by the mechanics. We never think about the tool company that closed it's doors because the airline was allowed to not pay their bill rather than pay a dollar an hour less to the mechanics that used the tools.

    We are shocked at the stories of pilots who aren't making what other pilots are... and yet we never cry over the mom and pop business that can't get a small loan from the major bank because the bank didn't get their loan payments from the airline.

    I'm not judging... I'm pondering. I ask you to do the same.


    1. What expenses, exactly, are we expecting the airlines to cut if not labor?

    2. At what point do we balance the damage being done to the economy by the airline industry's "serial bankruptcies" with the damage we allege is being done to a relative handful of employees?

    3. At what point do we realize that, while the airlines continued healthy existence is necessary for the country's economic stability, their continued unhealthy state is undermining the exact same economic stability it is meant to serve?


    Let's think about this... not slam each other about it.





    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    115 replies: All unread, showing first 25:
     
    User currently offlineFlying-Tiger From Germany, joined Aug 1999, 4161 posts, RR: 36
    Reply 1, posted (10 years 3 months 2 weeks 10 hours ago) and read 10801 times:

    I throw in a few considerations:

    Work on the INCOME side, not only the cost side. If you have a healthy income you are able to accept higher costs. An example how you could increase your income would for example be a state-of-the-art yieldmanagement system.

    Try to fly on routes which justify a higher fare.

    Try to match capacity and demand.

    -----------
    Cost cuts:

    I have to disagree somewhat on the fuel bill, you can cut this one a bit if you are always using state-of-the-art technology which is usually more fuel-efficent. That might give you an edge over a competitor - this basically means, that DL, UA, AA - the all have employed their B727, 732 fleets way too long, and now don't have the appropriate replacements in place due to funding issues.

    De-Hubing is not a heal-everything-idea - all majors rely on a hub-and-spoke strategy for their long-haul networks, someting the 7E7 won't change. You need the feed from smaller destinations.

    Regards
    Flying-Tiger
    http://fly.to/rorders



    Flown: A319/320/321,A332/3,A380,AT4,AT7,B732/3/4/5/7/8,B742/4,B762/763,B772,CR2,CR7,ER4,E70,E75,F50/70,M11,L15,S20
    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 2, posted (10 years 3 months 2 weeks 10 hours ago) and read 10781 times:

    "Work on the INCOME side, not only the cost side"

    However, the consumer has the final say on that. As long as there is someone charging less, your hands are somewhat tied.

    "Try to fly on routes which justify a higher fare. "

    This only works if you are a mid-sized national line where you can pick and choose. If you are a major where you are expected to have service to all places, you don't have this flexability so much.

    "Try to match capacity and demand."

    That is pretty much a given - but is often difficult due to relatively inflexible asset lists. You have what you have and you will just have to make it work.

    "I have to disagree somewhat on the fuel bill, you can cut this one a bit if you are always using state-of-the-art technology which is usually more fuel-efficent."

    As I mentioned above, this is a long-term strategy that may require short-term expense. As you pointed out, it may not save someone who has gone too long that way.

    "De-Hubing is not a heal-everything-idea - all majors rely on a hub-and-spoke strategy for their long-haul networks, someting the 7E7 won't change. You need the feed from smaller destinations."

    Notice I didn't say "de-hubbing" above. I said "de-peaking a hub". Believe me, I have written some pretty massive explanations of the benefits and pitfalls of the hub system. However, it is a mathematical fact that a banked hub has a horrible asset utilization rate. By shifting to a rolling hub rather than a banked hub, you can either operate more flights per day or use less gates/ground assets to serve the same number of flights. The only casualty of that is slightly longer connect times for the passengers.

    Thanks for jumping in, though!



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineClassicLover From Ireland, joined Mar 2004, 4634 posts, RR: 23
    Reply 3, posted (10 years 3 months 2 weeks 9 hours ago) and read 10762 times:

    Personally, I think labor costs should be cut - but not in the usual ways that people think.

    Long serving airlines tend to have long serving staff that are on vastly superior salaries to LCCs. The LCCs have proven the theory that people will do the same jobs for a lot less money in order to have a career in the airline industry.

    As such, the base salaries for newly hired all crew in the so called legacy carriers should be reduced to LCC levels.

    This is taking the very long term view. As people retire and new staff come online to replace them, the overall salary expenditure is going to decrease. It's a win-win situation for the airline in that the existing staff don't get pay cuts, and the airline gets to save money.

    However, I can see three problems. Firstly, unions would never let it happen. Secondly, staff morale would suffer as some people were getting a lot more money for doing the "same" job. Finally, some airlines would go bust before all the people turned over (up to 40 years in some cases).

    It makes sense to me, but human nature would never let it happen.

    However, I also believe that in 40 years time the survivors of today's LCCs will be in precisely the same position as the legacy carriers are today - spiralling labor costs killing the airline. It's due to the yearly pay rises given on performance and the like.

    Perhaps the airlines should fix any wage increases to inflation in the home country only, and pay the employees cash bonuses in profitable years, based on performance. In that way, labour costs are not increasing in real terms.

    The only other way an airline can cut costs is to not fly any unprofitable routes. All unprofitable routes should be withdrawn immediately, or appropriate steps done to make them profitable. An example here is Qantas creating the low cost international airline Australian Airlines. It flies routes profitably that Qantas can't due to its cost base, yet as a wholly owned subsidiary, all the profits go back to the parent company.

    I think airline managers need to think outside the square a little more in some cases - remembering here that I don't profess to have all the answers either.

    Good topic!!

    Trent.


    [Edited 2004-05-11 06:47:27]


    I do quite enjoy a spot of flying - more so when it's not in Economy!
    User currently offlineUA744Flagship From , joined Dec 1969, posts, RR:
    Reply 4, posted (10 years 3 months 2 weeks 9 hours ago) and read 10754 times:

    Great post with a lot of thought. Good job!

    Look back at some of my posts last year and I echo a lot of the same sentiments.

    Especially about the "cumbersome equipment obligations"...

    I'll write some more pt/counterpt response later when im not so tired..


    User currently offlineSydscott From Australia, joined Oct 2003, 2965 posts, RR: 20
    Reply 5, posted (10 years 3 months 2 weeks 8 hours ago) and read 10725 times:


    "What expenses, exactly, are we expecting the airlines to cut if not labor?"

    How about Labor related costs?? Don't cut the salaries but make people pay for their own Health Insurance, Life Insurance etc.

    How about Pensions costs?? Why should any business be lumbered with a Defined Benefit Pension Plan. If the employees Pension provider loses money why should the airline foot the bill for that loss plus pay more contributions for that employee?? It shouldn't. Defined Contribution plans are way fairer to the employer as they have set commitments to their employees and are far more efficient to run. Just look at US Airways Pension deficit problems. The employee should take responsibility for their own retirement. (Its general practice in Australia. There are very few defined benefit plans left except in government service)

    How about property related costs?? Terminals, Offices etc. These are all non core assets of any airline and could be sold to a private property group to maintain and upgrade. This then ensures their efficient use and provides the airline with capital to invest in their flying operations. It will also force the airline to be more efficient in their gate and space usage as the private operator will seek the maximum movements through their terminal in terms of planes and passengers. This would result in a more streamlined and efficient airport operation which would definitely cut costs.

    "At what point do we balance the damage being done to the economy by the airline industry's "serial bankruptcies" with the damage we allege is being done to a relative handful of employees?"

    I think the damage done to the economy as a whole by an airline bankruptcy is negated to an extent by the way that airlines capacity is replaced. Clearly if US or DL went under there would be a rush to fill the void at places like Atlanta, Philadelphia and Washington National. The employees would find new jobs, probably at lower pay, and the economic damage would be minimal as the new airlines expanded to fill the void. Even if they didn't add all the flights back they would use larger planes which means the employees at Boeing or Airbus would build more planes, requiring more parts etc. So the economy would recover and continue. The damage in smaller communities would be harder to offset and that is where the loss would be most felt but if their services are profitable other airlines will add frequencies and replace the bankrupt carrier.

    I'm sure my points will be expanded upon as this topic continues. Lets not get personal either. (As InnocuousFox said)


    User currently offline4jaded From United States of America, joined Apr 2004, 248 posts, RR: 0
    Reply 6, posted (10 years 3 months 2 weeks 8 hours ago) and read 10704 times:

    Excellent discussion here. To put in my penny thought on the subject pay does not make any employee happy to do his/her job correctly everyday. It is human nature to always want more. If you make $7.95 as an agent or $27.95 for example you will live a lifestyle at the edge of your pay scale. The LLC's have proven this time and again. There are people that just love to work in aviation and there are people that would be better served doing something else. No matter what you pay them they will just not "get" the job they are supposed to do to make the company a winner. I have never seen any of the legacy carrier employees run around really happy that they make more than the person at the next counter making a fraction of the pay doing the same job. It just does not happen. They complain about this that the other thing going on at there company, worry about there bills, there Christmas gifts etc.
    There are employees that have been working years at legacy carriers that make really big money and refuse to take overtime or Holiday shifts even when the company Begs them too yet if you asked any LLC agent if he/she would like to work for $35.00 an hour /overtime pay for example/ they would cut there arm off to be able to do that.

    The problem with cost cutting the employees however is that once you are used to working for $17.00 an hour working for $10.00 an hour makes them feel cheated, violated, etc and puts a great deal of stress on them personally as they now live an $18.00 an hour lifestyle /yes $18.00/ and now you want them to cut it back to a $11.00 an hour one. The resentment alone is palpable when these things happen and it shows in the product. So the ailing carrier is now cut cost but has also cut revenue as customers flee in terror away from the angry nasty employees. It is a cycle that repeats itself over and over. Plus the rumor mill winds up into high gear and employee groups look for a target to focus their anger on. This could be a CEO, a local manager or whatever, and the Ivory Tower mentality kicks in also. They start to complain about everything that "looks expensive" to them in the hope that by cutting that they will somehow get some money back. This focus is obviously not on the customers still showing up for the flights and I have even seen agents and others get resentful of them as well. Lets take it out on this GOLD level FF because he got a free upgrade! Well the guy earned it he flew 50 revenue flights this year already.
    To close, cutting anything is very difficult for a variety of reasons
    but unless the employees truly get on board any move and see past themselves into the whole or imagine what life will be like without a job at all
    these failures will continue. It is hard working for a big company and sometimes employees feel just like an employee number but everything they do with every customer counts. The truth is here in our posts we all have tales of being mistreated.


    User currently offlineDAirbus From United States of America, joined Nov 2003, 593 posts, RR: 2
    Reply 7, posted (10 years 3 months 2 weeks 6 hours ago) and read 10672 times:
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    This is a great topic and illustrates that there are no quick fixes to the problems facing the legacy carriers. I do have to agree 100% with what ClassicLover said in his post regarding the fact the tenure and overhead is a factor which most LCC's don't have to deal with. At least not to the degree of the legacy carriers. I can see however that the issue of "long serving staff" as he put it is starting to put pressure on labor relations at the oldest and biggest of the LCC's which is Southwest.

    I can use the example of their BWI hub to illustrate my point since I worked there for over six years. Southwest is roughly 30 years old but most employees have worked for them, on average, 10 years or less. This is about the timeframe that Southwest started building their BWI hub which now is their third largest operation. Say that someone in their late teens or early twenties started with Southwest when they first came to Baltimore. They start out at around $7-8.00/hour but it seems like it is a good deal since they like working at the airport and their income is sufficient for their lifestyle at that point in their lives.

    Let us now fast forward to the present. The same ramp agent has now maybe moved up to Lead or Supervisor but is still working on the ramp because that is what he or she likes to do. They have had incremental pay raises and are now earning maybe $15.00 to $20.00/hour. That is not bad money and better than what they started out with but their lifestyle and responsibilities have changed dramatically as they move into their late twenties and early thirties. They might now be married with a family to support and mortgage payments to make and although they have a good job, they find that money is a little tight at times. Meanwhile, the legacy carriers are paying their employees higher wages while continuing to lose money (although granted there have been mass layoffs and huge wage concessions) but their wages lag behind even though the company has been profitable for practically their entire existence. They go to the company to ask for more money but they say that they can't raise wages to match the other carriers because they would lose their cost advantage. The 10 year veteran is then left pondering about the future earnings potential in relation to other fields and what career path to take from where he or she is now.

    I know that a lot of my remarks are speculation and opinion on my part but the facts is that this industry is no longer going to be as well paid as it used to be no matter what part of it you belong to. Pretty soon, the only people working for airlines are going to those that love aviation no matter what instead of just looking at the dollar signs. As a final remark, about two years ago when the current economic crisis was still fairly young, I was asked once why the legacy carrier I used to work for could not make money while Southwest and Jetblue seemed to be raking it in. I told that in order to make money, they would have to fire everybody, hire them back at half their original wages, and sell off their fleet to just one type. Then you would have just another LLC.

    The whole industry is clearly in upheaval and there are no quick or easy fixes. Only time will tell what results from all this.



    "I love mankind. It's people I can't stand." - Charles Shultz
    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 8, posted (10 years 3 months 1 week 6 days 22 hours ago) and read 10601 times:

    @SydScott

    "How about Labor related costs?? ... Health Insurance, Life Insurance etc."

    Many people include those sorts of things in the idea of "labor costs" - I didn't diferentiate for that reason. Sure, you could cut them, but that is almost as bad as cutting salary since you are adding an expense for the employee. In fact, it is cheaper to have a group health plan through the company than to increase the employee's wages enough so that he can pay it himself (which WILL happen over time).

    "How about Pensions costs??"

    This I agree with. Maybe I'm just from a different generation, but pensions seem kind of outdated. I suppose it is now things like IRAs with company matching, etc. That goes in a similar pile as the benefits above, however.

    "How about property related costs?? Terminals, Offices etc. "

    I'm not sure if there is going to be that much of a savings here to make it worthwhile. I don't know enough about it, however.

    "I think the damage done to the economy as a whole by an airline bankruptcy is negated to an extent by the way that airlines capacity is replaced."

    I don't think you understood what I was saying. As I explained in my original post, there is a financial void that is created when a company declares bankruptcy and doesn't have to pay their full debt. That money comes out of the economy as a whole. As an example, if I buy ProductA on credit, CompanyA has to spend money to make it. If I don't pay for ProductA, CompanyA has incurred expense that they can't recover from me. Same thing for money that is lent to me. If I don't pay it back, LenderA has less money and takes a financial hit. Bankruptcies ripple throughout the economy in that way because anyone who doesn't get paid is now hurting that much more.

    @4jaded

    "once you are used to working for $17.00 an hour working for $10.00 an hour makes them feel cheated, violated, etc "

    That definately complicates matters! It's the same thing in professional sports, for example. Once one person gets the big huge contract, all the other players say "uh... aren't I worth as much as that guy?" and ALL the salaries increase. Is the pay necessarily proportional to the work being done, however? Each airline's unions can point to the other airline's pay scale and say "what about us?" There is a "salary creep" that happens that is very hard to reverse - or get to revert back to before it began.

    I'm not saying that airline employees are overpaid - I don't have enough information to judge. But don't you think that EVERY industry has people that thinks they aren't paid enough? The #1 sign that you may be paid too much, however, is when your industry is crumbling around you.

    @DAirbus

    "I told that in order to make money, they would have to fire everybody, hire them back at half their original wages, and sell off their fleet to just one type. Then you would have just another LLC."

    Bingo. That just about sums it up.

    Thanks for all your responses... good stuff so far! (It beats the hell outta "what is your favorite bulkhead", doesn't it?)



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 9, posted (10 years 3 months 1 week 6 days 16 hours ago) and read 10541 times:

    One note: I just was looking at my May copy of Airline Business. There was a quote from David Seigel (USAirways) where he said:

    "Last year our average fare was $125. Unfortunately, it cost us $140 to carry that passenger, so every time a passenger got on one of our airplanes last year, we were paying them $15."

    Serious ouch.



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineUA744Flagship From , joined Dec 1969, posts, RR:
    Reply 10, posted (10 years 3 months 1 week 6 days 16 hours ago) and read 10522 times:

    OK, here's me on the soapbox.

    The solution to getting labor to be more amenable to wage/salary fluctuations lies at the root of the company culture.

    If you have the right company culture, then adjustments of labor cost when they are needed by market fluctuations are much easier to accomplish.

    What kind of culture do you need? Definitely a "Performance Based Culture"... e.g. one where risk and reward are shared. Currently being implemented under United as "success sharing" and under AA as "Pull Together Win Together", and already done successfully for over the last decade by Continental...

    But it doesn't just mean rewarding employees for good operational performance. It means making sure that everyone has the same mission, vision, priorities, etc. It means making your workforce concious about what's going on with the company, and truly care about the company.

    Yeah, this all sounds like touchy feely mumbo jumbo, but this is one of jetBlue's and Southwest's biggest strenghts -- the kind of culture where F/A's really care and take pride in having a clean a/c, for instance.

    Financially, wages can be made more stable with better paying systems. Unfortunately, the network carriers face union opposition with regarsd to changing the way people are paid, but carriers like jetBlue have it right with such innovations as individual pilot contracts, etc...



    User currently offlinePA110 From United States of America, joined Dec 2003, 1999 posts, RR: 23
    Reply 11, posted (10 years 3 months 1 week 6 days 15 hours ago) and read 10502 times:
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    This thread represents the best aspects of A.net (as opposed to "what is your favorite....). It's why I joined up in the first place. Great and thoughtful contributions by all.

    I honestly believe if some of the big legacy carriers are to survive, they will have to abandon the traditional airline pension plans in favor of the 401K's or SepIRA's that most other industries offer. They must also introduce a new lower payscale for new hires, but at the same time introduce pay for performance rewards. As was seen with Eastern, unions only benefit employees if they can deliver. In Eastern's case, although the airline was already pretty far gone, union intransigence pushed it right over the edge, and everyone lost. Unions need to be amenable to pay for performance type contracts, and so-called "B-scales". In fact, if you are really trying to look long term, stage the lowering of wages over several periods to avoid some of the inherent inequities. Go B-scale for 5 years, then introduce C-scale.
    Maximize aircraft hours by careful planning and rotation. Dedicate some aircraft to regional service so that weather delays in one area of the country don't have a ripple effect across the airline's entire fleet.

    These are just a few of the "what if" thoughts off the top of my head. I'm enjoying reading everyone elses contributions. Please keep this discussion going.



    It's been swell, but the swelling has gone down.
    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 12, posted (10 years 3 months 1 week 6 days 12 hours ago) and read 10457 times:

    "This thread represents the best aspects of A.net ... Great and thoughtful contributions by all. ... Please keep this discussion going."

    Absolutely! I would have thought this would be more trafficked than it is, however. I suppose it is easier to bitch, defend and finger-point (and then move on so you don't have to follow up on anyone's responses) than it is to actually come up with thoughtful solutions. However, while I know that this thread won't "solve" anything, perhaps it will generate some understanding as to how the industry we all seem to love works.



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineNcflyer From United States of America, joined Sep 2000, 482 posts, RR: 1
    Reply 13, posted (10 years 3 months 1 week 6 days 11 hours ago) and read 10424 times:

    Are WN workers (as an example) really paid that much less, or are they just more productive? Example: who cleans the planes on WN-- not a third party cleaning crew, but the flight attendants and sometimes even pilots-- that's gotta save some bucks. The flight crew including pilots must have to work harder to earn the same wage, as they turn the birds around in 20 minutes. I don't know the facts, but I just can't imagine WN (as an example) gets such good workers if they pay so much less than the industry.

    User currently offlineMats From United States of America, joined Jul 2003, 629 posts, RR: 1
    Reply 14, posted (10 years 3 months 1 week 6 days 11 hours ago) and read 10413 times:

    I'm impressed by the thoughtful, eloquent commentary here.

    I was thinking that training costs and employee benefits warrant some discussion.

    I think that the LCC's are at an advantage because their operations are inherently simpler to understand. For example, legacy CRS systems are exceptionally difficult to comprehend; newer carriers have simpler, more intuitive systems that are easy to learn. New employees can learn the systems more readily and training costs are vastly reduced.

    Simpler operations also facilitate turnover. Without the financial merits of a long-term career, employees can come and go more rapidly without the training costs of complex operations.

    Health insurance is a contentious issue for many organizations, airlines included. Although this is an enormous cost for the employer and a focal point of union concerns, I still believe that the airlines should provide adequate health insurance for their empoyees. I speak as a healthcare provider, not a businessman, but I feel that the airlines have the responsibility to be good employers. Furthermore, I consider employee health insurance as a safety issue; the safety of passengers depends on the health of employees.


    User currently offlineN844AA From United States of America, joined Jul 2003, 1352 posts, RR: 1
    Reply 15, posted (10 years 3 months 1 week 6 days 11 hours ago) and read 10395 times:

    I think this thread is a pretty good summation of why the airline industry's cumulative return to investors has been something like -2% since the dawn of commercial aviation. (Source: an Economist from a couple weeks ago. Can't remember the exact figure or issue.)

    It's an expensive, cutthroat industry, with enormous fixed costs, unpredictable fuel prices (and, lately, upwardly trending), a highly skilled labor pool, exacting standards of maintenance and safety, and competitors at every turn.

    The airlines are squeezed by these pressures from every which direction, and they are either effectively or actually powerless to change most of them.

    But let's take a look at labor costs, which I agree are probably the most adjustable of the costs in the airline's equation. For the reasons well-stated above, variable though they may be, employee resistance and morale issues are likely to impede any attempt to downwardly adjust payscales. While lower rates of pay can be successfully introduced (see b-scales at American in the early 80s) eventually those b-scalers will be your senior pilots, F/As, maintenance techs, and union chief, with similarly senior rates of pay. And the airline is left with little choice but to begin the cycle again.

    Frankly, I'm not sure the airline industry is one I'd care to invest my money in. I'm not saying I could resist working in it -- it'd be an adventure, if nothing else -- but for long-term return, the industry thus far has not proven to be a winner.

    I read once that over the 80 years of passenger aviation, the total profit generated by the industry was exactly $0. And that was written a year or two ago, so it may actually be in negative territory at this point. It's a rather remarkable record if you think about it.



    New airplanes, new employees, low fares, all touchy-feely ... all of them are losers. -Gordon Bethune
    User currently offlineClassicLover From Ireland, joined Mar 2004, 4634 posts, RR: 23
    Reply 16, posted (10 years 3 months 1 week 6 days 10 hours ago) and read 10369 times:

    Ncflyer had a good point.

    Both productivity and assigning "non-traditional" jobs to staff to increase efficiency is something that makes a lot of sense. The example given of aircraft crew cleaning their own planes on turnarounds is an excellent one. Not only is it increasing the efficiency of pilots and flight attendants, but it's directly saving costs by not having a 3rd party cleaning crew.

    This is not as simple as it sounds, however!

    It seems to be a general human trait to not wish to do "more work" or to work outside a current job description without compensation in the form of more money, or other benefits (time in lieu, and so on). It's something I've never understood personally, because the person who takes on more work and doesn't complain is usually the one promoted when the time comes.

    To have a productivity increase happen, you need to have -

    * Honest management - and this usually comes about when management is up front about what they're doing and why.

    * Respected management - management presenting what they are doing in a logical and easy to understand why. Also, management leading by example, and management not "ordering" but "asking".

    By management, I don't just mean CEOs - you need line managers who will lead by example, and who will back up senior management. It flows all the way down, and if everyone is empowered, productivity gains will happen.

    Back in the old days, it was not uncommon for a Flight Attendant to be responsible for ordering the catering, choosing what to serve, prepare the food, keep the cabins clean, and to check in and board passengers as well. From what I've read, I couldn't see a Pan Am Purser with 30 years experience in 1986 doing something like that! It would have been "below" their station in life.

    From what people write on here and in other groups, it seems that the culture in many of the majors is a case of, "Well I'm not doing that, because I already do this and this, and they can't ask us to do more!" - it's defeatist and very unfortunate. Everyone pitching in and helping regardless of "rank" creates a very close culture, even in a big company, and if it can be achieved, there are big advantages.

    The other issue is "It can't happen to me"-itis - "XXX Airline will never fail! Even if we don't give these concessions, we'll be fine!" ... where history has proven that airlines do fail, all the time. Typical head in the sand mentality, that I think is partly a management issue and partly a union issue.

    Unions have things to answer for too. While they do serve a purpose, sometimes I think they serve their own ends a little too much, and behind the scenes power struggles and the like can really destroy other companies.

    I have noticed that some companies outsource maintenance and other services (IT, etc) and this apparently saves money as well. Unfortunately I don't know enough to comment on outsourcing savings... maybe someone else has a better idea.

    Cheers,

    Trent.


    [Edited 2004-05-12 05:44:29]


    I do quite enjoy a spot of flying - more so when it's not in Economy!
    User currently offlineLtbewr From United States of America, joined Jan 2004, 13073 posts, RR: 12
    Reply 17, posted (10 years 3 months 1 week 6 days 9 hours ago) and read 10333 times:

    Clearly the labor cost/productivity balance is the hot button issue. LLC's started with lower costs and higher productivity, and still have better productivity due to their culture. That's hard to change at a legacy airline. As to pay tiers, well AA tried that a few years ago, and it wasn't successful and later abandoned. Legacy airlines seem to be running into the same fate as passanger railroads in the USA did in the 1960's/early 1970's due to technological changes, competition (cars for pax RR's, LLC's for legacy co's) and high, union structured labor costs. Benefits as part of labor costs are a major problem, especially fixed pension costs for long retired employees, (versus most working people having 401k's and the employer adding money to them based on their profits) and health care costs for current and retired workers. Cut or change them, and productivity may fall as in effect your getting a pay cut.
    Income is one variable that maybe has to change, in a upward direction to reasonable levels, but competition and having many seats available on may flights negate that situation. Maybe fares should have a base $ amount, plus taxes, TSA fees, and then a variable fuel adjustment fee for when national average fuel costs go up above certain points. Of course, the compeition will find a way, take a slight loss for a while to attract customers, so a variable fuel surcharge would be a problem too as well as an administrative nightmare.
    As to more efficient a/c used, with 9/11 we saw a lot of older, less efficient a/c sent to the dessert, and then replaced with more efficient new or newer a/c (777's for DC-10's, 747's and bigger 737's for 757's, and so on) as well as large growth in RJ's to better balance need for seats without over capacity and with lower costs.
    Maybe we need to allow a bending of the Anti-trust laws in the USA to allow for some carefully limited working together as to schedules, airports serving, and so on to reduce overlaps of flights, costs, gates needed,
    .


    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 18, posted (10 years 3 months 1 week 5 days 22 hours ago) and read 10272 times:

    @ltbwer

    "Maybe fares should have a base $ amount, plus taxes, TSA fees, and then a variable fuel adjustment fee for when national average fuel costs go up above certain points."

    "Maybe we need to allow a bending of the Anti-trust laws in the USA to allow for some carefully limited working together as to schedules, airports serving, and so on to reduce overlaps of flights, costs, gates needed,"

    While your two points above SEEM like more freedom for the airlines, it also looks a little like "enforced freedom" - especially the 2nd point. I hate to get the government involved in anything at all lest we get back to a regulated industry. That may be healthy for the airlines, but it won't be healthy for the conusmer. I'm talking a VERY big generality here, I know. Just be careful what you wish for.  Big grin

    By the way, I have a feeling my respected user list is going to grow substantially by the end of this thread! (It already started!)



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineBabybus From , joined Dec 1969, posts, RR:
    Reply 19, posted (10 years 3 months 1 week 5 days 21 hours ago) and read 10238 times:

    I tend to believe that the more companies cut back, the more consumers cut back. Hence we have seen a spiralling downwards of quality and economic activity over the past 25 years.

    It's time to start spending again like FDR did back in the 40's before we all become pigs eating swill.



    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 20, posted (10 years 3 months 1 week 5 days 21 hours ago) and read 10194 times:

    "It's time to start spending again like FDR did back in the 40's"

    Who should start spending? Consumers? The Government?



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
    Reply 21, posted (10 years 3 months 1 week 5 days 13 hours ago) and read 10076 times:

    Someone in another thread brought up the idea of workers doing things that may be outside their job description - FAs cleaning the cabin, pilots slinging bags, etc. Of course, a lot of this comes from Southwest's company culture.

    There are a number of factors that could contribute to resistance to this:

    One is arrogance - e.g. "I'm too good for that".
    One is ignorance - e.g. "I don't know how to do that."
    The other - and most subversive - may be union reps jumping in and saying "you shouldn't HAVE to do that!"

    If it is a proven fact that fluidity in job assignments helps to "get the job done" quicker and/or with less expense, why WOULDN'T a company embrace this? Is presure against it SO horrible that there isn't a way to infuse it into the company culture?



    Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
    User currently offlineClassicLover From Ireland, joined Mar 2004, 4634 posts, RR: 23
    Reply 22, posted (10 years 3 months 1 week 5 days 7 hours ago) and read 10020 times:

    I also wrote something that touched on this in this thread.

    I think Southwest gets away with it because it's always been that way - everyone pitches in and helps. This was probably partially easy due to the fact that in the beginning (I'm talking deregulation beginning) there would have been a sense of ownership. WE started this company, WE are building this company and so on.

    Do you think the employees in some (or the majority?) of the legacy carriers have a feeling of ownership of the place they work for? Or the ability to make a change? Judging from some comments, morale seems to be a big issue.

    Changing a company culture is a difficult thing to do. It takes people with vision to be able to do that. Personally, I'd like to know what the CEO of Continental did in more detail - he seems to be held up as the pillar of all that's good and what can be done with an ailing legacy carrier...

    Trent.


    [Edited 2004-05-13 08:45:56]


    I do quite enjoy a spot of flying - more so when it's not in Economy!
    User currently offlineQqflyboy From United States of America, joined Oct 2003, 2272 posts, RR: 13
    Reply 23, posted (10 years 3 months 1 week 5 days 5 hours ago) and read 9988 times:

    Interesting read so far...

    Since labor is the biggest cost of an airline, it makes sense it alone has the power to change the company's overall costs. There are other ways, however, and although they may seem small, when added together can actually be quite large. For example, when AA set out to reduce costs, it looked at everything from aircraft purchases to purchasing paper clips, literally. When AA began this monumental task, they had determined they needed to reduce overall expenditures by four billion dollars. Two billion was achieved by labor cuts and the other two billion were all the "little things."

    Here are some of the little things: AA reduced it's company headquarters from 11 buildings to three, saving several million in annual leases. AA also looked at all the space it had at airports around the world and consolidated where it could, sold off or returned leased space to airports and renegotiated leases on airport space to save money. Construction on the JFK remodel was temporarily sped up to lower the overall cost of the project. The project was eventually halted to reduce capital expenditures. Renegotiate contracts with all suppliers. This is easy to do when facing economic hardship as the suppliers have a vested interest in your company's well-being. If you go under, they lose a hell of lot more than charging you two cents less per bag of pretzels. And when I say suppliers, I mean suppliers for everything from the inflight beverage service to spare engines. AA saw very good results from this monumental task as it literally restructured every agreement with EVERY supplier and contractor over the last two years. Although aircraft costs are high and generally fixed, the opportunity to renegotiate leases also exists with the above philosophy. In addition, as you are well aware, AA deferred its remaining 777 and 738 orders, thereby reducing capital expenditures.

    Another "little thing" AA accomplished was to make payroll entirely paperless. First, there was a big push to get everyone to go on direct deposit. Once that was accomplished, the company ended paper statements and made them available via a website. Up to three years of past pay stubs are available for viewing. In the process, AA has saved millions on paper, postage and printing costs associated with mailing out pay checks and pay stubs.

    There are some ways to reduce employee costs without reducing wages, although, I agree, wage reductions are inevitable in a down turn such as this. Adding more automated customer service features reduces the amount of people needed to operate the airline. Of course, this isn't popular with the unions or the employees, but it is possible. Productivity, as discussed above, can also save costs while maintaining wage. For example, I am a flight attendant. I now am scheduled to work somewhere between 70 and 85 hours a month. Increase that range to between 75 and 90. Yes, flight attendants will balk, but most will enjoy the increase in their paycheck as a result of increased flying. Here, you've preserved wages by increasing productivity and reducing the overall number of flight attendants necessary to operate. Again, not very popular with unions and employees, but, sadly, more popular for those that keep their jobs. Their still making the wage their used to.

    Another way to decrease employee costs, especially for the legacy carriers, is to offer an early out package. Although the company may give the employee a one time early out bonus of $10,000, the company will make that up and then some by the junior, lesser paid employee who replaces them. The most senior flight attendants at American make nearly three times as much as a newbie. Again, you are maintaining wage by reducing the number of people flying at the top of the pay scale, as well as potentially increasing morale by allowing workers an early out option.

    There are literally thousands of things that can be done to save money, and when added up, save a great deal. It is true, however, that employees remain the biggest expense and therefore the most easily targeted for cost reductions.

    ~~~~~~~~~~~~~~~~~~~~

    Some unrelated food for thought: Every penny increase in fuel price costs AA an additional $30 million annually. (Source: Gerard Arpey, CEO.)

    [Edited 2004-05-13 11:26:55]


    The views expressed are mine alone and do not necessarily reflect my employer’s views.
    User currently offline4jaded From United States of America, joined Apr 2004, 248 posts, RR: 0
    Reply 24, posted (10 years 3 months 1 week 5 days ago) and read 9946 times:

    A couple of additional thoughts as I have read on since my post.
    While AA did have a good Idea many years ago to start the "B" scale this idea was a miserable failure and was "corrected" due to employee pressure. As I remember it the A scale employees had the following reactions. First they felt threatened by the B scale employees ability to perform the exact same job at a lower cost. There was an effort on many of the A scale employees to point out the flaws in performance of the new hires. This was not only difficult on morale but mostly unjustified as new employees go through a learning curve at just about any job. The A scale employees also made constant accusations that the company had lowered its standards by taking on employees at a lower scale and to prove the point would set up difficult or impossible situations for the B scalers and then walk away and watch the disaster /usually customer service/ unfold. In addition going on at the same time AA was growing AMR Services /a very low cost ground handling operation/ and farming out a lot of traditional AA employee work to AMR Services. This only helped fuel the fire .
    The B scale employees on the other hand had the following reactions.
    At first they were very excited to be airline employees and had the zest for the job that any new hire has. However this was very short lived as the A scale employees rolled out the UNWelcome mat for them. Besides the constant looking down the nose routine they found themselves being pitied for their plight. As they did not know anybetter they would have been happy at the job they signed up for yet the constant reinforcement of " being taken advantage of" got to most of them rather quickly. The backlash of course was to with hold output and dump the bulk of the work back onto the A scale employee they were working next to. The justification was " well they think they are all high and mighty and they make blank blank dollars an hour more than I do let them do the work then. It became a cycle of abuse that only the passengers and some managers suffered. It was amazing to see the change when the scale was "righted" as everyone was suddenly Welcome and respected and "wrongs" were corrected.
    The last topic I wanted to speak about was that of productivity.
    Legacy carrier employees do have a sense that they are too good for many of the little jobs needed to get the flight going. This has been fostered by the carriers themselves in the good years. While small city employees at big carriers are much more adept at performing Multiple functions HUB employees
    for the most part /unless they came from a smaller city/ are trained in a specific function and pretty much can be " born, raised, live, and die" doing that one function if they so choose. My experience is that " for example" most gate and/or ticket counter agents would leave a passenger stranded for hours as opposed to getting a wheelchair and helping out a customer get from point A to B unless specifically instructed to do so by a supervisor. That was always someone else's job. They would spend an hour bitching on the phone to that "contractor" to " hurry up" as this was " Unacceptable" but would not spend the 5 mins to do it themselves. In many cases that was the training that they have and are actually afraid to think outside their box. While they were all trained in wheelchair procedures if you never really have to do it then when the time comes you are unsure if you can. Worse is the Flight Attendants revulsion at cleaning anything up. Not only have I seen them be unwilling to correct an oversight by the Cabin Service people and become indignant about "their failures" but I have also witnessed them make a mess of a perfectly clean cabin ie drop something on the floor etc by accident" then call for cleaning and sit down and refuse to board until that " someone comes and cleans it up". This type of mentality is dripping from the legacy carrier employees while the LLC employees have more of the "small city mentality of lets just get this done right now."

    Just some more of my experiences with this topic


    25 Post contains images InnocuousFox : Fantastic information! From what I have read about Southwest (in the book "Nuts!", for example) the culture is a big deal to them. Most of what you wr
    26 Qqflyboy : 4jaded... I totally know what you mean. When I was a flight attendant at Reno Air, we did clean cabins and would do that and many other things to get
    27 InnocuousFox : "In Chicago, I was walking through the cabin picking up blankets and folding them when one of the rampers literally yelled at me and said, "You're tak
    28 Qqflyboy : In all fairness to the unions, however, not all have that mentality, really. My union at least encourages thinking outside the box to get the job done
    29 InnocuousFox : "There is strength in numbers, but the bigger you get, the less skilled and more ignorant your members become. I'd rather go the extra mile and be res
    30 Goingboeing : "Work on the INCOME side, not only the cost side" Excellent idea, except management of most US "legacy" carriers finds this idea repulsive. Here's a s
    31 InnocuousFox : (And if it wasn't for the "Wright Ammendment" - specifically designed to clip WN's wings at DAL - you likely could have done a non-stop anyway.)
    32 NWA Man : Since multiple unions at Northwest have rejected any plans for contract restructuring, NW has chosen a different route - cut labor costs through techn
    33 4jaded : To reply to the above I also have nothing but respect for most airline employees. There is always some bad apples but that goes without saying everywh
    34 InnocuousFox : "Since multiple unions at Northwest have rejected any plans for contract restructuring, NW has chosen a different route - cut labor costs through tech
    35 Qqflyboy : It's a vicious cycle, isn't it?
    36 Ckfred : I think one of the biggest problems for legacy carriers is the crazy fare structure. Although most businesses do respond to the pricing of competitors
    37 Goingboeing : The airlines need to devise fare scheme that a) has only a few fares, say 21-day Advance, 7-day Advance, 3-day Advance, Walk-up Coach, and First Class
    38 InnocuousFox : "The airlines need to devise fare scheme that a) has only a few fares, say 21-day Advance, 7-day Advance, 3-day Advance, Walk-up Coach, and First Clas
    39 4jaded : Heck I remember the old days when your choices were excursion, coach, and first class. That was it take your pick. Made planning a trip and doing busi
    40 ClassicLover : Regarding culture being lost when airlines are bought and merged into the buyer... I've always been against this. Often an airline is bought because i
    41 InnocuousFox : " Wouldn't it be more prudent for big airline A to buy smaller new airline B and let it continue as a wholly owned but separately operated subsidiary?
    42 Econojetter : At this point, it is too late for any big airline A to buy a profitable small airline B. Airline B will not let itself be taken for any price. An exte
    43 InnocuousFox : While I originally thought concepts like Song and Ted were rediculous, (if you realize it works, integrate the idea system-wide!) I began to realize t
    44 Docpepz : Outsourcing ground operations may have its benefits - but if the airline can run its home base with its own ground handling company, shouldn't they co
    45 InnocuousFox : I would have to agree that a lot of the ground service at a major center should be kept in-house. However, when you get to smaller stations such as fe
    46 4jaded : On the topic of Ground handling inhouse. Bob Crandall tried a brilliant idea of starting a low cost ground handling company AMR Services. He then orde
    47 Aa757first : USAirways has been carrying an average of 130 psgrs per day between these two points (PHL-PVD) On 9 trips Sunday WN carried 550. WN's PAX count is gr
    48 TxAgKuwait : >>WN's PAX count is grossly inflated. I would guess that 420 of those WN passengers were going to BOS, not PVD. US Airways served both, meaning the pe
    49 Jetbluefan1 : Labor actually can go quite a ways when it comes to cost cutting. All airline employees know that the "good ole' days" when you got paid $25/hour to c
    50 Aa757first : TxAgKuwait, But GoeingBoeing claims WN increased demand between PHL - PVD, but they didn't. Maybe between PHL - BOS, but three quarters of those South
    51 Jetbluefan1 : I will be so flamed for this, but I think airline employees, in general, are very overpaid. Looking at AirTran's pay rates, I think $18.56 an hour for
    52 Docpepz : One of you mentioned "cutting city offices" In fact, many premium airlines have been doing this. Speaking to an SQ staff who used to work in Rome, he
    53 ChrisNH : The whole issue of costs in the airline industry is a complex one. Still, wages and salaries among the workers are a huge component of the overall cos
    54 InnocuousFox : @JetBlueFan1 "JetBlue pays its phone reservationists $8.25/hour, and they say LOTS of money by having them work out of their own homes. US Airways pho
    55 TxAgKuwait : >>TxAgKuwait, But GoeingBoeing claims WN increased demand between PHL - PVD, but they didn't. Maybe between PHL - BOS, but three quarters of those Sou
    56 InnocuousFox : Remember that there is NOT a finite number of travelers in the system. What WN often has the effect of doing is generating NEW travelers in a market w
    57 InnocuousFox : A couple of generic questions about airline unions: What are they specifically... I know of the pilots, FAs and mechanics. Are there any others to con
    58 Aa757first : InnocucousFox: Do we even HAVE those in the States still? US Airways has thirteen alone! Jetbluefan1, I should have stated this, but I was specificall
    59 Post contains images InnocuousFox : Hmpf. I just can't imagine going to a strip mall to book my airline tickets.
    60 Post contains images ClassicLover : Yeah more information on the Unions in the US would be interesting, as I know very little about it. Trent. P.S. A concise couple of lines to explain t
    61 InnocuousFox : A "banked hub" is where you have all your feeders arrive together (reasonably), everyone changes planes and they they all depart together. That is kno
    62 Post contains images ClassicLover : Thanks for that I don't think that it's done here in Australia, because I'd never heard of it before! Trent.
    63 InnocuousFox : Now, if we can just get more info about the unions as per Reply 57 above.
    64 BILLAMT : What are they specifically... I know of the pilots, FAs and mechanics. Are there any others to consider? Depends on the airline. AMFA ( Aircraft Mecha
    65 InnocuousFox : (Let's make sure this doesn't turn into a flame thread, people. Keep that in mind when responding to the above.)
    66 Aa757first : Ever think about trying to raise a family on 12 an hr AND being away from home 10-15 days a month? People get the notion that all F/A's just want to
    67 PSU.DTW.SCE : Thank you BILLAMT, you spoke the words and at least bring up the other side of the issue. Some of you questioning other people's wages is absurd. One
    68 BILLAMT : (Let's make sure this doesn't turn into a flame thread, people. Keep that in mind when responding to the above.) Innocuous Fox -- whats that supposed
    69 BILLAMT : How about airlines properly staff, and not over load like in US? 20 AMT's to one bird? SWA has a 3 to 1 ratio. Meaning that their employees can be pro
    70 Post contains images ClassicLover : Nice to see some counter opinions from BILLAMT, and also very good to see further information presented. I think the point of this thread is to get so
    71 InnocuousFox : "Innocuous Fox -- whats that supposed to mean? That I actually had the nerve to have a difference of opinion than you and the rest of the posters? " A
    72 BILLAMT : was fully aware that each person in maintenance is personally responsible for his or her work (it is the same at the manufacturers) - but I am not aw
    73 BILLAMT : Innocuous Fox -- Thats cool, no I wasn't trying to get hot headed sorry if it was going that way. It gets old defending yourself though. Labor costs a
    74 ClassicLover : Interesting comments about the supervisors - good lord... that's a bit much, isn't it... Anything to avoid a delay! I've heard that whistle blowers us
    75 NWA Man : BILLAMT: but I am not aware that the airlines would compromise safety if they could. Look no further than the case of Alaska Airlines and mechanic Joh
    76 Aa767400 : Aa757first, You say it should not pay more. Ok, What job are you in? Because it say's that you are between 13-15? Explain why you think, F/As can't/sh
    77 BILLAMT : Unions are not necessarily a bad thing. But your right they can get greedy. And not every employee wants to be unionized. A couple friends of mine are
    78 InnocuousFox : In the book "Nuts!" about Southwest, they talk about the culture of "question everything" that the employees are encouraged to have. All management su
    79 BILLAMT : Thats what i'm talking about. Little things add up FAST!!
    80 InnocuousFox : "Thats what i'm talking about. Little things add up FAST!!" And yet, labor is the single largest expense for an airline. All of these little cuts in o
    81 Elwood64151 : I'm not even going to read any replies (there are 80 of them, after all). The problem most airlines have is that, when they try to cut costs, they are
    82 Econojetter : It seems like the U.S. airline industry is headed for a period of bloodletting one way or another. In this reply, I am focusing my comments on the U.S
    83 InnocuousFox : @Elwood64151 "I'm not even going to read any replies (there are 80 of them, after all)." That's not only unfortunate, but mildly insulting to the othe
    84 BILLAMT : www.amfanatl.org, go to the saftey link. You'd be very surprised to see what the union is involved in. I'm sure ALPA has a similar link on their site.
    85 InnocuousFox : "As to what union leaders have access to, well i'm not real sure. I'd bet they do have access to most of what you mentioned. I'm not a rep or leader t
    86 Aa717driver : BILLAMT and classic lover--Thanks for the input. InnocuousFox--Great thread. Now, no one here is more of a proponent of the free market than I am. But
    87 InnocuousFox : "InnocuousFox--Great thread." Thank you, sir. The resason they can't make ends meet is too little revenue to cover costs. The reason they can't make e
    88 Aa717driver : I-Fox--But the free market being what it is, someone will start up a new carrier to try to capture a small piece of the market and eake out a small pr
    89 InnocuousFox : Yeah, you're probably right. Well, we just wait for this next upswing we are starting to see and hope it gets everyone back on their feet long enough.
    90 Post contains images ClassicLover : To my thinking, a lot of the problems at the moment come down to the fact that a lot of airlines are not sure of their identity - or what they want to
    91 InnocuousFox : "Perhaps the industry is moving back towards the more fragmented situations of the past, only with more emphasis on alliances." That's an interesting
    92 Post contains images ClassicLover : Why not? For internal flights in the US, isn't it somewhat expected that you will have pretty much a bare minimum of service in Economy? Couple that w
    93 InnocuousFox : You realize, of course, this is why you are on my respected users list, right?
    94 InnocuousFox : Someone in another thread pointed out the difference between airline CEO pay and the CEO compensation of other industries of similar size. Airline CEO
    95 ClassicLover : Well, labour costs should be listed in Annual Reports for listed companies. What I do have (weirdly enough) is a copy of the 1977-1978 Annual Report T
    96 InnocuousFox : 24 inches from my right hand is the Q1 2002 breakdown from Aviation Daily of all the airlines and their figures in about 12 categories for each aircra
    97 Post contains images WearyBizTrvlr : InnocuousFox, you don't need to resort to your e-trade account to find the labor bill for airlines. It's all publicly available in the SEC's Edgar dat
    98 Aa717driver : Classiclover--One reason the legacy carriers tend to stay in markets is that their infrastructure is rather inflexible. Union and airport contracts ma
    99 Elwood64151 : That's not only unfortunate, but mildly insulting to the other contributors to this thread... but moving on... I didn't mean to offend anyone. I just
    100 ClassicLover : Aa717driver, good point on the union and airport contracts. I've never worked in a unionised company before, so those things didn't cross my mind with
    101 Aa717driver : Classiclover--The reason(simplified for a simple mind like mine!) the legacy carriers don't reduce costs when pulling out of a station is infrastructu
    102 ClassicLover : A question though - wouldn't they save money by not employing the staff at the destination they pulled out of? I imagine it's not a big enough saving
    103 InnocuousFox : "A question though - wouldn't they save money by not employing the staff at the destination they pulled out of?" I wonder if it is a matter of taking
    104 Shark : InnocuousFox Thats the way it works. When an airline pulls out of a station the employees can transfer to another station if they have enough seniorit
    105 InnocuousFox : "When an airline pulls out of a station the employees can transfer to another station if they have enough seniority. The higher seniority employees bu
    106 Elwood64151 : A question though - wouldn't they save money by not employing the staff at the destination they pulled out of? Yes, and you're saving on rents at the
    107 InnocuousFox : That's a good point. Also, remember that when you pull out of a station, you are not only losing revenue and loads on flights serving that station, bu
    108 Post contains links FlyingDoctorWu : Great thread- first time reading it, and I read it all.. i dont really have much to add but the following: WearyBizTrvlr Southwest ... 2.56 ... 41%...
    109 InnocuousFox : "One reason why it seems that WN has a high percentage of labor costs relative to their fuel cost..." That's why I thought it was an odd comparison to
    110 Aa717driver : I've only heard of hedging in the price per gallon frame of reference. I think SWA used a per barrel price to help the man on the street equate it to
    111 InnocuousFox : Aa717driver - which post were you answering?
    112 Freshlove1 : We still 'Luv' you, but why don't you leave? A voluntary early retirement program is being offered by Southwest as a way to trim costs. Airlines hope
    113 Elwood64151 : Freshlove1: Okay, I'm going to go on a little rant about fuel prices. This is one area where the free market is definetely screwed-up. Of course, if w
    114 InnocuousFox : The purchase price is only part of the equation. Right now, US refineries are working at peak production, therefore limiting supply. Since we have not
    115 Post contains images InnocuousFox : Actually, considering the scheme of what we are talking about in this thread, the WN early retirement idea (and others like it) isn't a bad idea. Get
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