What are you worth?

[Bog]

I had planned on posting this info, but after reading the thread about how United is telling its pilots not to take bottles of water, it has much more meaning now.

Yesterday I had a United Captain ride in my jumpseat. She's been employed there for 17 years. It was her first time riding in the front of a CRJ (don't think she'd ever ridden up front in any RJ), and probably the first time she'd really had the chance to talk to two regional pilots.

One of the discussions revolved around pay. With all the give-backs at United, this Captain has gone from a high of $209/hr to a current $118/hr. Now, you may say, that $209 was too high for the Captain of a 737-300. You may say that $118 is still a great wage. Well, compared to the hamburger schleppers at fast-food joints, sure. Compared to other professions requiring mucho recurrent training and lots of education, it's not.

So what does it cost, per passenger, to pay a 733 Captain at United? Well, according to their website, the plane will hold 120 or 128 seats, depending on the aircraft. So we'll average it out to 124. Let's also look at an 80% load factor. That's 99 passengers. To cover only the hourly payrate, each of those 99 passengers would have to cough up a whopping ... drum roll ... $1.19 at the current rate of $118/hr. To get the $209 back, each passenger would have to dig really deep and contribute $2.11.

That's it. $2.11. The ticket costs at least $100 each way, and we're talking about less money per flight hour than it takes to buy a large shake at McDonalds.

I ran the same situation for Mesa. Our FOs make the same payrate no matter what size jet is flown, and ran their numbers based on 2nd-year pay. I used 6th year CA rates for the CR2, 7th-year for the CR7, and 8th-year for the CR9. For the FA pay, I calculated them at 1st year, since almost all of our FAs quit by then. So what's the damage? Here ya go:

A/C Type / CA / FO / FA1 / FA2
CRJ2 or ERJ / 1.54 / 0.73 / 0.45
CRJ7 / 1.28 / 0.56 / 0.35 / 0.35
CRJ9 / 1.07 / 0.42 / 0.26 / 0.26

That's all it takes to pay, per flight hour, for our hourly wages and per-diem, again based on an 80% load factor. Sure, you'll have to add a lil more in to cover our medical benefits, vacation time, and sick pay, but that's not much.

So there you have it. The most expensive, controllable part of running an airline, according to airline CEOs. Now, tell me again that we're greedy and overpaid.

Cost to see a movie, per hour, $9 ticket: $6.00
Cost to eat at McDonalds, per hour: $5.00 (for most meals)
Cost to watch a Nascar race ($35 for the main event, 200 miles, 2 hours): $17.00
Cost to pay your pilot to safely get you where you need to go: less than $2.00.

[Bog]

While we're at it, let's talk fuel. I didn't bring home the exact numbers, but on my flight from DEN to BNA, each passenger paid about $13.50 for their share of fuel for the flight. If the price of fuel was lower, that would obviously be lower, but by how much, really?

So ... why not tack on a $3.00 fuel surcharge to each one-way to cover the rising cost of fuel? Oh ... that's right. It makes too much sense.

[flyover]

These types of analyses have often been done. And everyone can do them, including the burger flippers at McDs. Teachers, firemen, doctors, etc. The only ones that probably can't do it are lawyers. The amount of costs attributed to them are almost incalculable they are so high.

But when it's all said and done it will come down to how much cost the industry can support, which is mostly a function of matching capacity with demand. Plus how many people want the job and at what salary they will do it for versus how well the unions can influence or control that supply.

The airline industry is a labor intensive industry, with labor being the highest fixed costs they incur. This is particuarly true of hub carriers vs. LCCs. So when bills can't be paid labor is a target, inevitably.

But I agree with you, you are not greedy or overpaid.

[Screaming_Emu]

Sounds like bog is in rant mode. Some very valid points though with the math to back it up though. Makes you wonder where all this money people are paying is going. From what I have seen (I dont have access to numbers) but on the flights that I've flown loads dont seem to be bad, so what's the problem?

[Bog]

Well, if it came across as rant mode, then my apologies. It was more of something as "food for thought." My FO and I discussed this at length yesterday. Considering our FAs are making $16k / yr, and many have to pay for an apartment at home and a crashpad at work, it's beyond sad that the company is going to ask them for paycuts next year when their contract becomes amendable.

It's also food for thought for all of us at regionals and all of you planning on going to regionals. Almost every RJ operator works on a fee-for-departure basis. So let's say that for every flight completed, my airline gets paid $2500 (I know it's at least a lil more). Where does the money go? Who gets the remaining $2495? So basically dream bigger, demand more. We are not breaking the bank, and none of us want to. Let's just get some fair compensation for what we do.

[av8trxx]

[ QUOTE ]
Yesterday I had a United Captain ride in my jumpseat. She's been employed there for 17 years. It was her first time riding in the front of a CRJ (don't think she'd ever ridden up front in any RJ), and probably the first time she'd really had the chance to talk to two regional pilots.One of the discussions revolved around pay..

[/ QUOTE ]

What was the Capt response? Also, what were the other topics? Did you get the UAL mainline view on other things you'd care to post?

[stuckingfk]

I talked to a Captain and FO from NWA on my flight home from Cali last week. The FO all but told me to plunk down 30 grand and head to Gulfstream because "I know a guy who went from O to hero in 10 months after Pinnacle hired him."

I about puked.

[Bog]

[ QUOTE ]
What was the Capt response? Also, what were the other topics? Did you get the UAL mainline view on other things you'd care to post?

[/ QUOTE ]
She was great to have along for the ride, actually. She's on the 73-3 (steam gauges) and was quite impressed with the level of automation and CRTs we have. When I was taking off, I noticed that she was looking around like a little kid and enjoying the show.

My FO mentioned to her that she had the best attitude of any jumpseater he'd seen so far, and she did correct him that she's quite unhappy with the way things are going. She offered a great point, though, that there's no reason to let it bring you down when it's out of your control.

We talked about saving fuel to cut costs, talked about how it should be obvious to add a fuel surcharge to tickets instead of absorbing the higher costs. Also talked about how several RJ routes would be better served by 737s and 319s again.

The only thing I sensed she frowned upon was my taxi speed. I don't crawl on the ground; never have, never will. I know that mainline UA and AA do ... unbearably so. My FO teased me about my "Southwest taxi speed" and she laughed in agreement, but hey ... we were 45 minutes late and I had passengers hoping to make connections.

[joel_MQY]

[quote

The only thing I sensed she frowned upon was my taxi speed. I don't crawl on the ground; never have, never will. I know that mainline UA and AA do ... unbearably so. My FO teased me about my "Southwest taxi speed" and she laughed in agreement, but hey ... we were 45 minutes late and I had passengers hoping to make connections.

[/ QUOTE ]

Ha! So I know when I see a UAX RJ passing a SWA plane at BNA it is you!

[aloft]

[ QUOTE ]
The only thing I sensed she frowned upon was my taxi speed. I don't crawl on the ground; never have, never will.

[/ QUOTE ]

At least until you have your first, um, "run-in" with something on the ramp. Slow down, buster.

And like I said in the other thread, crews would do better financially these days working for tips. Hell, the skycaps at most major airports make more than most regional crews. Let the companies pay a tip wage in exchange for the right to pass the hat through the cabin.

[Bog]

[ QUOTE ]
At least until you have your first, um, "run-in" with something on the ramp. Slow down, buster.

[/ QUOTE ]

Ahh, but see, I never said I taxi at an unsafe speed. I just don't crawl like AA and UA. Trust me ... ever tried to do the great-circle taxi at ORD to get to your gate when you're stuck behind an AA Maddog? Takes forever ...

As for actually passing a Southwest bird ... well, that'll never happen. I don't buy pizza for the tower.

[Cherokee_Cruiser]

[ QUOTE ]
A/C Type / CA / FO / FA1 / FA2
CRJ2 or ERJ / 1.54 / 0.73 / 0.45
CRJ7 / 1.28 / 0.56 / 0.35 / 0.35
CRJ9 / 1.07 / 0.42 / 0.26 / 0.26

That's all it takes to pay, per flight hour, for our hourly wages and per-diem, again based on an 80% load factor. Sure, you'll have to add a lil more in to cover our medical benefits, vacation time, and sick pay, but that's not much.

So there you have it. The most expensive, controllable part of running an airline, according to airline CEOs. Now, tell me again that we're greedy and overpaid.


[/ QUOTE ]


Tell that to the SrJrPorties guy...

... he'll provide newer figures with lower numbers, since he'd be stealing your job for a lower wage.

[DE727UPS]

"The FO all but told me to plunk down 30 grand and head to Gulfstream because "I know a guy who went from O to hero in 10 months after Pinnacle hired him."

That's unfortunate. There are always people out there that see it that way. You should have asked him if he'd have been willing to pay to get his job at NWA. He might have said yes.....

[Doug Taylor]

Heck, you ever try stopping a mad dog?

"GAGAGAGAGGAGAGAGAGAGG...AGGGAGAGAGAGGAGAG" (Brake chatter)

[flyover]

[ QUOTE ]
As for actually passing a Southwest bird ... well, that'll never happen. I don't buy pizza for the tower.

[/ QUOTE ]

I actually out-taxied a Southwest airplane at MSY and ground made me stop and let him go ahead. I think they are just so used to SWA beating everybody it's automatic. But I'm with you on the taxi speeds.

[Screaming_Emu]

[ QUOTE ]
Well, if it came across as rant mode, then my apologies.

[/ QUOTE ]

Oh, no problem even if it was a rant. If there was ever a reason to rant this is definately one of them.

[WillNotFly4Food]

Anyone remember the million dollar tomato?

Airline X opts to remove the 15 cent tomato off their first class meal. Let's say they operate 2500 flights per day and average 8 first class meals per flight.

2500 x 8 = 20,000 tomatoes/day
20,000 x 365 = 7,300,000 tomatoes/year
7,300,000 x 15cents = $1,095,000/year

Do not get caught up in the details of this example. Think about the idea behind it. How many millions of tickets did Southwest sell last year? Raise the MO-effing ticket prices. If LUV made $1 more per passenger it would increase their profit margin by 20%. The problem is when someone checks travelocity and sees two tickets, one for $99 and one for $100, guess which one they choose. Oversimplifying, I'm sure. Airline ticket pricing is a science unto itself. It can't be that simple, can it?

[tonyw]

I gotta find the powerpoint slide from that conference I was at about a month ago. I gotta post it here. It was hilarious and it poked fun at all the airlines doing things to "save money."

[Doug Taylor]

Does it include idiotic phraseology that uneducated analysts use like:

[*]Paradigm shift[*]Re-alignment [*]Low Cost Carrier [*]New "Reality" [*]Legacy Airline (Whatever the *blank* defines that because most of us have been around since the Ford administration except perhaps JBLU and Citrus.)[/list]
You know, words from the dorks that always say, "Well Southwest isn't unionized so it keeps their costs low unlike the other airlines"

[WillNotFly4Food]

There's this ongoing myth that an airline is made or broken by the concessions of a single workgroup. Management touts it all the time. After all the givebacks we've seen, which airline is back in the black? Which airline can say "we are standing today because our pilots took a 30% pay cut." How many would hesitate to place blame if the airline were to fail?

[tonyw]

No, he was having a field day with, if I remember right, American taking pillows away because it would save them $200K a year.

Something like that.

The reason why I liked these people is because they actually knew their stuff.

One of the guys speaking was someone who was instrumental in Air New Zealand's turnaround. He either gave great lip service to making sure employees are on board with things and that you treat them well, or he really believes it.

He was talking about how you've got to keep the employees morale up or your customers will feel the brunt of their anger. And if that happens, you'll see some unhappy customers who will end up going somewhere else.

The guy met with every single pilot and flight attendant Air New Zealand has in order to get their input. He said it took him about eight months and damn nearly killed him.

Know what he did?

He listened. And he acted on their suggestions.

He figured they knew their job better than anyone, so he should go to them in order to figure out how to save the airline.

Can't argue with the results!

This attitude wasn't unique to this particular exec. The CEO of Air New Zealand was quoted as saying that he thinks that he's got to take care of the employees, the customers, and then the shareholders.

And right here at home, Johnson & Johnson's CEO has that attitude as well.

Can't complain about the results there, either!

[Doug Taylor]

Very simple. The aircraft is full of people that have this idea that over the course of a four-day trip, the airplane flies itself, we stay in 5-star hotels and don't pay taxes on our $200,000/year salary that "only" takes us 70 hours a month to earn (whereas the average Joe works 40 hrs/week).

We're an easy target. If those overpaid pilots only took a pay cut, your tickets will be cheaper and we can bring back prime rib, woo!

The problem is that most airlines haven't the balls to sell tickets for at least X + "cost of production". Continental rescinded the $5 fuel surcharge fee, then Delta said, "Holy cow! if we don't rescind ours, we're not going to be competitive!" Nevermind CAL management is doing what worked great for AA and then later DL when they wanted some scratch from the pilots.

Considering $5/ticket pretty much pays for the entire crew on an hour long flight, we're dealing with absolute idiots. Besides, it's much more 'profitable' not to make money in today's environment rather than show a profit. They're able to roll the clocks back on collective bargaining agreements, beg DC for handouts and more or less clean house before they decide to start making profits again.

Yes, "decide".

Paradigm shift, realign, yadda yadda yadda, whaaaaaaaatever.

Gotta go pick up Kristie from Tuscon. Must've been another wonderful fare sale to PHX because the flight was way oversold. Gas high? Throw a fare sale and seal in the loss, woo! 105% load factor! The analysts will love our load factor!

[tonyw]

Until the execs get it through their heads that you cannot sell things for less than the cost of providing it, airlines are screwed.

It's business 101. If you can't provide something for cost plus, then don't provide it.

If Aunt Bessie ain't willing to pay cost plus for a ticket from point A to point B, tell her to drive. Or take Greyhound. Or walk. Or whatever.

I'm amazed that all the MBAs in the executive suites don't get this. But then, we do have a Harvard MBA that's telling people, hey, we've got risky IOUs as he's trying to sell his Social Security plans but telling foreigners to buy treasury debt because it's secure on the other hand.

The other lesson from business 101 that the execs have seemed to have forgotten is that you cannot cut your way to profitability.

[flyover]

[ QUOTE ]
Until the execs get it through their heads that you cannot sell things for less than the cost of providing it, airlines are screwed.

It's business 101. If you can't provide something for cost plus, then don't provide it.

[/ QUOTE ]

I'm just curious what you think drives ticket prices? First of all the total profits the major airlines made during the 90s is attributable to their yield management systems which maximised revenue by constantly manipulating fares to get the most revenue from each flight. When I came to work we operated with load factors in the 40s. Some days of the week, and sometimes for whole months, we flew empty. Delta also had less than 4,000 pilots. It was yield management and a deregulated environment that lead to huge growth that is the reason many have jobs in the industry, possibly including Doug. I know it was a huge factor in me getting a job in '79. Delta was looking to grow in deregulation. I got hired and in just a year or so there were 500 guys behind me. Unprecedented. They had to run the training center around the clock.

This system really worked great through the 90s as the tech boom spurred business travel growth and the yield management systems made sure they paid a premium and kept the airplanes full on the non-business days by offering lower fares to get people in the seats. During that time the whole pricing system became transparent when it moved to the internet. Fares weren't such a mystery anymore. Anyone who wanted could shop days and times and instantly see what fares the yield management systems were offering.

All of this ran headlong into the downturn in business travel that probably started in 99. The booms of the 80s and 90s had driven airlines to rapidly expand. There were hubs everywhere, didn't matter, you could not not make money in that enviroment, even as thin as the margins were.

So a tsunami of too many hubs chasing a shrinking market of business travelers combined with a completely transparent and elastic pricing system runs into a growing LCC market and out of control costs and debt at the legacies. Now the airlines continue to try to generate as much revenue as possible using yield management in an environment where everyone is desperate to feed their hubs. Where being $5 above your competitor means a significant number of customers click on the other guy. Where every seat that goes out empty is a lost revenue opportunity forever.

Note that as soon as a legacy tries to get away from that system. Trying to stabilize prices and lure customers away from the internet bazaars, the immediate cost to the industry is in the hundreds of millions in revenues. Putting the lie to the idea that the legacies haven't been trying to maximise revenue. They've been doing it continuously since the 80s.

Back to "business 101". Which parts are you having trouble with? Basic supply and demand? The high elasticity of prices? Too many hubs leading to all of the legacies fighting for the same customers? Your suggestion that smart executives should just stop providing the service or product is well taken. It does need to happen. So which should throw in the towel first? Delta? United? Given that "business 101" tells all these people that if they can keep their businesses alive until some competitors finally capitulate and supply and demand stabilizes at price above cost, would it be good management to just quit now?

To borrow your phrase, I'm amazed that airline employees don't get this. How can people engaged in the industry not understand how critical yield management has been to the airlines making any profits at all? You go into any airport of any size and see every gate filled with the livery of every legacy carrier and yet not realize how desperate the competition is out there to fill seats? You have people who sincerely believe that the difference between the profits then and the losses now is that executives "remembered" back then to add enough on to "cover the costs." That system ended in 1978 with airline deregulation and guess what, even under that system some airlines couldn't make money.

And of course the biggest canard is the idea that it's the customers fault. Their misguided expectations about how much things really should cost is the whole problem. We all operate that way. I know personally when I'm comparing the prices that are being offered to me, the first thing I do is set a lower price level, below which I will not go, so I can insure that company makes a profit. I don't care that six or seven companies are fighting for my business. I just want to pay what's fair. Yeah, that's what's wrong with the airline business, dumb customers. Maybe a new marketing campaign. If you're dumb enough to want to save money on air travel, get the h*** off our airplane.

[flyover]

[ QUOTE ]
There's this ongoing myth that an airline is made or broken by the concessions of a single workgroup. Management touts it all the time. After all the givebacks we've seen, which airline is back in the black? Which airline can say "we are standing today because our pilots took a 30% pay cut." How many would hesitate to place blame if the airline were to fail?

[/ QUOTE ]

Where are you seeing this myth? I don't think anyone, including most of the unions that have given concessions, believes that there aren't many things that have to change for any of these companies to survive. If there is a myth out there it's that costs, particuarly labor costs, aren't part of the solution. (Where "solution" is defined as continuing to exist at all.)