Don't fall for CX managements sob story...
Thread Starter
Join Date: Mar 2008
Location: London
Posts: 1,539
Likes: 0
Received 0 Likes
on
0 Posts
Don't fall for CX managements sob story...
Might be worth reading this and then allowing it to sink in. CX is trying to convince everyone that "times are tough". Well, news for management: running an airline is costly, and the skilled help at the front of the aircraft deserve their share of the budgetary spending, and eventual profits. Read on. (oh, and read the last paragraph for context).
Southwest pilots want a big raise
Last fall, Southwest Airlines' pilots rejected a tentative contract agreement that would have raised their base pay by more than 17%. 62% of the pilots who participated voted against the deal. One of their biggest complaints was language that would have given Southwest more flexibility to partner with other airlines (and thus potentially "outsource" some flying).
In March, the Southwest Airlines Pilots' Association (SWAPA) released their own contract proposal. Some of the key requests were better work rules, a significantly improved retirement plan, and bigger raises.
The SWAPA proposal calls for an immediate 18% jump in pay rates upon ratification and a total increase of 33% above current levels by October 1, 2019. This would raise the top-of-scale wage (for a 12-year captain) to $289.44/hour, up from $218.06/hour today. SWAPA also wants 4% annual raises indefinitely beyond 2020, in case the next round of contract negotiations also drags on for many years.
For comparison, the highest wage for pilots flying similar planes at other airlines in the U.S. is $245.80/hour today (at United Continental), with more increases set for the next few years.
Big demands are the new normal
The Southwest Airlines pilots' demands may seem steep, but big demands have become the new normal in pilot contract negotiations. Delta Air Lines' pilots recently called for an immediate 22% pay increase and a total base pay increase of 39.7% by 2018 -- while keeping their very generous profit-sharing formula. This would raise the top-of-scale wage rate for Delta's 737 pilots to more than $300/hour by 2018.
Delta's pilots have demanded even higher raises than the Southwest pilots. Image source: The Motley Fool.
Meanwhile, Hawaiian Airlines pilots -- who are starting from lower pay rates today -- are demanding a 52% increase in total compensation, according to the airline. The pilots say they should be paid the same as pilots flying similar planes at Hawaiian Holdings' larger competitors.
Can airlines afford these raises?
Pilots are negotiating for big wage increases at an auspicious time, as most airlines (including Southwest, Delta, and Hawaiian) are raking in record profits. Nevertheless, negotiations have been tense. Airline management teams are wary of giving away too much, as looming oil price increases and falling industry unit revenue could start to erode their profit margins in the next couple of years.
Southwest Airlines CEO Gary Kelly has stated that he is willing to give pilots a big pay increase. However, he said the new contract would need to provide the company significant productivity improvements to ensure that Southwest remains a low-cost producer.
SWAPA counters that while its proposal would add $508 million to Southwest's costs in 2017, that's less than the amount Southwest lost on bad fuel hedges last year. It's also about equal to the annual windfall Southwest is getting from its new co-branded credit card agreement. The implication is that pilots shouldn't have to offer major concessions in return for pay increases.
In the end, Southwest will probably get some productivity benefits. And with operating income of $4 billion last year -- which is expected to rise by double-digits in 2016 -- Southwest can absorb the hit to earnings from a big step-up in pilot pay.
Delta Air Lines is similarly positioned. One independent analysis has pegged the annual cost of its pilots' contract proposal at roughly $750 million by 2018. Delta's recently updated financial goals imply that it will generate over $7 billion of annual operating income for the next several years.
Hawaiian Holdings faces the biggest pay increase demands, and it is also the least able to afford those costs. The company says that the pilots' demands would cost $74 million in the first year of the new contract. Analysts' 2016 earnings estimates imply that Hawaiian's operating income might be about $450 million this year.
Still, it's impressive that even Hawaiian Holdings would be able to meet its pilots' maximum demands while remaining quite profitable. This suggests that airlines and their pilots will eventually break through the current negotiating impasses -- thus rewarding pilots for their patience without hurting shareholders too much.
Southwest pilots want a big raise
Last fall, Southwest Airlines' pilots rejected a tentative contract agreement that would have raised their base pay by more than 17%. 62% of the pilots who participated voted against the deal. One of their biggest complaints was language that would have given Southwest more flexibility to partner with other airlines (and thus potentially "outsource" some flying).
In March, the Southwest Airlines Pilots' Association (SWAPA) released their own contract proposal. Some of the key requests were better work rules, a significantly improved retirement plan, and bigger raises.
The SWAPA proposal calls for an immediate 18% jump in pay rates upon ratification and a total increase of 33% above current levels by October 1, 2019. This would raise the top-of-scale wage (for a 12-year captain) to $289.44/hour, up from $218.06/hour today. SWAPA also wants 4% annual raises indefinitely beyond 2020, in case the next round of contract negotiations also drags on for many years.
For comparison, the highest wage for pilots flying similar planes at other airlines in the U.S. is $245.80/hour today (at United Continental), with more increases set for the next few years.
Big demands are the new normal
The Southwest Airlines pilots' demands may seem steep, but big demands have become the new normal in pilot contract negotiations. Delta Air Lines' pilots recently called for an immediate 22% pay increase and a total base pay increase of 39.7% by 2018 -- while keeping their very generous profit-sharing formula. This would raise the top-of-scale wage rate for Delta's 737 pilots to more than $300/hour by 2018.
Delta's pilots have demanded even higher raises than the Southwest pilots. Image source: The Motley Fool.
Meanwhile, Hawaiian Airlines pilots -- who are starting from lower pay rates today -- are demanding a 52% increase in total compensation, according to the airline. The pilots say they should be paid the same as pilots flying similar planes at Hawaiian Holdings' larger competitors.
Can airlines afford these raises?
Pilots are negotiating for big wage increases at an auspicious time, as most airlines (including Southwest, Delta, and Hawaiian) are raking in record profits. Nevertheless, negotiations have been tense. Airline management teams are wary of giving away too much, as looming oil price increases and falling industry unit revenue could start to erode their profit margins in the next couple of years.
Southwest Airlines CEO Gary Kelly has stated that he is willing to give pilots a big pay increase. However, he said the new contract would need to provide the company significant productivity improvements to ensure that Southwest remains a low-cost producer.
SWAPA counters that while its proposal would add $508 million to Southwest's costs in 2017, that's less than the amount Southwest lost on bad fuel hedges last year. It's also about equal to the annual windfall Southwest is getting from its new co-branded credit card agreement. The implication is that pilots shouldn't have to offer major concessions in return for pay increases.
In the end, Southwest will probably get some productivity benefits. And with operating income of $4 billion last year -- which is expected to rise by double-digits in 2016 -- Southwest can absorb the hit to earnings from a big step-up in pilot pay.
Delta Air Lines is similarly positioned. One independent analysis has pegged the annual cost of its pilots' contract proposal at roughly $750 million by 2018. Delta's recently updated financial goals imply that it will generate over $7 billion of annual operating income for the next several years.
Hawaiian Holdings faces the biggest pay increase demands, and it is also the least able to afford those costs. The company says that the pilots' demands would cost $74 million in the first year of the new contract. Analysts' 2016 earnings estimates imply that Hawaiian's operating income might be about $450 million this year.
Still, it's impressive that even Hawaiian Holdings would be able to meet its pilots' maximum demands while remaining quite profitable. This suggests that airlines and their pilots will eventually break through the current negotiating impasses -- thus rewarding pilots for their patience without hurting shareholders too much.
Join Date: Dec 2010
Location: Here ---> X
Posts: 438
Likes: 0
Received 0 Likes
on
0 Posts
And if the situation is that dire, they can always take a lesson or two from a true leader:
CEO of Japan Airlines Takes The Bus To Work And Gets A Salary Less Than Some Of The Employees | True Activist
Seems like a different planet, doesn't it?
CEO of Japan Airlines Takes The Bus To Work And Gets A Salary Less Than Some Of The Employees | True Activist
Seems like a different planet, doesn't it?
Thread Starter
Join Date: Mar 2008
Location: London
Posts: 1,539
Likes: 0
Received 0 Likes
on
0 Posts
Difficult to have any respect for our 'leaders', when even an industry leading fuel hedging loss doesn't even warrant a mention of the responsible individuals losing their jobs (or even being reassigned). There is NO accountability in this company (except for the pilots). Meanwhile, our colleagues at other airlines are about to enjoy record salaries and benefits (and they don't even pay for staff travel!). Makes me 
Join Date: Sep 2004
Location: somewhere
Posts: 249
Likes: 0
Received 0 Likes
on
0 Posts
bm330 - you may wish to withdraw your last post which accuses Swires of holding the fuel hedge. That would be taking value out of Cathay and depriving share holders of dividend. Unless you have proof that your assertion is correct?
