DD et at ... I have been travelling, so have been unable to respond as rapidly as I would ordinarily do.
Turbosheep - a properly constituted ESOP works on an equitable basis - you are eligible/required to purchase x% of your base salary worth of shares at a preferred rate. Too often, though, schemes which are as you pointed out designed to benefit management rather than all stakeholders are mislabelled "ESOPs" - and this devalues the genuine ones, making employees suspicious about management's motives for doing them.
dallas dude - as I said, I was using DOT figures - but, hey, what do they know anyway? I enjoyed your attempt to downplay the argument by selecting one of the smallest aircraft - let's use one of the 'hot' aircraft, shall we?
You like figures - well, here's some for you. These are the median operating costs for the B767-400, sourced from Delta, Continental and Boeing for a 2,000 nm trip, assuming US$0.80/USG:
Fuel: US$6,024
Landing fees: US$2,041
Nav charges: US$4,485
Crew Salaries: US$2,232
Maintenance: US$3,281
Ownership: US$13,309
Hull Insurance: US$693
DOC per trip: US$32,065
Sensitivity Analysis:
Fuel: 18.8%
Landing fees: 6.4%
Nav charges: 14%
Crew Salaries: 7%
Maintenance: 10.2%
Ownership: 41.5%
Hull Insurance: 2.2%
Now, lets see what happens with the sensitivity analysis when we increase the pay rates by the percentage sought by DALPA (31.15%). It has the effect of increasing salary cost per hour to US$2,927 per hour and total DOCs to US$32,760
Sensitivity Analysis:
Fuel: 18.4%
Landing fees: 6.2%
Nav charges: 13.7%
Crew Salaries: 8.9%
Maintenance: 10.0%
Ownership: 40.6%
Hull Insurance: 2.1%
I agree that the incremental increase in overall costs is minimal, percentage-wise - but let's look at the impact on the bottom line. The average
gross profitability of a major US carrier (again according to the
DOT) is just 18.9%, with an average
net profitability of less than 3%. The astronomical turnovers give some very large profit dollar numbers - but as we all know, you're better off putting your money in the post office than putting it in an airline!
That overall increase in operating costs - a mere 2.17%, if applied to all the majors - would have the effect of wiping out their average profitability. That's a sobering thought, surely.
Roadtrip - Under UK companies law, directors are required to reveal in their annual accounts their total remuneration package value, including all shares and options held. I'm not sure what US law is, but if that isn't the case there then I certainly feel it should be.
I agree with you that bad management decisions are a major contributing factor to the survival of an airline - but what I'm specifically talking about here is overall costs.
How many senior managers are there in say American Airlines earning the same as, or more than, say a 767 captain? Then how many 767 (or larger) captains are there in American? Sure, you'll find that at the very top of the food chain there are one or two individuals earning telephone number salaries. As was pointed out earlier, the cream of any profession can - and do - earn substantial amounts. That said, I certainly do not think that it is right that these people should be awarding themselves huge salary increases and/or bonuses and at the same time telling the employees that they have to tighten their belts - I believe the term for that is BOHICA, right, dd?
Roc - high salaries may be the norm for the US but I can assure you that 18-24 hour shifts and pay below the minimum wage is the norm for many interns over here who still hold people's lives in their hands. It would be interesting to compare UK pilots pay with that of their medical counterparts; and do the same exercise with US pilots and doctors.
[This message has been edited by The Guvnor (edited 03 January 2001).]