Aircraft,
Let me see if I can explain the mathematics here, I am going to use the method I read on another forum here in the States that somebody used.
Let us assume a company operates only 50 seat regional jet's, if we increase the salary of a captain and FO by a total of $50,000 per year, 30,000 for the FO and 20,000 for the captain, this is just to keep the math simple. Now let us assume the average length of a trip for the company is one hour, and the flight crew, that is every pilot in the company works an average of only 500 hours per year, this is very low I know.
That means $50,000 per crew divided by 500 hours flown equals $100 per hour of flight time, that is now divided by 50 passengers on the jet giving a ticket price rise of two dollars to cover that extra cost.
Now, if the company is really busy, and the average pilot flies a thousand hours per year, which is allowed here under the FARs, then for an average sector length of one hour then we get $50 per hour extra cost, which is one dollar per seat. As you can see from this rather high average annual flight time of 1000 hours or the more extreme low time of 500 hours the average cost of a ticket increase is $1-$2 based on the assumptions we have made.
When we factor in much more realistic real-world conditions, such as possibly a mix of 50 to 90 seat regional jets in the fleet and maybe some 30 to 35 seat turboprops, an average sector length of say 1 1/2 to 2 hours, and maybe 900 hours per year per pilot, plus an average load factor of 80% per flight etc, the price increase will still be in the region of $1-$3 approximately.
I cannot find fault with this basic reasoning. This assumes of course that nothing else changes as far as current salaries go, and that we are simply increasing the existing salary level at each year of service by the above amounts. Since 9/11 all the airlines have done massive restructuring and cost reductions in order to regain profitability, so we're not changing anything else in the way the company is run or the costs involved. We are simply talking about increasing a flight crews salary in this case by a specified amount and dividing that cost up over their annual average hours flown and the average length of a flight.
Obviously, a computer program could analyse all the company's operations and staff utilisation levels, number of aircraft in the fleet and their seating capacities, speeds etc, as well as average flight times per sector for each type, average load factors per flight, etc, and come up with an exact figure for each Fleet type, that would be the increase in ticket price required to cover such an increase in salary.
I don't have a business degree or a degree in economics, but as I said before can see no flaw in this general reasoning in determining this cost recovery model.
If anybody who worked for a regional airline in Australia or here in the States would suggest this to their management staff and see what the reaction was, I am sure it would involve a lot of kicking and screaming and reasons why it would never work and could not possibly be done. Anybody would think it was going to come out of their pockets!!
Another simple reality of business that always seems to escape airline managements around the world, is the fact that nothing is coming out of their pockets, or the company pockets,…… when there is a cost increase etc, this is a cost of doing business and is paid for by the customer/passengers as these costs are passed on, or are at least supposed to be!!!
Doesn't this happen in any other kind of business?? A business passes it's rising cost on to its customers, it has to otherwise it's profit margin will reduce or be nonexistent, and then the company goes out of business. Seems like basic business sense to me, but hey, what the hell do I know, I'm not handicapped. by actually having a degree in business/ economics. (Apologies here to people who have those degrees and actually know how to use them and what they are doing)
Every airline passenger in the world since 9/11 has had to pay much larger increases in ticket prices to cover increased security fees, fuel surcharges govt fees, etc, than the $1-$2 we had discussed above, or hell let us say a whole $5 increase. How many regular passengers who fly a certain route over and over again would even blink at a five dollar ticket increase, let alone a two dollar increase, which they would just assume was to cover an increase in security fees or some other government imposed fee??.
One article I read recently suggested that airfares are now a simple commodity and are basically purchased by the consumer purely on the basis of cost in most cases. Even if this is true, or other factors being equal, does $1-$2 difference on a ticket price of several hundred or more dollars necessarily swing people from one carrier to another?? Of course, if one company goes and raises their ticket prices to cover such a cost increase than all the others have to do so as well, or of course, their pricing will not be competitive. I understand this, but my point is, we're not talking about a 50 or $100 ticket price increase, which is obviously substantial and will swing people to the opposition, we are talking about $1-$3. Even if it were 5 or $10 this is still small compared to all the fees and charges included in or added to the "fare" to get the actual final ticket price.
If anybody can see a major flaw in this logic as far as how to calculate a ticket price increase to cover a lump sum cost increase per crew, without changing anything else in the company's cost structure then please let me know.