Race to the bottom...

[Elroy Jettson]

With the race to the bottom in full swing in the Australian airline scene, can anyone else come up with a precedence for this? What was the result? I understand in the "REAL WORLD" companies and contractors fight tooth and nail to win business or contracts, but they all have bottom lines where they are not prepared to do the job. What is ours?

I understand that we suffer from the "Fly for food" mentality of some pilots, usually very young and inexperienced, but there are a few experienced guys that fit that bill. Surely they aren't too numerous. Surely you couldn't crew an airline with these clowns? The question is, what is our collective bottom line? As an industry, how low are we really prepared to go? I thought jester had found it, but Tiger dont think so and will probably crew their startup even cheaper than Jester. How about the Virgin ultra low cost carrier? Expect them to pay the big bucks? Do you think they will have trouble crewing their machines?

Yes, the American airlines are reducing terms and conditions too, but they are financially in crisis, so it is logical? We are in an amazing position where all airlines in Australia are reporting that they are experiencing unprecidented profitability. No comparison.

Where are we headed? This is new ground for all players, and i think we are the ones being played the hardest!

[freddyKrueger]

Tiger dont think so and will probably crew their startup even cheaper than Jester.

Pure speculation. Do you have any verifiable facts to support this ascertion?

[domo]

ryanair like to advertise on pprune as the low cost high pay airline
a lot of companys like to look after their staff and understand a happy worker is more productive and promotion prospects are better if the company is successful

its only the established airline that saw these start up companies pay less to their workers that they had to start to slash the legacy perks it will all sort itself in time using market forces

i believe the future is bright for well trained pilots in australia

[roamingwolf]

freddyKrueger,

Mate I think what he is trying to say is that if Tiger paid more money than J* for staff how are they going to give lower fares and take business away from J*.

If they paid more for pilots for example then other staff are going to say well how about us.They will pay the same rent for bridges,same fuel..etc...

unless the HQ in Singapore is prepared to subsidise the Oz operations but then that can't last.

Tiger can't offer even 1 or 2 seats for $1.99 if they have a higher cost base than J*

[freddyKrueger]

ryanair like to advertise on pprune as the low cost high pay airline

Southwest Airlines seem to be able to do it too.

If they paid more for pilots for example then other staff are going to say well how about us.

The "other" staff are quiet entitled to use their days off and beg/borrow/steal the cost of a CPL + endorsemement to gain a pay increase if they think it will be worth it.

If you want to really see how it can be done read the book Nuts! by Freiberg & Freiberg. Twenty bucks from amazon. It is entirely possible.
Your line of logic simply views pilots as a straight cost with ZERO ability to value add. Pilots have a significant effect on the overall operational cost, way beyond their pay.

[roamingwolf]

Freddy mate that just shows how little some pilots think...this is all about pilots you think.

Pal I meant other staff who are not interested in being a pilot.If you pay big bucks for pilots then the other staff will want big bucks to for their job?

Thats right mate there are other people who work for an airline.the way you talk you would think that the whole airline industry is run by pilots.

Any group that is capable of having an effect on airline ops can as you say have affect things beyond their pay not just pilots.

If tiger comes in you can bet the race to the bottom will gain speed and not just for pilots because there will always be people who don't think further than the next weekend when applying for a job.

[freddyKrueger]

OK lets do the math
CPL -$60,000
Type Endorsement -$35,000
Time (18 months min) opportunity cost @ average wage(50K) -$75,000
This get you the absolute minimum, around 200 hours + jet endorsement. Congratulations, your now qualified to earn around $25,000 a year for 24 months. +$50,000
So after 3.5 years the pilot is -$120,000.

Compare this to the average wage earner who has gone to work, who over 3.5 years has earned +$175,000 & we haven't even covered super.
The difference is $295,000, or almost 6 years of average wage. That is six years at double the average wage just to break even after 9.5 years (excluding flying loan interest & additional tax).
The pilot has taken a huge risk just getting to the starting line. Unlike an apprenticeship, you need to spend the money before getting the job. This is what makes pilots so easy to exploit.
All this to hope to earn $70,000 for 3 to 4 years and then up to $125,00 at the current LCC rate. The airlines are getting serious value for money from their pilots at this rate. The pilot bares all the risk so he can end up in the same postion as Mr average after 10 years, and the airline pays nothing. Do you still think it should be cut further? Are these pilots still overpaid?

Anyone with a professional qualification who works in an airline has also made similar sacrifices, however, they have a vast range of opportunities to work elsewhere, for the pilot it would usually mean leaving OZ and starting at the bottom again or taking a contract at their current level.

If you pay big bucks for pilots then the other staff will want big bucks to for their job?

Please don't come onto the Professional Pilots RUmour Network and bag us about money. I think I have debunked the "Big Bucks" for free theory. If you too have made these or similar sacrifices I apologise in advance. As I said, others are free to pursue a pilot career should they believe it is in their best financial interest.
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Thats right mate there are other people who work for an airline.the way you talk you would think that the whole airline industry is run by pilots.

Nothing could be further from the truth. Did you read the book? Did you even go to amazon for a look at the reviews. I've made it easy for you, with this LINK.
Here are a couple of quotes from the reveiws

much of Southwest's success to the willingness of its management, led by chairman Herb Kelleher, to be innovative. Southwest's primary operating philosophy is low fares and lots of flights. To make this formula work, Southwest management has created a culture where employees are treated as the company's number one asset

Pilots help out at Southwest, they do someones else job if it needs doing. This means the lowest head count possible, which is returned through higher wages/profit share. Goodwill comes with a dollar value, not abuse.
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If tiger comes in you can bet the race to the bottom will gain speed and not just for pilots because there will always be people who don't think further than the next weekend when applying for a job.

With the above math, it should now be obvious that learning to fly is a financially marginal & risky proposition. Guess what? The market is voting, the risk reward profile is skewed towards risk & people are unwilling to take the chance. The operators may able to exploit the vulnerable in the short term, but the long term picture is the the opposite. They will reap what they have sown.

[prospector]

And with the new Airline Pilots licence coming into vogue, those that have paid the big bucks will be got at from both ends. will be harder to get jobs, and when you get one it will be paid at the rate relative to what the new pilots have expended for the licence.

[topgun0007]

Feddy,

Mate you need to go into the "REAL WORLD" and look at what undergraduate degrees cost and what the remuneration is at the end of the 6 plus year committment.

Do the real math on repaying HECS fees and working on lowball wages just to get a start after already being several income years behind your contemporaries.

Why is it pilots feel they are so special and deserve more than the next guy?

Most of the pilots I know would do it for nothing because they love the industry, they are still passionate.

That is what makes them so exploitable.

[The Professor]

“With the race to the bottom in full swing in the Australian airline scene...”

The aviation scene in oz appears to be at an all time high. Passengers are traveling in greater numbers than ever before with lower fares, jet aircraft now service more ports and city pairs than deemed feasible under the 2 airline system and pilots have more opportunities to progress into a jet aircraft as a result. There are more jobs.

“As an industry, how low are we really prepared to go?”

As low as the market dictates. Whether you are prepared to or not has no relevance.

“We are in an amazing position where all airlines in Australia are reporting that they are experiencing unprecidented profitability. No comparison.”

Unprecedented, maybe. But returns on investment are still very poor compared to other investment opportunities. The industry is changing. Capital is now totally transnational, the strategic importance of flag carriers is less important and the airline industry is required to compete with a wider range of investment opportunities than before (witness TPC/Indigo). More importantly, business will ALWAYS strive to reduce labor costs/improve productivity irregardless of how profitable they may be.

“Pilots help out at Southwest, they do someones else job if it needs doing.”

Pilots at WN sometimes assist in loading bags or assisting ramp staff. Are you suggesting that if paid to your satisfaction, we will see you on the ramp hurling samsonites into hold 2 during a turnaround?

“Pilots have a significant effect on the overall operational cost, way beyond their pay.”

Perhaps you could provide examples.

[BIKKERDENNAH]

Ok i have one.

A Dissillusioned,fatigued pilot with a little effort just on approach can save up to 1 tonne of FUEL,however why should he or she try that extra mile to do so. Far easier and more conservative which some believe SAFER to select flaps a little earlier or even gear down flaps 30 at glideslope capture instead of flaps 5 this takes a little more brain power and a few more considerations NOT DESIREABLE to a Tired,demotivated ,low paid airline pilot.

SO 500kg of gas say per 2 sectors. AVERAGE four sectors per day equals 1 tonne per day at 80cents per litre at an sg of .8 equals 1250 litres of fuel 1000 dollars. 5 days a week equals 5000dollars or per month 20000 dollars of extra fuel burnt by 1 unmotivated ,tired and underpaid airline pilot by not putting in the extra mile because why should they have to!!!! PROFESSIONAL PRIDE,BECAUSE THEY LOVE THEIR JOBS!!!! That captain at some of the airlines in OZ would be lucky to earn 7000 Dollars after tax!!

So there is an example.

many more me thinks!!!!

[assasin8]

Here here Freddy... That's right, it's the PROFESSIONAL PILOTS rumour network ! Who invited the mothers group to join in the discussion ?
I think Gilligan's running this week's cake stall in Melbourne...

[Elroy Jettson]

Professor, thanks for your reply. The term race to the bottom refers to the negative pressure on terms and conditions. There is no denying there is huge negative pressure on these. No denying there are more jobs, read companies require more pilots. That is demand for pilots has gone up, economics day 1 suggests if demand for a commodity goes up, and there is a finite ammount of this commodity, the price should rise. Not fall as it is doing now. Yes, there are more jobs, but they are lower paying, on reduced terms and conditions. Where else does this happen? Any examples?

I think it is very relevant what industry professionals are prepared to do it for. You forget the companies need pilots. The simple law of supply and demand they keep jamming down our throats at negotiation time work both ways, so there is a bottom line where they wont be able to crew their aircraft. Is it $5 dollars a day, or $200 dollars an hour? Probably somewhere in between?


Freddy, you are right, I dont have any proof that tiger plan to pay less, but do you think they are sitting in the boardroom in Singapore, "OK Gents, here is the plan... We are going to take on Jester Domestic, shot for shot in the Australian domestic market, but here is the killer punch. We are going to do it with an even higher cost structure than they have! What do you think?"

Yep, they would all stand and applaud that plan.

[Keg]

"OK Gents, here is the plan... We are going to take on Jester Domestic, shot for shot in the Australian domestic market, but here is the killer punch. We are going to do it with an even higher cost structure than they have! What do you think?"

They can actually wipe out J* domestic pretty easily. All they need to do is to start up and rapidly push up from 3-5 airframes through to 10-15. If they offer about 15% more than J* with the prospect of rapid promotion then they may find the J* crew running a mile toward them. The fact that their labour cost is higher won't bother them too much when J* can't find the crew to run their airline! Parked aircraft due to not enough pilots is a sure fire way to hobble an airline. This poaching by offering higher terms and conditions is starting to happen in Europe. I didn't think I'd ever see it in Australia (we still may not) but a smart airline would consider the best way to start up AND hobble the opposition at the same time. This is one of those way!

Then just maybe we may start to see the race to the bottom turn around and become a 'race for crew' and who can 'lock them in thanks Eddie' on the best terms, conditions (and probably bonds!). Of course this applies to type rated crews. Those without type ratings may continue to sign up to pay for it themselves but it'll be interesting to watch.

[Elroy Jettson]

But Keg! Tiger wont have a parent company to indulge in creative accounting and hide costs for them!

[The Professor]

"Far easier and more conservative which some believe SAFER to select flaps a little earlier or even gear down flaps 30 at glideslope capture"

So your suggestion is to purposefully undermine the efficiency of the operation because you are not paid enough. Yet you are trying to justify a higher salary because of the professionalism you are offering the company. Do you see a slight flaw in your logic?

"There is no denying there is huge negative pressure on these"

No, there is no denying. The pressures of the market place for lower costs will always compete with the desires of those working in the market place for higher income. You have not discovered anything new; this pressure has always existed but has been kept at bay by many factors: a highly unionized workforce, a localized domestic airline sector with a formal government policy of complete regulation and mostly domestic capital investment in the industry. All of these factors have changed. One unionized incumbent has been replaced by a largely unionized start up. The domestic airline industry is now more closely linked to the global industry through alliances, code shares and foreign ownership. The removal of any overt anti competitive government policy. The transnationalisation of global capital.

Let’s not forget that customer expectations have also changed. A choice of hot meals between Mel and SYD at 4pm was only ever employed to give the customer perceived value as a way of masking high operating costs.

It requires a great deal of naiveté to expect the labor market to remain the same as the forces applied to the industry have all changed.

"That is demand for pilots has gone up, economics day 1 suggests if demand for a commodity goes up, and there is a finite amount of this commodity, the price should rise."

This is precisely what has occurred. Jetstar have found that the supply of DEC for international ops is limited and have increased the salary levels in response to market conditions. The price has risen; your economic theory has been validated.

[Toolman101]

Topgun0007

'Why is it pilots feel they are so special and deserve more than the next guy?'


'Never in the field of human conflict have so many owed some much to so few' W.Churchill 1940

Need I say any more!!!!!

[Traffic_Is_Er_Was]

Mate, that's a pretty tenuous link.

[max autobrakes]

Toolman by name , Tool by nature.

[Traffic_Is_Er_Was]

Actually I think what he meant to say was:
"Never in the field of human endevour have so few felt they were owed so much by so many"