Peaks and Troughs of the US Airline Industry
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Peaks and Troughs of the US Airline Industry
Not really any surprises and i suspect this could be just the tip of the iceberg.
http://www.chicagotribune.com/travel...0,554576.story
Can anyone enlighten me as to the difference between 'furlough' and to be 'let go'? is it a peculiar American bean counter thing so management get to withhold payment of benefits or simply local terminology?
Anyone think this will have a flow on effect to Australia, or is it a correction of unsupportable business models and inefficient management?
http://www.chicagotribune.com/travel...0,554576.story
Can anyone enlighten me as to the difference between 'furlough' and to be 'let go'? is it a peculiar American bean counter thing so management get to withhold payment of benefits or simply local terminology?
Anyone think this will have a flow on effect to Australia, or is it a correction of unsupportable business models and inefficient management?
FB,
"Furlough" is an American term, roughly the same as Leave of Absence. When there are surplus pilots, furloughs are first offered voluntarily, then compulsorily. It means you are out on the streets with no severance pay, technically still employed by the company. You have first refusal at any job that comes up for a certain period (I think about 5 years is the norm) and go back at your old seniority. Cheaper and easier than redundancies.
There have been periods when being a US pilot meant spending your first several years of employment being furloughed every winter. Reading Ganns "Fate is the Hunter", he also talks about being promoted to Captain every summer, only to be down-trained to FO every Winter for a number of years.
The thing that occurs to me about United and the other US carriers doing this large-scale furloughing is that the subsequent training costs must be enormous. Being strict seniority, it means Wide Body FOs being down-trained to Narrow bodies, Narrow Body Captains going back to Wide Body FOs, etc. etc. 1000 furloughs must mean around 3000 training movements, only to repeat the whole process in reverse when things pick up.
But, then, I'm sure the bean-counters know what they're doing....
"Furlough" is an American term, roughly the same as Leave of Absence. When there are surplus pilots, furloughs are first offered voluntarily, then compulsorily. It means you are out on the streets with no severance pay, technically still employed by the company. You have first refusal at any job that comes up for a certain period (I think about 5 years is the norm) and go back at your old seniority. Cheaper and easier than redundancies.
There have been periods when being a US pilot meant spending your first several years of employment being furloughed every winter. Reading Ganns "Fate is the Hunter", he also talks about being promoted to Captain every summer, only to be down-trained to FO every Winter for a number of years.
The thing that occurs to me about United and the other US carriers doing this large-scale furloughing is that the subsequent training costs must be enormous. Being strict seniority, it means Wide Body FOs being down-trained to Narrow bodies, Narrow Body Captains going back to Wide Body FOs, etc. etc. 1000 furloughs must mean around 3000 training movements, only to repeat the whole process in reverse when things pick up.
But, then, I'm sure the bean-counters know what they're doing....
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.the last big trough in US aviation was about 1st Quarter 02 (after 911) so that was 6 years..then the rest of the world sort of followed at 6 months..so I reckon the good times will be just around the corner again in oh..about 2013..damn I wish I'd asked for a pay rise 3 months ago..now I gotta wait 5 years 
Wizo is correct in his definition.
If furloughed you are basically laid off from the bottom of seniority list ,ie last hired on first off.
When the company starts expanding and hiring again those on furlough are asked i they wish to return to work, in seniority order going down the list. If they refuse or if they have resigned their number in order to work for a new employer then that is their choice.
Only once the last furloughed pilot who wishes to return has done so when offered will the company then start recruiting "New Hires" off the street.
The biggest benefit for those involved is that you return at your old position on seniority list, even if re called years later instead of starting at the bottom again like a new hie would.
In the US ,unlike here in OZ, everything at the airline is strictly determined by seniority, no exceptions, Upgrades, base assignments, rosters, leave requests, extra flying etc, everything.
If furloughed you are basically laid off from the bottom of seniority list ,ie last hired on first off.
When the company starts expanding and hiring again those on furlough are asked i they wish to return to work, in seniority order going down the list. If they refuse or if they have resigned their number in order to work for a new employer then that is their choice.
Only once the last furloughed pilot who wishes to return has done so when offered will the company then start recruiting "New Hires" off the street.
The biggest benefit for those involved is that you return at your old position on seniority list, even if re called years later instead of starting at the bottom again like a new hie would.
In the US ,unlike here in OZ, everything at the airline is strictly determined by seniority, no exceptions, Upgrades, base assignments, rosters, leave requests, extra flying etc, everything.
As a wandering Aussie who's been living and working for a couple of Regional Airlines in the US for the last 9 years, I can say without any doubt, that this particular down-turn is the mother of all troughs.
I think the best way to describe it, is that it's a perfect storm in US aviation; US$ is in the ****ter, economy is taking a nose-dive and oil is spiralling out of control. They've never had to face all 3 factors conspiring against them at the same time. Added to which, when the cycle has turned against the US airlines in the past, they've always had more than a few years of profits to tide them over. This time they've had what, a year, maybe 2 of profits and this after bankruptcy for most?
It really is going to be bad in the US, United just announced close to a 1000 pilots furloughed/layed-off and that will go back to guys hired in '99/'00. The very same poor souls who've just got thier jobs back after being furloughed after 9-11. I've lost count of the airlines that have gone out of business in the last 12 months....maybe 7-8, I think. By the end of the year, you're going to see at least another 1000 on the streets from all the other legacy carriers.
Be very thankful you're not here
I think the best way to describe it, is that it's a perfect storm in US aviation; US$ is in the ****ter, economy is taking a nose-dive and oil is spiralling out of control. They've never had to face all 3 factors conspiring against them at the same time. Added to which, when the cycle has turned against the US airlines in the past, they've always had more than a few years of profits to tide them over. This time they've had what, a year, maybe 2 of profits and this after bankruptcy for most?
It really is going to be bad in the US, United just announced close to a 1000 pilots furloughed/layed-off and that will go back to guys hired in '99/'00. The very same poor souls who've just got thier jobs back after being furloughed after 9-11. I've lost count of the airlines that have gone out of business in the last 12 months....maybe 7-8, I think. By the end of the year, you're going to see at least another 1000 on the streets from all the other legacy carriers.
Be very thankful you're not here
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It was only a matter of time..
Economists have been forecasting a major correction in the US economy for years. The historic deficit the Bush administration has stupidly built up is finally coming back to roost, and it'll sting big time. Really no big surprise there..
As for the state of the aviation industry in the rest of the world, I would think the effects would not be major; firstly there are lots of pilots close to retirement age, so they'll basically just drop out of the market.
The biggest driver for global pilot demand is solid economic growth in the Middle East, India, China, the rest of Asia and Australia. That growth is to a large degree independent of goings-on in the US, and is not set to slow in years to come. Literally hundreds of millions Chinese and Indians progressing into a new middle class, wanting to travel for leisure and needing to travel for business, will keep the flight switches ticking over nicely. The underlying need for raw materials will keep especially the Australian economy going for decades to come.
This may be a good time to think about migrating (back) Down Under for the young US-based pilots caught in the post-Bush spiral, it'll need to get a lot worse before it can get better over there..
As for the state of the aviation industry in the rest of the world, I would think the effects would not be major; firstly there are lots of pilots close to retirement age, so they'll basically just drop out of the market.
The biggest driver for global pilot demand is solid economic growth in the Middle East, India, China, the rest of Asia and Australia. That growth is to a large degree independent of goings-on in the US, and is not set to slow in years to come. Literally hundreds of millions Chinese and Indians progressing into a new middle class, wanting to travel for leisure and needing to travel for business, will keep the flight switches ticking over nicely. The underlying need for raw materials will keep especially the Australian economy going for decades to come.
This may be a good time to think about migrating (back) Down Under for the young US-based pilots caught in the post-Bush spiral, it'll need to get a lot worse before it can get better over there..
With most of the world heading towards a 1929 type depression many business organisations in the US are in a precarious position. These include Banks, Airlines, Motor Car Industry and the US Government.
The trough will deep and last a number of years.
The trough will deep and last a number of years.
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most of the world heading towards a 1929 type depression
With the Euro slowly taking over the USD role of world currency, once the majority of oil contracts are processed in Euro, oil prices will return to supply and demand pricing..
Geoff Dixon mentioned the United redundancy recently on ABC radio as part of his doom and gloom message of the airline industry. What he and most of the media fail to mention is that the executives of United will gain from laying off workers. If they can meet cost saving measures they will pocket performance bonuses. It has been done before and may be done again. Fire a bunch of employees, pocket your bonus, then carry on.
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Then again the economist was most likely saying "subprime is contained" nine months ago, who's going to buy all the crap coming out of china when the US and Europe are in recession? I predict you will start to hear the words China and overcapacity associated with each other alot more within the next 6 to 9 months.
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B772, you may in fact be correct. Just heard a program that referred to General Motors being on their knees and a major US air carrier (unnamed) not far behind.
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Back in 1979 an author called David Graham wrote a great flying book called "Down to a Sunless Sea" which, though fiction, detailed what might happen if the world stopped selling the US oil for the worthless USD.
That is the big worry here IMHO. If America cannot afford to pay for its oil imports and the oil exporters no longer accept the USD in payment, the ramifications would be swift and catastrophic for the US and in turn the entire world.
Everyone is aware of this of course and there is a many reasons to not allow that to happen. The dilemma is that the US government needs to increase interest rates to stem the decline of the USD, but that very act may guarantee that the US goes into recession.
There is a very interesting few months in store for us all.
That is the big worry here IMHO. If America cannot afford to pay for its oil imports and the oil exporters no longer accept the USD in payment, the ramifications would be swift and catastrophic for the US and in turn the entire world.
Everyone is aware of this of course and there is a many reasons to not allow that to happen. The dilemma is that the US government needs to increase interest rates to stem the decline of the USD, but that very act may guarantee that the US goes into recession.
There is a very interesting few months in store for us all.
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Lets be honest, the US deserve their recession and the world probably needs it too. They can't keep printing money to finance a pointless war in Iraq, and selling treasury bonds to China indefinitely. They have to pay for their indiscretions sometime. Don't get me wrong, I like the Yanks, but its about time the world figured out how to get a little bit of financial independance from Wall St. Just a pity about our industry..
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How it came about
What I like most about the US downturn is that it is the poduct of their own greed. Who was giving mortgage's to people who didn't really qualify and then cried about it when they couldn't pay?
The problem being that alot of banks and investment funds had put money into sub prime lending institutions and the knock of effect of bankruptcy happened.
Boom then bust, I thought we had seen the last of that trend in todays modern economies?
The problem being that alot of banks and investment funds had put money into sub prime lending institutions and the knock of effect of bankruptcy happened.
Boom then bust, I thought we had seen the last of that trend in todays modern economies?
crank1000
Just because we may live in a modern society doesn't mean we are imune to the boom bust cycle. Like the sun rises in the East and sets in the West, boom bust cycles will happen until the end of the human race. It is generic in our make-up.
Just because we may live in a modern society doesn't mean we are imune to the boom bust cycle. Like the sun rises in the East and sets in the West, boom bust cycles will happen until the end of the human race. It is generic in our make-up.
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The state of the airline industry in the US has never been a stable one. If you were to plot a line that represented a level of staus quo so to speak, then in the USA the trend historically, and especially since deregulation, would be a sine wave like oscillation that was either roaring up through the staus quo flat line in some record growth period or crashing down through that line in the subsequent decline. The US airline industry has really never seen long continuous periods of stability. The factors that make that happen are the system of furlolugh, which can occur with no or little notice or penalty to the airline, and the rediculous chapter 11 bankruptcy protection. Having been furloughed myself once I would not wish it on anyone. I knew pilots that had been on furlough for five or six years and after getting called back were out on the street again in a year or so. You wouldn't wish it on anyone but in my opinion the US can stand, in fact just about needs to lose another major carrier in order to stabilise the industry somewhat in the longer term. There is simply to many seats and to little yield that market.
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Too many seats
Sprucegoose,
Why is it in such a volatile market that the smaller carriers seem much more able to ride out the storm better than bigger one's? WestJet and Alaskan come to mind. Would you say that having the best managers on your team still wont help you against the volatility that is the American Aviation industry? Is it just pure luck?
I would have thought the smaller guys would be the first to go but United, AA and Pan Am all seemed to die first. I'm told Pan Am failed in the middle of Boom. Please correct me if that isn't the case.
Why is it in such a volatile market that the smaller carriers seem much more able to ride out the storm better than bigger one's? WestJet and Alaskan come to mind. Would you say that having the best managers on your team still wont help you against the volatility that is the American Aviation industry? Is it just pure luck?
I would have thought the smaller guys would be the first to go but United, AA and Pan Am all seemed to die first. I'm told Pan Am failed in the middle of Boom. Please correct me if that isn't the case.
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Well Pan Am actually went bust during the recession which occurred during the first Gulf War in 1990. The boom period for the airline market in the USA that preceded that ended in 1988. However the fate of the airline was sealed before deregulation in 1978. Back then Pan Am was solely an international carrier and though the details elude me right now I recall that in the years preceding deregulation the US government allowed some domestic carriers to apply for and receive rights to fly international routes. Pan Am was at a distinct disadvantage as it had no domestic network to feed its international routes. There was an attempt to merge with National Airways before 1978 but that was prevented in the regulated environment of the day. By 1978 Pan Am was already a white elephant and the next decade was an exercise in slow death. Assets were sold progressively for cash but the low yield ($)deregulated market with Chapter 11 protection for sick/mismanaged carriers gave Pan Am no chance to rebuild. The Lockerbie bomb fallout and a couple of years later the recession and bust in the industry was the last straw. I was at LAX as one of the last 747's landed and the fleet was parked forever.
As for smaller carriers surviving, well many don't trust me. and many end up in mergers so we don't tend to see their demise quite the same. As for those legacy carriers like Pan Am, Braniff, Eastern, TWA, and the plethora of deregulation carriers they were largely mismanaged or intentionally hit by corporate raiders. Look at the Frank Lorenzo years. Alaska and Westjet largely serve in hubs that have little competition on the same scale in that region. For many years Alaska and Southwest served niche markets in their regions and only expanded significantly in the boom years of the mid 90's. Also there is a pretty clear link between profitability and fleet simplicity. All those still struggling legacy carriers like United, American, Delta, Northwest, US Airways all have fleets of just about everything ever built. When fuel was cheep the older long since fully paid for jets were seen as cheaper to operate that newer jets. But that is typical of US airline philosophy where the industry fleet average age has always been by far the oldest in the world outside of third world and former Soviet Union countries. This isn't the first time fuel costs have risen faster that an US airlines can shift their fleet mix to more efficient newer types. And as we are sure to see there will be bankrupcies and failures of legacy carriers yet again. United and US Airways have been pursuing a merger to stave off a failure of one or the other as have Northwest and Delta. Thats all off as they all struggle with rising losses yet again. As I said I don't wish it on anyone at all but I still think that at least one large legacy carrier needs to fail completely in the US for there to be any chance of stability in that market, and maybe even two carriers. There are too many seats, to much competition and no price mobility at all except downward between carriers. I blame Chapter 11 for creating this scenario which has never seen the market settle at a suitable staus quo since 1978.
As for smaller carriers surviving, well many don't trust me. and many end up in mergers so we don't tend to see their demise quite the same. As for those legacy carriers like Pan Am, Braniff, Eastern, TWA, and the plethora of deregulation carriers they were largely mismanaged or intentionally hit by corporate raiders. Look at the Frank Lorenzo years. Alaska and Westjet largely serve in hubs that have little competition on the same scale in that region. For many years Alaska and Southwest served niche markets in their regions and only expanded significantly in the boom years of the mid 90's. Also there is a pretty clear link between profitability and fleet simplicity. All those still struggling legacy carriers like United, American, Delta, Northwest, US Airways all have fleets of just about everything ever built. When fuel was cheep the older long since fully paid for jets were seen as cheaper to operate that newer jets. But that is typical of US airline philosophy where the industry fleet average age has always been by far the oldest in the world outside of third world and former Soviet Union countries. This isn't the first time fuel costs have risen faster that an US airlines can shift their fleet mix to more efficient newer types. And as we are sure to see there will be bankrupcies and failures of legacy carriers yet again. United and US Airways have been pursuing a merger to stave off a failure of one or the other as have Northwest and Delta. Thats all off as they all struggle with rising losses yet again. As I said I don't wish it on anyone at all but I still think that at least one large legacy carrier needs to fail completely in the US for there to be any chance of stability in that market, and maybe even two carriers. There are too many seats, to much competition and no price mobility at all except downward between carriers. I blame Chapter 11 for creating this scenario which has never seen the market settle at a suitable staus quo since 1978.