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Intnl Air Transport, Restructure...or Die

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Intnl Air Transport, Restructure...or Die

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Old 19th Nov 2002, 22:11
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Intnl Air Transport, Restructure...or Die

"Can Majors Shift Focus Fast Enough To Survive?"

"Question haunts industry as low-fare carriers grab market share, and high costs, low productivity begin to strangle some airlines."

"Low cost carriers steal the European show."

"Some European flag carriers may not survive in the long term, a politically correct reference to the need for consolidation."

Just SOME of the quotes in an interesting article in the latest issue of Aviation Week, just delivered...on the web shortly i'm sure.

The picture is NOT pretty, at all....

Would suggest that some here, who think that their respective airline is the nirvana of aviation, have a look...and consider what the future holds for those that are not prepared.
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Old 20th Nov 2002, 00:05
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Restructure...or Die

Hi 411A, I'll answer that one:

If restructuring doesn't satisfy the model you propose...what is the alternative?

I don't think 'Death' is realistic.

If, by Death' you mean the complete eradication of the whole worlds full-service airlines..... I think you're oversimplifying the marketplace.

A totalitarian solution has never worked in any human endeavour. Communism sounded fine to a lot of folks (some even hang on to the concept today) but overall its been proven as a failure because (among other things) it failed to recognise the human need for diversity of choice.

Not everyone wants to fly steerage class.

I've been in this business long enough to see the wheel turn almost full circle...from B737s losing money on shorthaul regional routes, causing majors to pull off them, to the early low cost operators replacing them with Shorts 360s, and then the market building up again to the new LCOs B737s displacing the 1st generation LCOs.
And now the 'frills' airlines adapting to challenge for the same routes they abandoned years ago.

Now the passengers appear to be coming round to the view that cheap isn't always cheerful, and the price differentials are closing.
The 'frills' airlines may never compete head on with the LCOs but the vast gap in the middle ground has been eroded rapidly, even in the last 12 months.

This is the view from Europe anyhow. The US seems to be on a continuing downtrend. But I'm no longer worried about my job over here.
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Old 20th Nov 2002, 02:26
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You could be right Maxalt, but I suspect that the folks at Sabena and Swissair felt the same way...until the end.

Even AirCanada CEO Robert Milton seems to agree that the business model of the full-service carriers..."just doesn't work anymore".

Suspect he's right (with a few exceptions, Lufthansa comes to mind). This does not bode well for the "increased compensation" that some pilots (and cabin crew) think that they are entitled to. Bottom line is, cost reductions are here to stay, like it or not (and many won't).

Last edited by 411A; 20th Nov 2002 at 04:45.
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Old 20th Nov 2002, 08:01
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Well, let's get Sabena and Swissair in perspective. Sabena had made a profit (I think) about 1 year in all the years (lots) it operated. Swissair thought that it could go from a small loss making airline to a large profit making airline by buying other small loss making airlines. Instead it became a large loss making airline.

The dinosaurs in Europe may be the flag carriers who refuse to modernise and adapt (apparently, Air France has just received another billion euros in state aid - is this true? - which has already been declared illegal). In the US, it may be those who are unable to adapt by virtue of union pressure. Er, that would be the big five, then. However, there are an awful lot of people flying in Europe, and paying reasonable money, both on LoCos and with non-LoCo airlines. It ought to work out for the next few years - unless Bush Junior is really intent on trashing the world economy.
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Old 20th Nov 2002, 11:38
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411- this is something you have been flogging to death. It's beginning to sound as hollow as "United about to declare Ch11" (running for months, several separate guises, and blow me, United are STILL NOT THERE!. The we have "MyTravel in trouble"........er.....still waiting!). The low costs in Europe are doing well, but the majors are coming back. We are seeing strong signs of recovery in BA, LH and KLM. Your solution to their problems seems to hinge on 'Pilots (and Cabin Crew) remunerating themselves too much'! Well the history of low costs goes back to People Express, Braniff, Laker, Air Europe. They can shine intensely, but the trouble is they extinguish as quickly as they come up. Their problem is long term survivability.

Wanna know what I think? I'll just keep doing my best at my job, and hope that REPORTING POINTS keeps to its function as "Rumours and News that may affect our jobs or lives as professional pilots"! Don't you think a general chin-wag like this is better confined to QUESTIONS or AIRCREW NOTICES? Then when I log on in an internet cafe in Bangkok or Caracas, I don't wait 30 seconds for a rather unimportant discussion on already flogged to death items FINALLY displays itself when what I am after is something NEWSWORTHY and INTERESTING!

MODERATOR- Please put a lock on this or move it elsewhere. 411 shudda known better to use Reporting Points as it is defined. Accessing RP downroute can be like using a 2400bps modem- painful. In places like that, you only go to RP, and to be subjected to personal opinions and irrelevancies like this that take 30 seconds to load is putting even me off now!
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Old 20th Nov 2002, 12:53
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....................Alarmist..................

411A........yes you are. I agree with Notso, UA are still hovering about etc etc. I feel the technical arguement is correct. Lo Co's are doing the business. Those following the Southwest model will thrive, ie FR, and ESY. In many ways they are adding value to their fares, and no matter what you do these days you have to add value.......dell........."Flat screen or old style?". The good old corner shop is on the way back, but again not in it's old style.
The Flag carriers have an added value product but charge premium prices. Again these are falling. I priced 10 flights from Dublin to the UK last week on 3 different routes.......who was the cheapest and had the most suitable times? EI in 9 out of 10 cases. And on the 10th they were only 3 Euro dearer. So how you market yourself is also most important.
The fat flag carriers will vanish, no questions, they will be swollowed by their own sisters. You will have 2 distinct markets - Lo Co and Full Service. However the enormous price variations will vanish, as will a/c sitting on the ground half the day etc etc.

Here endith the lesson

Sid
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Old 20th Nov 2002, 13:33
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I think it's an overstatement to suggest that "the majors" will all go to the wall and Ryanair will rule the world. Not all the majors are the same, and not all doomed. Not all cheaplines (my copyright) will necessarily win.

Some points:

1. Low-cost operations seem to have an upper limit in terms of routes and in terms of size: there are no discount long-haul operators. Is this because most of the costs hacked out are the ones you begin to incur by getting big?

2. Not all "full service" operators are losing money. Certainly, the traditional high-subsidy prestige carriers (Swissair or Sabena - wot, they both went bust?) will be in trouble, given that they don't just burn off some more of the taxpayers' money.

3. So - what does that tell us? That inefficient, ill managed businesses don't do well. And you could have called that obvious..
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Old 20th Nov 2002, 15:02
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Hotchicken-Right! And that brings us to an evolutionary change where the big operators will hopefully become more efficient and low cost, and the low costs will grow their niche in the market and evolve into larger carriers and longer range routes, and all will be sweetness and light, and hey-ho! It will be seen that it wasn't all the fault of 'overpaid pilots & cabin crew' as 411 seems set on lecturing everybody, and we can all get our heads down and get back to people moving!

Propose end of boring discussion (in the wrong place anyway!)! Happy 411? Seconded anyone?

(I'm only in this as an escape from servicing a dishwasher which is on its back with its feet in the air in my kitchen. This over hacked to death thread has been running in various guises for years. It is only marginally more interesting than cleaning water filters........in fact..........I'm outtahere- I would rather be lying down pretending to work)
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Old 22nd Nov 2002, 01:06
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411A

Did a Major Airline 747-400 Captain back over your dog in your driveway after taking your wife for a spin once? If not what is your problem?

Why did National just shut down? High crew salaries? What about Midway?

At American airlines, cockpit salaries and benefits are around 1.5 billion a year. AA lost about a billion in the last 3 months alone. do the math for the group.

Another example at AA. 75 FK100's are effectively getting thrown away at around 25 million or more each. Most are less than 10 years old. $1.9 billion at least. The MD11 was another smooth purchase, but they got some value dumping them to FeDex.

Keep kicking tires around Marana and Mojave while the dreams of being an airline tycoon dance in your head. You might get lucky on some scam, but you won't get anywhere based on what we've seen here.
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Old 22nd Nov 2002, 03:30
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Not my authored comments or title, Lizad...they came directly from the referenced article.
Suspect that the author(s) may just be a bit smarter than you.

Notice that UAL is now in the "giveback" mode...others will follow i'm sure.
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Old 22nd Nov 2002, 05:44
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411A,
I wasn't referencing the reporters comments, he may be right, I was referencing your second post.

If I performed my job with the performance level of the average aerospace reporter, my obit would have been posted long ago.

UAL giving back? Take away the posturing and the poker faces and every union group will give up some if its needed. Improve on it another day. that's life.
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Old 22nd Nov 2002, 06:00
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Hey 411a

During the last contract at AA (in 96-97) during negotiations, the APA offered the Southwest pilot's contract word for word. (including the self funded retirement, stock options health insurance, productivity etc)

CrAAndal rejected it and said that there was no wAAy that they could afford to pAAy that. Because of the inefficiencies of AA schduling practices and the penalties to Southwest should they be similarly inefficient in the scheduling of the pilots, AA determined that the southwest pilot's contract was way more than they could afford to pay.

The problem is not pilot salaries, the problem is inefficencies in scheduling by the airlines (both of the aircraft and the pilots).
But you keep hammering on the pilots. They could fly the aircraft for free and it wouldn't matter. All a pilot wants to do when he goes to work is fly the damn jet! The only way the pilot can get the airline to do that is with a complicated contract including rig, duty time and TAFB provisions.

There really is no excuse for the amount of overnighting and whatnot that goes on around the system, Transatlantic/Pacific excluded. For example, flying in the caribbean out of NY its 3.5 down and 3.5 back for most flights. There is no excuse to do anything other than turns. Then the airline doesn't pay for hotel rooms, rig time, etc.

A pilot should never report for work and fly significantly less than 8 hours in a day. But if I fly New york to Sanjuan, lay over and fly back the next day for 7.5 hours of flying total, the airline deserves to get burned. (Yes Aircraft overnight terminators/originators in Sanjuan are different, I am talking about in the middle of the day when we have 6 or more flights in either direction.)

IF an airline actually scheduled their flight crews efficiently, they would do much better. (productive crews are happy crews, crews sitting in the hub taking a 4 hour 59 minute productivity break because 5 hours would get em a hotel room, are trouble/expenses waiting to happen!)

The problem is not pilot salaries, the problem is poor managment.
The British have a great expressions for airline managment (Southwest excluded, and JETBlue is waay to new/small to count yet) They couldnt organize a pissup in a brewery... I used to say that USair couldn't make money if they were hauling cocaine...

Cheers
Wino
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Old 22nd Nov 2002, 14:20
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A lot of truth in your comments Wino.
Over the last thirty five years have worked for only ONE airline that had the crew scheduling "correct"...and they used turn-arounds and overtime to keep the crew numbers (and payroll burden) down. And the crews smiled all the way to the bank.
Many large airlines have lost the plot a long time ago.

And as for CrAAndal, the less said, the better.
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Old 24th Nov 2002, 14:50
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Exactly Wino. Scheduling is one of the biggest money losers. Flew 15.5 hours this month; commercialed 9 hours, sat five days and 4 nights at a Hilton. No mechanicals, no schedule change, just crew scheduling failure. On duty 7 days and I'm done for November. Dig it. (But I'm not complaining).
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Old 25th Nov 2002, 04:39
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Thumbs up

Wino (Union Goon): Quite right.

411A and Gang: You all made at least some fairly plausible points, whether vague and very subjective, or not. However, after the Continental strike ended back in the 80's and old "Frankie Smooth Talk", known also on Wall Street as the "airline builder", had merged People's and New York Air into CO, the pilot and other employee salaries were relatively low. Was this not the case? Never mind the benefits. Why then did the airline not become the most successful US carrier?

If low pilot salaries were/are the primary factor, as many of you claim so often on Pprune, success should have resulted. There is no direct correlation between average or even below average pilot salaries and having a reliable, profitable carrier. Come on now, quick sound-bytes from the (Republican) GOP anti-labor campaign platform can't begin to describe the overall picture of an airline, and neither can I, even in a few paragraphs.

Could the low morale (what mgmt attitudes contributed to such?)and crude merger of seniority lists have helped lead to CO's lack of success? Could Southwest or JetBlue have succeeded with Frankie or Icahn or Larry Risley (Mesa "fame"), or a Brady (Express One) at the helm? But then, what could employees know? Most have no MBA from any business school. How about Steven Wolf as a true White Knight? Maybe Continental's rapid upper mgmt turnover years ago was an indicator of internal troubles. How about reading some old 'Aviation Week & ST' magazines from that time? Some checking up on DOT Admin Judges' reportedly favorable rulings on Texas Air Corp, and just which company the judges went to work for right after these very favorable ruling$, might be a bit enlightening: was there any similarity there with the classic "Beltway Bandits"? Or the "alleged" FAA Western Division's policy (marching in lockstep with Ronald) to avoid serious meddling with airline ops there during the strike?

Even with such external political help from the highest levels, or in spite of it, success depends on much more than low labor costs.

Back to salaries.
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Old 25th Nov 2002, 16:02
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Former low cost KIWI Airlines, mostly made up of ex EAL scab pilots who had paid up to $50,000 for a job (because they couldn't get a job elsewhere), was a company that had paid extremely low salaries...and in spite of all that went belly up after many agonizing years in and out of Chapter 11. Low operating expenses and low pay does not necessarily translate into profitability.
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Old 26th Nov 2002, 01:05
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I thought Kiwi was predominantly rEAL pilots, and PanAM pilots that were too OLD to find a job.

Southeast Airlines (currently using the old National Sunking logo) still flying is populated with many scabs... You might be confusing the two airlines because they had similar route structures at one point. Or alternatively I may be wrong, because I didn't pay too much attention to them at the time....

Cheers
Wino
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Old 27th Nov 2002, 05:38
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Glueball: One of our pilots was an FE with Kiwi, and they were not started by Eastern scabs, but by some real former Eastern pilots, maybe also some Pan Am pilots. They each invested large sums of money, depending on from which seat they were to fly.

Guess how the FAA found a way to shutdown a small carrier, showing the public that they were actually supervising the US airline industry, following their very muddied image after the horrific Valuejet tragedy?

Well, supposedly a former military aviator, with no airline experience, got a job as an "FAA Inspector". He found that all of the Kiwi simulator training records had no pre-printed box for windshear training. The records had small checkmarks or notes outside the other printed boxes, which documented that windshear training had been performed for the pilots. But hang on- these notes were not inside of any normal printed boxes. So the FAA found an easy little airline to blame for "fraudulent training records", or some such legalistic charge, while the media and naiive US public were exposed to an easy scapegoat: what did they know? This was what the Man (a former US Navy P-3 pilot) told me. His father was also a Kiwi pilot.

By the way, what is a 'scape' (i.e. scapegoat), other than a chunk of land?

Is this from Anglo-Saxon or Middle English?
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Old 27th Nov 2002, 15:01
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Ignition,
That jibes with my memory of the event...
Cheers
Wino
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Old 28th Nov 2002, 03:47
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Cool

OK Wino (you are my kind of Goon), I just saw "the Man" tonight, and asked him if my previous comments about his story are accurate, and he said "yep". He was an FE there for about two years or so, and commutes from Hotlanta/Atlanta. By the way, some sneaky mechanics there stole our plane yesterday with no notice-they need 'extra' gear inspections.
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