Rumours & News Reporting Points that may affect our jobs or lives as professional pilots. Also, items that may be of interest to professional pilots.

AA sacks 7,000

Old 17th Aug 2002, 05:33
  #21 (permalink)  
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411A, you are so blinded by your hatred of airline pilots who earn a decent salary I am beginning to suspect you must have a psycho hang up of some sort. Did your wife run off with a pilot or something?

Pilot salaries are high if you are lucky enough to get to the top of the heap. If you are just starting you would be better off at Best Buy pushing stereos. We can argue forever about the responsibilities versus rewards of the job. Just stop being so vitriolic for Heavens sake. It makes your sometimes sensible comments less credible.

What you refuse to consider is the "ticket price" side of the equation when you talk of airline losses. Recently, AMR was selling tickets for 40% of last years prices. Tickets, in adjusted dollar terms, are far cheaper now than they were in 1978. Tell me the name of any other business or industry that has seen the price it charges for its product reduced to such an extent.

No doubt the reduction in salaries will come but this will not save the industry or any individual airline. Only when the airlines start selling tickets at something like the cost of the product will the airline industry turn itself around. Unfortunately, the cost of the product includes various large items such as fuel costs, insurance, various airport and security fees and aircraft financing. Lumping all the blame for the costs on the employees salaries is short sighted and ineffectual and does not reach the roots of the problem. Reducing salaries will perhaps help the airline industry to recover but as long as other costs are out of control only sensible product pricing will ensure survival of the airlines.
Old 17th Aug 2002, 06:58
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Tell me the name of any other business or industry that has seen the price it charges for its product reduced to such an extent.
Have you bought a computer recently? - the price charged for a product is generally what the market will stand. I am not up to date on the way the airline market operates in the states, but in Europe we have seen the big state monopoly airlines, BA, Air France, KLM, Alitalia etc. etc. struggle because their prices are too high.

By comparison the Low Cost airlines EasyJet, Ryanair, Go etc. etc. are booming because they deliver what the consumer wants at a price that he/she is willing to pay.

To be fair to the staff of American, I am not convinced that salaries have a great role in deciding the bottom line - it is just that mismanagement see salaries as an easy target when times are tough, rather than concentrating on the real problems of efficiency, which are rather harder to tackle.

Good luck to everyone at American at this time.
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Old 17th Aug 2002, 09:17
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Guys, whether you like 411A or not is hardly the issue here. What he is trying to tell you are in my ears wise words, and you better take them ad notam rather sooner than later.

If you have the time, I suggest that you read the following speach done by Captain Otto Lagarhus at the International Aviation Conference at Sola near Stavanger, Norway.
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Old 17th Aug 2002, 11:17
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Some of the UA pilots know a salary cut will not change the end result. They might as well take as many $$$$ as they can while they can.

The end result being bankruptcy for UA in Nov. I also believe there will be major havoc in the US financial system come Nov.

Mark it in your diary.
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Old 17th Aug 2002, 14:51
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As pointed out previously, the computer you are using to reply to this forum is no doubt far cheaper today than it would have been just five years ago.

The aviation landscape is littered with failed companies whose pilots no doubt never expected their respective companies to turn turtle. Take Eastern Air Lines, a perfect example of gross mis-management and unbridled demands of unionised employees.

The lower cost airlines operating today represent the future. The flying public demands lower fares and this very basic fact will NOT change. A large revenue shortfall requires economies of scale, which includes reduced salaries from all, like it or not...and most certainly will not.

Take your pick, lower pay or no pay. The choice is yours.
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Old 17th Aug 2002, 15:19
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If the pay drops drastically, the job will not attract the best of the pilots looking for a good job.

Then there will be an increase in accidents and incidents, and the public will hurt. Then they might understand, but probably not. The airline pilot job is becoming less attractive as the months go on, and it isn't all due to the events of 9-11.

Unbridled competition in the industry is not necessarily healthy.
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Old 17th Aug 2002, 15:21
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As I suggested elsewhere: Why not a variable pay ?

An acceptable base income - similar to what the low cost carriers may pay - and an oppertunity to earn a lot more, if the company makes a profit.

That would cause everybody to think twice before introducing new costs and not limit the pilots (and others) to a permanent low wage.

I have been on that scheme for 6-7 years at my IT company, lots of money in the good years, less in the bad.

Since the payments go down when profits do, we rarely fire people and then in much more limited fashion than the competitors.

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Old 17th Aug 2002, 16:48
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Here's another side of this situation to think about:

The pilots who get furloughed from AA have a ten year right of recall. (At least that's what one of the ex-TWA/AA guys told me last week when we were flying together).

This guy told me that he had applied to Polar, along with another colleague who was 17 numbers senior to him at AA.

He heard from an inside source that the reason they both didn't get hired was their AA seniority number.

That is also the reason they will never upgrade here at the company we work at now.

Why should a company put out good money in training costs for someone who will leave when they are recalled?

Both of these pilots are good guys, and excellent pilots, but it seems my company would rather invest in some of the younger guys who have been here longer, and will stay longer.

When UAL furloughs in Nov (and they will), along with the USAir pilots all ready out there (we have 2 of those guys here also) the streets are going to get more crowded.

As 411 says, no matter how bad your flying job is at the moment, it is a flying job. Do whatever you can to keep it, because there are lots of companies out there who are simply not hiring right now.

The days of thinking you can go fly night freight or commuters until your recall are over.

Even the old stand-by...C-402's to the islands are full up at this time.
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Old 17th Aug 2002, 16:55
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Glad you found an example so that we can examine the fundamental difference between the airline industry and other businesses.

Let's compare the cost of a computer and the cost of an airline seat. We are equating the individual computer with the individual airline seat.

The difference is that a computer has a low, and almost fixed, cost in materials. Once the design work is completed and the production facilities are on line the cost of producing an individual computer is very predictable and falls dramatically. The variable costs of computers are amortised over hundreds of thousands of units over a relatively long period of time. To look at things simplistically, after a certain break-even point in the production run almost every machine sold is pure profit. You can afford to sell machines later in the production run at reduced rates because you have recouped your expenses. However, compare the price differential between a computer which is new on the market, with new features, with a computer that has been around for a while. You will see that, although some computers are indeed cheap you still pay a premium price for the top of the line, new items. Although computers may be cheap, on an average, an individual computer can still be an expensive item.

This situation has a parallel in the airline industry but with a difference. Whereas each computer produced is an inherently low cost item after the break even point is reached each individual airline seat is still a high cost item. That is why break even load factors are so high. Once the machinery is in place a computer plant can make an extra thousand units purely for the cost of materials but every airline ticket sold generates extra cost in terms of services and material required, baggage handlers, food service, fuel etc. Computer production cost are amortised over hundreds of thousands of units , airline seat costs are amortised over a few hunderd at most. It is as though you have to start a new computer production line for each flight. Each flight generates its own costs which must be amortised over the number of tickets sold. The benefits of volume are not as great in the airline industry as they are in the computer industry,

Certain costs of reaching the break even point for a flight are variable items ie they reduce as the number of tickets sold increase. However, a very large portion of the expense items do not show a dramatic fall off with volume (the number of tickets sold). For example the amount of fuel used on a flight is relatively constant because the bulk of the fuel used lifts the zero fuel weight of the aircraft rather than the passengers. There are advantages to scale and volume but they are not as marked as in the example of the computer industry. Unfortunately, the high cost items, ie fuel, represent a very large proportion of the production costs and their price is very volatile. The airline industry also suffers from unique variables such as weather and 9/11. If your production line breaks and ruins a hundred computers the computer maker has lost very little in expenses. If one hundred airline flights are diverted because of weather the financial cost and disruption are enormous because each individual flight is a high cost item.

The computer industry is still a developing technology where new designs and production techniques are being introduced which allow each new wave of products to be technologically improved whilst lowering production costs. Aviation, under the present financial model, is a mature (overmature?) industry where new techniques produce relatively minor cost reductions.

A more educated model of cost control is required in the airline industry but it must be coupled with a more intelligent pricing structure which ensures that seats are not sold for less than they cost to produce. The computer industry discounts its products after their useful production life has been completed and it has new products on offer. The airline industry discounts the very products it is currently selling and that it needs to sell a a fair price to survive. The airline industry, and the airline passenger, must get used to the idea that airline ticket pricing is a dynamic activity if ticket prices are to be kept low. One day it is going to cost you $50 to go see Grandma, the next day it might cost you $150.
Old 17th Aug 2002, 17:23
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The airline industry discounts the very products it is currently selling
The reason that the airlines discount current products is that once the aircraft has left the ground any empty seat is just excess weight.

For airlines (and any other business) to succeed they must keep there costs under control - the majors have failed to do this and are now in trouble - the Low Cost carriers have their costs under control and are booming - its not rocket science.

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Old 17th Aug 2002, 18:07
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I'm afraid you are oversimplifying the production costs of computers.
Much of the cost of computers lies in the massive R&D expenditures - in 2000, Intel spent $2.3 Billion and had 20,500 scientists doing pure research for the next Pentium/Itanium whatever. Once somebody builds a factory - its not as simple as churning new designs through it. Entire manufacturing facilities have to be rebuilt when new technologies are introduced.

The reason computers are cheap is because: sophisticated (and expensive) design & manufacturing, enable and benefit from economies of scale.

Also, most US pax are aware that one day it costs $300 to go JFK-SFO, and the next is $415, and if they don't stay over Sat nite its $2400. Dynamic pricing is certainly not a secret - try Expedia, or even the airline sites for their "every day leisure fares"!
In fact - its because business travelers know how the pricing works, and are disgusted enough - that the airlines are suddenly finding that they don't have full Y pax anymore.

Instead of paying $2400 for a 2-day business trip, companies are encouraging their employees to book a Sat stay -> get a $400 ticket on the same flights/same seats, the company picks up an extra night or two of hotel, and the employee gets a weekend on the company. (the company is better off by at least $1800, and the airline got screwed)

In my opinion, airline mgmt have spent too much time and effort concentrating purely on the revenue side (eg complex yield mgmt techniques) without being able to/or wanting to make the operations more efficient.

Last edited by InitRef; 17th Aug 2002 at 18:26.
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Old 17th Aug 2002, 18:59
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JetII. Far too simplistic. The low cost carriers have their costs under control for two main reasons.

In the case of established low cost carriers such as Southwest their management has been smart enough to grow the company in a low cost environment with specific "low cost" business plans. This includes such items as having only one aircraft type in the fleet and operating in an air traffic and weather environment which allows reliable service. Both items cut business costs significantly. The question is whether Southwest can, or wishes to, make the transition to a full major, implying nationwide and international operations with several aircraft types. The temptation must be there but I am sure Southwest management clearly sees the problems involved. This company has made attempts to break in to established "major" markets and has felt the pain. Not to say they could not succeed in the future. The point is that they are successful as a low cost carrier because of a specific business plan which may not work during expansion.

The other type of low cost carrier is the startup or the fairly new carrier. These carriers have a cost advantage over the majors but unless they are very careful it is only a temporary advantage. Mainly, they have a cost advantage because:
1. They start service with older aircraft or aircraft that some owner or lease company is prepared to supply at very low cost.
2. They have a young, new and unsophisticated workforce. This workforce is cheap because of low pay and low benefits. The workforce is willing and enthusiastic. All very excellent attributes.
3. They make their entry into a specific market where they are not in serious direct competition with a major.

Unfortunately, these advantages fade away over time. Expansion leads to new aircraft orders and increased finance costs. The workforce ages and thinks of families and mortgages. The company is forced to increase pay and benefits or lose experienced workers. Expansion leads to entry into less than optimum markets, competition with majors, worse operating conditions, less local support etc. At this stage you are left with something approaching the cost structure of a major airline with none of the benefits of scale or route system. You are left with People's Express, Vanguard and all the other bright hopes of the industry.

The point is that the relatively low cost structures you see are, in fact, adaptions to particular business plans and market segments. When the low cost airline becomes "major" the playing field becomes more levelled. This is exactly why we now see the major airlines floundering trying to find a new way of doing business and trying to beat the opposition. The costs of doing business for the major airlines are almost constants. They pay about the same for fuel, they pay about the same for labour, they pay about the same in airport fees etc. These costs are about the same for the majors because to a great extent they are forced upon the airlines by external events over which they have no control. Wars, fuel shortages, cost of living increases weather. When the low cost airline moves into the "major" arena it is inevitable over a period of time that it will have to face some of these operating cost increases. For example, do you think fuel suppliers at, say Chicago, are going to sell fuel more cheaply to a low cost carrier that operates ten flights a day rather than a major that flys several hundred?

The low cost carriers are not, in fact, a long term benefit to the aviation industry or to the passenger. The immediate effect of a low cost carrier is short term ticket price reductions. The long term effect is a lowering of the average quality of airline service. Will a passenger who wants to buy a First Class ticket be able to do so in the future? Probably not the way the trend is moving. Can a passenger expect a meal on a flight to replace the one he missed because of his business meeting? Probably not. And we must not lose sight of the fact when all the blood has been spilt, all the mess has been sorted out. THE FINAL ACT OF THE SURVIVING CARRIER WILL BE TO RAISE TICKET PRICES. See you sucker!!!!!

InitRef. No way we can post messages on the boards without some simplification. Sorry.

I know development cost of computers are very high. The point is that the computer makers have a disproportionately large advantage due to volume. Each computer contains a few dollars worth of plastic, copper, fibreglass and silicon. Its intrinsic value is less than a steak. What makes it expensive is what it takes to build those basics into a functioning computer. You have a very large one time RD cost and plant cost. (Simplified I know). After that the computer costs you basically the cost of its materials to produce. In contrast, each airline seat costs an element of the organisational costs (equivilent to the computer R&D) plus a large individual overhead. These costs are ongoing and never amortised, a painful fact about a service intense industry. These costs tend to be horribly unpredictable in the long term unlike computer production costs.

Whilst it is true that an empty airline seat is income lost forever this is where the generally held view is too simplistic. Let us assume we really know the costs of filling an aircraft seat and that we can view our costs as units. Say we have 100 passengers and their bags need exactly 4 baggage loaders to handle. We add 4 more passengers to the aircraft to fill those empty seats. But, Lo and behold, we now need another baggage handler for a total of 5 to get the aircraft out of town on time. Question, Did the extra income raised by filling those 4 extra seats at a discount price, as conventional wisdom requires, justify the cost of the extra baggage handler? Of course not. On the other hand if the airline had not added an extra baggage handler and the flight had been delayed and bags had been lost would the savings have been worthwhile in terms of PR in a service industry. Not easy is it? I would venture to guess that airline cost control is far more complex than computer production line cost control and it is more of an art than a science. I know this is a simple example, deliberately so, but I hope it demonstrates that the "cost cutting" approach, although valid, must be implemented with care.

By the way, how much do the 20,000 engineers working at Intel get paid per year? Bet on average it is more than the 20,000 best paid airline pilot including stock options etc. Perhaps Intel should cut its employee costs so that my cheap computer will get even cheaper. Same argument.
Old 18th Aug 2002, 12:56
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Very informative post but forgive me for playing the devil's advocate :

How do you make the difference between a lousy and a good airline pilot ??? Stop right here !! I know........the plane doesn't crash. Oversimplification though.
What does a 300 000 USD 777 Captain bring to UAL compared with ( haven't got a clue ) a Virgin Atlantic very young 744 Captain ( heard they hed a guy promoted at age 35 some time ago ) ? That's the question a lot of uninformed people, generically called " travelling public " regularly ask under the pen of well meaning / informed journalists.
This is the crunch question coz let me tell you that for all the years I flew the 744 as an F/O I saw quite a bewildering number of guys who were just " filling" the seat and nothing more. I was sitting there trying to keep my mouth shut and had I not been an animal lover my poor dog would have suffered a lot when back from a trip !!. None of the guys I'm refering to brought anything that another Johnie wouldn't have brought. At least they were not causing any damage and that's good coz I was also sitting there. Yet, they were what has been described above as valuable experienced .......bla bla bla.
There may a lot of people out there who like/love their job, but entousiasm like the one that has been reported in start up or aging start up airlines??? Certainly not and it shows when you are a pax. Put a enthousastic fellow at the wheel and it comes all the way down to door 5.
To all of you ready to shoot me from the hip, please do reholster.
I am not an expert able to bable on the future of low cost high quality airlines and what our future will be not that I don't care trust me on that one !
None of what has been said regarding salaries has kept major airlines from losing aircrafts in the last 2 years and sometimes under shocking circumstances that make us all feel rather sheepy.
So much for airline safety / salaries and that sucks !
To conclude, I have also been flying with guys I shall never forget because they were everything one expects from an airline pilot and I think they deserved a fat raise that they never got because too busy to ask.
We need to change our rethoric, or rather match or rethoric with our actions if we want to keep what certain ignorants describe as " fat " checks which we, by the way, deserve.

One can say everthing one wants about the crisis looming before Sept 11th, this is horse donk. What happened that day changed the way people live ( at least in the US ) if not for ever but for a long long time and I am convinced we would never be facing big cuts like what is happening to AA under different circumstances.
The profession is not attracting as many people as it did ? No s..t ? Who needs to have the finger pointed at everytime business is not shiny ? The prospect of being bolted behind a cockpit door with all sorts of ridiculous coded knocks on the door to take a pee, eat, God knows what doesn't make it look very appealing. Having to pack your bags to work at Office depot once the tune of musical chairs has stopped while the college tuition comes in isn't what what one would be hoping for and the list goes on.
Good luck guys.

By the way 411 A, I'm not on your side and get nicked !

Last edited by wallabie; 18th Aug 2002 at 13:11.
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Old 18th Aug 2002, 16:54
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The current stance that major US airline pilot salaries are inflated and that the upstart carriers and regional pilots salaries are the "market" rate is flawed.

The low salaries that pilots for upstart/regional carriers are willing to work for is actually a "subsidy" paid for by these pilots in the short term.

In the majority of the cases, pilots for upstarts are willing to work for far less than what would be a real "market" rate in the hopes that their carrier becomes another Southwest, Delta or AA. They know a fast upgrade may be in store for an immediate raise, and another raise once the carrier achieves and economy of scale to be very successful. Southwest union members are pressing for big raises at this time. UPS is another example. In 1990 top CA pay was 80k and top FO pay was 40K with no retirement. I believe they are near the best now. I not sure of the exact amount, but UPS large truck drivers make more than any regional 70 seat Captain in the US.

The regional pilots when starting generally have hopes of making it to the top paying jobs also. Not all, but the majority. By the time they get stuck in several downturns, those who haven't left over many years are outnumbered by the new hires willing to (subsidize) work for less for the same dream. This depresses the wages for the long term guys.

What is the real "market" rate? I don't know, but it isn't what the wannabee airline economists here claim to know. If they are right, why did Continental Airlines go into bankrupcty twice in the 1980's with the lowest labor costs in the industry?
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Old 18th Aug 2002, 18:27
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Continental. Interesting subject.
Many will tell you that Frank Lorenzo "done 'em in". The real reason is that Contineltal at the time was the weakest trunk carrier, and simply could not compete with UAL at DEN and ORD.
UAL could set the fares low enough (much like AA vs Braniff at DFW), and afford to operate at a loss for as long as it took.
Continental went downhill very rapidly after loosing Robert Six.
Now we are looking at a complete turnabout...Continental doing so-so and UAL against the wall.
Serves 'em right. What goes around, comes 'around.

Market rate, also an interesting subject.
Lets face facts. Some folks just like to fly aeroplanes, and pilots just starting out will work for less simply because they enjoy the work, not just because they want to move on to the majors and higher salaries.
Of course they want more cash (and larger, faster equipment), but as long as that supply is there, salaries at the regionals will NOT move all that much higher. And the supply will NOT diminish anytime soon, inspite of what some may wish.
One could just as easily argue that it is the major airline salaries that are "out of line".

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Old 18th Aug 2002, 18:46
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Please keep in mind that the ONLY cost advantage held by RJ's is in the cockpit. The non-crew-related CASM for an RJ is the same as a 757.

DAL is already farming out RJ flying to Chautauqua because Comair's crew costs went up and they need lower costs in the low-yield Florida market.

Pilots at JetBlue will fly for $80/hr. for how long? Will they take stock instead of cash?

The big majors were busy pissing away cash over the past few years because they had so much coming in. They have to change the way they are doing things. But simply slashing employee compensation isn't the answer.

Why is the UAL Captain worth $300k/year? Look at it as payback
for babysitting his captains while he was an F/E and F/O making $40k. And, even if you hire cheaper crews, they will eventually demand increased compensation as the operation expands and prospers. Profit sharing is tenuous due to a company's ability to hide cash. We've seen how valuable stock can be--NOT!

The CEO's now have to earn their keep. Pilots do it daily.TC
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Old 18th Aug 2002, 19:02
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Babysitting Captains? Oh come now! You could just as easily argue that they are entitled simply because they have to "put up" with the mis-guided opinions of the more JUNIOR crew

Costs for an RJ the same as for a 757, except for salaries? Hmmm, don't think so. If you put that 757 in the regional system, the cost would be lower simply because the regional airline costs are lower, exclusive of salaries. 'Course it might cost the regional a bit more for fuel and financing costs, but if they could FILL that 757, would be operated a whole lot cheaper.
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Old 18th Aug 2002, 19:29
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Please keep in mind that the ONLY cost advantage held by RJ's is in the cockpit. The non-crew-related CASM for an RJ is the same as a 757.
Yes, but the difference is that you only have to fill 50 seats on an RJ vs ??? on the 757. If a CRJ takes off on an hour long trip and has only 15 pax, you lose out based on 2200lbs of fuel burned. How do you make out on the 757 (and don't say that they don't fly with this many people on them because they do--i.e. Sept 11).
More importantly though, look at what the RJ's are replacing across the system. Old generation 737's, DC9's (and their variants), F100's, etc. Those things can't compare in the CASM analysis to an RJ or a 757, and that's why they are going.

Somebody suggested that you don't gain much by replacing an 87 seat F100 with a CRJ 700. Let's see. An average 60% load on an F100 would be 52 (ish) pax. Those same 52 on the RJ makes a load of 74% on a CRJ700 and 100% (if you boot off the couple of w@nkers that were flying for free on airmiles or passes) on a 200 series. If there's always 60 or 70 on board one of these routes, then the F100 or 737-200 may be just the ticket, but if not, the airlines must, in this day and age put on an aircraft that fits the route exactly. What is the alternative with requirement to still make a profit? One long haul in a turboprop (or more likely two, due to a changeover at a hub).

Now I know many have their panties in a bunch over what the RJ guys make, vs the mainline folks. Right now Comair is in the black if 16 people get on any one of their flights (this was the last number I got--correct me if I'm wrong). So, show some solidarity with them and get their wages up. Even if the costs at the pointy end go up to more reasonable rates, they still have a good profit. OR....Maybe the mainline folks should be pushing for more RJ flying for themselves instead!

Just a thought......
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Old 18th Aug 2002, 19:40
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Pleased to see some sensible consideration about what a realistic pilot pay scale should be. Unfortunately, the fact is that pilot salaries are ONLY, SOLELY, PURELY, ABSOLUTELY what a pilot or group of pilots can induce their employer to pay.

Here is some background information on the subject of pilot pay checks for our non-pilot members. It is important because it answers the question of, How did pilot salaries get so high in the first place?

This rate of pay is basically determined by supply and demand. The airlines are required by certification and federal regulation to put a certain size pilot crew on an aircraft. This crew must meet certain (very minimal) experience requirements (even the ATP is a joke but it is all we have as a base standard). The airline wants to pay the pilots as little as possible (quite sensibly). However, other factors usually prevent the airline from using minimally qualified pilot crew members.

Assuming there are plenty of pilots available the airlines then choose pilot employees considering several requirements. This is what complicates the process. If an airline trains its own pilots it needs to make sure its applicants can pass training otherwise it wastes a lot of money on training failures. The company may have minimum experience levels agreed with its insurance carrier. Most companies want people with stable personalities because they realise work conflicts can be dangerous or counter productive. Several more selection criteria can be added to this list. You will recognise them as the basic items covered during airline pilot selection. Other corporate planning factors also may enter into the considerations. The applicants age may be a factor because it will be reflected in the number of pilots retiring in a certain year and the company wants to smooth out this curve.

Importantly, these selection procedures are not common to all airlines. For example, a start up airline may not be interested in training its own pilots. It will insist on previous experience on its aircraft type for applicants. Some airlines insist on a type rating on its aircraft as proof of dedication and basic operating ability.

The situation varies almost directly with the size of the airline. A small carrier or an attractive carrier can probably find a number of pilots willing to get type ratings before applying for a job. A large carrier, in an expansion mode, will not be able to find enough type rated applicants so it must accept non-rated pilots and train them itself.

The supply of pilots varies over time. It depends on the basic cost of civilian pilot training (ie can I afford the cost of qualifying as a pilot which must, of course, take the future benefits into account). It depends on military demand, retention policies and retirements (the old question. Do I join the airforce to get pilot training or pay for it myself?). It also depends on the movement of previously employed commercial pilots into to and out of of the labour pool because of furloughs and airline failures and cut-backs.

Here is where the fun really starts. Firstly, the supply side. The supply side basically always lags behind the demand side, both on the up slope and the down slope. Airline pilot training takes time. Usually several years from commencing training to a producing a usable pilot with a few thousand hours flight time, some jet or t'prop time on multi-engined aircraft. What DOES happen is that the potential pilot who had always tended towards a pilot career sees the airline industry in one of its expansion modes. Supply is bad for the airlines and the pay checks are really getting up there. He decides to become a pilot. If he is very lucky, three or four or more years later, after suffering and working for peanuts, he finally gets that junior co-pilot position. Now the airline industry hits a bump, fuel price increase, Gulf War, Sept11th, whatever. He gets furloughed. DOES THIS SOUND FAMILIAR. Now the airlines see big supply and small demand. Guess what happens in the next round of contracts negotiations (or in the next bankruptcy threat). Pilot pay dives. Under these conditions nobody but the most dedicated (or perhaps most stupid) train as pilots. Now the demand side kicks in. Three years down the road things get better for the airlines, they recall their furloughees. Three more years down the road they need new hires because of retirements. Viola! a pilot shortage. Pilot pay goes up again. DOES THIS SOUND FAMILIAR.

Now, how does this tie in with what a pilot really gets paid. If the situation was totally laissez-faire each individual pilot would negotiate his own pay rate, say bi-annually, with his employer. This is what happened in the early days of aviation. Unfortunately, it became rapidly apparent that there were severe problems with this approach. Business owners have not changed over the years. Many early aviation managers could force pilots to perform dangerous duty under the threat of reprisal by pay check or firing. In a nutshell this safety problem led to the formation of pilot unions and government regulation. Of course, as soon as pilots were organised and protected as a group the group became the instrument for negotiating pay rates. In the "earlier" days of aviation this was a relatively minor factor. The airline industry was regulated, airlines were virtually guaranteed a profit and so they had no incentive to severely limit pilot pay checks. Around the time the pilot unions were formed the "seniority system" came into being which, although generally agreed to be imperfect, has been accepted over the years as the norm for the industry. Under this system, the senior pilots get the choice of which aircraft they fly with the size of the pay checks being proportional to the size of the aircraft. Note that the size of the paycheck being tied to the size of the aircraft has nothing to do with safety or responsibility. The argument is that flying the larger aircraft is more productive for the company and is hence worth more pay. For example, two pilots flying a 200 seat aircraft are more productive than two pilots flying a 100 seat aircraft for the same time and hence deserve more pay. No safety , responsibility or skill considerations, just productivity for the company.

The introduction of union contracts and the regulation of aviation distorted the "free market" concept of pay rates in the airline industry but it did confer certain benefits (here I must acknowledge exceptions which intrude in any large system). The first benefit was safety. Airlines, being guaranteed a profit, were under no restraint on spending for excellent pilot training and aircraft maintenance. Pilot status led to the conditions for the safety of flight being left with the crew rather than the company. Because of regulation the aviation industry had a very stable if somewhat restricted operating environment (I remember seeing a group of excited pilots clustered around a company notice board. We had just been assigned a new route, Chicago to Grand Rapids!). All of this changed with deregulation.

Under deregulation the airlines were no longer protected. Cost controls became vitally important and the pressure was felt through employee pay checks.

OK, this is probably boring for most of you. I will continue to bore you later if that;s OK. I need a coffee break.
Old 18th Aug 2002, 20:05
  #40 (permalink)  
Join Date: Apr 2000
Location: FL, USA
Posts: 411
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Continental. Interesting subject.
Many will tell you that Frank Lorenzo "done 'em in". The real reason is that Contineltal at the time was the weakest trunk carrier, and simply could not compete with UAL at DEN and ORD. ......411A

411A, would be nice if you knew what you were talking about.

I referred to the Continental of Lorenzo. somehow you drag in the Bob Six, pre-deregulation, bankruptcy for whatever reason Continental.

The Continental I referred to was your "wet dream", of a major airline, the one combining Texas Air in Houston, Peoples Express in EWR and a Cleveland hub.the airline with rock bottom labor costs, no pilot union, FAR work rules, ect. They only came back when a good manager raised salaries and provided leadership.(something out of your comprehension given you posts on being a "Captain") Their pay is very close to mine at AA now.

The major pilot salaries are a big factor on the demand. If your wish of airline Captains making 75K while living in expensive metro areas like NY, LA, ORD, BOS, or MIA comes true, I'm moving into a cave.

411A, In AZ a firefighter can make 100k in his 9 year on the job. A UPS truck driver is up in salary too. It is a supply and demand issue. The supply will react in a delayed manner if you got your wish. The major airline pilot job is still living off its long gone reputation of the 1960's and 1970's (remember when you couldn't get hired?). Throw in a 75K top pay, then watch the airlines cry about turnover costs and wage pressures not to mention hangar and taxi "rash" costs.


As a side note, during the negotiations of the last AA pilots contract (1997), we offered to fly the regional jets at AA at a pay level and workrules competitive with the regional industry, without any current limitations, and with a clause limiting future pay raises.

AA management said GFY's.

They instead ordered a fleet 44 seater EMB's instead of 50 seaters, (no limitation in numbers under our contract), an airplane which had to be certified for AA alone, no doubt for the same price or more than the 50 seater. It also has to have limited resale value for accounting purposes. They chose to fly with 6 less seats of revenue for the same aquisition costs when any increase of AA crewed 50 seater costs would have been less than the loss of revenue from those seats.

Shall we go into the artificial price of the RJ jets? Airplanes that could not have been developed without goverment subsidies shouldering the intial R&D. Spare me the free market crap. That talk is almost as ridiculous as my fellow americans claiming the "free market" cost of crude oil to the US is only $20-25 a barrell. (that is the price after subtracting the costs of 12 aircraft carriers, 1,000,000 soldiers, and 250 F15's to babysit the ME.)

Since when has any airline been interested in a free market?

Last edited by PPRuNe Towers; 18th Aug 2002 at 22:52.
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