Unfortunately theory doesn’t always translate into reality; as a result we are seeing a meltdown of the industry. Aviation infrastructure is expensive and unless fares match the cost of maintaining or renewing the infrastructure, eventually the whole infrastructure system will become unsafe and eventually fail.
Meanwhile the entrepreneurs behind the LCC’s will sail off into the sunset rich and happy with themselves leaving aviation in tatters.
Jetsgo to launch sale with seats for $20.05
Moderators: sky's the limit, sepia, Sulako, lilfssister, North Shore, I WAS Birddog
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Swamp Donkey
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Workers Suffer As Air Carriers Cut Costs
ALEXANDRIA, Va. - Airline workers' woes are piling up as carriers
By MATTHEW BARAKAT
The Associated
ALEXANDRIA, Va. - Airline workers' woes are piling up as carriers seek to cut costs amid higher fuel prices and a new round of price competition.
Machinists at US Airways, the nation's seventh-largest carrier, were facing pay cuts of up to 35 percent and the loss of thousands of union jobs after a bankruptcy judge on Thursday - for the first time in U.S. airline industry history - unilaterally terminated a union collective bargaining agreement.
Fifth-ranked Continental Airlines also said in a regulatory filing Thursday that it needs $500 million in wage and benefit reductions by Feb. 28 or it will face a liquidity crisis. And while pilots at No. 2 United Airlines ratified a new cost-cutting contract, the carrier's push to lop $725 million off annual labor costs by mid-January is heading to a court showdown Friday unless other unions approve new contracts.
US Airways, Continental, United and other so-called legacy carriers are struggling to cope with a combination of higher fuel costs, relentless price competition typified by Wednesday's announcement by Delta Airlines Inc. of a new lower-fare structure, and the growth of low-cost carriers like JetBlue and Southwest.
The Air Transport Association estimates, based on Department of Transportation data, that all U.S. carriers spent an additional $6 billion for jet fuel in 2004, an almost 40 percent increase.
Pressuring workers for concessions is about the only way to save large chunks of money in an industry where many of the costs, like aircraft leases, fuel and landing fees are essentially fixed, with little room to haggle. In US Airways' case, it is in the midst of seeking a third round of concessions from its unions in less than three years.
The industry also faces fundamental problems of excess capacity and too many hubs, meaning "it's not clear whether all these cuts are going to be enough" to keep ailing firms afloat, according to Bill Swelbar, president of Eclat Consulting, an aviation consulting firm in Reston, Va.
At bankrupt US Airways Group Inc., based in Arlington, Va., airline management had warned that it would likely have to liquidate beginning next week if did not receive roughly $800 million in annual cost cuts from its labor unions. Every union but one, the International Association of Machinists, had ratified new contracts.
U.S. Bankruptcy Judge Stephen Mitchell on Thursday abrogated IAM's collective bargaining agreements with the airline, freeing US Airways to impose pay cuts ranging from 6 to 35 percent. The ruling also will likely lead to the elimination of thousands of jobs as the airline outsources heavy maintenance on certain jets and other jobs like the cleaning of aircraft cabins.
Mitchell said he had to decide "which is worse - that half of the mechanics lose their jobs or all of the mechanics lose their jobs? ... The ultimate question is whether there are going to be any jobs left at the end of the day."
The union will still vote on management's final offer, which seeks the same dollar level of concessions but tweaks the pay cuts and work rule changes. If the union accepts the offer when voting concludes Jan. 21, the judge's action canceling the contract would be nullified.
The judge also terminated three pension plans for US Airways workers and retirees that would have cost the airline nearly $1 billion through 2009 if they remained in effect. Mitchell called the pension obligations a "financial albatross" that would make it impossible for US Airways to attract the investment necessary fo it to emerge from bankruptcy.
The airline has said most retirees will receive the same level of benfits from the federal Pension Benefit Guaranty Corp., which will take over the funds. But that did little to mollify dozens of retirees who attended Thursday's hearing and shouted at CEO Bruce Lakefield as he left the courthouse.
At Houton-based Continental Airlines Inc., Thursday's announcement seemed likely to put more pressure on pilots, flight attendants and mechanics. The airline said in November that it needed the savings, but as of Dec. 16, it had obtained only $70 million of the $500 million.
"This is a little bit of a prod to the unions, but I don't think Continental is trying to embarrass them," said Anthony Sabino, an associate business professor at St. John's University and a lawyer who represented Continental aircraft lessors in the 1990s. "They're sending the message, 'No kidding. We're really in trouble.'"
Ar United, a unit of Elk Grove Township, Ill.-based UAL Corp., the pilots' deal was approved by 77 percent of those who voted.
An attorney for the Air Line Pilots Association told Bankruptcy Judge Eugene Wedoff at a hearing in Chicago on Thursday that pilots are not happy about absorbing $3 billion in concessions, but believed the cuts were critical for the company's survival.
Earlier Thursday, Wedoff approved an emergency motion United filed Wednesday seeking to temporarily cut wages by 11.5 percent for baggage handlers, ramp workers and public-contact workers represented by the machinists union.
---
AP Writers Brad Foss in Washington, David Koenig in Dallas and Nathaniel Hernandez in Chicago contributed to this report.
January 6, 2005 6:50 PM
©2005 Copyright Calkins Media, Inc. All rights reserved.
ALEXANDRIA, Va. - Airline workers' woes are piling up as carriers
By MATTHEW BARAKAT
The Associated
ALEXANDRIA, Va. - Airline workers' woes are piling up as carriers seek to cut costs amid higher fuel prices and a new round of price competition.
Machinists at US Airways, the nation's seventh-largest carrier, were facing pay cuts of up to 35 percent and the loss of thousands of union jobs after a bankruptcy judge on Thursday - for the first time in U.S. airline industry history - unilaterally terminated a union collective bargaining agreement.
Fifth-ranked Continental Airlines also said in a regulatory filing Thursday that it needs $500 million in wage and benefit reductions by Feb. 28 or it will face a liquidity crisis. And while pilots at No. 2 United Airlines ratified a new cost-cutting contract, the carrier's push to lop $725 million off annual labor costs by mid-January is heading to a court showdown Friday unless other unions approve new contracts.
US Airways, Continental, United and other so-called legacy carriers are struggling to cope with a combination of higher fuel costs, relentless price competition typified by Wednesday's announcement by Delta Airlines Inc. of a new lower-fare structure, and the growth of low-cost carriers like JetBlue and Southwest.
The Air Transport Association estimates, based on Department of Transportation data, that all U.S. carriers spent an additional $6 billion for jet fuel in 2004, an almost 40 percent increase.
Pressuring workers for concessions is about the only way to save large chunks of money in an industry where many of the costs, like aircraft leases, fuel and landing fees are essentially fixed, with little room to haggle. In US Airways' case, it is in the midst of seeking a third round of concessions from its unions in less than three years.
The industry also faces fundamental problems of excess capacity and too many hubs, meaning "it's not clear whether all these cuts are going to be enough" to keep ailing firms afloat, according to Bill Swelbar, president of Eclat Consulting, an aviation consulting firm in Reston, Va.
At bankrupt US Airways Group Inc., based in Arlington, Va., airline management had warned that it would likely have to liquidate beginning next week if did not receive roughly $800 million in annual cost cuts from its labor unions. Every union but one, the International Association of Machinists, had ratified new contracts.
U.S. Bankruptcy Judge Stephen Mitchell on Thursday abrogated IAM's collective bargaining agreements with the airline, freeing US Airways to impose pay cuts ranging from 6 to 35 percent. The ruling also will likely lead to the elimination of thousands of jobs as the airline outsources heavy maintenance on certain jets and other jobs like the cleaning of aircraft cabins.
Mitchell said he had to decide "which is worse - that half of the mechanics lose their jobs or all of the mechanics lose their jobs? ... The ultimate question is whether there are going to be any jobs left at the end of the day."
The union will still vote on management's final offer, which seeks the same dollar level of concessions but tweaks the pay cuts and work rule changes. If the union accepts the offer when voting concludes Jan. 21, the judge's action canceling the contract would be nullified.
The judge also terminated three pension plans for US Airways workers and retirees that would have cost the airline nearly $1 billion through 2009 if they remained in effect. Mitchell called the pension obligations a "financial albatross" that would make it impossible for US Airways to attract the investment necessary fo it to emerge from bankruptcy.
The airline has said most retirees will receive the same level of benfits from the federal Pension Benefit Guaranty Corp., which will take over the funds. But that did little to mollify dozens of retirees who attended Thursday's hearing and shouted at CEO Bruce Lakefield as he left the courthouse.
At Houton-based Continental Airlines Inc., Thursday's announcement seemed likely to put more pressure on pilots, flight attendants and mechanics. The airline said in November that it needed the savings, but as of Dec. 16, it had obtained only $70 million of the $500 million.
"This is a little bit of a prod to the unions, but I don't think Continental is trying to embarrass them," said Anthony Sabino, an associate business professor at St. John's University and a lawyer who represented Continental aircraft lessors in the 1990s. "They're sending the message, 'No kidding. We're really in trouble.'"
Ar United, a unit of Elk Grove Township, Ill.-based UAL Corp., the pilots' deal was approved by 77 percent of those who voted.
An attorney for the Air Line Pilots Association told Bankruptcy Judge Eugene Wedoff at a hearing in Chicago on Thursday that pilots are not happy about absorbing $3 billion in concessions, but believed the cuts were critical for the company's survival.
Earlier Thursday, Wedoff approved an emergency motion United filed Wednesday seeking to temporarily cut wages by 11.5 percent for baggage handlers, ramp workers and public-contact workers represented by the machinists union.
---
AP Writers Brad Foss in Washington, David Koenig in Dallas and Nathaniel Hernandez in Chicago contributed to this report.
January 6, 2005 6:50 PM
©2005 Copyright Calkins Media, Inc. All rights reserved.
This is exactly why the aviation industry is going on a spirral to the floor for all employees, especially pilots. Almost every single airline is in a race to receive as many customers as possible in order to kill the competition by reducing fares as much as possible. This means paying your employees small potatoes and makeing them pay for their trainning and uniforms. This is a sick industry in serious need of help.
Flippers at McDonalds will make more money then pilots one day, all because pilots will do anything to fly "the big Jet".
I say we boycott all airlines who are killing the industry by means of expoliting pilots who would die to fly these planes.
Its not even becoming professional anymore with all these delays and customer complaints about poor service.
Lets revive it, does anyone have any serious suggestions?
Flippers at McDonalds will make more money then pilots one day, all because pilots will do anything to fly "the big Jet".
I say we boycott all airlines who are killing the industry by means of expoliting pilots who would die to fly these planes.
Its not even becoming professional anymore with all these delays and customer complaints about poor service.
Lets revive it, does anyone have any serious suggestions?
Your One Darn Good Pilot
Low cost carriers are the culprit; Sub-standard pay and high productivity. Can you say exploitation?
Of course pilots are to blame too: 'Dime a dozen...
Of course pilots are to blame too: 'Dime a dozen...
U.S. airlines seek routes to improve productivity, not just cut pay
Brad Foss
Canadian Press
Thursday, January 06, 2005
WASHINGTON (AP) - To fix bloated costs, the financially ailing airline industry took a familiar course in recent years: slash wages and benefits.
Now, with the limitations of that approach apparent as large carriers continue to lose money, experts say the cure lies in operational improvements that enhance productivity.
Consider Southwest Airlines Co. Its pilots, flight attendants and mechanics are among the highest-paid in the industry, yet the Dallas-based company delivers steady profits while many competitors that spend less on labour consistently lose money.
"Our low costs aren't achieved by paying lower wages," Southwest treasurer Tammy Romo explained. "The key to our low costs, really, is high productivity."
Meanwhile, ATA Holdings Corp. and America West Holdings Corp., which have some of the cheapest labour in the industry, lost money in the third quarter, observes John Donnelly, vice-president of Eclat Consulting.
"It's not just the wage that matters," Donnelly said.
To boost efficiency, carriers need to increase the number of hours their aircraft spend aloft; expand workers' responsibilities to ease the flow of passengers, baggage and planes; and outsource more maintenance work.
One obstacle for airline executives has been getting unions to accept changes to work rules and procedures.
"Taking down some of these walls is challenging, particularly in light of the fact that it is being accompanied in most cases with wage decreases," said Michael Allen, chief operating officer at Back Aviation Solutions.
"But if you increase productivity, you don't need to have wages come down as dramatically."
Analysts said airlines that seek to further shrink employee compensation run the risk of worsening morale.
This danger was highlighted over the Christmas holiday, when staffing problems at US Airways Group created a 10,000-bag pileup in Philadelphia. It was a public-relations disaster for the bankrupt carrier, which is pressing for new concessions from workers including baggage handlers, many of whom apparently called in sick for Christmas.
Similarly, flight attendants at bankrupt UAL Corp.'s United Airlines recently threatened strikes if the company imposes additional pay cuts.
The focus on labour costs remains intense.
On Thursday, United Airlines pilots ratified a new cost-cutting contract, while Continental Airlines said it needs $500 million in wage and benefits cuts to avoid a liquidity crisis.
US Airways, meanwhile, saved hundreds of millions of dollars by cancelling a collective agreement with its machinists union, but even the judge who approved the move said it would not guarantee the carrier's survival.
Airlines are increasingly attacking costs from another direction - designing more efficient operations for the rank-file to run.
Delta Air Lines is making major scheduling changes at its Atlanta hub to boost productivity; AMR Corp.'s American Airlines used that strategy in Dallas a couple of years ago. The objective is to spread arrivals and departures more evenly through the day, easing congestion.
American and Delta have also reduced the number of types of planes they use, reducing maintenance and training expenses. Southwest uses just one plane model.
Frontier Airlines pilots recently switched from a fixed monthly salary to an hourly pay system, a move the company expects will increase pilots' productivity by giving them the financial incentive to fly more. Southwest pilots are paid per trip.
United aims to exit unprofitable domestic routes and increase international service, where fare competition is less intense.
Despite these efforts, airlines have generally been too slow in overhauling route networks, schedules and procedures, said Robert W. Mann, an airline consultant based in Port Washington, N.Y.
"This all comes down to scheduling airplanes efficiently," said Mann. "If you can't do that, you can't schedule anything else efficiently."
Unions say there is still plenty of room for improvement.
"Cutting labour costs has been the path of first choice and last choice," said David Kameras, a spokesman for the Association of Flight Attendants.
"There has been a remarkable dearth of imagination among management."
Kameras complained of a misconception in corporate suites "that you've got to bust unions in order to succeed in this business."
Southwest is heavily unionized and has the U.S. industry's highest labour expenses as a percentage of total operating expenses, followed by Delta, Alaska, American and US Airways, according to Eclat Consulting.
However, Southwest is also one of the most efficient airlines in the industry, spending one-third less per available seat mile than US Airways.
Southwest's non-labour expenses, which include fuel, aircraft leases, maintenance, advertising and ticket distribution, are the second-lowest in the business.
Only JetBlue Airways has lower non-labour expenses and its advantage is skewed by the fact that it has newer equipment.
© The Canadian Press 2005
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Slick Fork
- Rank 1
- Posts: 22
- Joined: Tue Apr 27, 2004 11:04 am
Out of curiosity, I was wondering if anybody has seen any hard research on what the market in Canada will support in terms of national carriers. I'm asking because of this obsession all our major airlines have with putting the competition out of business.
I haven't been on an empty or even close to empty flight in years which would suggest to me that the routes (that I've been on at least) are doing ok in terms of traffic for their respective companies. If they are all getting the people they want, then obviously an increased market share isn't necessarily going to solve their problems. As there are only so many people you can put on the airplane (I hope!) My logic is if you can't make money on a route with 1 full airplane, what makes them think they're going to make money on a route with 1 and a half full airplanes? Yet they all continue to make the problem worse by offering ridiculously unprofitable rates and it just seems to spiral downwards.
I'm just wondering if they all spent more time figuring out how to price tickets so that they can MAKE money rather than trying to drive the other guy out of business things might just shape up. Sure, people will b!tch and moan about the cost of a ticket but at the end of the day I think the majority will still want/need to travel by air. I mean if McDonalds started offering five cent burgers every day of the week in an effort to drive burger king under, sure they might sell a lot of burgers but if every burger costs them 10 cents then their loss skyrockets with each Big Mac sold. It doesn't take a rocket scientist to figure out that they will be bankrupt long before they can ever enjoy a monopoly in the burger industry and if they manage to survive by some wierd fluke then the minute they bring the burger prices up to profit there will be mass demonstrations about corporate gouging because people got used to burgers for a nickel.
Just thought I'd throw that out for discussion, I may be way off the deep end, after all I'm a pilot not an economist but unless I'm missing something it seems sort of straight forward to me.
I haven't been on an empty or even close to empty flight in years which would suggest to me that the routes (that I've been on at least) are doing ok in terms of traffic for their respective companies. If they are all getting the people they want, then obviously an increased market share isn't necessarily going to solve their problems. As there are only so many people you can put on the airplane (I hope!) My logic is if you can't make money on a route with 1 full airplane, what makes them think they're going to make money on a route with 1 and a half full airplanes? Yet they all continue to make the problem worse by offering ridiculously unprofitable rates and it just seems to spiral downwards.
I'm just wondering if they all spent more time figuring out how to price tickets so that they can MAKE money rather than trying to drive the other guy out of business things might just shape up. Sure, people will b!tch and moan about the cost of a ticket but at the end of the day I think the majority will still want/need to travel by air. I mean if McDonalds started offering five cent burgers every day of the week in an effort to drive burger king under, sure they might sell a lot of burgers but if every burger costs them 10 cents then their loss skyrockets with each Big Mac sold. It doesn't take a rocket scientist to figure out that they will be bankrupt long before they can ever enjoy a monopoly in the burger industry and if they manage to survive by some wierd fluke then the minute they bring the burger prices up to profit there will be mass demonstrations about corporate gouging because people got used to burgers for a nickel.
Just thought I'd throw that out for discussion, I may be way off the deep end, after all I'm a pilot not an economist but unless I'm missing something it seems sort of straight forward to me.
