CaptainTeezy

Hey guys I just want to know what you all think about what caused the huge downturn this past 5-7 years in the Legacy airlines. Here are some factors I have heard and I want you to all comment on them and say true or false. Also, if you believe the airlines, or whoever, were at fault do you think they learned their lesson?

1. Pilots over-paid...like Delta's top 777 guys making 290k while American's top 777 guy made 190k a year. (I am not saying that they were grossly over-paid maybe just about 10-20k a year too much). *Not my opinion just something I have heard from a few pilots.

2. High Level Management extremely over-paid. Maybe like anywhere from 50-100k over paid.

3. This might relate to 1. and 2. , but did they expand too fast with out having a rainy day fund.

4. Gas Prices- Of course, but could they have all planned a little better?

5. 911

6. CRJ competing with them.

7. It really wasn't that bad.

Hey guys, like I said I don't know because I started flying at the end of this big down turn and I know historically the industry cycles, but I just want to know what could have been done differently in your opinions. Thanks!

Velocipede

1. Not really. You've got to understand where that pay rate came from. Essentially, UAL bribed its pilots to acquiesce to the proposed UAL-AAA merger that never happened. Then DAL pilots asked for UAL +1%. The managers were happy to give that rate to get a contract. They could have raised ticket prices $5 to $10 a segment and paid for it.

2. Same as #1. Raise ticket prices and neither of these are factors.

4/5. Gas/TSA charges after 911. Gas? Oh well, hedged airlines did well. TSA? Typical Republican mandate of a gov't program with no funding to go with it.

6. CRJ? Don't make me laugh. Read Mike Boyd's commentary on the CRJ at www.aviationplanning.com if you really want to understand the economics of the RJ.

Low & Slow

Focusing on compensation, labor or management, is a fool's errand. The reality is that the REVENUE wasn't adequate to keep up with the expenses. I think the real question was: Why was the revenue weak? That question has been answered again and again.

Ottopilot

The airline industry has always had it's ups and downs. No pun intended. Nothing is new.

saab2000

The biggest crisis facing the airlines IMHO is the staggering waste and operational inefficiency resulting from the so-called 'cost cutting' and subsequent exodus of qualified ground personel. A secondary problem is the overpayment of, and existence of, several layers of 'management' whose function is truly hard to define.

There is a reason that SWA makes money consistently even though they are the most heavily unionized carrier and has among the highest paid pilots in the industry. SWA has very little waste and very few non-productive employees.

End of story. If the other legacies would try to take a lesson in operational efficiency from SWA we would see a rapid turnaround in the whole game.

CaptainMark

forgetting about fuel hedges???????????????????????

saab2000

A big deal, no doubt, but not the whole story by a long shot. I spent years working in ground ops before I started flying and what I see nowadays makes my skin crawl. There are HUGE savings to be had in ground ops.

SWA's fuel hedging was brilliant, but not the whole key to their success. Their management's 'big picture' view is the reason for their success.

BTW, I am not a pilot for SWA, nor to I really aspire to be one. But they are a company I admire.

jsled

I think you had the perfect storm. Starting in 2000 you had a normal cyclical downturn leading to the first losses in years at the majors. Then you throw in 9/11, where revenue is 0 for a week and severely cut for months. If not for the federal government's intervention, there probably would have been several bankruptcys early on. Then you have pension funds, that because of the market crash end up being severely underfunded which trigger massive "catch-up contributions" (of course SWA did not have that problem). We are talking mandatory contributions in the hundreds of millions here, right when the carriers were burning through cash like never before. It sure was ugly.

NGINEWHOISWHAT

Yeah, what he said.

It started with Southwest. One story was how Southwest had four planes. Having trouble making payroll, one plane was sold and utilization upped to compensate and BAM, the high speed turn was born. When word circulates that a company is willing to do something of that nature, you bet your assets the people are going to work extra hard to take care of the company. There's nothing in the kool-aid.

Johnson and Johnson is a perfect example of that philosophy. Company owners selling mansions during the great depression to prevent layoffs says character. There was never a need for unionization because employees were compensated and treated with dignigty and respect ... something that is missing from a lot of companies today.

http://www.winningworkplaces.org/lib...rsation_wi.php

Lack of leadership plays a role. 9/11 warranted voluntary pilot givebacks, but CEOs padding their own pockets made certain that would never happen. I wonder about those airlines that have not redone their business models to match SW and the legacys that had to endure painful cuts and terminations.

The "South-Westernization" of the industry was going to happen one way or the other. 9/11 just sped things up. Fuel, war, the dot-com bubble bursting, tele-conferencing, video-conferencing as Jsled said, it was a "Perfect storm."

One final thing ... I read an article about All Nippon or Korean Air delivering freight in several states via Alaska. Not only did we have external factors dragging us down, this administration relaxed cabotage to allow foreign cargo carriers into our markets ... communist nations at that! We need to lobby HARD to keep SRB and his like OUT. Post election testicles (and ovaries) are sprouting and congress is now standing up.

Tom

I rode the short bus.

saab2000

This person gets it. Let me repeat. This person gets it.