10.7.2011 « The UAW Gets It; U.S. Pilot Unions Don’t »
It is simply time to end the war of words between airline labor and airline management. It’s time to respect the realities of a fragile global economy. It’s time to appreciate that increasing fixed costs can’t be part of collective bargaining agreements. It is time to realize that new competition does not include the iconic names of the past. It’s time for airline pilot labor to stop blaming everyone but themselves for the slow pace of negotiations. These sentiments apply in Chicago, Fort Worth and Phoenix.
Two of the Big 3 U.S. automakers filed for bankruptcy protection. A significant amount of the cost relief won by management came from labor, much like what U.S. airlines won from labor at United, US Airways, Delta and Northwest several years ago. The automakers are negotiating – successfully, mind you – their first agreements since gaining labor concessions. In my mind, there are few differences between these legacy industries except for the agreements being negotiated in Detroit reflect the realities of today’s marketplace while airline contracts still contain outdated provisions ladened with duct tape and chicken wire.
In an odd twist, the auto industry and the UAW embraced the concept of global competition long before globe-trekking pilots recognized changing domestic competition and acknowledged the economic realities of a new century. U.S. airline pilot unions seem to forget, as the Harvard Business Review wrote: “that there will be no going home again… that the landscape of business has been forever altered.”
U.S. airline pilot unions blame everyone but themselves for the growth of today’s regional industry. After all, it is the mainline pilot unions that negotiated the “productivity improvement” of shifting small aircraft flying to the regional sector. The war of (useless) words has to end, and it’s also time to stop the blame game over scope and just who is going to do the flying of aircraft 77 seats and larger. Today's regional carriers are. To accomplish that, U.S. pilot unions need to negotiate rates and work rules less than those in the current collective bargaining agreements in order to bring more flying in-house. That means, yes, a two-tier wage scale… like the UAW just negotiated.
The UAW agreed to continue the two-tiered system negotiated in bankruptcy in return for adding or keeping 6,400 jobs in the U.S. A central point in the agreement was leveraging the two-tier system to win buyouts for higher paid workers – up to $65,000. I think that would work in the airline industry as well, a prudent use of cash by airlines to get higher paid workers off the payrolls. Instead of pay increases, most GM workers will get $12,500 in profit sharing (more because of an improved profit sharing formula), bonuses and other payments over the four year contract. Those at entry-level wages - roughly half the current work force - will receive hourly rate increases of 24 percent.
Just like the regional industry cross-subsidizes mainline pilot wage and benefit packages today, the new two-tier system would do much the same, but also put an end to what pilots’ term “outsourcing.” I am not saying the numbers above are the right amounts for pilots; I am suggesting the concept of a two-tier wage/benefit/work rule package for airplanes dedicated to flying in the revenue-poor domestic system need a downward adjustment and need to include at risk earnings. Fixed rates of pay, particularly in the domestic system, should only be negotiated in return for hard and fast productivity improvements.
As a bonus, the credit rating of General Motors was upgraded by Standard & Poor’s allowing the company to borrow at cheaper rates which also works to maximize profit sharing payments.
I’m writing this after listening to speech by Capt. Wendy Morse at United in which she spoke openly about the dysfunction in her own ranks standing in the way an agreement. Morse does suggest the company is also dragging its feet, but it certainly makes one question the internal union politics at United/Continental. The same rhetoric has been heard at American and US Airways.
What absolutely befuddles me about the FUPM mentality by the boisterous minority at each of the pilot unions is the failure to recognize the past financial performance of this industry certainly doesn’t guarantee job security. There is no more room for court-assisted restructuring. What is absolutely amazing is the U.S. airline industry might just make a penny on the dollar of revenue in 2011 despite jet fuel prices that are higher than they were in 2008 when the industry lost 17 cents on a dollar. A penny of profit is just north of $1 billion for the entire industry. Some will do better, some will do worse, but either way, there is not a lot to go around.
There have been times in the history of the U.S. airline industry where union pilot leadership has, well led. This is an opportunity for those heading the pilot unions at United, American and US Airways (and, to an extent, Continental) to do so again. Leadership is needed to understand domestic flying economics do not support collective bargaining terms for aircraft sized between 100 and 140 seats. Someone needs to step-up, otherwise the industry squanders yet another opportunity to remove emotion from the bargaining table and untangle the morass called scope.
Just like the UAW is negotiating terms and conditions not previously considered in order to maintain and create jobs in the U.S., mainline pilot leaders must figure out how to return flying to its members. The U.S. airline industry is going to see its fortunes turn. It just won’t be today or even 2012 based on current economic trends. Therein lays the opportunity. Like the auto industry, airline pilots and other workers should share in increased profits. It’s an upside protection that pays off for members and they “get theirs” when the headwinds change. It’s also a catalyst to get something done now and provide cost-certainty to companies desperately trying to staunch the red ink.
If pilot group “asks” continue to follow the same old, tired, predictable pattern of fixed-wage increases and blind allegiance to obsolete scope clauses, more than likely, one carrier will face liquidation and tens of thousands of jobs will be lost.
I think of these negotiations as “transition” agreements. They must be evolutionary because past “gives” cannot be repaid. The industry, the economy, has dramatically changed and we can’t go back. To be evolutionary requires leadership willing to be revolutionary in their thinking. It might be cliché to say the world is getting smaller, but it’s a truism for the networks that comprise domestic U.S. airline systems today. Larger markets will always have airline service; it’s the small and mid-tier markets airlines struggle to serve profitably. As the network continues evolving, the underlying economics of the domestic system simply do not work if flown at today’s outdated and trumped up wage and benefit packages at the mainline.
No more whipsawing. No more arbitrage. Just reality. Pilot leadership and airline management must get it right this time and create a template other work groups mired in their own false hopes that historical patterns will reemerge can follow.
Pilots are a sophisticated group in their education, reasoning and their ability to react in times of trouble. The UAW probably isn’t as sophisticated, but currently, they’re smarter than pilots.
This is a case where the ends really do justify the means.
Reader Comments (26)
You are always free to drive or take the bus if you can't pay to fly.
My job as a pilot is to safely transport people and cargo to their destination. i cannot control the price at which the tickets are sold or the fuel is purchased. I have safely performed my job for the last 10 years. Management has done a poor job of pricing tickets and hedging fuel. They have had significant increases in compensation in the last 10 years and I have had none. In ten years, not one single raise, but instead pay cuts.
Do you fact check at all or just type what ever sounds good to you? I'm not sure what world you live in, but back here on Planet Earth top management from the airline sector all have increased compensation about 40% in the past few years, While Pilots have had pay CUTS. Pilots have not had an INCREASE in salary (not raise) in 10 years. I will repeat that one. Pilots have not had an increase in compensation in over 10 years. What that means in other words is 30% just for cost of living. Pilot compensation have not even kept up with the cost of living.
Now shall we talk about the stripped retirements or do you have a plan for us to work past 65? Walmart greeter? You sir are a wind bag.
It is interesting that you think pilots in the "revenue-poor domestic system" need to take pay cuts, while the highest paid passenger pilots in the industry work for Southwest. All of Southwest routes are in the "revenue-poor domestic system" and they are able to pay their pilots industry leading wages....and make money flying domestic passengers.
I humbly submit you are completely missing the economic phenomonon of dissociation. On a completely economic anaylsis you have strong merit in your points, but we are rapidly approaching a point at which the supply-demand curve will dramatically re-balance because the industry has seen a tremendous drop in the supply of properly qualified people who want to do this anymore. The increasing rash of fatal and near-fatal accidents around the world (including the USA) where inexperienced sub-optimum pilots are culprits (think Colgan Air Buffalo, innumerable Indian and Chinese accidents) reflect that there is a grave cost to be paid for having the overall compensation and work environment below that which would attract and retain the proper candidates. This takes years to play out due to the commitment it took for pilots to get where they are - you won't see the effect until the old school is all gone and replaced over the decades with lower bidders......and dead passengers.
The fuel spikes of 2009 pretty well showed that you could double or triple the pilot labor cost and it would be well within the demand elasticity of the the travelling public, so total cost isn't really the issue. The current compensation environment for flight crews is a product of oversupply on the airline side (creating artificaially low fares) and lack of horizontal mobility for pilots (restricting their ability to sell their expertise to the highest bidder).
No doubt pilot purchasing power doesn't need to be what it was 40 years ago, and no doubt the union has made many missteps and are imperfect, but the overall system needs to have the pendulum swing back toward better compensation and work rules. I truly believe you are out of touch with what life is like now for modern airline crews and what price the travelling public will eventually paying for their thrift.
"Pilots are a sophisticated group in their education, reasoning and their ability to react in times of trouble."
You said it yourself. Don't you think that compensation should be commensurate with that ability. And perhaps just maybe have some cost of living adjustments for the past decade?? I know the brilliant management teams you so respect go theirs. So did you apparently.
FUPM
Swelbar:
Let's you and I trade jobs for 1 day.
You do exactly what my job description requires and I will do exactly yours. I pick the day of weather and the poorly maintained average airplane you will fly (all within legal limits of course). We will load you up with 240 passengers and your job will be to fly them to their destinations without a fatal mistake.
In the aftermath, the rest of the world will learn why highly qualified pilots deserve their pay.
At the end of the day, you and I will speak of our experience..... well, actually, there will be just one of us remaining, I am sure.
The mouthpiece for the ATA speaks yet again. And gets it wrong. Yet again
Swelbar writes well but NOT intelligently. MIT is severely lowering its standards by allowing him to be part of it. He spews out the same platitudes in different ways, i.e. pilots over paid, pilot union is bad, pilots are overvalued, etc. I don't know who he is trying to impress, but I guarantee you it's not the majority of the flying public, they want a highly compensated, well rested professional flying them from A to B. Maybe Swelbar should do some research on what the majority of the public wants and he will be enlightend. I think Swelbar is some underpaid bully who is trying to get hired by some airline upper management in the hopes of a "big paycheck" because he is able to show them some ridiculous blog on how to control "pilot costs."
After discovering his roots as a Flight Attendant I understand his post. Pilot envy. He is one of those that always wanted to be one but couldn't. MIT you allow this envious little boy on campus. Really!
It is interesting to read the comments.
I find it surprising that Swelbar continues to have the comment section open when the majority of comments are derogatory.
His point of view is certainly not positive about the state of the industry.
But do you think attacking comments are going to convince him of your point of view or elicit a response?
Well, it certainly helps to steam anger.
I digress, my apologies, let the fights continue.
I want my pension back.
how did this industry become so unprofitable?
too much competition driving down prices. but then do we want one national airline.
hahaha maybe you can all serve us some coffee Swelbar! Oh yeah we'll call you up for a pee break too. Then you can really feel powerful since we now have to ask to go potty.
now go hang out with your boys...
"Fixed rates of pay, particularly in the domestic system, should only be negotiated in return for hard and fast productivity improvements."
OK. My last trip had me fly 1.5 hrs IAD to ORD, sit 3:59, then fly, 1 hr to OMA. That's a day. That's a productive day devised not by my union but somehow decided upon by the airline.
Hows about an article about that?
Auto work can be send to Bangladesh. As much as they would love to, the airlines would not be able to import enough Bangladeshi pilots. Not too hard to understand.
FUPM. What do I have to lose? I and every other pilot I know works a parallel career that could be turned into a well paying full time job in a snap.
Swelbar, all the hot air comments you read above are EXACTLY why pilot unions are having such difficulty. They just don't have the ability to understand that the world around them might be changing because they are so intensely self-centered. "Enough"'s sentiments say it perfectly: they don't care if they grind the airline industry to a complete halt. I have talked to multiple pilots who would rather be out of a job than agree to anything. Pride is going to bring everything crashing down.
J.J.
You are correct, it has gotten to the point where we don't necessarily care about this career as much. It has even gotten to point where crashing it down has benefits, such as raises and better work rules. Like Enough mentioned, most pilots do have a paralel career where they could earn the same amount of money. This is why so many don't care anymore if they fly or not. JJ maybe you can go fly the planes for $18k.
Ok this UAW post was up on our board and I told myself not to come over here to see what you now conjured up to bash pilots, again. I guess the boys over at ATA are getting what they paid for, a B Scale Blog Poster.
Where do you even start? Ok let's just take one local person at the Detroit unemployment office with a minimum of a GED certificate and by lunch time I can have him trained to install headlights on the assembly line.
You want to try doing that to man the cockpit of a Regional Jet or greater? Seen the new FAA time requirements to strap one of these babies to your bottom with a load of paying passengers in the back? Either a boat load of college hours (bought) or a boat load of actual flying time (hard to come by). Either way it is going to be expensive.
Seen this? It is up on our board:
http://www.faa.gov/data_research/aviation/aerospace_forecasts/2010-2030/media/Forecast%20Tables%20%28Tables%201-33%29.pdf
Table 10 shows the growth in RPM for the next two decades.
Table 29 shows the growth in pilot head count for the next two decades.
Bottom of the page from 2009 - 2030
Table 10 shows a net RPM growth = 3.4%
Table 29 shows an ATP growth = 0.6%
Per year. That's what they're worried about.
No wonder ATA wants to break everyone's Scope Clauses before the pool of qualified pilots dries up. After the contracts are rewritten in managements favor (once again) it will be extremely hard to gain those Scope Clauses back as management whipsaws group against group.
Now back to my sock drawer.
I’m going to agree with you that ” The industry, the economy, has dramatically changed and we can’t go back.” Unions, management, investors and Government would be wise to keep this in mind. Your premise is on point where as your argument is not.
You talk of removing emotion from the bargaining table and yet you are obviously writing with far more emotion than fact.
Case in point, where do you get the inside scoop that there is emotion at the bargaining table? You didn’t because there isn’t. You’re assuming.
Where do you get the information that “pilot group “asks” continue to follow the same old, tired, predictable pattern of fixed-wage increases”. This just isn’t true, profit sharing and stock incentives are part of many contracts and you can’t have any insight as to what concessions is discus at the negotiation table. This is bunk.
What birdie told you that unions are not trying to negotiate the rate for in-house flying of 77 seat aircraft? This is myopic conjecture.
And as for your closing comment, “The UAW probably isn’t as sophisticated, but currently, they’re smarter than pilots.” It strikes me that you have reached the insulting point of desperation.
Swel, you can do better than this.
John
JJ said "Pride is going to bring everything crashing down." No you misunderstand.
When I said "FUPM. What do I have to lose? I and every other pilot I know works a parallel career that could be turned into a well paying full time job in a snap." What I'm saying is that it would be foolish for me to vote for 90+ RJs and lose my job the next day due to outsourcing. My other option is to not vote for them and call the company on their "but we can't compete" argument and risk losing my job. The first option is a known job loss the second is a maybe. Either way this industry has taught me to have a solid backup plan so I don't really care what happens at this point.
Tomorrow I'm calling in sick for my flight. Why? Because I'm swamped by my second job which pays just as much as the airline but is on much firmer economic ground.
CB from 10.8.11; what airline are you referring to where management got a" 40% raise in the past few years" I want to work at THAT airline...I've been in management with one of the worlds largest airlines for 12 years and haven't seen an increase in salary since 2001 (PRE 911) and live in one of the most expensie cities in the world!! I'm the dolt for staying here....your the dolt for thinking that things will change to what it used to be and you'll get back what you gave up. Look around...it' s a new world
Hey VV gues what I found? Mgmt compensation data. Guess where I found it:
http://tinyurl.com/5vqrzft
UAL mgmt salaries 2000-2008 up 6 fold (26% annualized increase).
FUPM!
"Tomorrow I'm calling in sick for my flight. Why? Because I'm swamped by my second job which pays just as much as the airline but is on much firmer economic ground."
You're such a leader. Not only do you have poor reasoning skills, you also engage in fraud. Good job. Keep the profession professional.
Richard, I went to the Don Carty school for leadership and ethics.
Bill,
The unions are out of touch with reality. The rhetoric has not changed since the days of a regulated environment. ALPA/APA/USAPA are only concerned with pattern bargaining rather than pilots of each individual carrier determining what is in the best interest of their own pilot group and their own company. Southwest's pilots could care less about ALPA's plight and their bottom line has reflected that year after year. Their contract is based on productivity not bloat. Defined Contribution rather than Defined Benefit. They got it years ago. They now are going to have to make some adjustments. The fuel hedging advantage they lavished in for so many years just kicked them in the teeth by ending their string of profitable quarters.
They will control capacity and growth as a result.
Lets talk for a minute about the Scope discussion and the unions intransigent position.
A glaring example of this was Continental approached the pilots about flying the 170/190 several years ago. These hulls would have been flown by CAL pilots, under the CAL contract and it would be a moot argument during this negotiation cycle. CAL wanted reasonable rates of pay that would reflect the revenue of the aircraft and the rates where north of $120 for Captains. The union, in their infinite wisdom, demanded small narrow body rates. They were so entrenched with that ideal they would net even allow the rank and file pilots to make the decision by a vote in favor or against the proposal. Yet ALPA, on the other hand, went out to the commuters with the same lawyers and subject matter experts and negotiated rates of pay well below what CAL mgmt. had proposed. ALPA wanted those commuters sewn up to ensure the dues income was secure while all the dues income from the majors was used to establish the so called draconian pay scales at the commuters that became the nemesis of the majors scope clauses. Pilots profess to be an educated bunch that continue to be out maneuvered by their own unions and blame management.
ALPA, with their change to the merger policy after the DAL/NW merger was nothing more than protecting ALPA's revenue stream not the pilots they represented. Their fear of another AW/USAir debacle was their internal logic. The only realistic merger left in the majors was CAL/UAL. A very similar seniority model existed between the careers that ultimately resulted in ALPA losing representational privilege at AW/USAir. ALPA could not take the chance of a further loss of revenue. These changes were to protect the obscene wages and benefits of the ALPA leadership and employees. Pilots rattle their sabers regarding executive compensation yet they are not willing to reign in their National Union Executives. Two of ALPA's last two presidents, Babbitt and Woerth weaseled their way into govt. positions and Prater soon will try and make the move as he too was more interested in his goals rather than the so called plight of the pilots. Why would pilot advocates that take these jobs to help the cause not accept what they would make Flying the Line with an expense account?
The hypocrisy is deafening.
It is just a matter of time before cabotage and foreign ownership are unleashed in the globalization scheme that is how the govt. will lower the cost of air travel. It is interesting that the pilot unions do not publish the average compensation of foreign airlines pilots as a comparison or the executive compensation of those carriers leaders. Rick Dubinsky of UAL loved to talk about "squeezing the Golden Goose's neck to near death until it dropped another golden egg into their ALPA contract." Well we saw how that worked out. We saw how the Delta Dot worked out. The NW contract and now the calamity of the APA in expedited negotiations with the specter of bankruptcy in the wings. Gee does it have anything to do with the saving the Defined Benefit Plan?
Until such time ALL pilot groups realize the symbiotic relationship is with their OWN company, instead of Boiler Plate contracts, they will be doomed to relive Groundhog Day throughout their careers. History does repeat itself.
They just don't get it and never will.
Regards
Greybeard
How about we publish the accident rates with the pay rates of those foreign airlines: http://planecrashinfo.com/rates.htm
Here's the bottom line: I have 24 yrs flight experience, as a Navy pilot I flew in both wars with Iraq. I know what I am worth. I have a second career that pays just as much as the airline. More if I made an effort. I will work an airline job for $X dollars. Not less.
Like any other profession the market will decide. The can pay my rate which is CERTAINLY higher than that of Avianca (2X avg accident rate) or China Air (5X avg accident rate) or they can welcome those pilots, pay them a bowl of rice and a chicken a week and hope for the best.
And that's about as far as ALPA negotiations should go.