To US Airways and the Pilots Union...

The BBQ Pit
21

Do you really think they charge below cost because they like it, or because they made some kind of miscalculation regarding their costs? They charge less because their low-cost competitors charge less (and profit or expect to profit in the long run when fuel costs come down) and if they don’t match it no one will fly their planes. The age of business travellers paying $1100 for a $150 flight is over, and there’s nothing US Air can do about it.

They have to cut people. Specifically, they have to reduce their fleet types and the mechanics and pilots which specialize in the models being dropped. This is particularly difficult in US Air’s case because of how they were cobbled together, but it has to be done.

You seem to have a unique unawareness of where “all the money” comes from. The O’Hare cuts will tend to increase prices unless more customers choose to fly out of Midway, if demand stays constant.

What do you think a US Air mechanic or pilot makes compared to one working for Southwest? Why do you think US Air mechanics are not banging down the doors for a job with Southwest, particularly in cities where they share or shared hubs like Charlotte or Baltimore.
Here’s the thing. US Air has higher costs than it’s competitors. Higher than the discounts, including Southwest, and higher than other high-cost airlines. It is owned primarily by a public pension fund – teachers’ retirement money in Alabama. There’s no new money coming in. Here are the chocies: Get costs down or liquidate. Personally, I think they should liquidate - it’s a failed airline which followed a failed strategy and is hoplessly, permanently broken. But I daresay that the employees and that awful, evil management might combine to disagree with me.

22

Your post implies (and apologies if I’m not reading it correctly) that Iacoccoa got paid $1 for 1979 (the year he took over Chrysler), but then his compensation was raised in successive years as the company improved, while still only being paid $1 for his 1979 work. My point was that his compensation for 1979 was not a dollar, but rather what one expects a CEO to get paid. He got paid $1 for 1979 in 1979… but then got reimbursed $500,000 in 1984 for his work in 1979*.

And the UAW cares very much if they send an auto manufacturer under. Without Chrysler, the union would’ve lost well over 100,000 members, their ability to play the automakers against each other would’ve been severely compromised, and if a strike would’ve put the company under for good, that is what people would remember in 20 years, not the mismanagement that occurred before it - or so the union (quite rightly) feared. This thread is an example of that - the OP blames the union wiithout mentioning a thing as to why the company is in this predicament to begin with.

*The above was taken from memory, meaning the numbers might not be precise (for example, it could’ve been his 1980 compensation that was deferred). However, information about Iacoccoa’s compensation package can be found in Comeback: The Fall & Rise of the American Automobile Industry , an account of the industry between 1979 to 1995 (ending after the Kerkorian/Iacoccoa buyout play for Chrysler, but before Eaton sold it to Schremp at Daimler-Benz.)

23

Just to be absolutely clear, if US Air goes under, then they don’t get the pension plan anyway right? Seems to me they’re acting rather shortsighted.

24

US Airways has filed for Chapter 11 bankruptcy protection, Bloomberg is reporting on its website.

25

According to the fact sheet on Southwest’s website, the fleet consists of:
18 737-200s, 194 737-300s, 25 737-500s and 168 737-700s.

GE’s web site indicates that the -300 and -500 aircraft use CFM56-3 engines, while the -700s use the CFM56-7.

To the best of my recollection, the only engine used on 737-200s was the Pratt and Whittney JT8D (also used on 727s).

26

First of all, I trusted the ‘travel pro’ I paid to find the fares would, you know, do that, but if SHE didn’t know, how the hell would I?

Secondly, I understand the plight of airline industry workers, but in this instance, I don’t believe I give a damn. The stories I read, (the links to which I can’t locate) from the Boston Globe said that because of 4 ALPA hard liners, that the vote to take the pay cut just to stay employed never made it to the membership of the union.

Being a union steward myself, I see this situation from a unique perspective, and I’ve got to say that if you’re not even letting a proposal make it to your membership, then you’re doing them, (and us the customer) a disservice.

If employees are willing to take a hit to keep the planes in the air, why should they not be allowed to?

I think the trees are getting in the way of the forest here, the big question is, do they fly, or not?

The whole here is greater than the sum of it’s parts, either the pilots stay employed or they don’t, either management finds a way to cut costs or they don’t, and quite honestly, I don’t give a damn, I just want to go on vacation, and damn the public posturing.

Selfish? Yeah, maybe, but I’m a customer, the reason any business exists at all, I mean it’s ALL selfish when you boil it down, so what?

The ALPA isn’t standing next to me when I’m running into those burning buildings, or supporting me when I negotiate for salaries for the brave men and women who do the same, why would I give a tinkers damn about their hard on for US Airways?

27

Okay I was half right, but to be fair I did say former, and I went from memory. Anyway just to be sure on the data I went to the source. The majority of the fleet is actually the 737-300 (not 200), that’s what I get for not looking it up. Their next major airframe is the 737-700. For more information go here As it happens the powerplants would be the CFMs you noted above. However, I think the major difference between the two engines are the blades, which if there’s a problem there means you’d need new engines anyway, but the core of the engine is the same, and thus would have mostly the same parts, but I need to fact check this with a friend who’s on the engine side before you take it as gospel.

Anyway most of the points I was trying to make still stand, as the major changes between the 737s have to do with wing design, engine placement and fueslage lenght. Instrument panels as well as the core guts of a 737 remains the same, with the major exception of the 200s having a different core powerplant. Oh and do you have any idea how many mothballed JT8 engines happen to be lying around waiting for chopping? In addition to the 727, they’re also on the MD80 series, DC9&10 and the 707. Besides that the great majority of engine work is not done on the engine itself but the acessories such as generators, air cycle machines and whatnot. All these part are readily avialable merely needing overhauls to be added as spares for an existing fleet.

28

A big part of the problem is that the “$150 ticket” actually costs the airline more like $175 or $200… you can NOT do business like this indefinitely.

If the competition really does run at a genuine lower cost then US Air is well and truly fucked and it’s time to stop CPR and admit the patient is dead.

And, by the way, fuel prices are not going to come down, not to the levels we saw, say, 10 years ago.

They can’t add significantly more flights to Midway - that airport is full, too.

Of course prices will go up at O’Hare - whether flights are cut or not. As just one factor, the city of Chicago has already declared it is raising the fees it charges to the airlines to use the city’s airports. And, of course that will be passed on to the customers because the airlines are already selling at cost or below.

The politicians in Chicago and Illinois have played politics with the airports, particulary the “third airport” that still doesn’t exist, for so long they’ve screwd themselves. Now it’s too late - Chicago will lose status and flights and service because even if they broke ground today (which they won’t) it would take 20 years to build another O’Hare or Midway. Meanwhile, they still refuse to even consider expanding airports that could take on that role, but won’t line the pockets of Dick Daley or his buddies. Anyhow, that’s getting off topic.

If US Air management has so fucked over the airline that it really can’t compete and can’t make money then those mechanics just might have the right idea to hold out for whatever they can get now, rather than limping along trying to ignore the writing on the wall. The USA has poured billions into propping up moribound airlines - for what? Time to stop CPR and move on to the next patient. Let the dying finish dying, and when they’re gone yes, the fares will increase some. To a sustainable level. Maybe you’ll have to pay $200 to fly to Phoenix from Chicago instead of $99. Boo-fucking-hoo. That would still make it competitive with Greyhound or Amtrak, if for no other reason than you don’t spend two or three days getting there and the same coming back. Hell, I’d spend over $80 buck in gas alone just driving my car one way!

On that, we agree.

29

Stuffy: *A decade back or so, the major manufacturers of parts on aircraft started making more and more maintenance manuals propietary. This limits the amount of maintenace an airline can perform itself, as well as shrinking the number of outside sources who are also capable of performing the same work, thus forcing items to be sent to the OEM (original equipment manufacturer). This in turn creates it’s own problems. The lobor prices increase accordingly dependant on where it’s done […] So the airline is in kind of a bind, the only way to reduce maintenance cost is to cut mechanic labor cost, or buy a new airframe (which is why Jet Blue is profitable) if you can get someone to loan you the money. […] The longer TAT means the airline has to increase it’s store of spares, further increasing its maintenance costs, or let the aircraft remain on the ground reducing revenue. In some instances as in Southwest this could be a good thing as they fly a single airframe and can get parts readily. It’s a major problem for a company like United as IIRC they’re flying several different versions of the 747, and Ameican who are flying serveral different airframes and versions of those airframes. *

Interesting. So the problem of high airline operating costs isn’t as simple as just greedy unions or greedy management, it’s also greedy parts suppliers?

So why ain’t the invisible hand of the free market fixing this part of the problem by providing lots of new aircraft parts manufacturers who’ll supply non-proprietary maintenance manuals, thus undercutting their major-manufacturer competitors and raking in the bux from airlines that, as manny points out, are desperate to cut costs?

30

I have no idea if this is actually true or not (Hey look everybody, that voice! It’s coming straight out of his ass!), but the nagging thought that occurs to me when I read your suggestion is that it may be a hellaciously tough market to break into. High quality parts are gong to be expensive, and airlines might be reluctant to buy parts from an unproven manufacturer (after all, you can’t just coast to the side of the road if something goes wrong at 35,000 feet. Well, you can, but you usually leave a big hole behind when you do), limiting the incentive new companies have to try for that market, etc…creating a vicious cycle that would be tough to break.

31

Makes sense to me, Wd. Makes it not a very good approximation of a free market, though. If true (and I have no more idea than you whether it is), then bummer.

32

Yeah, that’s the nub of it - the main reason aircraft parts are so expensive is the US FAA (and other nations’) certification procedures that make them *legal * to use, much less a good idea. They govern not only functionality in a demanding environment, but meticulous quality control and inspection procedures as well as all the overhead that entail from them. The entry barriers in the industry are so high, and the volumes so low, that it’s easy for existing non-aerospace manufacturers to simply not bother. Counterfeit parts are, however, a real issue, and have even been implicated in a few crashes.
FWIW, the 737-300 and up have glass panels, but the -200’s still have “steam gauges” as well as the venerable PW JT8D engines. The earlier and newer CFM56 engines don’t share all that many common parts, either - that reflects a common marketing practice in aerospace of reusing the names of older, well-respected products on newer ones, to make them appear to be essentially improvements rather than essentially-new and unproven. CFM56 engines are actually made by a 50/50 partnership of GE and SNECMA in France, not by GE alone. Both companies subcontract major sections of the engines, though.
To the OP: This is a result of the essentially free market being imposed on an industry where the participants don’t have an equal footing. The newer carriers can have lower costs in many cases because they haven’t had to fund pension plans. The older ones have the financial load of a large percentage of retirees who have to be supported, and they’re among the first to be jettisoned in Chapter 11. One might argue that the institution of federally-guaranteed pension protection plans that automatically take over from failed companies has made bankruptcy a more attractive option. What it also means is that, even if the “legacy carriers” cut their labor and all other operating costs to the level of the newcomers, they’re still at an irrecoverable disadvantage.

The airline industry is about as close an example as you’ll find to the Economics 101 model of a free market with perfect communication and no entry or exit barriers. There are few insuperable entry barriers to new airlines, unlike manufacturers - there are enough planes, and not just older ones, parked in the desert and available for a song that new hopefuls arise all the time - and die almost every time, too, as the existing airlines squeeze them out with legal below-cost pricing. When the new entrants can undercut the legacies, they’ll do so, as USAir’s stream of failures attests. But nobody makes any money at it - one consequence of a perfect market is that profit margins are driven to zero as inexorably as chronic money-losers are driven to extinction. USAir has made some management blunders, to be sure, but they’re dying as much because they’re just old as because they’ve depended for too long on too thin a market area.

33

Good article about JetBlue. It shows how much less they pay on various things than a major carrier like Delta.

34

[QUOTE=Kimstu
Interesting. So the problem of high airline operating costs isn’t as simple as just greedy unions or greedy management, it’s also greedy parts suppliers?

So why ain’t the invisible hand of the free market fixing this part of the problem by providing lots of new aircraft parts manufacturers who’ll supply non-proprietary maintenance manuals, thus undercutting their major-manufacturer competitors and raking in the bux from airlines that, as manny points out, are desperate to cut costs?[/QUOTE]

There are a few doing this, however it’s very heavily regulated. What you’re suggesting is what’s called Parts Manufacturing Authority approval. To do this on commercial aircraft is long, time consuming and expensive. Typically the process can take anywhere up to 2 to 10 years. It’s a shorter time frame for non-commercial manufacturers. The real problem though is a handful of larger companies who buy up the smaller companies. You might remember a few years ago that the European Union prevented the merger of Honeywell (valves, aircycle systems, starters, etc. )and General Electric (engines, instruments, sensors, etc.) . This didn’t get much news stateside but it really was a good thing. Honeywell is a huge manufacturer of aircraft parts, and the merger would have created proably the largest single source for aircraft parts other than airframe manufacturers Boeing and Airbus, and may have in fact eclipsed them. They got that way by buying up Airesearch, Bendix (both of whom if IIRC still manufactuer automobile parts indenpendenty) and others. Not that Hoenywell is the only company that does this. The EU is not immune for this practice either. The American market is virtually locked out of the maintenance for Airbus for similar reasons, though in fairness the EU stated goal is protecting Airbus from Boeing becoming the single source for Aircraft.

35

Absolutely, and I agree 100%. In fact for an airline to survive long-term they obviously need to change equipment at some stage. As you point out, Southwest have made the most cost effective decisions possible in going from the “classic” 737-300 to the “Next Generation” 737-700, and from the GE CFM56-3 to the GE CFM56-7.

Cockpit and engineering commonality are, as you say, really important cost-savers, and Southwest along with EasyJet in the UK have proven this beyond doubt. In Australia, one of the issues which caused problems for Ansett (leading to their collapse in 2001) was their mix of Boeing and Airbus aircraft on domestic routes. But that’s another story …

36

Gah! :smack:

OK, I’ve just found out that EasyJet recently acquired some Airbus jets. Still, they established themselves with only 737s and that was a big contributor to their success.

Just to save face, I’ll now predict that the fleet diversification will have a negative effect on their profitability next year. :wink: