UAL Concession Details

[FlyDeltasJets]

No, you see, it's not costs that would be the trigger here. It's only if Delta abandons its fare premium in an attempt to match AirTran that could cause AirTran harm. Costs do not affect other carriers. That's the point I was trying to make. Charging lower fares attacks other carriers, not lowering costs.

I don't know if you noticed, but we have been losing a little bit of money. Our RPMs and total revenue is down significantly, while that of the lcc's is up. The reason? Ticket prices. They are able to make money with a lower ticket price, and as a result of their lower prices, people are flying them. Delta mgt seems to have no choice but to lower fares, and to do so, they must lower costs. This frightens me, because I am of the opinion that fares are outrageously low as it is.



If Delta lowered fares to match AirTran's then (since you say AirTran would lose business) that would harm AirTran, and your scenario may indeed eventually play out. But in order to get there, Delta would have to lower costs, not just enough to become profitable, but far beyond that to the point of being profitable after throwing away revenue. So whose fault is that? Is it AirTran's pilots, or is it a Delta management with the overweaning arrogance to crush its own revenue base in order to sink another carrier? Haven't they learned that lesson yet?

Don't you see that their revenue base has already been "crushed"? It is down by billions of dollars. If they did lower fares (read: cut costs) they will do so not because they want to, but because they have to. Ticket price is the number one purchase driver, and as we are seeing with every legacy carrier, people are buying the tickets that cost less. Delta has concluded that they must lower fares, not to harm airtran, but to save our airline. I cannot say that I disagree with them, though it concerns me greatly. We as a profession have allowed mgts to compete using lower labor costs as a weapon, and it is biting us as we speak. It is naive to think that any airline pilot will be exempt from the consequences.

Pattern bargaining works both ways. I felt better about our futures when we were all fighting to raise the bar. Granted, we were doing so for selfish reasons, but in the end, we all benefitted (even the lcc guys). We are now watching the effect of the bar being lowered. It will get worse. For all of us.

 

[FlyDeltasJets]

What pilots are really worth is whatever the market will pay them. Based on SWA and Jet Blue, looks like an FO is worth about 40-60K/yr, and a Capt 100-150K/yr.

Golden,

What you continue to ignore is the fact that the market is only supporting those wages because they are lower than ours? Why do you assume that the same market forces won't lower those wages in the future. If you accept that the lcc's you mentioned are having an effect on salaries and ticket prices, wouldn't they be vulnerable to the same effect if a still lower cost carrier were to arise? The lcc pilots make the money they do only because we make to money we do. The market is supporting the 150k captain because our captains make so much more. If our captains were to drop to 150k, you will see some harsh results. It may not happen immediately, but it will happen. That lower "overhead" (technically, employee wages are not considered overhead, but your point still stands) which allowed the lcc to make a profit in your example will be neutralized. Once the ticket prices are equal, the lcc's will lose market share due to other market drivers like schedule, ff program, etc.

You are correct, the market is powerful. If we were to let it operate without limitations, as you suggest, we would not be having this conversation, for both of us would have been replaced with a Korean Air pilot making $5/day. Perhaps that will happen someday, but I am not ready to accept it quite yet.

P.S.
I assume that you are happy about mesa's new contract. Many of your collegues are pretty upset with the effects it will have on their contracts. I find it pretty ironic that many of the same people criticize me when I point out the effects the lccs have on our contracts. I guess it's easier for most of them to continue you calling me an "arrogant a-hole." Thank you for not resorting to that tactic!

 

[Blue Dude]

Don't you see that their revenue base has already been "crushed"? It is down by billions of dollars. If they did lower fares (read: cut costs) they will do so not because they want to, but because they have to. Ticket price is the number one purchase driver, and as we are seeing with every legacy carrier, people are buying the tickets that cost less. Delta has concluded that they must lower fares, not to harm airtran, but to save our airline. I cannot say that I disagree with them, though it concerns me greatly.

You just contradicted yourself! You just got through saying that Delta commands a fare premium because of its ff program, int'l presence, etc. and now you're saying that only price matters to the public. Which is it? Do those things have value to the public or don't they? Or are you saying that they only have value when they don't have to pay extra for them? I could see that. In that case the question is: is it worth it for Delta to offer these things when they cost money, but people aren't willing to pay for them?

In any case, your slippery slope of reverse pattern bargaining has yet to appear. Pay has been lowered at LCC's in the past in order to keep costs lower, but that's always a precursor to collapse, not a competitive response. Are there any current carriers where this has happened? Has a single carrier lasted long enough to provoke a further response, i.e. a further lowering of rates at a major carrier? No. So far it's theory. I will grant that in theory this could happen, but in practice lower wages aren't nearly enough to save a company, and therefore the LCC in question promptly self-destructs before they can ratchet down major airline wages.

 

[Blue Dude]

Once the ticket prices are equal, the lcc's will lose market share due to other market drivers like schedule, ff program, etc.

Just a quick note: this does not always happen. For instance, it's JetBlue that commands a fare premium when it competes with DLX. Average fares are 20% higher. I grant you, this isn't a lot of money when you're talking about fares to Florida, but it is significant. It's this fare premium that Song is designed to combat, not loss of market share due to lower fares. JetBlue usually doesn't have the lowest fare, but does very well anyway.

BTW, thanks for the debate, Delta, I'm enjoying this.

 

[FlyDeltasJets]

Blue,

I did not say that we command a fare premium. I said our ticket prices are, for the most part, higher. Obviously, the public has not supported this. Any airline expert will tell you that price is by far the number one purchase driver. My point is if that the prices were equalized, the other drivers would come into play, and most of the lcc's would lose that comparison.

Jetblue is the exception, because your product is so different (and good). I think however, that once song is in place, my original point will still stand.

You are correct that we have yet to see the full effects of the lcc compensation packages. We are, however, seeing the start of the slide. If you think that the present attack on the high salaries of the majors has nothing to do with lcc's, I fear that you are deluding yourself. When your competitors enjoy a huge advantage on the industry's largest cost, there is naturally going to be a response. It only frightens me that so few seem to be recognizing the effect, and so many think that wages will stabilize at a "reasonable level." I see no indication that this will occur if we as a profession do not force it. I don't think many realize that, and it worries me.


P.S.
You're welcome. I also enjoy debate, especially when I'm not being called an a-hole like so many of my opponents like to do. Thanks for keeping it civil.

 

[Blue Dude]

I'll buy that. I don't necessarily agree that such deterioration is inevitable, but there's not much more we can prove on a message board. I guess we'll see for ourselves in the next few years as this plays out. Thanks again for the civil discussion.

 

[terryhfly]

I thought this was about United. Funny how almost every post gets turned into a Delta battle.

 

[jetflyer]

Yea a lot of people came here to read about United. Take the battles elsewhere. Delta, Comair, and ASA and all their other affiliates should have their own website:
Deltaflightinfo.com so every thread is not hijacked.

 

[Blue Dude]

Well, it was really about the possible effect of lower wages cascading throughout the industry, triggered by concessions such as those at UAL. Delta vs. AirTran was just a convenient example, so the thread really wasn't hijacked. If I'd used UAL vs. Frontier would it have helped?

 

[FlyDeltasJets]

I thought this was about United. Funny how almost every post gets turned into a Delta battle.

Actually, it is about all of us. Unfortunately, too few people realize that right now.