One thing that is not quite so clear. It seems it is not in the interests of a senior pilot to not make it easy for him to switch to a better offer at a different airline. Sullenberger, for example, should want the freedom to change to United and, after being trained on their procedures, be a senior pilot there. Neither he nor US Air are interested in him doing that huge commute. So why don't the senior pilots seek "free agent" status for themselves?
-- Brad Templeton, November 2, 2010
Very neat article as always, Phil. Thank you again.Tell me how well I'm doing here:
This appears to explain very well how Southwest and Alaska airlines have grown so well: If you can just keep growing, and never once falter, then it's a positive-feedback cycle. As long as you never contract, you can keep growing cheaper than the competition by hiring new people, thus "liquidating" their seniority at their previous employers.
This is wild! If I were to go into the cement-mixing business, for example, and crowd out the incumbent competitor, that would be wasteful. They already have the experienced people, the trucks and equipment that are mostly paid off, etc. So it would be more profitable to just invest in that company but otherwise leave it alone.
But not with the airlines. When Airline A out-prices and takes a piece of business from Airline B, they wind up with LOWER costs than Airline B had. It's all about finding ways to churn the people from one airline to another, because each time that happens, money comes out of them!
This helps explain, to me, why people ever feel like investing in airlines at all. If one can just out-borrow, out-invest and out-grow the OTHER guy, he wins because the effective COST, over time, of acquiring that new business is negative... so long as you never run out of liquidity and no one else (Southwest?) does it better or faster. Wild.
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I also see a killer meta-opportunity here. There must be SOME kind of "deal of the century" in this situation that effectively "metabolizes" the inefficiencies that you so clearly explained here.
I'm not sure what that deal-of-the-century might be, but here are a few guesses:
o An airline successfully opting out of the union system altogether, maybe with a "suicide clause" in its charter that programs its self-destruction if it ever signs a union contract. Thus, all starting pilots make 2X what they would at a union airline, but ultimately 0.5X when they reach seniority?
o Setting up nice airports along the borders of Mexico and Canada, and matching Mexican/Canadian airlines to fly between US cites, but making these required-by-labor-law short hops over the border?
o Some kind of just-in-time airline with no employees at all, but instead hourly independent contractors that sign big computer-generated contracts for each and every flight?
o (etc.)
-- Craig Meyer, November 3, 2010
It also breaks my heart to think of how the senior and junior pilots, helping to fly the same plane, have to do so in spite of their having, essentially, and adversarial relationship.The senior pilot is a parasite on the junior, they both know it, they swallow that and do their jobs, and that sucks. I also trust their partnership with my life when I fly.
What this also suggests, to me, is that flying a jetliner actually isn't that hard. Driving a taxi in Manhattan sounds more challenging. I mean, it apparently costs basically NOTHING ($19,000/year) to pay someone to just FLY A JETLINER. That's free. They make the REAL money by running a (legally-protected) protection racket, gate-keeping between the airlines and their ability to do business. They could do THAT from home; flying the airplane is just a formality.
-- Craig Meyer, November 3, 2010
@Brad,My guess? Because making it easier for them to leave for a competitor is tantamount to making it easier to bring in other pilots to your own airline.
Besides, no other airline is going to bring in a senior pilot when they can hire a junior pilot to do the same work. The whole concept of senior pilots exists only as a means for *current* employees to extract rents from the airline.
-- Michael Stack, November 3, 2010
Brad,Although jointly, senior pilots would benefit from the ability to trade airlines, a United senior pilot does not benefit from the ability of Delta pilots to join at a higher seniority level and vice versa. To negotiate these kind of reciprocal powers, they would need to form a cross-airline union, but that organization is much less effective at protecting the interests of its (senior) pilots for reasons explained above.
-- Nikita Borisov, November 3, 2010
Brad,In addition to what other have posted about switching company-to-company, it would put a burden on the Air Carrier itself to create a happy/beneficial work environment for the majority of its employees so that people didnt leave. People leaving means the company will have increased training costs, and lower return on their investment in the individual pilot. With this burden resting on the company's shoulders it largely removes the necessity for a union to negotiate a collective bargaining agreement. The company will be forced to treat each employee as an individual with variable amounts of value instead of being a commodity that rises and falls with the market value. "Good" employees would need to be rewarded so that they didnt leave the company, while "bad" employees would be shown the door.
A collective bargaining agreement is not always a limit to how little a a pilot can be paid, it is also a limit on how much they can be paid. The negotiated payrate cannot be exceeded, because that would be a violation of the contract.
The solution sounds simple, just start a non-union airline and treat the employees right! But without a wide network of companies to move between(ie: switching from Company A to B while retaining pay/benefits) this wont work.
Great article Phil, thanks for writing.
-- Evan Williams, March 2, 2011
"Craig Meyer":You really think that driving a cab is more difficult than flying a jetliner?
Why don't you take a couple of flying lessons and report back to us.
You obviously have some issues, buddy.
-- Capt Kaos, November 12, 2012
There are numerous points in your article I would disagree with. The most important is that you vastly overestimate the power the Unions really have. It is not unusual for the Airline to drag negotiations on for many years past the amendable date of a Contract, during which time the Pilots must keep working, they cannot strike until released by the NLRB. Getting the the NLRB to release a union to strike takes years, which benefits the Airline by keeping the Pilots working under the old Contract for as many as 5 or 6 additional years.Also, when you say that " . . some airlines pay Pilots $300K while paying junior Pilots $19K" you are really mixing the top and bottom scales from two totally different types of Airlines. The senior Pilots at Regionals aren't making $300K, more like $100K, which makes the pay differential much lower. At a Major airline, the difference is more like $45K first year pay to $250K after 12 years.
Your article mistakenly claims that Senior Pilots are part of the reason that Junior Pilots' pay is lower. The reality is this- Senior Pilots, by definition, make up a small portion of the Pilot Group, the junior Pilots make up the majority of the vote. Additionally, the Pilots who are negotiating contracts are not necessarily the Senior Pilots. At my airline, and at several other Majors, the Negotiators are often Junior Captains and First Officers. They are negotiating for Junior First Officers, "Senior" First Officers, Junior Captains, and Senior Captains. All Contracts have to be approved by a majority of the Pilots; Senior Pilots make up the the smallest percentage of any Pilot Group, so they are not in control of what passes. Often, Contracts are passed with improvements for junior pilots that outstrip the improvements for senior pilots. I have seen this happen, and if you are in this Industry a little longer, you will, too.
The real reason that Pilots at the Regionals are paid less than Major airline Pilots is that:
A) They carry less passengers (hence produce less revenue) and,
B) They are willing to work for less money in the hopes of getting experience to move on to a better-paying airline.
C) The Regionals are also able to pay less because they can cast a wider net for applicants, due to lower requirements. Many major airlines,including the one I work for, require previous experience as a Captain at a Regional (or military PIC experience), whereas during the last hiring boom at the Regionals, pilots were hired with the bare FAA minimums.
-- Capt Kaos, November 12, 2012
When the UAW strikes, the auto manufacturer(s) shut down, but still have all the capital and other fixed costs to support. When baseball players strike, the league shuts down, but somebody is still paying for the stadium upkeep, front office salaries, etc. When Boeing goes on strike there are no 'replacement workers' who come in and man the factories, and management still gets paid and the buildings must still be maintained and paid for. Your assumption that the pilots shutting down an airline gives them unsurpassed power (enough to extract 115% of profits) does not hold true in any other industry, so I challenge the premise.Do pilots have a lot of power? You bet. What happens when the aviation maintenance facility workers go out on strike? The SAME THING; the industry stalls. Likewise the machinists at Deere, or the Writers Guild for TV production companies. And yet the writers don't control the industry, nor the machinists at Deere. Perhaps your entire argument rests on a faulty supposition.
(No connection to the airline industry; not a pilot, maintenance or other worker.)
-- Rick Starr, July 21, 2015
The maintenance workers don't have the same power that pilots have. It is legal for a U.S. airline to contract with another airline and/or an independent maintenance shop for maintenance.
-- Philip Greenspun, October 18, 2015