Kev,
I want to hear Dawg’s comments but since he can go for quite some time between posts, we need to keep the conversation going.
I am very glad that you said:
Your comment is dead-on accurate… but it isn’t just about AMFA. AMFA may have done a worse job of other unions than other unions and IAM might have done a better job, esp. during BK (both are hypothetical – not saying it is/is not true), but the fact remains that labor and management have an adversarial relationship in most US industries, and the US airline industry is probably out front for being one of the worst.
The reasons are simple. Companies, with any expense, asset, or liability want Control, Predictability, and Flexibility.
Obviously in a unionized environment, mgmt gives up control. Even if labor-mgmt relations are good, it is still a process of compromise and negotiation which can often take a lot of time. IN the US airline industry, history is on the side of difficult, long and drawn out negotiations.
That is all academic but the application is directly related to maintenance and to the AM maintenance JV.
The answer to all of the questions I raised above is MONEY – or because what DL did made financial sense – at the time.
But the better answer is that DL made a decision that made the best financial sense – and they had – and still do have – the flexibility to adapt to the realities of the marketplace.
DL didn’t need to shut down all of its maintenance operations… it focused on the part – airframe overhauls – that didn’t make sense.
Because DL outsourced a lot of airframe maintenance, it was able to close a lot of hangars around the system. And it focused on higher value work to keep in-house, the same kind that they could get a premium to do – and the same services which other airlines don’t do because they are more high tech, require considerable expertise, AND because they require lots of VOLUME to do economically.
DL has the flexibility to in-source what makes sense to do today and change to what might make sense to do tomorrow.
You need only look at the jobs that are returning to the US from Asia to realize that outsourcing manufacturing does not always produce the sustained results it once promised. The same principles apply to outsourced SERVICES.
You need only look at DL’s traffic statistics (released today for the month of August) to see why DL is NOT outsourcing more of its work, but actually insourcing.
DL’s MAINLINE capacity IS UP while its regional carriers are DOWN. Overall, DL’s capacity is DOWN which means its regional partners are absorbing the brunt of the decreases in capacity.
That trend will only accelerate with the removal of 50 seaters and the arrival of the 717s.
Compare that record to other airlines… I’ll give you a hint…. Even though US is the only other major that has reported so far this month , their regional capacity is UP 10%. MOST US network carriers continue to increase regional capacity.
How many major airlines do MRO work for their regional partners? If mainline FLYING is shrinking and regional capacity is increasing, then that is lost work.
If you are looking at the company as a whole, then DL is bringing jobs back while others continue to outsource.
Why?
MONEY… because as industry capacity is pulled, it makes more sense to remove CONTRACT capacity than to pull mainline capacity and make mainline less efficient, driving up its costs.
Could DL outsource more of its maintenance to Mexico? They sure could. But the answer to why they have not done more in the past is the same reason why there is little likelihood they will do it more in the future.
MONEY
They can’t get the costs out except in bankruptcy.
Now contrast this with the maintenance situation at other airlines, and labor in general. While not all airlines are engaged in continual war with labor, there is far more conflict than cooperation.
And outsourced work at other airlines is not only higher than at DL, but is increasing. WHY?
CONTROL, FLEXIBILITY, and PREDICTABILITY.
It is easier for other airlines to OUTSOURCE work than to risk losing control of the business to labor unions, or more specifically, the process of conflict and negotiation that marks most labor-mgmt relationships.
With multiple outsourcing providers, companies have the FLEXIBILITY to adapt to realities of the business. Labor contracts allow very little flexibility (in general) to what is obtained in non-contract employee or outsourced arrangements.
FLEXIBILITY most definitely means that at times some strategies are used to allow the company to adapt. DGS mechanics, RR employees in ACS are just a couple examples.
But the real question that has to be asked is whether current full-time jobs are being lost in the process. Unions will always seek to protect CURRENT and FUTURE jobs in that class/craft. DL has no allegiance to protect future jobs and has made no promise to do so.
It also is worth nothing that very few people will stand up for protecting future jobs, esp. if their current situation is stable and safe. For most DL employees they can say that they are as good as or better off than their peers at other airlines. There is little reason to attempt to protect future work as long as their current situation is safe and the company demonstrates a commitment to protect the jobs of current employees.
PREDICTABILITY means that you know costs will rise in a labor contract and there is little you can do to bring it down short of a BK. There are precious few examples of US airline labor unions renegotiating contracts to cut costs outside of BK.
Even if you look at the unionized companies w/ the best labor-mgmt relationships – WN and CO – they succeeded because they had low costs relative to their competition. It is a whole lot easier for mgmt to be cooperative and conciliatory than when costs are comparable to or above your peers.
The AA BK is a stark reminder that the process of getting costs down is brutal – and it absolutely will affect employees throughout the industry, including at DL.
While it may not be popular to say so, DL is willing to keep work in-house because its non-union workforce is more efficient and provides the flexibility to the company to adapt to the market when it is necessary to do so.
Look also at DL’s better relationship with DALPA (unionized pilots) than exists at other airlines that drives an environment that helps both. DL’s pilots are blasted by other pilot groups for giving away scope via 76 seat RJs. The DL pilots allowed DL to buy more but only if DL added more mainline jets and reduced overall RJ flying. And the DL pilots got a pay raise out of it all. Contrast that with other pilot groups.
If a company views an asset as a high-risk, low flexibility asset that locks them into escalating costs and gives them little ability to adapt to the market, they will seek alternatives – and often that is an alternative outside of the control of their unions.
But if they see employees as assets that provide the company what it needs while allowing both to win, then the historic confrontational environment is banished to – history.
DL employees are not going to buy the company “family and culture” line if the evidence is contrary.
The mindset that DL will outsource work because it can is a byproduct of the confrontational environment that exists at most airlines.
While companies and individuals can change over time, there is a constancy that should be used as the basis for gaining insight into the future. Tossing out a history of above average employee relations, including a history of doing a better job of protecting the jobs of DL employees in order to argue for something new is not only illogical but it also raises the question of why anything is discussed about the future if you can’t draw some experience and insight from the past.
BTW, with regards to moving the TOC, it's at least been discussed.
http://www.ajc.com/n...s-abound/nQTbc/
From the link:
"The airport’s biggest tenant, Delta Air Lines, also is looking ahead. CEO Richard Anderson said last week the airport could also expand by adding Concourses G and H, with Delta moving its hangars in that area to former Ford plant land the airport acquired last year."
As for the possibility of moving the TOC in order to expand the terminal, I will fully go on the record as saying that if Anderson or anyone else supports “moving” the TOC in order to built out the terminal, you can kiss the TOC and the jobs it has goodbye. A few jobs might get moved but the vast majority of jobs will not move – they will be lost.
ATL is big enough and there are other options to expand, including the south side terminal. And there is nothing that says the main domestic terminal itself couldn’t be razed to allow for new concourses. The road system at ATL is a disaster and isn’t getting any better.
You don’t move a major industrial operation. There is a reason why the land where the former Ford plant once stood as well as the former GM plan on the NE side of the city is largely vacant. Regardless of the industry, there are very few major industrial plants – and the TOC is an industrial plant and not just a bunch of hangars – that are MOVED from one location to another.
Beware of ANYONE who tries to argue any differently.
This would also be a good place to AFFIRM CATEGORICALLY that I am pro-success and not against ANYONE. I am not opposed to any person or any idea. Healthy dialogue requires providing evidence for ideas and allowing them to stand the test of time.
The notion that workers have to lose in order for management to win is a false dichotomy that flows from the failed labor-mgmt relations that exist at most US airlines.
Labor and mgmt CAN and SHOULD succeed – to each other’s mutual benefit. One side cannot gain everything at the expense of the other. But if one side is losing, then the system is a failure – and no can argue any differently.
I have every desire to see every airline employee AND company to succeed. TOGETHER.
It's a two way street foreign companies are beginning to show an interest in US manufacturing once again in right to work states. Airbus is building their facility in Alabama which will be more cost competitive than their France operations, Caterpillar (a US company) shuttered a plant in London, Ontario, Canada to relocate to Georgia. United Technologies (Otis elevator manufacturer) has similarly moved work back to the US from Mexico.
Josh
Aviation is a global business. Companies insource and outsource and buy and sell products worldwide. You can’t argue that it is ok for US companies to buy products from other countries if you won’t also acknowledge that customers in other countries don’t also buy services from US companies… and they do.
DL has a number of customers in other countries and the flow of services and revenue is one-way – into DL’s shops.
AM is a customer of DL Tech Ops as well as a supplier. That is why it is called a Joint venture. Lost in all of this rhetoric is that AM brings a lot of its work to DL.
Ouch. I had not seen that little tidbit.
I do remember Richard's statement about not being in the maintenance business. He has not changed since his Larenzo lawyering days.
The comments from Richard years ago at NW reflect the situation at that time. If NW didn’t insource, then maintenance was solely a cost base.
DL Tech Ops generates about $50M in PROFITS per year. Not revenue. Profits. Richard isn’t going to wipe out those profits unless he can find something else to replace them. Tech Ops generates the highest margin profits for the company.
BTW, your fearless leader is or has been in Paris, apparently talking with Airbus. DL has also reportedly signed an NDA with AA, as have other companies beyond BA and US as has been reported. Time will tell but I have a feeling the two events are most definitely connected.
