"employee Cost...seniority(?), To Be Addressed"

[767jetz]

If I may emphasize more a bit here. During the good times legacy carriers do well and suffer during the down times but it's the LCC that does well ALL the time.

I strongly disagree.

Examples: People's Express, Air South, Ozark, Pan Am II, Air Florida, and many other LCC's that started strong, expanded fast, and are now long gone.

People's Express was the darling of the industry back in it's time, much like Jet Blue is now. I don't expect JB to disappear like PE, but they are enjoying their moment in the spotlight. Their expansion will eventually slow and their costs will mature. With more LCC's entering the market, LCC's will now be competing with each other instead of just poaching off the majors. When the economy rebounds strongly, competition from the legacies will get stronger. Some of the market share lost by the legacy carriers since 2001 will be recaptured, and the balance of power will once again shift. In fact it's already starting to happen for JB and Frontier. JB's earnings forecast has slowed from expected, and FNT lost $$.

 

[MrAeroMan]

I strongly disagree.

Examples: People's Express, Air South, Ozark, Pan Am II, Air Florida, and many other LCC's that started strong, expanded fast, and are now long gone.

People's Express was the darling of the industry back in it's time, much like Jet Blue is now. I don't expect JB to disappear like PE, but they are enjoying their moment in the spotlight. Their expansion will eventually slow and their costs will mature. With more LCC's entering the market, LCC's will now be competing with each other instead of just poaching off the majors. When the economy rebounds strongly, competition from the legacies will get stronger. Some of the market share lost by the legacy carriers since 2001 will be recaptured, and the balance of power will once again shift. In fact it's already starting to happen for JB and Frontier. JB's earnings forecast has slowed from expected, and FNT lost $$.

I disagree. Look at Southwest, Airtran and Jetblue. None of those companies are run like the ones you mentioned. This is a whole different market compared to when those airlines flew.
The market has changed forever and the fares that drive the majors profitability are not going to come back to the levels that were pre 9/11 ever. Price is driving the market now and the LCC's are delivering that to the market. By the time the legacy carriers "right" themselves on the cost side they will have lost major market share that will likely never come back to them. The LCC's have been expanding and taking market share for years and it's not slowing down. Look at the numbers and you'll see how much market share the majors have lost and how much the LCC's have gained. It's almost one for one on the percentage side of lost market share by the majors and gained market share by the LCC's. I agree their costs will eventually mature but the markets that they serve has hardly been scratched. If they begin point to point out of small sized cities you'll see even more shift and if they ever decide to offer international service that's a whole different ballgame yet again and it appears that is on the horizon for some namely Jetblue and AirTran.

 

[jimntx]

The market has changed forever and the fares that drive the majors profitability are not going to come back to the levels that were pre 9/11 ever. Price is driving the market now and the LCC's are delivering that to the market. By the time the legacy carriers "right" themselves on the cost side they will have lost major market share that will likely never come back to them.

I think anyone who says that price has "permanently" changed a market underestimates the ability of the American consumer to make dumb choices. At the time of the first Arab oil embargo when gas prices skyrocketed to 0.50/gal the gas guzzling 8 cylinder sedan was declared a thing of the past. Well, as a matter of fact, it was. It was replaced by the gas guzzling SUV (which, of course, everyone justified on the basis that it is safer).

 

[mweiss]

If I may emphasize more a bit here. During the good times legacy carriers do well and suffer during the down times but it's the LCC that does well ALL the time.

To be more accurate, the LCCs do well during good times, but not as well as the legacies.

People's Express, Air South, Ozark, Pan Am II, Air Florida, and many other LCC's that started strong, expanded fast, and are now long gone.

The industry is very different from 1986. The LCCs have gotten smarter, and the legacies have gotten weaker. The LCC class as a whole now remains marginally to very profitable in good times and bad.

 

[insp89]

To be more accurate, the LCCs do well during good times, but not as well as the legacies.

People's Express, Air South, Ozark, Pan Am II, Air Florida, and many other LCC's that started strong, expanded fast, and are now long gone.

The industry is very different from 1986. The LCCs have gotten smarter, and the legacies have gotten weaker. The LCC class as a whole now remains marginally to very profitable in good times and bad.

weiss, Can't agree with your statement that LCC's are marginally to very ? profitable.. Southwest CEO Parker stated in USA TODAY a couple weeks ago that the only reason SWA made a profit was due to fuel hedging.. Fuel cost is EVERY airlines headache, not just the so called legacies.

 

[mweiss]

Doesn't change the fact that they're profitable, though, does it?

 

[insp89]

Doesn't change the fact that they're profitable, though, does it?

If the fuel price stays high, we'll see how long profitability will last.. unless, of course, fares will begin to rise, Oh, wait a minute, they already have..

 

[PBIRAMP]

When Lakefield outlined the five dimensions of employee costs the one that strikes me the most is the word seniority! I believe the only reason for this is to merge USairways.If language of seniority is included for pay reasons it will probably be used for years of service in some fashion to intergrate workgroups,which will put Usairways employees at a disadvantage upon a merger.Once again this transformation plan does not seem to be the answer to the airlines woes,but giving time for a transaction of some type.I am not sure if all groups will give in to this issue but less years of seniority puts you closer to the street.And being close to the street anywway PBIRAMP will vote no to any seniority tampering in this plan.
If anyone else knows of another reason seniority is listed in employee costs I would like to hear your take on it. Thanks

 

[767jetz]

When Lakefield outlined the five dimensions of employee costs the one that strikes me the most is the word seniority! I believe the only reason for this is to merge USairways.If language of seniority is included for pay reasons it will probably be used for years of service in some fashion to intergrate workgroups...

I agree. That was the point of my original post.

I don't neccessarily think it would be used to the disadvantage of the US employees however.

If Lakefield sells his transformation plan to the employees on the grounds that US will eventually be sold, then he is smart to consider the effect of seniority. The years of service of US employees compared to that of any possible aquiring company makes US an unattractive buy. (IF the CEO of an aquiring airline considers labor peace and moral to be important.)

 

[PhillyFlyGuy]

I heard that the seniority issue is for pay purposes only. Employees will keep original date of hire for all other issues including M/A

 

[767jetz]

I heard that the seniority issue is for pay purposes only. Employees will keep original date of hire for all other issues including M/A

Yes, I've heard that as well. I'm not disputing that. Not trying to start a war here either.

I was just suggesting that IF any M/A activity happens between US and any other airline, then pay rates, which inturn affect quality of life/ retirement/ equipment flown (in the case of pilots)/ future earnings (ie: career expectations)/ etc., will be the starting point for any integration of employees. It will probably also play a role to some degree or another in future recalls and/or furloughs.

I'm sure date of hire will apply to vacation acrual, retirement calculations, pass travel, etc.

 

[FlyingHippie]

Any airline contemplating a merger in this day and age is out of their mind. This isn't going to happen people. If anything happens it will be an asset sale. Feel free to get in line and apply for the open jobs with the rest of the world. Sorry to be harsh, but that's the reality of the situation.

 

[insp89]

Any airline contemplating a merger in this day and age is out of their mind. This isn't going to happen people. If anything happens it will be an asset sale. Feel free to get in line and apply for the open jobs with the rest of the world. Sorry to be harsh, but that's the reality of the situation.

"If anything happens it will be a asset sale" Hey, Can I borrow your crystal ball ?? I can find better uses for it. :blink:

 

[ktflyhome]

Wow. I've never seen six weeks in the public sector before. And I thought I had it good when I had four at my top-out point. Granted, mine was at 100%, but still...

Mweiss: My sister has been with BlueCross/BlueSheild for over 25 years. She has had 6 weeks vacation for years now. A friend of mine at Dupont got 6 weeks after hitting 20 years. And I know a few others. It is rather common.

 

[dbcooper]

the following is from the CWA report on their June 2nd meeting with management in regards to the "seniority problem".

Management's main claim is that although Southwest pays $2 more
an hour, Southwest costs are lower because they have lower
average seniority. They stated that the average seniority at
Southwest is 5 years and the average at US Airways is 20 years.

Why would Southwest have lower average seniority since they have
been in existence for 30 years and it¿s a good job with low
turnover? Management candidly replied that there are three reasons.
1) Southwest has a policy of sustained growth, so that even
though they have a lot of long term employees, they also have
new hires that balance out the average seniority. (US Airways,
on the other hand, has a policy of shrinking the airline, which
produces a higher average seniority as they fail to hire new
people).

2) Southwest has never furloughed, so they have never gotten rid
of all their low seniority employees. (US Airways has a policy
of furloughing every passenger service position they can, which
results in higher seniority for those remaining).

3) Southwest has a good retirement system, so senior employees
are encouraged to retire and that lowers the average seniority.
(US Airways passenger service retirement plan is not adequate
for most employees to even consider retirement until the last
possible moment.)

CWA'ers pointed out that each of these three causes of lower
seniority are subject to management control. Southwest
management made good decisions, US Airways management made bad
decisions.

Management also presented
data from their other low cost example - America West. That
airline not only has a low average seniority (4 years) but they
also have 1970's wages. The top agent rate is $13.10 an hour
after 11 years (managements' dream come true!). But what was
even more interesting is that JetBlue has a higher starting
salary than US Airways ($10.50 vs. $9.52) and tops out at only
$.05 an hour less than US Airways ($20.00 vs. $20.05).

The good news is that US Airways passenger service employees
really do have competitive salaries, benefits and workrules.
That's why management has to concoct a ¿seniority problem¿ to
make their case for salary and benefit cuts.