Fun With Numbers

[BoeingBoy]

Lets have some fun with numbers. (PineyBob, you'll love this)

Dave Siegel in 4th quarter announcement:

"In the fourth quarter, for example, our labor expense for mainline operations accounted for 42 percent of total revenue, compared to an average of 33 percent for the low-cost carriers." Here ('bout 1/3 down)

Group Revenue from Passenger Transportation = $1,585M
Group Personnel Costs = $662M
% = 41.8

But wait, didn't he say 42% of "Total Revenue"?

Group Total Operating Revenues = $1,764M
Group Personnel Costs = $662M
% = 37.5%

Oh, oh, I see a little problem here. Dave wants concessions from mainline, so what are the mainline (Inc.) numbers?

Mainline Total Operating Revenues = $1,741M
Mainline personnel Costs = $598M
% = 34.3

Now, did Dave tell a lie, a d#$n lie, or just use statistics to paint the picture he wanted?

Jim

 

[Kev3188]

Hmmmmm....Interesting. Perhaps in CCY, 2+2+5? I imagine that each of the Big Six have/will have some of this type of spin in their reports.

 

[BoeingBoy]

Probably so, but the others aren't using the spin to pressure us for further concessions.

Jim

 

[Kev3188]

Jim--

Well, over here at the Red Tail they certainly are. It's a non stop blitzkrieg of propaganda in everything from our daily news bulletins to our employee paper. :angry: This, of course, is also one of the reasons they cited when deciding to not buy back employee stock they had issued in return for concessions in 1993 (although I think the pilot group was repaid, but I'm not sure).

 

[BoeingBoy]

Sorry, didn't mean to imply that the other carriers weren't using their spin to push concessions on their employees.

 

[Winglet]

The part you leave out is that ultimately Siegel, Anderson, Arpey, et al iare going to want you to work for less compensation than the LCCs. The reason for that is U is a major international airlines and it's fixed inherent costs are higher than LCC's cherry-picked routes and single aircraft type. So, logically, to Siegel & Bronner et al it's only right and necessary that you work for LESS money than a LCC worker, so U can be competitive. After all, it's "your" fault.

 

[Kev3188]

Yeah, it's interesting hearing all the doom and gloom from the CEO's, and then walking over to the next gate (WN's), where they make more per hour than you. Very frustrating.

 

[BoeingBoy]

Bob,

Well said. For the 4th quarter, employee costs at mainline amounted to 4.6 cents per ASM. To get to SW CASM, we need to reduce ours by 2.7 cents. There's just no way to get there without looking at the "other" costs that go into CASM.

Jim

 

[youngblood]

Jim,

Forgive me because I'm ignorant in alot of areas when it comes to figures and aviation. We're talking about cutting costs. I have a few examples - one of which was brought to my attention by an ex-pilot for Piedmont.

1. Tonight I witnessed not one, but several Shuttle America flights that were delayed tremendously or canceled due to maintenance. Albeit, I have no idea what the actual problem was, but I can conclude two things. We had many PAX that were extremely unhappy. Our compensation to those PAX will be in the thousands of dollars - between RTFCs, hotels, and ground transportion. Not to mention expenditure for baggage delivery and lost bags. Alot of the markets involved used to be operated by wholey owned express carriers. (i.e. Piedmont) IMO, wholey owned express operates much more efficiently than those who are not. Hell, they're some of the best in the business. Shuttle America is DEFINITELY not the only example. I have had problems with MESA, Chatauqua, and Midway (before it closed it's doors). Why replace something that works with something that doesn't work?

2. Top management and pay, bonuses, etc. Need I say more?

3. I'll say it again and again and again. Fare structure. We have proven markets that are sold out in first class because fares are being offered for approx. $500 RT.

4. Baggage delivery. How many thousands of bags do we deliver per month via delivery services? Why not bring back a few employees and pay them an hourly rate verses $10 to $35 dollars per bag. $10 for 300 bags a month is $3000 a month. You would never convince me that our own delivering would out price hiring a taxi service or delivery service.

5. One of the known saving graces for LLCs is that people can only book via the internet through their own website. We pay most websites other than USAirways.com a "fee" to sell our flights. Make our site better, hire more rsv agents, and eliminate the third party.

I can go on and on and on. But I won't. Maybe I am clueless - maybe not. I think the company would be better off if they just listened more to the employees and stopped propaganda via media. You can spout cost cutting measures, threaten all you want, but you can't tell me I'm worth less than what I'm making now.

 

[Gibstr]

"Figures don't lie, but liars figure"

 

[AtlanticBeach]

Lets have some fun with numbers. (PineyBob, you'll love this)

Dave Siegel in 4th quarter announcement:

"In the fourth quarter, for example, our labor expense for mainline operations accounted for 42 percent of total revenue, compared to an average of 33 percent for the low-cost carriers." Here ('bout 1/3 down)

Group Revenue from Passenger Transportation = $1,585M
Group Personnel Costs = $662M
% = 41.8

But wait, didn't he say 42% of "Total Revenue"?

Group Total Operating Revenues = $1,764M
Group Personnel Costs = $662M
% = 37.5%

Oh, oh, I see a little problem here. Dave wants concessions from mainline, so what are the mainline (Inc.) numbers?

Mainline Total Operating Revenues = $1,741M
Mainline personnel Costs = $598M
% = 34.3

Now, did Dave tell a lie, a d#$n lie, or just use statistics to paint the picture he wanted?

Jim

OK, let's all take a deep breath if we're going to talk about numbers. I'm not an employee nor am I a member of management. I'm a customer who can usually read balance sheets and in this case compare apples to apples. Airways and Southwest report things in such different formats that it is often difficult to make this comparison.


1. Boeing Boy, you are correct about the percentages. Let's give Dave a pass on this one as he can claim that he "mis-spoke". It's easy to talk about gross revenue when you really mean to refer to operating revenue.

2. Labor costs are "33% for low cost carriers". Let's look at Southwest. According to their annual report, it is 40.7%. 4.1 cents per ASM out of total operating costs of 7.6 cents per ASM. Score a big one one for the employees. Looks like on a percentage basis US and WN were very close. BUT:

3. In the fourth quarter, US labor costs were 4.9 cents per ASM. That's the price of having a senior workforce. In retrospect (and it was suggested in 2002), early retirement packages would have resulted in a one-time charge and reduced costs long term. Further reduction of this cost should involve more efficient use of aircraft and crews. Management appears to be correct on this issue, but they have to lead by quickly presenting new utilization techniques.

4. Sixty additional mainline aircraft ain't gonna happen this year, if ever. Single digit increase in ASM as claimed on the conference call contradicts that rumor.

5. Management's biggest error and I know that I'll get plenty of PMs on this one is regarding fuel costs. There is a 0.33 cent differential with Southwest. $170MM a year.

6. Moving aircraft in and out of the desert, letting them time out and other maintenance issues excluding the S-checks. I have only owned 8 airplanes, but I know the problems in letting them sit around and settle when no one is flying. Stick with your best equipment and mechanics. I'm not sure of the cost to the company but based on a review of prior posts, the costs of musical airplanes after bankruptcy probably exceeded $10MM. Oh yeah, from a passengers standpoint, leave the flight numbers and equipment swaps to a minimum.

7. Now to one of labor's complaints. Management is generally not overpaid when compared to other businesses of this size and type. The recent RIF on the VP level was long overdue. Lost some good folks and others who were not pulling their weight.

8. The latest financials were a tightrope for management. They had to allay fears on Wall Street, the flying public and the press that liquidation was not just around the corner. At the same time, they had to make the case to labor that work rule changes are mandatory to decrease costs.

 

[mwereplanes]

How's about some comparisons for management pay?

Kelleher - Chairman of the Board $652,294 plus 8,570 stk options

Parker - CEO $536,060 plus 12,024 stk options

Barret - President and COO $616,360 plus 7,663 stk options

Kelly - CFO $449,993 plus 21598 stk options

Wimberly - VP Ops $422,573 plus 17,981 stk options

These figures are for the year 2002 from the proxy statement. It is important to note that these 5 are the HIGHEST paid officers of Southwest. Any other executive VP or officer earns LESS than these 5. That is factual.

Anyone care to post what U's top 5 execs earned over that same period? Is is just the rank and file that are out of whack? As Davey said, everything is on the table isn't it?

mr

 

[76200]

Boeing Boy,


Well said.

My vote is for, " Use the statistics to paint the picture he wanted. "

Every time Siegel speaks, belive me, it is a well orchestrated statement.

Every time Siegel speaks concerning the employees, he is negotiating.

It's all about managing our expectations.

The usual items on the menu, of course :

1. Deadlines
2. Labor costs are too high
3. Oh, and of course, lets not forget about the LCC's

The # 1 target is Labor and associated costs.

Revenue should be # 1.


76200

 

[Bear96]

Revenue should be # 1.

Well that's a pretty slogan and all but with SW about to set up shop in PHL, revenues and yields are only going to be going one way and it ain't up.

You can keep on blaming Siegel for not being able to raise revenues enough, but really the problem is the invisible hand of the market causing the problem, thanks to the LCCs.

 

[76200]

Amount of time spent on labor costs are too high,
and LCC's .......... = 100 %


Amount of time spent on " THE PLAN "
to generate revenue............ = 0 %


We're still waiting for THE PLAN.


76200