speedbird86 said:
I never understood why management wanted to shove parity+1% down our throats. But it just seemed like a stupid business move during a time when lower wages should have been the smart thing to do. :blink:
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A fairly wide-spread sentiment, at least in hindsight. As for being a stupid business move, one needs to look at the environment at the time that decision was made and what happened to make it look stupid in hindsight.
Of course, when everyone talks about "parity + 1%", the emphasis is on the pay aspect and the productivity enhancement components are forgotten (or seen as better days compared to current contracts). But "parity + 1%" was a package deal - not just pay.
As for the environment, the network carriers viewed each other as the competition. The LCC threat was beginning to be countered with Metrojet, Continental Lite, Shuttle by United, and Delta Express (the 737-200 operation, not the RJ operations). US Air (at that time) had among, if not the highest, cost structure and employee costs were one factor.
So the thinking was that if US could get employee cost per block hour down to the level of the perceived competition, that part of the problem would be solved. That was the purpose of the "parity + 1%" package. To give Wolf credit, he also started working on another component of the US cost disadvantage - the hodge-podge fleet - with the Airbus order. Apparently, though, Wolf soon decided that there was neither time or money to transform US into a lower-cost carrier capable of competing with the other network carriers so he turned to a merger as the solution.
As has been the case repeatedly, however, little or no effort was made in attacking the other factors that resulted in US having a higher cost structure than the other network carriers, much less the LCC's.
So "parity + 1%" failed for at least two reasons.
- A somewhat misguided, though possibly understandable, view of who the competition really was, and
- A nearly total disregard of all the non-employee factors that resulted in US having a higher cost structure than the other network carriers, much less the LCC's.
The question today is "Are we seeing history repeat itself?"
Through 2 bankruptcies, we've seen efforts focused on lowering employee costs but little effort expended on lowering the other costs that contribute to our high overall cost structure. We've seen a sort of "parity + 1%" solution emphasized - this time with the LCC's as the target competition. Again, a merger is seen as the answer.
Assuming that the merger goes through, only time will tell if Parker and his management team will be able to finally get the US cost structure down to a competitive level. The employee cost portion of the problem has been handed to them on a silver platter, thanks to 2 bankruptcies. The rest of the problem is much harder to attack.
Jim
