Originally Posted by
Truman_Sparks
Excuse me, but doesn't XJET ERJ side already have an industry leading contract in terms of pay, benefits, retirement, scheduling, and QOL? If not, who has better - especially in the 50 seat RJ market? The old ASA side is pretty much next in line in most contract categories, especially after all the bankruptcys, etc? Why all the chest pounding to get an industry leading contract? Your already there. Now, that said, neither side is even remotely suggesting you go backwards in ANY contract category.. The gains you get will probably be smaller than you expect, despite the economy of scale, etc. the whole 20-30% pay increase with full retro isn't going to happen. Going from the best contract to even way higher the best + just probably won't fly.
Look at the contracts of AWAC, Horizon, Eagle, Comair, and even the ASA contract and you will see that XJT had an all around decent contract but it was easily trumped by sections from every one of those airlines. They are asking us to go backwards in deadheading, retirement matching, PBS with a completely different scheduling section filled with gray areas and loop holes yet to be discovered, and they are looking for a lower sick bank acrual. I don't care about the hourly pay rate as I do about the work rules. No one is asking for 20-30% increase but a 2-3%+ a yr to keep up with inflation and make the SAME amount in buying power would be nice.
Originally Posted by
Reggie Dunlop
The other side of that argument is diminishing marginal return...which unfortunately where the regional segment of the industry finds itself. There are too many widget makers (50 seaters and the pilots that go with them if you will) bumping into each other on the factory floor. It has tipped over the top of the curve and is no longer an efficient means of production from the perspective of those with the capital.
You could grow any subcontractor to infinity and they would only get less efficient and more expensive at this juncture. Behemoth size is not necessarily a strength, and in this particular instance it is not. An increase in cost only furthers to sharpen the curve in the wrong direction from the perspective of labor. It happens over and over yet labor still buys into notion of a very broken pattern bargaining model.
We are not anywhere near the point of diminishing marginal returns. The erj side is planned to be refleeted and you can expect a common fleet across all branches of the company in 10 yrs(skywest, Legacy ASA, and legacy XJT). Even with different fleets we are expected to save 30-40 million a year when we are completely combined. That number will go up if we are all the same fleet.
This is a little different then the overly simple widgets definition from microeconomics. The more jets you operate allows for cheaper pilot and FA training, bulk prices on spare parts, better financing terms, lower management overhead as a % of revenue, and simplified payroll/benefits/HR. Even at the text book point of diminishing returns the costs of entry for a regional to compete are too high. This market favors bigger companies and that has been echoed by numerous financial guys in the industry (boyd, Mann and company, and other analysts.) They predicted 4 massive regional airlines surviving in the next decade. Most agree on Skywest, Republic, and the remaining two are an unknown.