SkyWest Airlines Flight Attendant Contract Negotiations Update May 3, 2012
SIA has worked hard to ensure that our Flight Attendant contract is the best in the regional industry. We are the second-highest paid regional Flight Attendant group right behind Delta’s wholly-owned (and struggling) Comair and most of our competitors are working under expired contracts. SIA is proud of the role that we have played in pushing our pay packages to the highest levels of the industry.
The initial contract negotiation meetings with SkyWest senior management has revealed a great deal of research by the Company showing that SkyWest Flight Attendants are at the top of the regional industry, both in work rules and compensation. Their main point of argument is the question of how can SkyWest increase Flight Attendant pay scales while keeping current partners and acquiring new opportunities in the highly competitive regional airline business.
Based on this question, your SIA Board has spent a great deal of time researching and verifying the data given to us by SkyWest management, and we have compiled a series of charts and graphs for Flight Attendants to review and discuss. We have used the Profit and Loss statements as reported by the Department of Transportation (DOT) of all regional airlines to test and verify management’s claims.
In the months to come, we expect to have more information and insight to share. Included in the charts and graphs** below, you’ll find profiles for operating profits/losses, a graph of SkyWest’s recent performance and an industry-wide examination of labor costs. A comprehensive survey of Flight Attendant pay scales throughout the industry is available on SIA Central (www.siacentral.net).
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Figures 1 and 2 show the profit and loss of our peers and direct competitors in relationship to SkyWest through Q3 2011. While Q4 earnings for 2011 and Q1 for 2012 have been announced by most carriers, they have not yet been posted by the DOT. As this chart and graph show, SkyWest’s profits have declined despite steady top line growth (and increased overhead).
(Figure 1)
(Figure 2)
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Figure 3 shows SkyWest’s profits (in millions) for each year from 2003 through Q3 of 2011. Although the DOT has not yet posted the 2012 profit & loss statements, we know from the earnings call and subsequent postings by COO Chip Childs that SkyWest’s profit margin has dropped to that of the level of 2003. This is also the reason we have not seen a Financial Performance Reward payout for the last two quarters)
This chart in particular showed SIA that the data provided by the Company was accurate. SkyWest has grown yet the 2012 profits have come back to the 2003 level.
(Figure 3)
SIA next looked at the overall labor costs of all the regional carriers over the same time period. This includes all labor groups, salaried employees and additional compensation.
Figures 4 and 5 that SIA compiled are particularly eye-opening. Labor expenses directly impact SkyWest’s ability to compete for contract flying. Fuel, and provisioning of a major partner’s product will be roughly the same for all. The carriers who are able to underbid SkyWest on contracts are the carriers with much lower overhead costs, and labor costs often become the determining factor in competing for contracts. The charts show where SkyWest’s labor costs are compared to our competitors.
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(Figure 4)
Figure 5 provides a striking visual. The two carriers consistently underbidding SkyWest are Go Jet and Shuttle America. These are both very young companies. Shuttle America commenced operations in 1998 and Go Jet commenced operations in 2005. The majority of their workforce has less than six years of seniority. This keeps their overhead extremely low which allows them to underbid regional airlines like SkyWest that have been in business for 40 years, and SIA has been successful negotiating contract increases for many years with a much more senior workforce. Pinnacle comes nowhere close to SkyWest in terms of labor costs, yet they have filed for Chapter 11 bankruptcy protection/reorganization and undoubtedly they will emerge much leaner with potential to win contracts with lower costs per departure.
(Figure 5)
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Your SIA Board has also reviewed the state of the regional industry as a whole. Taking all of the above charts as well as other research into consideration, SIA cannot dispute the claim printed in many industry publications and cited by the Company that the current regional business model is evolving. It also gives much food for thought for SIA when determining the length of contract we should negotiate. With all of that said, what is in the immediate future for the regional industry and for SkyWest Airlines? Things could improve or they could get worse – either possibility must be considered.
The above information is just that – information. Coming to the table with an understanding of our position as it relates to our direct competitors helps your SIA Board make informed decisions about the direction to proceed with contract negotiations. We encourage you to take the time to look over this information, as well as the data the Company has provided. Please don’t hesitate to let us know if you have questions. Certainly your SIA Board would like to see an increase to our pay scales and work rules. Understanding where we stand today and what we’ve been able to deliver in past negotiations will ensure we come to the table on a realistic, fact-based platform that will allow us to get the best contract possible.
The focus and topic of the next discussion is our contract negotiations list.
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**All data has been provided by the RITA (Research and Innovative Technology Administration) a division of the U.S. Department of Transportation which performs comprehensive transportation statistics research, analysis and reporting. SIA makes no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents and disclaims liability for errors and omissions.
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