Originally Posted by
scottm
The majors are all hiring as fast as they can, working their existing pilots as hard as they possibly can, they are unable to grow beyond their pilot manning levels. Maybe they choose not to grow, even though their existing flying is wildly profitable, but airline executives have never before shown individual restraint out of concern for industry health or profits.
There are no CBAs that limit mainline growth, even pilots seem to have forgotten that mainlines can fly small jets. Some mainline pilots will fly them cheaper than the regionals now. The majors are milking the last of the money out of the regionals, before regional costs spike in a tightening labor market.
For mainline executives, the best thing about watching their low-cost competitors shrink, will be all the seasoned airline employees on the street looking for work. That and empty gates and slots, idle equipment and airport space, and a drop in jet-fuel demand. Mainline costs will go down, even if they have to offer signing bonuses to pilots. This gift will just keep on giving.
A bit of history is in order here. After deregulation, airlines did not know how to operate in an unregulated market, and so most of them screwed it up in fabulous fashion: goofy city pairs, poor network management, new fleets, the airline-within-the-airline fiascos. That was the order of the day through the 1980s and early 1990s. The result was predictable: many failed.
In the late 80s and early 90s, there was a gradual turnover of management as the older generation retired. The new generation began the imposition of containing capacity and doing a better job of controlling inventory (Bob Crandall at American was at the forefront of this, which is something he learned working for Hallmark selling greeting cards). Others followed, and eventually it was perfected, esp. in the post-9/11 world. None of the airline managers in that era were hold-overs any more. All had come from other backgrounds, and had a much better understanding of the value and cost of a seat. In fact, there is no commodity more useless than an empty seat on a plane that is pushing back from the gate--it can never be sold again.
In the last 10-15 years, airlines have shown phenomenal discipline in controlling inventory, and thus costs. It is that discipline that has allowed the industry to thrive, along with overhauls in the overall model, including some of the fluff in legacy labor contracts (not just the pilots).
The legacies may have pilots working more hours, but they still don't come close to the average line of a regional pilot, where line values start at 82-84 hours per month, while the min line value at a major may be 70-75, even when taking into account seasonal spikes in the summer. Throw in differences in vacation and sick accrual, along with the ability adjust schedules, and regional pilots still work harder.
Bare in mind as well that while the majors are "wildly profitable," all of them are dealing with sizeable debt loads that need to be addressed. Delta (I believe) has a total debt burden of $8-10
billion, and United's is around $14
billion. Those are big numbers, and both carriers are aggressively working to pare them down. If you think they're making money now, wait until those debt loads are reduced.
Remember, the only airlines that are making money strictly on their operations are Southwest and jetBlue. Everyone else is only making money because of ancillary fees.
As for growth, the reality is that there isn't much room for organic growth for network carriers. They already go where people want to go, and as far as the areas that they don't go, someone in their alliance does. There comes a point where it is cheaper to book someone on an alliance partner vs. opening a station on your own. The growth now is in total revenue, and that's where all the fees come into play.
The smaller cities in the US are about to learn that (cheap) air service is not a right, it's a privilege, and you will only have it if the demand is there.
The pilot shortage is indeed here, but it will be some time before the real pain is felt. I do believe that something will happen to change the market for pilots, whether it's more pay or some other incentive, but it will happen.