Originally Posted by
scottm
$400k/yr for five years? Not in this country, not even including 401k and occasional overtime. And especially not for the large number who will never make widebody captain, or will only make it as junior on reserve at a base far from home and family.
I'll use the current CBA at UA. In the final year of the contract, 2017, retirements will be really spooling up. A widebody captain will be at an hourly rate of $278.36. If he gets 84 hours of credit every month, he'll make $280, 586. The company will then kick in 16% of that towards his retirement
no matter what the pilot does. That's another $44,893, which is right up against the IRS limits. If he chooses to take advantage of the IRS catch-up provision, that's another $14,011, and while that is money from his own pay check, it's generating growth in his retirement fund. So, using the first two numbers, we're at $325,479. If we split the difference on the 14k, we're at $332,000. The out-of-pocket value of our health insurance (at retirement age) is probably close to $50,000, which brings the value to $382,000. This pilot has not picked up a bit of extra-flying, nor cashed in his vacation.
So, yes, it's a realistic number for the senior captains that are still on property, and that is who I was referring to. You are correct that the cadre of pilots in this elite group will be very small, but don't kid yourself---aggressive 737 captains can clear $300K a year. And we haven't even discussed the rates that will be in a effect beginning with the next contract.
I disagree that airlines have had any form of capacity discipline. Even as they descended into and through bankruptcy, the financial press was full of criticism for their lack of capacity discipline. Crandall and his peers at other airlines were ruthless in dumping extra capacity on a market to squeeze out smaller competitors, even at a loss, that was how they competed. Network size was king, even if smaller routes didn't make money. The whole regional airline system was expected to lose money, and squeeze concessions out of unions, which it very much did. While the mainlines grew their regional affiliate flying rapidly, they shrunk their mainlines reluctantly and haltingly.
I'm not sure why you mention debt. Exceptionally high profits indicate demand is well above supply, that means there is significant room for more profit through expansion, room for growth. More profit means more debt can be serviced or retired, more profit is never a bad thing.
Note that I said the discipline was brought to bare in the post 9/11-world. It wasn't overnight, but that's when it happened. Mainlines shed airplanes they didn't need, and ticket prices finally began to go up--and stay up.
The regional system was never expected to "lose" money. What killed the regional airlines was the fixed-price fee-for departure model. That was attractive to the majors because it allowed them to know exactly what the cost of regional block hour was going to be, and it was attractive to the regional because it was guaranteed revenue. Prior to the FFD becoming standard, it was very common for regional carriers to get a fixed percentage of each ticket price. At Comair, where I was, we got 35% of every ticket that Delta sold on our flights. We also had our own ticketing and reservation system, and any tickets that we sold, we kept 100% of the revenue. That's how Comair became, quite literally, the most profitable airline in the world prior to the purchase by Delta.
As for debt, I mention it because the majority of the debt that was taken on post 9/11 was not for growth or expansion. It was for survival. The airlines borrowed billions in order to buy them the time they need to restructure and clean up the messes that could no longer be avoided. Debt can be used for growth, but it doesn't have to be (Southwest had virtually no debt until they bought AirTran; they pay cash for each plane they get, and while their growth was slower, it was more controlled and more profitable in the long run). Debt can also kill a company, so it needs to be addressed (it sank Eastern, and very nearly killed both USAir and Delta). In the case of the airlines the last several years, they needed to start producing profits just to avoid paying usury-level interest rates on the money they had to borrow.
Another way to look at the effect of debt is this: SWA has the highest hourly rate of pay and the highest min-day value for the equipment they fly. They openly discuss the fact that the reason this is so is because they own the planes outright. The difference in pay from their employees to those at legacy carriers is money the legacy carriers have to use to service debt or pay leases on planes they don't own.
I do agree that the growth in the regional sector hurt mainline pilots, but that's only because the mainline pilots were so short-sighted when the RJ came into the picture. It still hurts them because mainline and regional contracts have different pay rates for the same planes, and that brings down pay across the board.
Reservist Kinda sick of hearing there will "never" be a shortage at the majors.
Only the regionals huh?
Isn't that "regional" flying needed by the majors? You think they'll sit idly by while routes and aircraft go unstaffed? And They're unable to get passengers into hubs to get on international "mainline" flights.
All the flying is eventually going back in house, the first ones to do so will be able to staff their network, the ones that don't or are slowest are going to have EMB 170s and CRJ 900s sitting on a ramp somewhere with no one to fly them. Call it what you want.
You'll note that in my post, I said that "something will happen to change the market for pilots." I agree that bringing it back in house is one solution. Another is a true, no funny-games flow. The shortage will hit the majors in the sense that regional feed is needed, but it will be sometime before they themselves can't find pilots.