I'm going to plagiarize myself

This is something I wrote last night in response to a major airline widebody F.O.s comment that NAI would lead to him losing his upper middle class income:

It's not that I am for or against it, it's simply that I strongly believe the protectionist strategy is doomed to failure. That failure will result in your fears coming true.

What is happening is simply the marketplace driving demand. ALPA has tried in the past to drive the marketplace with spectacular failure. Their strategy against the RJs doomed an entire generation of pilots to not just something less than upper middle class, but actually not even being able to achieve middle class. That same strategy left you an F.O. for years.

Back in the late 80s and early 90s the 50 seat regional jet was first coming onto the scene. ALPA tried to scope it out of the marketplace instead of embracing it. Why? Because they often sacrifice the bottom two thirds of the list so that the top third can protect what they have. Instead of a strategy to get the new jets onto the mainline certificate they tried to limit their numbers. That worked out great for those in the top third of the list that were able to retire before their pensions were stolen from them. For the rest of the nations airlines pilots, and aspiring airline pilots, it was an unmitigated disaster.

Now after decades of pain the airlines are healthy. But are they really healthy? What they have done is to consolidate and restrict seats so that the airplanes are flying with the highest load factors ever. That means that not all demand is being met. When that happens there are bound to be opportunities in the marketplace for start ups to flourish.

Even in this last two decades of pain new entrants have started and flourished. Those Lost Cost Carriers, such as JetBlue, Spirit, and Allegiant are operating hundreds of airplanes with lower paid employees and lower operating cost than the majors. Has that doomed the major pilots to lower salaries and a plummet from their "upper middle class" life to one of poverty and starvation wages?

Of course it hasn't.

NAS or NAI is planning maybe 20-30 787s flying internationally from Europe to North American and Asia. That is a fractional percentage of total demand. But, some of the demand they are generating is new demand that would never have been there if it were not for their low prices. So they themselves are hardly a threat.

That brings us to ALPA's fear. That "flags of convenience" will be used for all airlines everywhere and all of our jobs will be outsourced to Liberian pilots. Makes for great reading and actually does engender some level of concern for the uninformed. I just have to ask, how many pilots are there in Liberia? or Thailand or Singapore, or in any of these worrisome countries? What is their barrier to entry? Is it low or high.

In other words, how the heck are Liberians going to afford a couple hundred thousand dollars to learn how to become airline pilots so they can steal American pilot jobs? It's not like ship workers who can pretty much jut show up at the dock and get taken aboard for a trip (okay, that's an exaggeration, but the point is similar)

Supposing they could, would the regulators of the USA, EASA, etc even license them. Could they get right of residency or work permits for U.S. or European carriers?

To be honest, on that front I'm more worried about the seemingly endless supply of rich British kids who are buying their own type ratings to start working for Ryanair and Easyjet and then go off to Emirates, Etihad, etc in search of greener pastures. They are the ones who are keeping the supply high and salaries low. Not Liberian pilots.

Back to the fundamental flaw in ALPA's strategy. Protectionism never works. It may delay and allow an entrenched business to continue on it's present path for a little longer, but in the end the marketplace drives demand. Those companies who can innovate, lead, and be creative will fill the market's needs.

Look how poorly Metrojet, Song, and Ted did. A delayed response to the low cost carriers with little creativity that actually ended up hurting the parent company. USAir in their brilliance put Metrojet flights out of LGA to Florida destinations. Flights that were being served with high load factors by mainline with high yields. What the heck were the managers thinking? They actually put a bunch of seats on sale that never needed to be put on sale. All those "airlines within an airline" failed miserably.

Long haul LCCs are coming. They already exist in much of Asia with airlines like Scoot, Air Asia X, JetStar International, etc. The British and other European countries have had their version of those even longer with the "tour company" airlines like Thompson, Arkefly, and others. There is no way they can be stopped because there is demand for them.

Worldwide passengers numbers are increasing due to population growth and due to increased incomes. Twenty years ago very few people in China could afford to fly on an airplane. In fact I remember going to Taiwan in 1995 reading an article that there were only a little under 400 total commercial jetliners in all of China. Today there are well over a couple thousand. And guess what, those pilots make less than you do. Has that driven down your salary? Lion Air in Indonesia didn't even exist until 2001, Now they have close to 200 airplanes. That's all growth that is meeting demand. I didn't even touch on India, The growth there in the last 20 years is also phenomenal, as it is in the Middle East. Much of the Middle East growth is due to the Indians travelling to Europe and North America not getting their needs met by local airlines.

And that last sentence is the crux of the matter. U.S. airlines will get destroyed if they fail to meet the demand for travel to North America. This strategy of reducing capacity, or growing slower than demand growth, is going to come back to haunt them. Why? Because it is leaving room in the marketplace for new entrants.

Looks great in the short term. They are filling airplanes and making record profits. Makes the MBAs look like heroes and gets them big bonuses.

Just think about this in numbers. Outbound Chinese tourism to the USA is up 20% in 2014. It will reach over 2 million this year. So let's say it only goes up 10% next year. 10% of 2 million is 200,000. That is 200,000 more people who need round trip flights from China to the USA. Are the U.S. carriers keeping up with that demand? If not, why not?

Look to Europe. Sweden's inbound tourism to the USA is expected to be around 450,000 people in 2014. That's up over 12% from 2013. Looking again in numbers, let's say they have 10% growth in 2015. That's 45,000 more people who need round trip flight across the Atlantic or 123/day just from Sweden.

This while the major U.S. carriers are only increasing capacity at 2% across the Atlantic. So is it no wonder a new entrant is coming in to fill the need for the demand?

I submit the U.S. majors and ALPA members need to stop this protectionist baloney and get on the ball of helping get more flights and more route rights for U.S. carriers on international routes. Start a letter writing campaign and petition to get more access to the Chinese market; more access to other Asian markets; more access to India. Go out and capture the demand. Get the revenue.


That is how you keep your upper middle class job, not by building a fort and hiding in it.




Typhoonpilot