Originally Posted by
Ray Red
I'm not a finance guy but how would DL's bottom line look like if DCI disappeared? Every passenger that gets onto a DCI flight is either:
1. Flying one leg on DCI
2. Connecting to a DCI flight
3. Connecting to a DL flight.
If the mainlines are not worried about their regional feed in the next few years, they are foolish. DL seems to be the airline that is taking this seriously. What I DL doing is setting up Endeavor for a possible merger/staple down the road. Wholly owned, procedures and manuals aligning, etc. When the staffing gets critical they can flip the switch. If the entry level job at DL is an RJ FO at 70k+ a year they will have a line out the door. Pilots leave in droves from other regional carriers and the competition suffers.
I know a senior check airman.
Bingo. But I wouldn't bet on a merger or staple. Delta can just move the aircraft from the Endeavor certificate to the DL certificate, interview and hire the pilots it wants, and can the others. Why would you merge and pay a Senior captain DL pay rates when you can move the planes, hire them as new hires and pay them year one pay?
I live in DL country, have a lot of friends there, and commute on DL all the time. Everyone you talk to thinks there will be little if any outsourced flying at DL in ten years.
Pilots have a problem thinking like accountants. Its all about saving cost and maximizing profit. You outsource something because the hit you take in quality is greatly offset by the reduced cost. If the product you are outsourcing has little if any cost savings, why outsource it? Then you insource it.
Right now Endeavor is paying $20,000 extra a year which is approximately $20 an hour. New hire pay rates are $25 an hour. If Endeavor is forced to pay 200% for pickups then you are producing the product (flying) for $70/hour ($20+$25+$25). What is Delta's new hire payrate on the 717? $70 an hour. Its not just Delta. TSA just got a $10,000 bonus plus everyone can see 200% coming like a freight train. So we will potentially be performing flying at $58 an hour ($24+$24+$10) and United's new hire pay rate is $66 an hour.
Keep in mind under these fee for departure contracts regionals are guaranteed a profit margin so mainline has to pick up the extra cost to guarantee that margin
The numbers are similar when you look at CA rates vs CA narrowbody pay rates. So if you don't have huge savings anymore then why are you going to outsource? Insourcing will be the trend and in 5-10 years it is likely all the large RJ flying will be perfomed at mainline and the few regionals that are left will go back to flying pro rate contracts to small destinations with EMB 170 and MRJ type aircraft because they have CASMs that are competitive with narrowbodies.
Everyone that wants to be at mainline will be. Some will choose to stay at regionals because they will return to more profitable and stable pro rate flying similiar to what they performed in the late 70s and mid 80s before the advent of fee for departure contracts.
Endeavor is ahead of everyone in the bonus game because they got to the critical level first. As this shortage progresses, more and more bonuses will be offered to the point that even the slowpokes at United will figure it out.
I give RA and his NWA boys at DL credit. They have always been ahead of the curve when it comes to the accounting. They are ruthless as hell and would sell their mothers to make a nickel, but are very shrewd businessmen.