Originally Posted by
Boeing Aviator
Spirit has an agreement in principle for a 45% pay raise, Virgin just got a sizable raise in their Alaska merger contract. Frontier and JetBlue are next up both with big pay increases. I believe Allegent got a sizable raise a year or two ago. It’s called pattern bargaining and it’s ALPA’s wet dream. The LCC’s ability for profit and to survive on extremely low fares reduce significantly as their companies mature with higher wages and higher longevity employees. Kind of levels the playing field.
The problem facing United is that margins have been dropping for the past few years. Airlines stocks have been performing well because investors believed everyone would reduce capacity growth. But the other day, United just created a more margin pressure by announcing more capacity growth. The big markets are oversaturated with mainline and LCCs already! United wants to significantly expand the regional cities, but where does United think the regional pilots coming from? That plan might be in limbo unless United starts raising RJ pay by 50%.
Can United really compete longer term with the LCCs? LCCs don't have to pay for the highly unprofitable regional jet routes like mainline. United is not structured to be a LCC. United is heavily exposed to international and it's not as profitable compared to domestic. Norwegian and other European LCCs pose a major threat to international profitability. As I was reading through the United investor presentation, they have 90 aircraft to park (return to the lessor) in an economic downturn. But what about the financial obligations on the other 630 jets? United has ****ed off investors with their growth plans. It's going kill margins, but good for customers that don't want to pay more than 100 dollars for a ticket. Can United execute? I don't think so.