Originally Posted by
Bucking Bar
Boilerpilot:
The whipsaw comes into play when negotiating rates for equipment. But the real factor for costs has to do with LONGEVITY.
The bottom and top longevity for my current position is $52 to $115. Removing first year pay, the range is $82 to $115. Then there are the costs of benefits, like vacation time, that increase with longevity. That is where the real difference is for established versus start up airlines.
I think we will see a trend where airlines that don't have good scope are "whipsawed" to reduce longevity. Mesaba serves as an example, as does ASA. Each time the airline is in crisis mode senior pilots leave for better. Then they gain the advantage of lower longevity and lower costs on the upswing with growth until they get top heavy and the cycle repeats.
I understand that whipsaw does in fact provide results, but even if you consider doubling the salary of a pilot, we're only talking about a 1% or 2% increase in costs because of those pilots. The costs of having multiple management teams, dispatch teams, scheduling teams, facilities, etc etc etc FAR offsets the cost of even a 2% increase in costs because of the pilots.
The profitable model of outsourcing does indeed work for companies that outsource an entire branch of labor, however, you negate all cost savings when you have an outsourced and a non-outsourced group of labor doing the exact same thing, because of the (in this case) legally mandated overhead required. For example, Boeing outsources much of its composite manufacturing because it makes sense to not have to pay start up costs for facilities, training, and patents and intellectual property (that's a big one) when there already exists a company that has all those things. If Boeing tried to outsource its composite production because of a $10 an hour wage difference, but it already had a production facility, the expertise, and the training done, they would end up losing money on the deal because of the increased overhead costs they would incur.