Originally Posted by
TOGA LK
This one is good, I disagree with most of it and here is why.
Most regional feed operates at a loss. From Delta or American's perspective regional feed is an onboard loss. This is very similar to a telephone company maintaining phone lines, installing fiber optic networks and the other plethora of expenditures associated with providing the entire service. What regional flying does provide is feed. Therefore regional feed in conjunction with larger transcon routes and international routes will typically operate at a profit. I once took a course that analyzed the costs of an American 767 conducting a transcon flight from LGA to LAX. After all things considered, the flight operated at a profit of just under $200, or about $40 an hour for each hour of the flight. Had it not been for cargo below deck the flight would've lost several thousand dollars.
I agree with most of that, and that is how DAL prices its tickets. I like how you use the reference to the show on AMR that is more than a few years old.
IMO one of the biggest reasons the RJ sector exists today besides labor whipsaw is that ALL mainline carriers do not have the balance sheets to hold those leases. They need risk sharing partners. Like a JV it is not the first choice for an airline, but it is a viable choice without too much upfront capital expenditure.
That is why, in regard to the 100 seat segment that we are all very concerned about, DAL NEEDS to pay down debt. If they do not we will be backed in to a corner once again. The outcome is known by the last decade of decline and the reaction by us, labor will be a lot worse, but to the airline, it will be a need for the route structure, not just a way to poke a stick in your eye.
From our perspective the overall operation has to stay profitable, not necessarily the feed. Typically the only people that generate a profit from regional flying are the actual companies providing such flying as they operate under a fee for departure. Therefore, when contrasting a contract feed partner in which Delta must guarantee a profit for their operation vs an owned subsidiary, the owned subsidiary can actually operate at a loss and in the larger picture, provide a savings to Delta. Either guarantee someone else a profit or take a smaller financial hit and record the loss on your own books.
For the most part Delta has contracted out most of the support infrastructure associated with flying. Whether the cleaners in DTW are cleaning a DC-9 vs an E-175, the costs are likely similar. Furthermore, rolling such feed into a larger operation would allow existing dispatchers and schedulers to pick up the existing equipment types without having to mirror an entire operation because it's operated under another certificate.
DAL has made most flights in main hubs serviced by the mainline above and below wing. Where the glaring differences come are these:
1) Interest rate on said jets due to the extra debt burden DAL would be liable for with all of these jets on their books. (Our credit rating would be reduced farther in to junk)
2) The overall benefits packages of mechanics, dispatchers and admin staff of regional airlines pales in comparison to that of a mainline. DAL for example has a very senior support staff. They still have pensions, better bennies, and medical. For example regional lead and OCC mechanics top out below 50K a year. Dispatchers used to top out at 35K before they organized at ASA. Yes, the majority of that cost passes though, but there is no way that those groups would not want the same benefits if those companies were folded in. That is where the lion's share of the cost is.
3) Us. Not as large as many think, but it still adds cost to the operation. If this was the only issue, then I agree, but after seeing how a regional airline does it, there are other costs besides us. (That is why Bar makes a great point in the fact that we can fly across certificates and that should be looked at)
When considering all the factors associated with regional feed, mainline pilots are not operating the aircraft because of our hourly wages, DCI is operating the equipment as a future insurance policy against labor unions. It's all about divide and conquer. In my humble opinion, ALPA is way off on their approach to recovering this flying.
Labor Relations are part of it and to think otherwise is naive. In the end of the day cost has a lot to do with it. I think that we need to seriously look at the cost of brining flying in below us. I would suspect that the company would want us to incur the majority of the cost. Why? it is easier, and that alone is the major detractor to trying to pull flying in that by all accounts will not pay for itself once the FFD agreements become amended. Many think FFD and the regional industry were one big Band Aid to the fact that there was not an aircraft with the economics to support the mainline cost structure. I agree with that in concept.
What has happened since that initial Band Aid was applied, has been sigificant downward pressure on wages and the overall quality of an airline career. That is undeniable. We we now have is airlines like republic ordering what are clearly airplanes that are viable at our compensation levels. Problem is that those jets will not be flown for what we would be paid. They will be paid less. Even at the same hourly rate for us (which will not happen) the benifits that go along with the job are way below what we have left. That in the end once again lowers the bar for all of us. The race to the bottom is economic. I hope republic proves all of us wrong. We need them to.
We also need another mainline airline to commit to 100 seat flying at mainline. No one wants to be the first, because if one mainline agrees to it and another gives it up you will see a major issue for the one that brought the jet to its mainline. It will be a cost issue. I wish DAL would commit as all are waiting on us, but wishing does nothing.