Thread: Compass updates
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Old 05-10-2010 | 06:10 PM
  #601  
boilerpilot
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From: Satan's Camaro
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Originally Posted by mynameisjim
Flow up keeps the longevity down and therefore keeps costs down. Replace a Captain making $100/hr with a new Captain making $60. That's one reason I can see flow up being beneficial to the company.
Bingo. Not only that, but at a certain point, training becomes a fixed (albeit high fixed) cost. Therefore, a flow can actually save a company money because a flow can be viewed as a quantifiable benefit for a new pilot joining the workforce at Mesaba or Compass. Because the new hire perceives this as value, they can delay other costly enticements such as health care improvements, salary improvements, and work rule improvements. Basically, training costs are not linear: When you have one person, it costs $50,000 per person to put them through class; When you have five, it costs $15,000; When you have 10, it costs $9,000. Greater cost, yes, but marginally. So if you're going to run a class at Mesaba or Compass anyway, it pays to put as many people through as possible to help keep the per-head cost down. Of course, all of these benefits are on top of the benefit of taking a $100 an hour captain and replacing them with an $80 an hour captain ($20k savings), etc.

I'll use Mesaba as an example, because I believe their pilots have, on average, more longevity. You take 9 pilots from Mesaba. This results in $100k in training costs to replace these people at the bottom, but if you take into account, let's say, a $10 per hour difference in pay, that gives you $90k per year in savings. Now that you're putting through a class of 9 people, you might as well double that to 18 people, which results in a training cost of $150,000. Despite $150k being greater than $100k, you are now saving $180k a year (savings which are reoccurring). This all means that the more people you bring, especially at a senior airline, the more money you save.

Believe it or not, accountants do actually think this way (and for once, I would agree with them). Do I think more people will flow? Who knows, but I will say that this is the reason why I wouldn't be surprised to see more people flow up than just the guaranteed numbers.