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Old 01-05-2011 | 05:04 PM
  #56045  
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Originally Posted by sailingfun
The cost savings to outsource flying is always carefully monitored by DALPA. The ALPA economic analysis team is considered by even most airline managements to be the best around. This was especially true in the 1113 contract where the company had to put their case for outsourcing before a judge. The reality is that the company numbers and the EF&A numbers have always been very close. There have been differences but never large. The intangible in outsourcing is how much future revenue is lost due to poor performance of the contractor. The actual costs to outsource verses keeping the flying have rarely been in dispute.
I have a lot of respect for ALPA's EF&A department WRT many things, but they are not infallible either. While I bet they have some very accurate cost numbers on some static things, I believe those numbers do not nearly take into consideration the multitude of unintended consequences. Sure they can show how outsourcing to DCI carrier #8 compares to DCi carriers #1 though 7 and how they all compare to mainline. However I do not believe that ALPA's EF&A department, and certainlly not the company's esteemed and accredited geniuses come anywhere close to calculating the full ramifications and unintended consequences of their outsourcing schemes.

When DCI #3 cancells a flight because they don't have a flight attendant even though DCI carriers #4, 6 and 8 do, does that make EF&A's initial analysys? I doubt it. When DCI #2 needs a tire but doesn't have one, but DCI #4 right next door has spares but its a different type of aircraft, does EF&A calculate that? You mentioned the lost customer issue which is valid, but the unintended cost creep of numbers that may look solid under EF&A's microscope, but based on a low ball bid that even a cut throat underbidder can't honor because they bid below costs to get the work and then the operation gets trashed, suddenly the numbers move. Many DCI carriers go through the binge and purge cycle of crisis hiring only to furlough only to recall only to have no idea how to plan and there is a cost to that and I don't think ALPA's EF&A has a clue because no one does until it happens. DCI litigation and injunctions were never in the initial cost out either, but they are very much real. And what about the cost when a megalomanic in charge of a large portion of DCI doesn't get his way one day and pulls an IndyAir with a Billion dollars in the bank? Even if its not successful, how much revenue will it bleed us before its put down? EF&A numbers have been proven comically invalid on all those glorious 50 seaters that the business travel supposedly was in love with and overnight became massive liabilities but the company had long term binding agreements with ACMI carriers to fly them.

Can someone do simple math like mainline would cost X$ to fly the EMB170 and RAH will cost Y$ to fly it. The deal is inked, the bonuses fly, and all the sudden we are subsidizing a competitor who best case is only a nominal negative pressure on yields in certain markets, and worst case a lot more than that some day. Ditto for all the outsourcing schemes we're in bed with.

I bet Boeing's EF&A geniuses got pats on the back from all their white papers about how glorious their cost saving outsourcing for the 787 was going to be. Real numbers, real dollars! Whoops.

Sorry but I will never be convinced that an airline that outsources half its flights is correct in doing so. I think its a pee poor business practice and the company and ALPA need to both come up with a better formula to predict its disasterous costs and inintended consequences. Not just operationally either. Watch as outsourcing present and future negatively effects our section 6 dynamics in the not too distant future. Even if we get a "big raise" it may be less than what we would have gotten had we not outsourced, and/or we may be asked or even severely pressured to outsource more to get a sizeable fraction of the restoration we are owed, which will, of course, create even more negative pressure years down the road. And I very much doubt ALPA's EF&A takes that fully into account. They haven't so far, that's for sure.