sqwkvfr

The discussion isn't about whether you or anyone, for that matter, cares about what others think or how either of us spends our free time, it is about how TheChow's point is correct.

It is.

g4giggity

U.S. Airlines Set for Pivotal Year for Labor - Barron's

disco inferno

Can you paste the article for those of us without a subscription?

fishforfun

Why are mission modes not acceptable to pickup but we can take as much open time as we want? That is completely backwards logic. And before anyone freaks out, I will not do either. Fly your schedule and nothing more.

rokgpsman

U.S. Airlines Set for Pivotal Year for Labor - Barron's


U.S. Airlines Set for Pivotal Year for Labor
Unprecedented profitability and generous wage increases from major airlines have elevated employee expectations.

November 24, 2015

Credit Suisse

Rising non-fuel costs are an increasing concern for airline investors when considering margin trajectories in 2016-2017. Open labor negotiations are popular topics since wages are the predominant driver of higher costs. We take a closer look at each airlines’ labor situation and the timeline and process for negotiations.

2016 is a pivotal year in the industry for labor. Only two sizeable union groups ratified new contracts in the last 12 months (American Airlines Group (ticker: AAL ) pilot and flight attendants) while there were three major rejections (Delta Air Lines ( DAL ) and Southwest Airlines ( LUV ) pilots, Southwest flight attendants). We count 18 amendable contracts (with most in active negotiations) across our coverage.

As fuel has declined, labor is now by far the largest component of airlines’ cost structure, averaging 30% of total operating expenses. 2016 will mark the seventh year of industry profitability, making this the longest up-cycle in the history of the industry. High-teens operating margins are about two times those of the prior peak during the late 1990s. Following the last extended upcycle in the late 1990s, generous labor contracts led to rising wage expense that weighed heavily on industry profitability after the cycle turned in 2001. In the following 10 years, nearly every major airline filed bankruptcy enabling a substantial reduction in wage rates. As benefits from post-bankruptcy restructuring diminish and contracts are becoming amendable, wage escalation is creating upward pressure on cost structures across the industry. Upgauging and productivity initiatives should help keep nonfuel unit costs sub inflation, but for several carriers we expect 2016 or 2017 could see above inflation unit cost growth when contracts with sizeable pay increases are ratified.

Unprecedented profitability and generous wage increases from major airlines have elevated employee expectations. Pattern bargaining is prevailing as groups look to recently signed competitor contracts and demand even higher pay rates. High expectations have led to numerous rejections of initial tentative agreements as groups hope for higher wages with fewer concessions in the next go-around. Concessions come in the form of profit-sharing reductions (or elimination in the case of American Airlines) or changes to work rules (including scope, flexibility, codeshares) that allow companies to improve productivity or generate more revenue. It seems unlikely management teams will reward contract rejections with meaningfully higher economics. We expect major labor deals will not be reached until mid-2016 at the earliest.

Alaska Air Group ( ALK ) has the most visibility, facing the least level of escalation and incremental expense before 2018. American Airlines is next with fresh five-year contracts for pilots and flight attendants, but remaining groups could add an additional one to two points to 2016 cost per available seat mile (CASM)-ex growth guidance of 0-2% if signed soon. Delta’s pilot contract is amendable Jan. 1, 2016, and negotiations continue after an attempt at an early agreement failed over the summer; as with the non-pilot group though, a profit-sharing trade should cushion the impact of what is likely a mid-teens increase in pay rates. United Continental Holdings ( UAL ), Southwest, Allegiant Travel ( ALGT ) and Spirit Airlines ( SAVE ) have multiple contracts up for renegotiation with varying (and widening) gaps to industry average. United’s renewed focus on expediting new and extended labor contracts make it the most likely to see deals ratified near-term.

-- Julie Yates
-- Parker Kim

fishforfun

Seriously, mission mode vs open time? Why not fly mission modes vs open time. Costs the company a heck of a lot more to do mission mode.

Vegaspilot

While I get where you're coming from, I think the general feeling is that MM is helping the company out of a last minute bind. Not to mention the way it's been used vs how it was originally conceived. MM is viewed as enabling the company to continue to do business as always so that's why it's frowned upon. Although honestly I'd just as soon see no one pick up anything...MM, OT or otherwise.

fishforfun

Agreed, if no one picked up open time there would be a lot of mission mode, correct? I believe we should fly our schedules and nothing more also.

BigTime

Mission Mode is a last minute, desperate attempt by the company to find pilots to fly a trip that would otherwise be cancelled. It should be paid at a guaranteed premium 2x or better and it should be written in a contract. Unfortunately it is only paid at 8hrs ABG. If the trip is already 7 hours long, you only get paid 1 additional hour above straight pay.

Mission Mode is also being used by management to understaff the reserves which is bad for all of us. If you ever need a day off, forget about it because they no longer have excess reserve pilots due to those who fly Mission Mode trips.

Let's not forget about the effect Mission Mode has on your average line value each month. Fewer pilots on reserve means more pilots get a line in each base every month. That means all the trips get divided up among more pilots. The result is fewer hours on each line every month for line holders.

Ever been TDY'd? You can blame the pilots who fly Mission Mode for your month-long forced vacation away from your family. That's because the company needs fewer pilots in each base if they can simply send out a mission mode to get a trip covered. During the slower months that means bigger bases will have excess TDY's.

SFB is a good example of this problem. Month after month they TDY more pilots out of that base than any other. It's no coincidence that SFB had traditionally been one of the worst bases in the system for pilots who will accept Mission Mode trips. Those guys are screwing themselves and the pilots junior to them and they don't even realize it (or they don't care).

Mission Mode is bad. The pilots who fly Mission Mode are screwing you out of a better schedule, more money, and more days off. It needs to go away and be replaced by a seniority based system that pays double time or better. It would still save the company a ton of money because they wouldn't have to cancel flights but the company has no incentive to do it if pilots keep flying Mission Modes.

tom11011

Can you explain this point more?