ULCC Model in the U.S.

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04-07-2021, 05:00 PM

#181

chrisreedrules

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Joined APC: Feb 2012

Position: CRJ FO

Posts: 4,599

Quote:

Originally Posted by Al Czervik

Right. Doesn’t fit with your narrative.

My narrative?

3 bailouts later and I no longer think liquidation is on the table. The next couple years are going to be pretty interesting though that’s for sure.

As for the current situation I think it’s as simple as all the airlines rushing to grab market share while the federal government is picking up a big chunk of the tab. And the pressure on AA is only going to increase. Like I said, interesting couple of years ahead.

04-17-2021, 08:51 AM

#182

aeroengineer

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Joined APC: May 2016

Posts: 324

Quote:

Originally Posted by chrisreedrules

Another question for the financially savvy. I understand that two of the biggest costs for airlines are fuel and labor. How's AA compare to the rest of the industry on labor costs?

04-17-2021, 08:59 AM

#183

Excargodog

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Joined APC: Jan 2018

Posts: 11,494

Quote:

Originally Posted by aeroengineer

Another question for the financially savvy. I understand that two of the biggest costs for airlines are fuel and labor. How's AA compare to the rest of the industry on labor costs?

The main problem isn’t labor rates per se. It’s one of an awful lot of people being at the top of those scales, and the WB aircraft (and their pilots) not being able to be optimally employed until international and business flying rebounds. that and the debt service. $35 billion is a lot of debt to service - especially now when everyone is losing money.

04-17-2021, 10:43 AM

#184

rickair7777

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Joined APC: Jan 2006

Position: Engines Turn Or People Swim

Posts: 39,254

Quote:

Originally Posted by Excargodog

The main problem isn’t labor rates per se. It’s one of an awful lot of people being at the top of those scales,.

This is why startups seem to be able to get goping and occasionally thrive despite numerous structural barriers to entry. A new pilot group works for a lot less, and that won't change until they get a union, operate for a couple decades, and do a couple contract cycles.

04-17-2021, 01:06 PM

#185

Excargodog

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Joined APC: Jan 2018

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Quote:

Originally Posted by rickair7777

Yeah even Spirit, which has been around a couple decades, doesn’t have very many truly senior guys. Prior to COVID they had guys making CA at about 3 years. When you are growing 15% per year half your people are an FO with 4 years - or less. AA is going to be retiring about 7% of their pilots a year pretty soon - while Spirit will be retiring 1-2% of theirs. They simply don’t HAVE that many senior people. When your Median CA is in their seventh or eighth year and your Median FO is in their 3rd year you have a helluva advantage over a longer established major where the median CA is making top scale and their Median FO is over 12 years - even if the hourly rates per year longevity were the same - which they aren’t.

Last edited by Excargodog; 04-17-2021 at 01:17 PM.

04-17-2021, 07:17 PM

#186

aeroengineer

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Joined APC: May 2016

Posts: 324

Quote:

Originally Posted by Excargodog

It’s one of an awful lot of people being at the top of those scales, and the WB aircraft (and their pilots) not being able to be optimally employed until international and business flying rebounds.

I think that's the rub. As a guidance counselor told me more than a few years ago you can expect your pay to be related directly to your ability to make your company money. Obviously there are exceptions but I've felt that was good advice all these years later. I'm sure we would all like to make 500K a year but most aren't in a position to do so and if the company's bottom line can't support it eventually it will go out of business. Guess we'll see.

04-17-2021, 07:58 PM

#187

Aero1900

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Joined APC: Nov 2012

Position: 1900D CA

Posts: 3,394

I wonder what the monthly payment on 35 Billion dollars of debt is?

04-17-2021, 08:24 PM

#188

Excargodog

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Joined APC: Jan 2018

Posts: 11,494

Quote:

Originally Posted by Aero1900

I wonder what the monthly payment on 35 Billion dollars of debt is?

Depends on your bond rating usually although the payout is generally twice a year rather than monthly. Or at least what your bond rating was when you took out the loan.

https://www.forbes.com/sites/michael...h=2d49b006cffa

https://www.bloomberg.com/news/artic...-strong-demand

But the big risk is that all the money the fed has been pumping into the economy will raise interest rates and when the bonds mature they will need to be refinanced at a far higher rate if the company can’t generate the free cash flow to pay the bonds off outright.