Quote:
Originally Posted by Bucking Bar
Not really. Several factors come into play:
- SkyWest in particular has a very good looking balance sheet. They can obtain financing cheaper than anyone. Within the blood bath that is DCI bidding, SkyWest even uses this advantage to beat rivals for RJ flying while paying their pilots significantly more (and treating them better) than say, Mesa.
- Offshore carriers (if permitted) have subsidies and financing arrangements that make their jets significantly cheaper. Google, "Emirates, import export bank" I bet France (the government) gives Air France (owned by, guess who) quite a deal on Airbus (French jobs program, keeps the peasants from burning the place down)
- Not all costs are just pay rates. Longevity enters into the picture. Part of the reason for the constant shuffle among DCI partners is the destruction of pilot longevity to reduce costs. In my category the top FO earns 211% of what the new hire does. Second year that drops to 137%, but is really more due to vacation and other bene's.
- Delta has outsourced somewhere in the neighborhood of $28,000,000,000 to DCI going forward. Sure, that is enough to buy their jets. But Delta enjoys greater flexibility than if it had committed for these jets directly. If I recall, Republic actually (was dumb enough to) sign some three year deals on surplus jets coming off the US Air outsourcing disaster.
- In a game where a 5% margin is success or death, marginal differences make or break the airline. This debate started with me pointing out ALL of our profits this year could be summed up in two words, bag fees.
Not worried about SkyWest one single bit. They are a ponzi scheme whereby "deal me an ace" SJS victims throat cut their peers for PIC time and their management acts all suave by flaunting guaranteed profits and hoarded cash. But big deal. Their balance sheet is irrelevant because they aren't a real airline. They are a guaranteed profit virtial airline. One of the best in that category? Absolutely. Even "better than Mesa" for whatever that's worth. There was a time when ACA was almost as King Shiz as SkyWest is now.
As for the battle of the balance sheets goes, I'll take DL's balance sheet in a few years with massive revenue and cash flow and significantly paid down debt. To say that SKYW or any other regional is in some magical position to get financing, based primarily or exclusively on DL effectively "co-signing" for them is precisely the point. If any regional flies the C-Series for DL, DL will pay 100% of the cost including the financing and DL will shoulder the debt. The creditors know that if DL were able to suddenly opt out and SKYW were left holding the bag then SKYW would liquidate quickly if they didn't find another sugar daddy because their revenue would dry up fast and furiously.
Now as for subsidized foreign purchaser schemes who use oil or printed stimulus funny money to bankroll a nationalized jobs program, you might be right in that it will be very challenging to compete against that.
Someone mentioned fighting for all ALPA regionals in furute DL contracts. I disagree with that stratedgy because it doesn't do jack. If we wasted one penny of capital on that, SKYW and Republic would vote in ALPA overnight, but so what. The RJ outsourcing among already existing ALPA carriers has shown just as much predatory bargaining because outsourcing by its very nature results in a bidding war. The notion that we can trick management into giving us "bargaining credits" to outsource our flying to cheaper labor, but then turn around and outsmart them by only allowing them to outsource to high priced labor simply will never happen. It would cost the same to keep the flying in house in the first place than to do that.
02-27-2021
