Continental Executive for Re-Regulation
 

I thought this was an interesting read below my comment from an Airline Executive interview.

My opinion; We are flying people round trip from MSP to ORD for $89.00, US to London for $600.00 ect.. Here is the problem as I see it. Lets say a CEO at X airlines decides to increase the price to break even (or make a profit for god sake); then the exec at Y Airline operating out of the next gate over keeps the price at a loss (stealing business from X) aiming to push X out of the game. It's a viscous cycle of "who can go into dept the longest without going belly up"? What a horrible situation to be in as an employee (the Exects still feel entitled to their pay until the every end). The Exects are stuck in a situation they can't improve or get out of themselves in such an environment.

Unless ALPA takes on an all encompassing attack on all airlines to increase pay and in turn increase ticket prices at one time or the government steps in to regulate, the airline industry in general and our appreciation and QOL as pilots will continue in a graveyard spiral.



Houston Chronicle
March 20, 2009
Headline: COMMENTARY: Continental's Kellner states case for regulation
Byline: Loren Steffy

Larry Kellner served me a cup of coffee with the aplomb of a veteran flight attendant, and then, a few moments later, served up a stunning comment about the airline industry.

“If the government wanted to re-regulate the business, I wouldn’t be opposed to it,” he said.

While he didn’t mean the wholesale regulation of yesteryear, it’s still a surprise coming from the chief executive of Continental Airlines, the nation’s fourth-largest carrier by traffic.

Thirty years ago, airline executives battled fiercely to preserve government control of routes and pricing. Former American Airlines chairman Bob Crandall, then a rising executive, declared profanely that deregulation would ruin the business.

Fast-forward to today, and Kellner, agrees, at least up to a point.
“What we’ve got today doesn’t work,” he said in an exclusive meeting with me and several Chronicle colleagues. “It isn’t creating a stable industry.”

Kellner isn’t calling for a return to the good old days when fares were so high most people took the bus. Airline deregulation has always been about price, and in that sense, it’s been a roaring success.

Where it has failed, though, is on the cost side. Most airlines today have a cost structure that’s changed little since deregulation, which impedes consistent profitability.

Airlines’ profit margins are dictated almost solely by fuel and labor costs, which almost never decline in tandem.
New government rules?

Kellner said he prefer new government rules that would remove some of those cost constraints, allowing airlines to make money, employees to earn decent pay and passengers to feel they’re getting a good deal.

Among the biggest rule changes would be revamping the Railway Labor Act, which has governed labor agreements since the dawn of passenger air travel.

The RLA was designed to keep railroads running during labor disputes at a time when trains were the nation’s lifeblood of commerce and travel. For airlines, it means lengthy contract talks, which often wind up in mediation that leaves both sides unhappy.

“The problem is the structure of the RLA creates a very cumbersome process,” Kellner said. “It hasn’t worked well since deregulation. It creates a tremendous amount of angst on both sides.”Customers’ anger

Previous attempts to alter the RLA, though, have failed in Congress, and few lawmakers have shown an interest in revisiting it.

Over the years, airlines have tried to revamp labor agreements with disastrous results — strikes, bitter negotiations, acrimonious relations between unions and management.

If the current state of the industry doesn’t benefit workers, it also doesn’t benefit investors. Continental’s market share, for example, has fallen to about $1.1 billion from $3.8 billion in 2006, and the airline lost $585 million last year.

Nor are customers happy about the current state of the industry. Passengers angry over flight delays and poor service are pressing Congress to enact minimum standards for the industry.
Equal playing field

I had intended to ask Kellner if he thought the airline industry could ever achieve sustainable profitability, but his comment about regulation made the question moot.

The industry, he said, needs new rules, ones that make the playing field equal for all carriers while still allowing competition to thrive.

Kellner may be right, but I was surprised by his candor. It’s the first time in more than two decades of covering airlines that I’ve heard an executive pine for more regulation.

Then again, it’s also the first time I’ve had an airline executive serve me coffee.

All I know is that if the executives thing it's a good idea, it's going to be a disaster.

I dont know much about politics and know even less about the RLA. But at face value it sounds like mgmnt just wants us to keep working while they pay us lousy wages and choke us out while we negotiate. And like the last poster "If mngmnt thinks its a good idea.......":rolleyes:

Yawn.....
 

It sounds to me like Kellner is starting to beat the drum for "baseball style" arbitration. He must have been appointed by the ATA to start the discussion. (Reading from the talking points memo, of course.)

And he had the journalists eating out of his hand.
Nothing new here except an attack on pattern bargaining, now that BK and the threat of BK has run its course. (For now.)

Hog

Just a quick question. Why is that automatically, whatever management wants is bad? Where does this us (labor) versus them (management) mentality come from. I'm not saying it's a bad or good idea, I'm not very familiar with the RLA other than to know that it currently is at times inefficient and in some cases ineffective for everyone, but why would it be such a bad thing if our union(s) can with airline management come up with a more effective way of contract negotiations, one that benefits both parties mutually? I know there are prolific examples of executives who have screwed airines, there are still some around today, but I can't imagine that all executives want to punish their employees all the time.

I'm not a company man, just providing a differing viewpoint. I do not, I repeat, do not advocate either position at this point, I don't know enough. I honestly am a rube when it comes to negotiations. Take care everyone.

Wasn't this already posted in the "Majors" section?

yeah I think so

I sure wouldn't mind getting a chance to be like a pilot in the good old days (Pre deregulation). I have read so many articles about the good old days being gone and how much being a pilot sucks now, and quite frankly I'm kinda sick of hearing it since I will never get to experience it. It costs less to fly now (for the passengers) than it did 20 years ago. Even with every single cost of business going up dramatically. Re regulating the airlines would force people to pay a fair market price for air travel, and the only competition betweeen airlines would be service.

Another thought: What if the FAA just didn't issue any more 121 certificates. The low-cost start ups that were trying to push their way into a niche by under pricing everyone would eventually go away, and ultimately lower competition. The existing carriers have enough competition as it is, do they really need more?

Rant Over

You hit the nail on the head, it is exactly about who can last the longest. The airlines know they are losing money. Every plane that flies is losing money (on average). So why don't they just shut their doors? United, for example?

The more that turn blue and give up, the more market share is available for those that are still standing. Its brilliant!!! The next best thing is a merger and/or consolidation.

Re-Regulating=Less jobs. When the airlines started the deregulation process in 1978 it helped open up many low cost carriers that otherwise would have never gotten their start because of the barriers to entry.

Although I like the idea of regulation are you all ready for the pilot cuts this may bring?

ABSO-FREAKIN-LUTLY!!

We've been beating that horse forever. There NEVER should have been as many jobs across so many airlines in the first place and contraction is inevitable.

Yes, but it was posted here a day earlier.

YOUR RIGHT that it's brilliant "but not for us as pilots which I'm sure was your piont". Let's take this trend and extend it to the ultimate end of its journey. If this trend continues then the final outcome will be a monopoly of one airline. I know this may sound extreme to some but can you see any other outcome that will bring it to end? If one of the two actions mentioned in the first post are not acted upon then the company will continue to have us by the balls to no end.

Yes I am. I would most likely be one that loses (my job) for the time being but the pilot industry would have a win and my potential future would be admirable when and if I return. I know I may get bashed for this next statement by some but please don't take it personal it's just my opinion; In addition the general public would also win because they would have more experienced individuals at the controls. Personally, I don't think anyone with 300 hours of flight time should be piloting commercial airline aircraft no matter how good of a pilot one has become up to that point of experience.

One additioal note;
Maybe something as simple as an update to the FAR's would be a solution. An additional FAA certificate required to be eligible for employed by the airlines. A certificate that falls somewhere in between the TT requirements of a commercial and an ATP. I'm sure that the original language was not meant to allow a pilot with 250 hours to sit right seat in a 76 pax jet for an airline but rather to allow a pilot to make money and/or reduce the cost involved to get the time that the airlines required for employment at that time.

I think we're more likely to see proposals that increase regulation, but dont necessarily 're-regulate' the entire industry.

Increased regulation doesn't mean we have to go back to the system that existed prior to '78. It could be as simple as mandating where US airlines get their maintenance done (i.e. not Mexico/Canada). Could also be simple price floors that basically say companies cannot fly for less than a pre-determined ammount, forcing companies to not operate at a loss for the sole purpose of burning the competition out (i.e. aloha/go!).

Really doubt that any politician would go for full-blown re-regulation.

From a pilot's wife perspective ,how many of those carrier's are still in business that jumped in after deregulation?

Maybe that one airline could be our national airline, and owned/run by the government. The country is headed that way anyway...GO SOCIALISM!!!

Around 20 in my 2 second recollection. A lot have merged over the years but it did create a lot of new airlines at the expense of the value of the seat.

And it also created lower pay scale's by half at the expense of the pilot group's.


ALLY

That's exactly what I meant by saying that it lowered the value of the seat.

I think it was a very bad tradeoff.

When Fred started flying he would tell me stories from other Cpt's who would buy a new car on 2-3 month's worth of pay in the 70,s.

Anyone ever come up with what the pay rates schould be in this day and age?
ALLY

Since 1978 more than 100 startups have come and most of them went out of business. Many legacy carries retaliated against them by matching fares, adding routes, etc.

I use to work for one of the major airports. One of my duties was preparing "permission to operate letters" for new airlines. It feels like I did prepare about a hundred of those between 1994 and 2001. I can only think of three passenger airlines (flying transport equipment) that are still around today that were started (read totally conceived) between 1978 and 2001.

I don't include any of the regionals or commuters because they are proxy airlines not real airlines.

America West (now purchased USAirways and retained that name)
Midwest Airlines
Airtran (formerly ValuJet)
Jetblue

Onfinal

Then next the government can regulate who can and cannot buy/sell groceries and what is a fair price. Then maybe cars. Then maybe houses. Then furniture. Oh, that would be socialism... But, I'm sure you do not consider yourself a socialist. Just when it comes to airlines, right?

What an inane post. It takes the brainpower equivalent of powering a lightbulb to call someone a socialist/fascist/hitler/stalin/etc.

Actually, yes. Just the airline industry. We keep being told that our industry is one of the major lifebloods to the economic success of the country.

Pre-deregulation was a much better time and place for this industry and the simple truth is that the essence of capitalism, which I love and believe in, just can't be monitored properly to keep out the psuedo-criminal, to just plain criminal, element. And when that element puts in practices that are only for their benifit, we all lose.

We are seeing proof positive of that fact now in these economic times.

The federal govt already regulates who can and can't be a 121 operator. And they do this for the sake of public safety, and for reliable transportation. When airlines are trying to penny pinch every aspect of their company, that's not safe. If the company didn't have to do that, I'm sure they could provide a better and safer product to the customer. This is how our government works. We are not a pure free market economy as it is. The government intervenes when necessary. Whether I agree with it or not, it happens, and not just to airlines. I just think that if they are going to regulate it as much as they do already, why not make it actually work for the airlines by allowing them to make a profit instead of laying off thousands of employees every time the economy slows down.

And btw the government already regulates the price of groceries. They pay farmers to NOT grow/sell their produce. And as I recall, you have to have a license to sell cars, and houses as well. I wonder who licenses these people and regulates those industries? No I don't believe in pure socialism, but our country already has that somewhat blended into it. Just like we aren't a pure democracy, or a pure capitalist nation. We are about as close as you can get to it though and still make it work. Pure capitalism leads to monopoly eventually, and that doesn't benefit the majority of the people out there. The government lets businesses compete with eachother, while still ensuring safety and freedom for it's citizens.

Given the level of his previous posts, this is nothing new. Apparently alone with his spanking new college degree, he got a Websters Dictionary as a graduation present.

Definitions...yes....Understanding...no...fiber... yeeeees

Airlines have become an essential part of the nations transportation infrastructure and as such, should be re-regulated to the extent required to ensure that carriers do not continually undercut each other and try to make it up by cutting maintenance or margins. And the crap that wages should be allowed to be driven down by the market is just that...crap.

Psuedo airline pilots who embrace this are the same as politicians who claim that families can survive on minimum wage jobs. Let's see them do it.

A perfect example (on a micro level) of the purely capitalist state are the american slave plantations of the 18th and 19th century. And it would appear some of our elected leaders and captains of industry would gladly return us to this purer form of capitalism. Some of our fellow pilots, who've drunk the ubber-conservative koolaide, will only wake up when they're provided their daily ration of hog ears and pig tails after setting the parking brake. Personally, I much prefer the current arrangement.

Back to the original subject, I am suspect of any requests by Airline CEOs for a return to some level of regulation. Yet this kind of chatter seems to be increasing, among management who once said, "never". Although I tend to agree with setting additional regulations to the industry, I'm not sure that we are all speaking the same language, and would hope that the various unions are getting ahead of this to insure that labor is protected in any such new system.

How are slave plantations an example of a "purely capitalist state"? What is this purer form of capitalism that leaders and captains of industry wish to move us towards? More government involvement or regulation would move us away from capitalism not closer to it.

I love how everyone on this site is so quick to bash or flame posters with differing views (attacking the messanger, not the actual message). Those who have posted above have every right to say what they've said and I respect that--whether I agree with the content or not. Presentation of ideas is one thing, but attacking one for their views personally and insulting intelligence is completely different.

How is being conservative a bad thing? Some could say the same thing about being liberal, I don't think it's wise to criticize with such a broad stroke. I don't want to imply that I'm one or the other, but that's an assumption that can get people in trouble or very upset.

Do posters here feel that pilots are entitled to a high-paying job? Regardless of the consequences? I wished we got payed more and treated better, but until pilots begin to quit because of it, wages aren't going to change. There's too much labor chasing after a limited number of positions, that works to the bean counter's advantage, not the pilot's. By further limiting flying positions, you'll only create a greater surplus of pilots.

True Statement. And that is the downfall of re regulating the airlines. As glamorous as it seems, the can of worms has already been opened. If the airlines started making more money and weren't struggling to stay alive, pay wouldn't go up, just executive bonuses. After all, if they can make more money and pay everyone the same, why not?

Aviation isn't the only industry that is having wage decline issues. Look at health care. Who would want to be a doctor or a pilot anymore? As glamorous as it may seem, being paid to fly isn't all it used to be, and most people who "wanted to since they were a kid" are better off making money doing something else and flying on the weekends. Once it is not as easy to become a pilot, instruct for 6 months, then get a job in a jet, fewer people will become pilots and the surplus will slowly go away as the baby boomers retire. But you are right, there will still be a surplus.

And for the record, I am not a socialist/communist. I believe strongly in capitalism, but I struggle with seeing an industry this messed up as well. This didn't happen over night, and no single event is going to fix it. The industry has changed (in some aspects for the worse) and it is nice to look back at what it used to be like in the beginning.

Yes, you will but that is a good thing because the remaining positions will go to those with the better resume at a higher wage.......as it was before.

Jeeps, I don't think anyone who has been in this business awhile feels they are "entitled" to a high paying job. I for one see it this way:

A doctor, lawyer or God forbid, a fund manager holds a life, freedom or a lt of folks retirements in their hands (yeah, I know, but I felt this way a long time before they fubar'd it). If a doctor screws up, insurance pays and he likely will not lose his license. A lawyer can screw up a case and lose your money or your freedom. The money guy...'nuff said.

Not one of them is required to attend refresher courses that, if unsuccessfully completed, would cost them their license. They go merrily on, and many indeed DO feel "entitled."

We, on the other hand...you know the drill. Six month medicals, EKG's, PC's, recurrents, line checks, Fed's, FAR busts...need I go on? Any of those can cost our license. We fly tubes full of people who have aggregate net worth's in the millions on a passenger flight, cargo ranging from McDonalds cups headed for Dubai to Ferrari's to military equipment for our guys and gals. We can't make a mistake. It's not allowed because the penalty is: "Mrs./Mr. ___, the plane crashed. Your husband/wife didn't make it. Sorry."

We get pushed every day to keep the schedule. To "complete the mission." "So and so would fly with that broken." Again the list goes on.

I am a professional. So are my fellow crewmembers. We do what we do because we have a big enough ego to put on the monkey suit and walk into that plane, look at the passengers and turn left, knowing we are the only SOB's on that bird that can get them all safely from Point A to Point B. And we're smart enough to leave that same ego outside the cockpit door and trade it for a healthy yellow streak that keeps us from being stupid once we close the door.

So do I feel I am "entitled" to a high paying job? No. I feel I am entitled to be compensated for my years of experience, my knowledge and my professionalism that is all proven to be 100% dead on accurate and correct every time I put 800,000 pounds of of metal, fuel and freight or in a damn small box at high speed. I feel my fellow professionals who haul SLF are due the same. I'm entitled to the respect of some peckerhead in a suit who can't tell the difference between an airplane and a firetruck, who sits in an office and manipulates numbers to claim I cost too much money for the airline and makes me take a cut in pay while he rakes in bonuses and destroys a company I proudly work for.

There's more, but I'm sure this is beginning to sound like a rant. It's not. But it's high time we stood up for ourselves and called it like it is. Should we be greedy? No. That's stupid and only aids in the demise of our company. But we should be compensated properly for the work we do. And we shouldn't be ashamed to demand it.

Funny thing is this. Most businessmen are conservative. I don't knock that. Ask yourself this. When was the last time you heard a banker, a doctor, a lawyer or a broker arguing with their compatriots that they made too much and would gladly work for less? Or that the "free market" should determine their compensation package?

Tremendous post. I give you great kuddos, sir.

Doctors have to get board re-certification every 7 to 10 years.

You are right on, and its a shame that we have to keep revisiting this on a regular basis.

Hog

Of all the careers you listed, businessmen's salaries are the most tied to the free market. Well, except that now the government has decided to regulate executive pay for bail'd out companies. Businessmen are paid for their abilities and potentials. The companies pay the wage that they feel will draw the best talent that they can afford for a particular position. I think that your argument is completely off base.

And, I love how I'm accused of being a fresh face out of college. At least I have my shiny new dictionary to keep me company.

Milky,

Don't drink their koolaide! Corporate culture is a microcosm of American society, and in the corporate world you will see all types, the smart, the stupid, the fast talkers, the punters,the honest, the dishonest, the capable, and the downright embarassing. At the top levels, the culture is no different from the bottom, or the middle. Executives pay and station is not tied to their abilities. There are some really smart guys and gals making lots, and their are some really incapable ones making lots. Not my opinion, my experience.

Onfinal