Boyd
 

Monday, April 30, 2012

Dealing With The Virtual Airline

It happened in the petroleum industry. It's happening in the airline business.

Or, more accurately, it's already happened in the airline business. Brand virtualization.

Today, you go to the gas station and pump a brand of gas in to the tank of your SUV. But where that unleaded came from, how it was produced, who produced it, who moved it and who put it into the filling station storage tank, are all different companies, and they can change month to month, and even gas station to gas station across town. The only thing that's the same is that the sign at the station says "Conoco" or "Shell."

Twenty years ago, oil companies were involved from the wellhead to the gas pump. Today, it's different vendors and suppliers for every part of the logistics stream. It's all been farmed out to independent surrogates.

Tumble to this: that's exactly what's happened in the US airline industry over the last 15 years. Today, it's not only possible, but probable, that you can book a trip on a major airline from a mid-size community on the East Coast to one on the West Coast, and never in the process deal with anybody directly working for the airline brand. It's all been outsourced.

Think about it. You book the seat on-line. No contact whatsoever with an airline employee. And in the event that you do need human intervention, there's a better than even chance the guy on the other end of the phone is in a call center in some Third World country. He's successfully completed Level Three of English As A Second Language, and thinks that "FRA" is the code for "France."

You go to the airport. Get a boarding pass at a kiosk. Or, have it sent to your iPhone. You flash it at the gate, which, like the rest of the airline brand's operation at the airport, is staffed by outsourced vendors, or a "regional" airline. You board the RJ, operated by an outsourced vendor. You fly to the connecting hub - to a concourse again where staff are outsourced to a "regional" airline. Board another outsourced flight, and fly to your final destination.

Not one interaction with any staff or employees of the airline brand from which you bought your ticket. Just like at the gas station - the whole process is now virtual. You have no contact with anybody that is directly working for the airline. Vendors, all.

And, you'd best believe that this is sooooo much more cost-effective than having the airline itself do it with their own employees. Airline employees tend to want to make a career at the carrier. They stay around for years, moving up the pay scale. And - yikes! - they may even be in a union, one of those pesky groups that want to bargain for things like pay and working conditions. Truly, it's much more enlightened to just farm the work out.

Just Like The Fast Food Business. Youbetcha, it's better from a cost-approach to outsource this work to vendors. They just hire kids, or maybe not-so-kids, and pay 'em wages that will encourage them to work a while, and then move on, to be replaced by other bottom-of-the-scale new hires, creating a cycle that keeps labor costs low. It's the same approach that's been used in the fast food industry for years. Turnover is the key to low labor costs and a real barrier to union entry.

Sounds great. But what's been created is a system that is not focused on service. Not focused on excellence. It's just focused on labor costs. And it's one that offers employees almost zero potential for career growth - just like at the local Burger World.

This extends across the board: The ramper at East Upchuck has a career path that will last until the ground contract is re-bid in two years. The pilots and flight attendants on the "regional" airline to which flights have been outsourced are really caught in a special bind: there are limited flow-through opportunities to majors, and worse, those mainstay 50-seat jets are going to get retired faster than new jobs will open at majors. (See recent comments by Republic Airlines CEO on the matter, by the way.)

The point is this: there's not a lot of long-term career-play for employees involved in this oh-so-cost-efficient virtual airline system. But, so what? It works, right?

Here's a clue: airlines are not the same as Burger World. Slapping secret sauce on a hamburger and keeping the yogurt machine churning out sugary glop is not the same as the skills and training needed to professionally handle an airport passenger service and ramp operation.

So, let's touch that third rail that we're not supposed to mention: a lot of this outsourced work is shamefully done. To be sure, there are stellar companies in the business, like SkyWest, where there is a career path, and the training infrastructure in place to make it work.

But that's not the norm. It's not uncommon for consumers to get abused (unintentionally, usually) by vendors where the "customer service" staff has less training than a day-old puppy. Situations where they are clueless as to why the flight's late, or visually looking like they just came from a street fight. Or, hamstrung with really incompetent rules - like, the incidents where people actually standing in line to check-in for a 34-seat airplane are cut off 30 minutes before departure - and responding aggressively when consumers get understandably ticked off.

Why should they care? It's just a temporary job. If the customer doesn't come back, no big deal.

Training in customer service skills? Sure, we do a half-day program, you might hear. But to do more would be un-economic, don't ya know: There's too much turnover to spend the money,

Future? Two dynamics are emerging: Ground outsourcing will continue and expand. But in the cockpit, the trend will be toward flying shifted by to the major, simply becasuse of changes in airplane economics. As 50-seaters get retired, we can expect that 80+ seaters be the capacity floor - and they will be flown in-house.

Plan on it. :cool:

this guy has always been half right, and continues to be so, I do think however this long term is accurate. The industry is going to be a product of its own environment, they are going to be short on pilots long term, because they have made people not want to do it, and the govt is making them need more, while less are around.

The half wrong part includes calling SkyWest a career airline - Boyd's not looking five years into the future with that call.

Boyd has been about 50/50 on projections since I stared reading his stuff in 2007. He is an entertainer, and I think half his following consists of airline pilots. You could almost read this website, and fly a few times a month, and write what he writes.

No prayers needed. It's already started. UCH is shrinking it's ffd budget by 420M from 2011-2015. That's 23% over 5 years. The DAL mec is reportedly in fruitful sec 6 discussions with management over improving mainline to express ratios. Take a look at Comair, Mesa, and PNCL. What's the time to upgrade at Trans States or Republic?? On a good note, those UAL furloughees are leaving GOJet in droves. THey will be hiring. 'cause the times..they are a changin.

Sled

Boyd has failed again, scope at all mainlines and AA will be included allow up to 90 seats at the regional non mainline airline. so his statement of 80+seats back to in house aint gonna happen.

Boyd was all for the regional airlines and regional jets until he was hired by APA at AA and from then on he has gloom and doomed the regional airlines. Only reason he is even partly correct is because of the banking fiasco with mortgages and the oil speculations. If they had not happened, nothing he spouts would have even come close to happening.

He is correct in one way somewhat, that in house it will be, the mainlines will again start to own there feed airline so as to control the quality of customer service so they can stop loosing corporate accounts.

AA has to double is domestic regional feed just to be equal with DAL, UCAL and UCC. AA is not going to expand domestic coverage with the mainline just to compete with a E175 or CRJ900 aircraft. An AA cramped 757 and 737 is worse than AE's CRJ700's, that is a given fact.

Boyd is a paid consultant. As consultants do, what you want is what you pay for.

What he said...
 

That's the part Boyd unknowingly left out. This won't be the windfall for pilots that everyone is hoping. Times a changin'? Sure...just keep in mind: The House Always Wins.

[QUOTE=buddies8;1179318]Boyd has failed again, scope at all mainlines and AA will be included allow up to 90 seats at the regional non mainline airline. so his statement of 80+seats back to in house aint gonna happen.

Negative. Scope at DAL is 76. Scope at UAL is 70. EMB 190s are flown by mainline at LCC. So who's scope is 90 seats???? Wrong

Boyd was all for the regional airlines and regional jets until he was hired by APA at AA and from then on he has gloom and doomed the regional airlines. Only reason he is even partly correct is because of the banking fiasco with mortgages and the oil speculations. If they had not happened, nothing he spouts would have even come close to happening.

Yeap. Comair parking half their fleet was all about AA and the banking fiasco. wrong again

He is correct in one way somewhat, that in house it will be, the mainlines will again start to own there feed airline so as to control the quality of customer service so they can stop loosing corporate accounts.

That is exactly what the mainline carriers that did own their feed are NOT doing. DAL sold ASA at a huge loss. DAL couldn't sell Comair so they are slowly just letting them die. DAL/NWA sold Mesaba and Compass. AMR has been trying to get rid of Eagle. Where do you come up with this stuff?? Wrong once again

AA has to double is domestic regional feed just to be equal with DAL, UCAL and UCC. AA is not going to expand domestic coverage with the mainline just to compete with a E175 or CRJ900 aircraft. An AA cramped 757 and 737 is worse than AE's CRJ700's, that is a given fact.

Oh yea. a Given Fact. Well you got me there. And who says they have to double their feed? you? If they merge with US Airways they ought to be just fine. What they need to do is pare that Eagle emb fleet, and hire Gojets or Republic to feed them. I am sure ALPA could work out a pref hire deal for the displaced bankrupt Eagle guys. maybe start you out at 2nd year pay or something.

Sled

ASA-sold. Compass-sold. Mesaba-sold. Pinnacle-spun off. AmEagle- they tried. Yeap, I see mainline buying up their feed right away, that's why they sold them all off.

Sled :rolleyes:

Keep in mind the industry is still changing rather quickly. Many of these regionals have merged. It would make sense for mainline to pick up their regionals to have better control over them (Look at what Delta made Pinnacle do with Colgan's UAX operation, and when RAH bought Frontier and Midwest, you know that got UAL's attention). I see regional sized aircraft getting a larger piece of the pie, one way or the other. And yes, scope will be lifted at mainline to protect those senior pensions.

The pensions are gone. DAL/UAL's were terminated, CAL/NWA's were frozen, and AMR is going to do one or the other. So you obviously don't know what you are talking about. A lot of majors DID own their feed. Recently, they sold them off to go with the UAL model, which is have as many feeders as possible, and give the new contracts to the lowest bidder. What is happening at PNCL is the future of the regionals. Those Colgan Qs will be flying at UAL operated by brand xxx in no time. Piece of cake.

SLed

totally agree!

The regionals as we know them are done for two reasons; 100 barrel fuel and lack of pilots. The regionals were originally made possible by a plethora of pilots with SJS that willflyforfood and cheap petroleum (The FAA rules have just been icing on the cake). Those two ingredients are gone or close to it. Idk what will happen with scope or future feed, but I do know that you can't not continue with the gojet model for much longer and expect to succeed. I truly believe that there are enough of us who understand what needs to change and that change will come.

[QUOTE=jsled;1179384]Fixed your data for you Sled.

I dunno, man. If you have more than, say, seven or eight years of seniority at SkyWest, leaving would be a tough call. Some guys are, and they may be right, but there's something to be said for staying, too. I believe SkyWest will one day face the day of reckoning when our giant UA and DL contracts get handed over to GoJet (or someone), but that's not in five years. Maybe ten. And even then, it's not a foregone conclusion. I want to leave, but I can't say I blame some of my colleagues for wanting to stay.

only an idiot stays at a regional! If you have the chance to leave, you leave.

There are hundreds of one- or two-time mainline furloughs who left in the past decade who would heartily disagree. Quite a few of those stuck at the bottom of second or third tier carriers regret the move as well.

Regional pilots making 6 figures or close to it have a big decision to make, and if past performance is any indication of future returns, many will continue to bide their time until conditions look better and decisions regarding scope play themselves out. These ladies and gentlemen are not necessarily regional lifers, they just don't make rash decisions when the economic fortune of their families is on the line. In that, they are far from "idiots".

So which is it...are they gone, or are there still remnants left? Pick which side of your mouth you want to talk out of and go from there. Retirements (what's left) are still on the negotiating table.

And a lot still do. USAir, Alaska, AMR, Delta. But you know what you're talking about:rolleyes: Sure, United loves to ***** all their flying out, but they also have arguably the sh!ttiest product out there.


Either way...more domestic service will get outsourced to regional carriers, and regional carriers will fly larger aircraft.

So says you. I am here in the middle of said negotiations, not out in the bush leagues looking in. Just keep dreaming 'bout stealin the "big" jets. Meanwhile, Keep flying your barbie jet and enjoy that PNCL bankruptcy. I'm sure Skywest or whoever gets the Qs will hire some of your furloughed guys.

Sled

[QUOTE=Boomer;1179716]Thanks man!!

Sled

No regional pilot ever "stole" anything: mainline pilots gave it all away.

99% of regional pilots support your cause as their career expectations have been diminished more over a longer period of time because of what has transpired than anyone currently at mainline. Condescension and burning bridges back to the next generation will not help your situation or the profession in general.

Get together and get it done.

Only people that haven't done the income projection say that.

If you're a captain at a better regional, it's going to take AT LEAST 7 or 8 years to make back the pay you lose by moving to "most" majors, not to mention the risk of going to the bottom of ANY seniority list (you have to count loss of weeks of vacation pay, 401k match, chances you'll get check airman pay etc etc)

I thought of going to USAir since I'd be based at home - AT LEAST 10 years to make back the loss (at current rates) and that's assuming you upgrade after 8 years. On top of all that, you're back at the bottom on reserve and your QOL goes away.

If you're over 40 or near there it just may not be a good decision.

Thank you, GB. I am all for the prosperity of mainline. But with as much flying that's been given away over the past few years...it's going to be tough to get that geenie back in the bottle.

There are roughly 300 Comair Captains that stayed put when majors were hiring, and are now back in the right seat. Did they make the right decision? Perhaps Comair is just a fluke, and every other regional will avoid our fate.

The recent trend, however (TSA, Mesaba, Pinnacle, Eagle, etc) does not look good. It may be Comair isn't a fluke, but simply at the front of the pack. One must also take this into account when deciding to stay put in their comfy regional Captain spot.

you own nothing. not aircraft nor domestic routes. you are to be as Boyd said a virtual airline, next will be virtual vacations. by the way when your on the street AGAIN, dont bother applying to a regional. would no want anything psychological to happen to you.

you RJ guys are nuts. You own nothing at all. Ask the guys at Comair how that worked out, next ask the PNCL guys in year how that is, when you have 10 year upgrade time. Soon ask the Eagle guys how it worked out. You are flat out nuts.

Now after a decade of cry babying about how you hate flying with 400 hour pilots, your RJ land is in BIG trouble. Boyd hit this nail on the head, plus the FT/DT, and the age 65 retirements. It will just be you guys left at your RJ airline. It is not a career stop, ask the guys at ACA, Lakes, TSA, Comair, or soon PNCL how that life at a regional worked out. You cant make a career out of a stepping stone airline, that OWNS NOTHING. Your making a career out of a staffing company. It might have been a nice ride the last ten years, but the bubble has popped, do you really want to ride it into the ground.

Wow - you think the last ten years has been a nice ride? I had an airline interview lined up for 5 days after 9/11 happened with Eagle. I've spent the last 10 years specifically staying OUT of the regionals because I thought it wasn't a good time... I just now got into one because I thought it was the best chance for me to take a shot before I got too old (34 now) and too tied down (proposal may be in the near future) to take a big pay cut and commute somewhere.

Anyway, I think you make some good points, but I hope at least the movement over the next 3-5 years is really good overall even if the pay and benefits don't increase much.

Why would you guys come to this forum and berate those of us who are trying to make a living? Our choices are none of your concern. Furthermore you, like all of us have no idea what the future holds.
Perhaps I should go and speculate on the major forum that those at the top of your senority list will sell you out on scope just like they did in 2001, just to get a rise out of you to soothe my ego.
Run along trolls. Dont forget that United express makes up a majority of united flying.

but do remember united owns it, and not the joe blow airline of the week.....just remember when RJs cant hire for rate anymore that are worth it for majors to bid the flying to them, you can blame all ya all who came on here and cried about flying next to 800 hour pilots.

Then you can blame how you would not let the airline raise first year pay by $10/hr without raising your pay the same amount.

Dude, give it a rest.

I am not a dude.

You know what, your right, I completely am wrong, your right, life is fair!

Correct! He is not a man.

never been on the street, bud. Did hire on here at ol' UAL at 28y/o. Flown alot of Boeings since then. Guess I've been lucky. Can't wait for all the retirements. Take care over at the bk Eagle.

Sled

It is nice to see that you have enough self awareness to realize that you are lucky.

Even though I have been on the " Barbie jet" for two UAL partners now I consider my self lucky as well.

Now that we have that all worked out you guys/gals can go back to the major forum and work out how to take back your flying i.e. my paycheck.

If it's going to be anything like the last 20 years...it's going to be a rough ride.

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I’m baffled that some pilots have an inability to understand industry trends and cycles. History shows us that what happened over the last decade will not immediately reoccur. We are not facing the same industry pressures we were in the 2000’s. .

As for Scope, it will not be relaxed. Remember that the ones who now make up the majority at mainline were seriously burned not to long again and now understand how critical it is. They will NOT vote it away again.

It would only take a few years for me to break even if I left SkyWest for DAL, SWA, FedEx or UPS and it won’t be long till the others gain new contracts which add pay increases. Plus you'll get 2.5 times the MAX 401K match at SKW year one at United (16.5% B-Fund) and well over 2X at AA, DAL, US and many more. You'd make FAR more as a career mainline FO than a career Regional CA. I could only justify staying at the regionals if I was in the top 20% of their list and over 50. Otherwise you’re FAR better off leaving with the retirements coming up.