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Originally Posted by meesq
(Post 1330293)
I believe that several of the DCI contracts contain a clause which requires the carrier to be the X-lowest cost carrier. That, in and of itself, would make a huge difference in who wins the contract. And it also perpetuates the race to the bottom. And that is why Delta would care if you were receiving pay as a 10 yr captain/FO vs a 2 year captain/FO.
[I have to do some more research on whose contracts actually contain such language.] The Delta Connection Agreements also provide that, beginning with the fifth anniversary of the execution of the agreements (September 8, 2010), Delta has the right to require that certain contractual rates under those agreements shall not exceed the second lowest of all carriers within the Delta Connection program. During the fourth quarter of 2010, SkyWest Airlines and Atlantic Southeast reached an agreement with Delta on contractual rates satisfying the 2010 rate reset provision and the second-lowest rate provision and agreed to rates through December 31, 2015. Delta additionally waived its right to require that the contractual rates payable under the Delta Connection Agreements shall not exceed the second-lowest rates of all carriers within the Delta Connection program through December 31, 2015. Waived until 2015 it looks like. |
I like the lawn service analogy, so let's stick with that.
Let's say you contract with a service to cut your lawn for 15 years. Things go well at first. They're a reasonable price, show up on time, perform the service once a week and do a good job. Now, they start having trouble keeping good employees, and things start to slide. They're late, they skip a week here and there and your yard looks like crap. Now, the HOA is coming down on YOU since it's your lawn and ultimately your responsibility. Let's take the analogy another step further and say it's a RENTAL house. Now, you can't rent it out because the yard looks bad. The renters are going to the house next door because it looks better and more comfortable. You'd love to find a new service since there are some out there that would do as good a job, and you'd even save a few bucks. However, you're locked into the contract with this lawn service. They're meeting the terms of the agreement (barely), so you can't just cancel it outright without a long, drawn out legal battle. You don't really want to do that. Heck, you did that with your last lawn service provider and it wasn't really that worth it in the long run. So, you talk to the guy that owns and operates the lawn service. He feeds you a story about not being able to keep good quality mowers since the other lawn companies are offering better pay and benefits. As a result, he's had to up his and it's cutting into his profit margins. Meanwhile, he's having to cut corners on things like quality equipment. He's really sorry they missed the cut they were supposed to do last week, but most of his machines were in the shop. But he's working on fixing the problems, and he's still making the quotas set by the low bar in the contract signed, so you can't quite push him to the curb. So, you've got limited options. You can stick with this guy for the next several years until his contract runs out or you can do something that would enable you to tweak the terms (or even cancel) his contract. You've got cash in the bank, so buying his operation IS an option. Doing this would, in fact, make you the boss. Other owners have done this in the past. In fact, you have done this recently with a couple of other services, Comlawn and Lawnaba. Owning the service would mean you could dictate terms easier. You might even be able to save a couple of bucks if you could get costs in line with what you're willing to pay for the lawn service. So, you make the call to go ahead and buy the service rather than just accept whatever they give you for the next 10 or so years. Now, YOU'RE in the driver seat. If someone comes along and says "Hey, I can do the job for $X-Y and save you money," you're not necessarily locked into a contract anymore. You're the owner, so you can re-negotiate the deal with yourself. Worked with Comlawn. OR, if things DO go well, you might even be able to sell the lawn service like you did with Lawnaba. Either way, it'll get the house rented, the HOA off your back and keep your wife from nagging you about how you've got too many lawn services and need to get rid of some.... |
Originally Posted by Kellwolf
(Post 1330419)
I like the lawn service analogy, so let's stick with that.
Let's say you contract with a service to cut your lawn for 15 years. Things go well at first. They're a reasonable price, show up on time, perform the service once a week and do a good job. Now, they start having trouble keeping good employees, and things start to slide. They're late, they skip a week here and there and your yard looks like crap. Now, the HOA is coming down on YOU since it's your lawn and ultimately your responsibility. Let's take the analogy another step further and say it's a RENTAL house. Now, you can't rent it out because the yard looks bad. The renters are going to the house next door because it looks better and more comfortable. You'd love to find a new service since there are some out there that would do as good a job, and you'd even save a few bucks. However, you're locked into the contract with this lawn service. They're meeting the terms of the agreement (barely), so you can't just cancel it outright without a long, drawn out legal battle. You don't really want to do that. Heck, you did that with your last lawn service provider and it wasn't really that worth it in the long run. So, you talk to the guy that owns and operates the lawn service. He feeds you a story about not being able to keep good quality mowers since the other lawn companies are offering better pay and benefits. As a result, he's had to up his and it's cutting into his profit margins. Meanwhile, he's having to cut corners on things like quality equipment. He's really sorry they missed the cut they were supposed to do last week, but most of his machines were in the shop. But he's working on fixing the problems, and he's still making the quotas set by the low bar in the contract signed, so you can't quite push him to the curb. So, you've got limited options. You can stick with this guy for the next several years until his contract runs out or you can do something that would enable you to tweak the terms (or even cancel) his contract. You've got cash in the bank, so buying his operation IS an option. Doing this would, in fact, make you the boss. Other owners have done this in the past. In fact, you have done this recently with a couple of other services, Comlawn and Lawnaba. Owning the service would mean you could dictate terms easier. You might even be able to save a couple of bucks if you could get costs in line with what you're willing to pay for the lawn service. So, you make the call to go ahead and buy the service rather than just accept whatever they give you for the next 10 or so years. Now, YOU'RE in the driver seat. If someone comes along and says "Hey, I can do the job for $X-Y and save you money," you're not necessarily locked into a contract anymore. You're the owner, so you can re-negotiate the deal with yourself. Worked with Comlawn. OR, if things DO go well, you might even be able to sell the lawn service like you did with Lawnaba. Either way, it'll get the house rented, the HOA off your back and keep your wife from nagging you about how you've got too many lawn services and need to get rid of some.... |
Originally Posted by johnso29
(Post 1330310)
From the Skywest 8-K:
The Delta Connection Agreements also provide that, beginning with the fifth anniversary of the execution of the agreements (September 8, 2010), Delta has the right to require that certain contractual rates under those agreements shall not exceed the second lowest of all carriers within the Delta Connection program. During the fourth quarter of 2010, SkyWest Airlines and Atlantic Southeast reached an agreement with Delta on contractual rates satisfying the 2010 rate reset provision and the second-lowest rate provision and agreed to rates through December 31, 2015. Delta additionally waived its right to require that the contractual rates payable under the Delta Connection Agreements shall not exceed the second-lowest rates of all carriers within the Delta Connection program through December 31, 2015. Waived until 2015 it looks like. |
Originally Posted by johnso29
(Post 1330310)
From the Skywest 8-K:
The Delta Connection Agreements also provide that, beginning with the fifth anniversary of the execution of the agreements (September 8, 2010), Delta has the right to require that certain contractual rates under those agreements shall not exceed the second lowest of all carriers within the Delta Connection program. During the fourth quarter of 2010, SkyWest Airlines and Atlantic Southeast reached an agreement with Delta on contractual rates satisfying the 2010 rate reset provision and the second-lowest rate provision and agreed to rates through December 31, 2015. Delta additionally waived its right to require that the contractual rates payable under the Delta Connection Agreements shall not exceed the second-lowest rates of all carriers within the Delta Connection program through December 31, 2015. Waived until 2015 it looks like. |
Originally Posted by Ftrooppilot
(Post 1330435)
I don't know who is winning the "race to the bottom" but it looks like this agreement was the "starting gun." Actually the race is to "next to the bottom"- (over and over and over and over ) unless the number of DCI carriers is reduced to one or two.
Those in glass houses... |
Originally Posted by Kellwolf
(Post 1330419)
In fact, you have done this recently with a couple of other services, Comlawn and Lawnaba.
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Originally Posted by Trip7
(Post 1330438)
Nice find. Next rate reset is in 2015 for Skywest Inc
Yep and guess who thinks they are immune to the regional race to the bottom. I have had many discussions with SkyWest / XJT people (all very professional good people) and most will never leave and truly believe they are the exception. 2015 (the year 9E gets put down, ty for the good times) and beyond will change that though, but who am I to speculate:D |
Originally Posted by SmitteyB
(Post 1330467)
A great point. Looks like Skywest Inc is leading the race to the bottom with a contractual clause like this.
Those in glass houses... |
DBMIVN (Don't blame me i voted NO)
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