Now, before I begin, I want to say that I'm going to make a few generalizations about costs, because different airlines have different costs. When I say that I'm making an assumption, I'm making an assumption based off of averages, rather than an assumption off of pure whim, so please don't throw out my "assumptions" because of the term I happened to use, or because it may be off by a little for your specific airline; while one average might be high for your airline, it might be low for another. For instance, SWA pilots with their general superiority and dashing good looks might fly 1000 hours a year, while the surly, mirror shattering group over at Delta might only fly 600 (I mean no offense!). Still averages out to the number I used below of 800 hours a year.

My second note is that I started this tangent in my head on another thread, but decided not to threadjack and instead give it its own thread. Therefore, please bear with me as I talk a little about the term "whipsaw" for a couple sentences before I get into the meat of the argument.

I hate the term whipsaw. It's worthless. Pilot cost is so minimal compared to the cost of operating separate businesses it's laughable. Differences between pilot costs become even more trivial. Sure, managemant may care about whipsawing Compass vs ASA vs Pinnacle vs Mesaba vs Comair, but honestly, the fact that on average a Compass FO makes $3 an hour more than an ASA FO makes (doesn't matter if it's true, random numbers) is TRIVIAL in the overall cost of the company, even if it adds up to a couple million. The benefits of merging those two pilot groups together for medical insurance alone saves well more than that $3 an hour per pilot. All I'm saying is that the famous whipsaw was termed by pilots because they see their $3 an hour difference as extremely important, but in the grand scheme of things, if you fly 800 hours a year at an average 80% load factor(comparing ASA 900 to Compass E175), that $3 raise costs less than a nickel a passenger! The real "whipsaw" mainline management is using is between the management of the regionals.


When talking about the cost of a pilot, the most thing to remember are the economies of scale are factoring into the cost, but when you consider the cost of a ticket (third quarter of 2008 was the highest in 13 years at $362 on average for a domestic round trip ticket) we literally cost almost NOTHING. Now, about $50 goes to the government in form of various taxes, security fees, improvement taxes, etc, so that's still $312 that goes to the airline. Assuming (ah!) an average Domestic FO costs around $150k a year, an average CA around $200k a year (including company insurance, benefits, pay, training, etc), so that's $350k a year for the flight crew. Now take an average 800 hours of flying a 140 seat aircraft at an 80% load factor taking an average domestic stage length of about 1:45 (just under 700 SM), that means you fly 25,600 roundtrip passengers per year, meaning you and your FO generate $7,987,200 a year. It also means that the cockpit crew's TOTAL cost (even the costs that you don't see like training and new mirrors in the Delta crew rooms) out of that ticket is about 4.4%, or about $13.67 per ticket. If you take the 100k or so of intangible costs (so training, the airline's insurance against you messing up, etc) off the FO and CA, that number drops to about 3.1% or about $9.77 per ticket. Because tickets are generally the only income source for airlines, simple logic allows us to say that the TOTAL cost for the pilots of a legacy/major is about 4.4%. The regionals are even worse at around 3.4% and 2% for their respective percentages.

Shocking. Isn't it.

At one point I worked in a highly technically specialized manufacturing industry...we built large, complex systems customized to the customer's needs and we marked it up about 50%. But we had few competitors, and fewer still who had our reputation.

Airline seats are a commodity. Commodities usually get marked up 2-3% (or even less), so EVERY cost associated with providing the commodity becomes significant in the long haul.

Boilerpilot:

The whipsaw comes into play when negotiating rates for equipment. But the real factor for costs has to do with LONGEVITY.

The bottom and top longevity for my current position is $52 to $115. Removing first year pay, the range is $82 to $115. Then there are the costs of benefits, like vacation time, that increase with longevity. That is where the real difference is for established versus start up airlines.

I think we will see a trend where airlines that don't have good scope are "whipsawed" to reduce longevity. Mesaba serves as an example, as does ASA. Each time the airline is in crisis mode senior pilots leave for better. Then they gain the advantage of lower longevity and lower costs on the upswing with growth until they get top heavy and the cycle repeats.

I understand that whipsaw does in fact provide results, but even if you consider doubling the salary of a pilot, we're only talking about a 1% or 2% increase in costs because of those pilots. The costs of having multiple management teams, dispatch teams, scheduling teams, facilities, etc etc etc FAR offsets the cost of even a 2% increase in costs because of the pilots.

The profitable model of outsourcing does indeed work for companies that outsource an entire branch of labor, however, you negate all cost savings when you have an outsourced and a non-outsourced group of labor doing the exact same thing, because of the (in this case) legally mandated overhead required. For example, Boeing outsources much of its composite manufacturing because it makes sense to not have to pay start up costs for facilities, training, and patents and intellectual property (that's a big one) when there already exists a company that has all those things. If Boeing tried to outsource its composite production because of a $10 an hour wage difference, but it already had a production facility, the expertise, and the training done, they would end up losing money on the deal because of the increased overhead costs they would incur.

The thing is that labor is virtually the only variable cost in the airline industry, and when the single most important thing to the flying public is ticket price, that is the area which management will make--or attempt to make, rather--cuts in order to compete.

Airline seats are an unusual commodity. They have zero shelf life!


As for how much we cost, we cost the airlines between 15-20% less per ASM when compared with the European airlines.

AL

Hopefully that will play to our advantage when cabotage arrives.

If you want to see some good info go to

Airline Analysis

Great comparisons of labor costs, revenue generation per pilot, etc.

All info based on airline provided BTS and SEC filings.

Lee

Wow

I don't want someone taking my job, I certainly don't want to take anyone else's.

How about some domestic U.S. carriers pilot groups grow a pair and get 15-20% pay raises and make it a wash.

Fuel?








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