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Old 07-12-2020, 09:05 AM   #1  
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Default Reversing Outsourcing/Ending Labor Arbitrage

The best way to protect scope is to end labor arbitrage at the regional level.

With the COVID-19 pandemic still raging and ravaging the financials of every airline under the sun, the prospect of bringing regional flying back in-house seems to worsen day by day.

Prior to the pandemic, the prospect were not so good, either. United ALPA came out and said they didnít think they could do it within one negotiation round. Scott Kirby said the 175s would lose their profitability by bringing them in-house.

This difference in cost structure between regionals and legacies is too great to overcome, it seems. And in light of the effects of the pandemic, I think any cost increase in the short term is inviable.

With that in mind, I think the only way to make progress in the regional question, beyond merely holding the line, is to negotiate with factors that will not have a short term financial impact.

In my opinion, one great way to accomplish this
would be to set us, pilots, up for greater negotiating power in the future by withering the cost structure advantage enjoyed by regionals. One way to accomplish this would be to negotiate a new regional model, forcing all regional jets to be flown by a single wholly-owned subsidiary.

A single, wholly-owned subsidiary for every legacy would put an end to labor arbitrage. This means the end of whipsaw. Regional pilot unions would gain strength, job stability, pay and benefits would improve, and the cost advantage of outsourcing would diminish.

To do this, every 175 (and/or other RJs) that comes off lease would be transferred to this wholly-owned subsidiary. This would happen over a period of several years.

Flow up/down could be established, union contracts could be shared or partially shared, MECs could share resources if not outright combine resources.

Remember, we didnít get to the current situation at the regionals overnight. Outsourcing grew over many years, arguably decades. I hope reversing this wonít take as long.

But for the company, there needs to be a reason for them to do this. Iím not sure what they would require to accept such a deal, but Iím interested in what you guys would be willing to use as a bargaining chip for something like this.

What do you all think?
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Old 07-13-2020, 11:50 AM   #2  
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I think it's hard to beat a really good bourbon.
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Old 07-17-2020, 08:19 AM   #3  
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I think it's hard to beat a really good bourbon.
Pretty much what he said.

Major pilots mostly view the regionals as either wolves to be held at bay with scope, or as a low-cost contributor to their profit sharing.

While we want to hold the line for sure, probably not going to be too interested in expending negotiating capital to the put toothpaste back in the tube. It would cost us a lot of capital, plus the junior folks don't really want to do RJ flying for less than NB rates anyway.
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Old 07-18-2020, 06:02 AM   #4  
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Quote:
Originally Posted by da42pilot View Post
The best way to protect scope is to end labor arbitrage at the regional level.

With the COVID-19 pandemic still raging and ravaging the financials of every airline under the sun, the prospect of bringing regional flying back in-house seems to worsen day by day.

Prior to the pandemic, the prospect were not so good, either. United ALPA came out and said they didnít think they could do it within one negotiation round. Scott Kirby said the 175s would lose their profitability by bringing them in-house.

This difference in cost structure between regionals and legacies is too great to overcome, it seems. And in light of the effects of the pandemic, I think any cost increase in the short term is inviable.

With that in mind, I think the only way to make progress in the regional question, beyond merely holding the line, is to negotiate with factors that will not have a short term financial impact.

In my opinion, one great way to accomplish this
would be to set us, pilots, up for greater negotiating power in the future by withering the cost structure advantage enjoyed by regionals. One way to accomplish this would be to negotiate a new regional model, forcing all regional jets to be flown by a single wholly-owned subsidiary.

A single, wholly-owned subsidiary for every legacy would put an end to labor arbitrage. This means the end of whipsaw. Regional pilot unions would gain strength, job stability, pay and benefits would improve, and the cost advantage of outsourcing would diminish.

To do this, every 175 (and/or other RJs) that comes off lease would be transferred to this wholly-owned subsidiary. This would happen over a period of several years.

Flow up/down could be established, union contracts could be shared or partially shared, MECs could share resources if not outright combine resources.

Remember, we didnít get to the current situation at the regionals overnight. Outsourcing grew over many years, arguably decades. I hope reversing this wonít take as long.

But for the company, there needs to be a reason for them to do this. Iím not sure what they would require to accept such a deal, but Iím interested in what you guys would be willing to use as a bargaining chip for something like this.

What do you all think?
Good luck with all that.
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Old 07-21-2020, 08:01 PM   #5  
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We reap what we sow. Tough times are when we sow.
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Old 07-22-2020, 04:42 AM   #6  
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The best idea floated prior to this mess was adding minimum pay rates for regional flying to scope. Then slowly raising them to eventually eliminate the arbitrage. That might work but requires a lot of co-operation.

Now I think there are bigger fish to fry and it will be a while before this topic is on negotiating committee priority lists again.
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Old Today, 09:06 AM   #7  
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The best idea floated prior to this mess was adding minimum pay rates for regional flying to scope. Then slowly raising them to eventually eliminate the arbitrage. That might work but requires a lot of co-operation.

Now I think there are bigger fish to fry and it will be a while before this topic is on negotiating committee priority lists again.
Unless you plan to add the minimum wage rates to FA's, Station Agents, MX, Ground Crews and everybody else it will always be cheaper to run at a regional.

The real issue is the RLA. Originally designed to protect the status quo, it desperately needs revision commensurate with modern business practices.

When the RLA was written, you could not tell a PanAm pilot to take these concessions or we will give your flying to TWA. Yet that is the exact dynamic in play at the regional level. However much flying the mainline decides to send to the regionals (they'd send all of it if they could) then gets shopped tot he lowest bidder. All regionals have similar operating fixed costs. Gate space, planes, ground equipment, office space... it all costs the same. So, where do they make their money? By reducing labor costs. This lead to a continual downward pay and wage pattern. The only way to stop it, is to modify the RLA such that you can't threaten to give the flying to somebody else if you don't take concessions. Then over time the wages and work rules will improve. At some point it will then make sense to eliminate the excess administration costs and just bring the flying all back in house.

Rome wasn't built in a day. Build a good foundation to effect change and let business and the market take it's course.

It's the RLA that needs change. The problem you will find is that the lawyers at ALPA and Teamsters have ZERO interest in trying to fix the RLA. I once spent 3 hours listening to a steady parade of one ALPA National Attorney after another make speeches at a Board of Directors meeting why they did not want us to direct them to work to modernize the RLA. Their thought process can be summed up like this:

1. After all these years, we (the lawyers) have a really good idea what it all means based upon countless cases over the years, so we are really comfortable working with it as is....

2. They are afraid that if they make a move t get changes to the RLA that management PAC's will move to get changes that hurt us even more than the RLA currently does.

That is the very short version of three hours worth of speeches. The problems I responded to them with was....

1. We aren't really interested in how easy, or how well, or how comfortable the attorneys are working with the existing RLA, since the RLA is NOT working for their clients, us.

2. If fear of what management might try to do is your best reasoning for not trying to fix something, then why do we ever sit down at a negotiating table with them? An ARC of stakeholders could easily draft common sense revisions. The fact is, management is not afraid of increased costs; they are only afraid of increased costs if the increased costs only apply to them. If the changes apply to everybody evenly, it's just a cost of doing business.

End result, the rest of the committee and BOD members refused to order the lawyers to work to better the RLA.... and ALPA and Teamsters are pretty much the same when it comes to that issue. So, until the field is leveled through the RLA, every management will resist anything that puts them on a different playing field than the competition.

Fix the RLA and over time the rest will sort itself out. Build the foundation.

Last edited by Cujo665; Today at 09:23 AM.
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Old Today, 12:05 PM   #8  
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Originally Posted by tallpilot View Post
The best idea floated prior to this mess was adding minimum pay rates for regional flying to scope. Then slowly raising them to eventually eliminate the arbitrage. That might work but requires a lot of negotiating capital.
Fixed it for you.
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