Delta and Northwest File Chapter 11
 

Link to the Article

Wow

I just read an email at work about this. What the.... :eek:

Let's close the American airline industry down overnight and re-open it without all the unions. How about that?

-Rudey

How are the unions the problem?
Baggage handlers make about $13 per hour. Mechanics $30 per hour. Is that overpaid? Should they work for free?


The airlines take a 50 million dollar jet, fill it with 100k worth of high test jet fuel. Then they sell tickets for $49 one way from NY to Orlando and fly with half the seats empty.


I think the airlines are setting their prices too low. Amtrak from NY to Phila is about $100.

Last night on the news an airline exec said "the only thing between the airlines and prifitability was fuel costs." It was only a few months ago that the same airline exec gave the same speech saying "the only thing between the airlines and prifitability was labor costs." Labor made the concessions and the first thing management did was lower their $79 tickets to $49.

How do you pay for a 50 million dollar jet when you are selling $49 tickets? It cost more to fly 30 years ago.

Their pensions are the biggest problem.

And Amtrak is the worst comparison. That should have been eliminated 50 years ago but the Federal government has essentially kept that from happening through subsidies and looking away as the trains fall apart and kill people.

-Rudey

Ok Bud Fox, lets say we do away with the unions. Non union labor will work for free. How do you pay for a billion dollar fleet of 50 millon planes that are filled up with 100k of jet fuel when tickets are being sold for $49.

Those $49 tickets are not everywhere. They're for very short flights on no-name airlines to places like Myrtle Beach. When I fly Southwest I pay at least 200 to go to Cali or NY from Chicago. A lot of times it's more and when I fly United, it's usually around 400 a ticket.

http://www.airlines.org/econ/d.aspx?nid=6207
Shows how many bankruptcies there have been in the industry.

Anyway here are the costs for airlines broken down:

http://www.airlines.org/econ/d.aspx?nid=1042

The largest component is labor. Fuel is 2nd largest and moves up and down as any commodity will but that labor cost isn't market priced.

Plus how can they charge more without losing passengers?

I have to think about it in terms of my own interests. I want cheap flights and I don't want an airline defaulting on its pension obligations like United did and leaving the government to take care of their mess. I'm sure the pilots all have to think about it in terms of how high a salary they can get with what benefits and the airlines in terms of how to get the most profits for themselves.

-Rudey

Unions are part of the problem, but like Rudey said the pensions are the biggest.

You have airlines paying a number of people (I can't begin to guess) penisons, healthcare, etc and these people are not making any money for the airline. It's an anchor that has drowned many companies in the past and is going to do so again.

Once they get re-organized and don't have to pay billions out to people that don't make the airlines any money they will be financially sound. There are already a few other examples of how well this works. I believe that Southwest is one such example.

GM is probably going to do the same thing relatively soon.

What the....? I actually agree with madmax?

I'm just wondering how this will affect United's anticipated exit out of bankruptcy early next year. With Delta and Northwest now in bankruptcy, I'm sure we'll be battling for capital.

But then again, it's no wonder how we're still in bankruptcy when I see this in our SkyNet NewsReal:

SmartMoney.com ran a piece saying, “With the airlines cutting frills left and right, we were a little surprised to learn of United Airlines' latest promotion: Book a ticket for $500 or more before the end of the year, and receive a free Treo 650 SmartPhone.”

Grrrreat.

Pensions are negotiated by the unions from what I understand.

Southwest and JetBlue seem to have done pretty well with their costs. In fact, if the costs were all from fuel, the large airlines would not have created their own "discount" lines.

Because United decided to shift their pension obligations to the government, that means you and I and everyone else pays.

-Rudey

I think your company should do the same thing to you. Why should any company pay a pension to someone that is retired and no longer brings in revenue? After all it isn't management fault that they agreed to the pensions plans and compensation packages. It is labors fault for accepting those packages.

Does someone work for an airline?

-Rudey

.05 cent


You are very wise.

No.

1. Do you expect labor to work for free. Since you blamed union labor for the problems then the real issue is difference in cost of union labor vs. non union labor and does that difference make up for the billions that the airlines are losing.


2. I disagree with your point that low cost tickets are not everywhere. I just checked Travelosity and there are tons of low cost tickets from NY to Orlando.

3. The airlines used to charge more. That was back in the day when they used to turn a profit.

I do not expect labor to work for free. I expect them to work for market-value wages - not above-market wages. Do you expect airlines to accept being held hostage to union demands, even when not viable financially?


These points are related. The reality is that airline pricing is the ultimate supply/demand price point experiment - you cannot blame the airlines for lowering prices AND for flying half-full flights. One is a direct result of an attempt to alleviate the other.

Other than business customers (who already get dicked with "no Saturday stay-over" restrictions and the like, and thus pay a premium) very few consumers are required to fly, and thus the airlines have to hustle for every dime. They cannot arbitrarily raise prices without a corresponding backlash in the supply/demand architecture.

ETA: With all that said, I think the true downfall for most modern airlines simply comes from bad business models and being spread too thin. Southwest has shown a productive, viable model, and other companies are emulating only superficial parts of it (a la 'no in-flight snack') and not the larger, important pieces (smaller number of flights, utilizing the internet to lower business costs, maximizing ad dollars, keeping costs low overall).

I'm not saying work for free. I am saying that the labor costs are the biggest expense for travelers and airlines because unions have allowed employees an unfair bargaining advantage.

NY to Florida is generally a cheap route. I'm not sure why, but you can find tix below $200. I am not sure you can find it on a major airline though (your link didn't open up for me).

And if the airlines all used to be profitable that doesn't make sense why so many went under.

And if labor costs (including the ridiculous pensions) weren't such a concern, then the major airlines wouldn't have opened their own discount airlines that aren't tied up with the same labor costs.

-Rudey

I will never understand why the government continues to subsidize companies that cannot compete with the current market. Why is it that some airlines are profitable, while others are not? Sink or swim, this is capitalism get used to it.

How is labor not working for fair market value? Did the airlines agree to the compensation packages or not? Isn't fair market value the price that is agreed upon by labor and management?


You get a D in Econ 101.

Who controls the supply?
Do the baggage handlers, mechanics, and flight crews make the decisions to expand and buy more planes or does management control supply? If supply was increased without an increase in demand then whose fault is it that ticket prices drop?


Southwest uses union labor.

No, I will not agree that "fair market value" is the same as "the most that someone will pay."

Again, you've ignored my point about the airlines being held hostage by union pressures, resulting in above-market contracts, and instead focused on the fact that the airlines agreed to the contract.

Sure they did - does that make these prices 'market value'? No. Does this make these bad contracts on the part of the airlines? Obviously. I'm definitely not arguing that the airlines are well-managed - I'm merely arguing against your points.


I pointed out that airlines are spread too thin, so that's an unimpressive addition.

You can't play both sides here, though - you can't argue that the airlines are stupid for lowering prices and stupid for having empty seats. You can argue that they've made terrible decisions to get to these points - and I'll willingly agree - but you're not even arguing economic theory here.

Also, to relate back to your labor point, how well would the unions respond to a roll-back in flights, planes and etc (and the corresponding layoffs of, say, 40% of the union workforce)?

Probably the same way a non union employee would respond to a 40% pay cut or a 40% decuction in workforce.

How much of a pay cut did Delta management take over the last 5 years that they were losing 10 billion dollars. I guess they should get pay raises since it wasn't their fault that they lost 10 billion.

Non-union labor would strike in a shortsighted attempt to cripple the company to reverse the decision, rather than accepting the superfluous jobs as wasteful?

Dude, you're twisting this argument, against someone who (ostensibly) agrees with you, at least regarding management.

Mismanagement has definitely been a massive problem - I gave examples of what I felt to be management issues above.

You responded to these with "Southwest uses union labor" - I'm not blaming the concept of unionized labor, I'm blaming the implementation (which, if you're playing at home, involves ... management), which is increasingly a destructive meme among these kinds of unions.

If anyone will be honest, Unions have done a Great Job of Putting Companies in dire straits.

Dont tell Me I dont know, I have been screwed by the 3 biggest Unions.

There was a need for Unions, but the wheel has turned and Unions are worried about one thing only, Members who will put Dues $ in their pockets.

How about getting laid off and receiveing 90 % of YOur wages not working=Automobile Industry.

NW has had some of the Highest Maintanence costs of any Airline!
Granted all Airlines are Having Problems, just look and see who they are?

At one time, Delta was the High Flyer of The Industry. Now, between the Unions Contracts and the Management, they are really screwed up.

Oh, Big Timers Gone: Eastern, Braniff, TWA, Pan Am. Why?

So now the unions have strapped some airlines and dont want to give concessions. OKAY. Lose Your Jobs. Welcome top the real; world. Live withing Your Means not what You make.:mad:

What does that make You? Figgen Morrons!:rolleyes:

"Reasonable Wage" that is the question or no job at all!

Just as the unions have been responsible for a lot of the airlines' problems, they arer also causing a lot of the problems in elementary and high school education.

Their answer to every problem is spend more, hire more teachers, and no accountability.

It's all going downhill.

Northwest dicked the unions over and still is going bankrupt. The union is not the problem there.

Certainly not all of the problem, but high labor costs are a factor.

As was the case in the 1970's when Doug Frazier, then president of the United Auto Workers, realized that some concessions were necessary to save Chrysler, concessions may be necessary to save the major airlines. Of course those concessions must be a part of numerous sound business decisions and not a single answer to what are obviously highly complicated problems.

Unions are part of the problem and I think they should be part of the solution.

It might be good to point out that a few of the "low cost" airlines who operate with non-union labor have failed as well.