Monday, January 14, 2008

The Sky Is Falling ( ! / ? )

Last week, months of persistent rumors were given credibility when one of the major US airlines publicly announced that they were holding merger talks with several other major airlines, including NewCo's parent company. This was mere confirmation of what had been spread as gospel truth by industry and general media for months despite firm denials by numerous executives that any such thing was in the works. Therefore, the announcement wasn't much of a surprise - after all, who believes a thing CEOs say these days? In a hundred years, I suspect the epithet "CEO" will be used as interchangeably with "liar" as "Benedict Arnold" is now with "traitor."

That said, a public announcement before God, the SEC, and the NYSE - not necessarily in that order - does seem to increase the probability of a merger actually coming to fruition by several fold. At least, that's how the markets took it: the stocks off all three companies involved shot up 20-30% the first day alone, and most other airline stocks inexplicably took a mighty jump too. Meanwhile, the aviation message boards were freshly abuzz with speculation as to what form the merger would take, which aircraft would be phased out and which bases closed, what the name would be, how many employees would be axed, and what other unholy unions the merger mania might spawn. The mood among airline pilots was uniformly gloomy. One wag posted the following darkly humorous checklist:
Loosening of scope.....................Check
Catastrophic terrorist attack....Check
Record pay cuts...........................Check
Termination of pensions...........Check
Elimination of work rules.........Check
Record high fuel..........................Check
Age 65...........................................Check
Second recession........................Check

Career destruction checklist complete to cabotage.
Standing by for the career change checklist.
When I accepted the job at NewCo I knew that RedCo being bought or merged was a distinct possibility. It's a risk I took. If the merger does go through, I could be out of a job. It's not that NewCo is going anywhere - both companies no doubt value having low-cost JungleBus feed - but that if RedCo furloughs pilots as a result of the merger, those pilots flow back to NewCo and displace the current pilots. The question is whether RedCo will really furlough, and if so how soon. The worst case scenario involves them parking a ton of DC9's towards the beginning of a speedy merger, resulting in massive furloughs and flowdowns to NewCo. In that case I could be out of a job in less than a year. The best case scenario involves early retirement payouts being offered to RedCo pilots as ALPA's price for blessing the merger, resulting in a mass exodus of everyone over 50 and few if any furloughs. Either scenario could happen, or something in between.

I'm still a little skeptical as to whether a merger is really going to happen. RedCo and WidgetCo doesn't make that much sense to me. Everybody points out that they have complimentary route structures, with a large European network for Widget, an extensive Asian presence for RedCo, and relatively little overlap in their domestic routes. Well, if there's so little overlap, how exactly will merging the companies save a ton of money? If merely offering customers an expansive worldwide network were the goal, couldn't the same thing be accomplished through a close marketing alliance like the one RedCo has with KLM? Everyone seems certain that the Bush DOJ will take a laissez-faire approach to this megamerger; certainly a more modest marketing alliance would survive scrutiny as well. One can make the argument that mergers will give the surviving airlines greater pricing power, but consider that capacity cuts have done nothing and will do nothing for the legacies' pricing power in a deregulated environment because there is always some low-cost carrier eager to swoop in and snatch any morsels of market share that fall from the legacies' table. With Open Skies rapidly approaching, that will soon hold true on transoceanic routes as well.

Merging the airlines will bring a host of problems. Take a look at the fleets, for example. The only overlap is the B757, plus some commonality between the DC9 and MD88/MD90. A merged airline would have the following fleet: DC9, MD88, MD90, B737, A320, B757, B767, A330, B777, B747 - and soon, the B787. Even Aeroflot has a less bastardized fleet! I think integrating the pilot groups is going to be just as messy as it has been at USAirways, since RedCo has a more senior pilot group than Widget. Even messier will be integrating RedCo's heavily unionized flight attendants, rampers, and customer service personnel with their non-union counterparts at Widget.

It's my opinion that this is not about making a healthy, prosperous long-term company and is all about creating wealth in the short term for a select few. It's already common knowledge that much of the pressure to merge has come from hedge fund managers and other private investment firms. With few other individual or institutional investors actively involved in corporate governance, they have the CEO and board of directors' ears. It helps that company executives themselves stand to profit handsomely from any transaction. The bottom line is that this may very well go through no matter how disastrous it will be over the long term. Think how much wealth was generated since the announcement, without anything really happening. Then again, maybe the whole thing will fall apart and the hedge fund managers will have to satisfy themselves with a few hundred million dollars in short-term profit taking.

In the meantime, I'm not worrying too much. There's not much I can do for now but try to get as much JungleBus time as I can and keep my eyes open for JungleBus-rated pilot opportunities here and overseas. If the worst-case scenario does happen, at least I got my ATP and a valuable type rating out of it. Till then, I'm just going to enjoy the flying and try to not listen to the gloomy rumor mill too much.

Thursday, January 03, 2008

Fly By Night

When I was new at Horizon, I was on reserve for about a year and a half. I knew it'd be significantly shorter at NewCo, but figured I'd probably do at least one month. Actually, it turned out to be only two weeks, because I got a regular line for January. That's encouraging but not particularly noteworthy. Here's the crazy part: it's a Monday through Thursday, weekends-off line. In 3.5 years at Horizon, I was never once able to hold that kind of line.

It turns out to have been a case of fortunate timing for me and rather unfortunate timing for several pilots senior to me. I went to Montreal a week earlier than the rest of my class, finished training more quickly than expected, didn't wait horribly long for IOE, and was then assigned a very efficient IOE schedule that went smoothly so I knocked it all out in one five-day stretch. The end result was that I (and my sim partner) finished IOE just in time to be eligible to bid for January. Meanwhile, everyone else in my newhire class (all senior to me) was one week or more behind me in the training cycle. Those one week senior to me, who I joined in Montreal, had delayed checkrides due to check airman availability issues. Several pilots in the class two weeks before me had their IOE delayed due to flight cancellations, sick check airmen, and other issues. The end result was that there were no less than eleven pilots senior to me who were ineligible to bid at the bid close, although they'll all be done with IOE before January. They'll get assigned to reserve, where they'll end up covering all the flying contained in the junior lines that went unawarded.

That alone does not explain why I could hold a normally coveted M-Th schedule, since I still had 16 FOs bidding senior to me. The other piece of the puzzle is that it's a CDO line, which many pilots bid away from. An explanation is in order. CDO stands for Continuous Duty Overnight. They're also known as hi-speeds, stand-ups, or a few unprintable names. The idea is that to maximize aircraft utilization without overnighting multiple crews, the same crew will operate the late flight into an outstation and the early flight back to the hub. On a CDO, you're technically on duty all night, and therefore aren't bound to the usual eight or nine hours of minimum rest. There's anywhere between three and eight hours between your last PM flight and first AM flight. Most airlines provide hotel rooms for your admittedly short nap, although a few regionals have made their crews sleep on board the aircraft during shorter CDOs (Mesa famously provided crews with plywood boards to make beds out of seat rows).

A lot of pilots dislike CDOs. They screw up your sleep schedule, and if you have family or other obligations that prevent you from actually resting during your daytime rest period, a few straight nights of CDOs will really fatigue a pilot. A few regional airlines with weak contracts (or non-union carriers) have CDO trips that are arguably unsafe, with multiple legs before or after the short overnight and duty times approaching the legal limit (16 hours). Another common gripe are lines that mix normal trips with CDO trips, which really screws with circadian rhythms and makes it hard to establish a good sleep schedule.

NewCo's contract, while weak in many areas, contains pretty good restrictions on CDO scheduling practices. Each CDO trip may contain no more than 12 hours of duty and five hours of block time, may only contain two flights (one out, one back), must have at least four hours of "rest", and each crewmember must be provided a hotel room. CDOs cannot be sprinkled throughout regular lines but must be grouped into "pure CDO" lines like the one I bid, and these have a number of restrictions such as no more than three consecutive CDOs and every stretch of two or three consecutive CDOs must be followed by at least two days off. That's part of what makes a CDO line palatable for me. The other thing is that I'm a very flexible sleeper, and I do well sleeping a few hours at night and then napping for a few hours in the daytime.

My schedule for most of the month is Saskatoon CDOs on Monday, Tuesday, and Wednesday nights. I show up at Minneapolis at about 8:30am those nights and I'm released around 9:00am the next morning. I get about 5 hours of rest in Saskatoon - if everything goes right. The last few nights we were delayed by over an hour getting out of Minneapolis, making that nap in Saskatoon painfully short. I'm getting a few hours of sleep in the afternoons, though, so I'm pretty well rested the following evening.

In February I'll have those eleven FOs bidding senior to me, but there are six senior to them that are upgrading so I should only move down five numbers. In the meantime the amount of flying and number of normal lines will continue to increase so hopefully my luck in bidding holds for another month. I'm enjoying it while I can, because I'm sure I'll be on reserve for a while after I upgrade, especially when they open Detroit and Memphis bases and start sending airplanes there.