Thursday, June 12, 2008

Downgraded!

It's official. The US airline industry is (back) in the crapper. With oil at $130+ per barrel, it's just a matter of time before one or more of our major airlines goes back into bankruptcy, maybe for good. The airlines have finally been able to get most of the fare increases to stick, but they'll need to increase yet more for airlines to make money... and the number of passengers willing to pay that much to fly in a less-than-stellar economy is surely less than the number flying today. Something has to give. United and Continental are taking preemptive measures by significantly cutting their capacity. USAirways and perhaps American will follow suit. The more cynical among us believe Northwest and Delta are holding off on capacity cuts for only as long as they need to secure approval of their merger.

When airlines cut capacity, the pilots most directly affected are those most recently hired. The bottom 10% or so of any seniority list is referred to as "furlough fodder," although there have been furloughs or series of furloughs that have gone halfway up the list and beyond. Getting furloughed is like getting laid off in the non-aviation world. You retain the right to your old position if the company expands again, but that's about it. You might get non-rev benefits for a while. You can get medical bennies through COBRA but it's on your nickel. Some pilots find work outside of aviation while they await recall; others take flying jobs at regional airlines or corporate gigs. Some go back on active duty with the military. Many simply move on with their careers and get hired by another airline, never to return. The ranks of SWA, JetBlue, Airtran, FedEx, and UPS are full of pilots who were furloughed by major carriers after 9/11. When airlines recall furloughees, they often find the acceptance rate to be less than 50%.

Even if a pilot avoids furlough, everyone except the very top is losing relative seniority. Many are displaced to smaller (and lower-paying) equipment. Worse yet is the Captain that gets downgraded to First Officer, sometimes taking a pay cut of up to 50%. This is on top of payrate and benefit cuts of up to 50% that were imposed in bankruptcy after 9/11.

There likely wouldn't be that many furloughs, displacements, and downgrades this time around except that the mandatory retirement age was just changed, from age 60 to age 65. Now there are far fewer retirements to absorb some of the capacity cuts. The irony, of course, is that those enjoying an extra five years at the top of the pay scale are those least likely to be impacted by capacity cuts. A guy on the top 5% of the list isn't going to be displaced, much less downgraded or furloughed. I hope the guys staying past 60 enjoy their extra five years. Their newfound freedom to "fly 'till they die" is going to set back a lot of junior guys' careers at least five years.

I've mentioned in previous posts that I don't see keeping my job beyond a year or so. With recent developments in the industry a downgrade and subsequent furlough is looking more and more likely. It'd only take a few hundred furloughs (flowdowns) from RedCo to kick me off the NewCo list, and that's on the small end of expected furloughs at many companies. The political pressure to avoid cuts until the merger is approved may be my saving grace in the short term.

In the meantime, I'm getting some good practice for my eventual downgrade by flying in the right seat. We're pretty short on FOs right now and I'm on reserve, so crew scheduling has seen fit to use me as a first officer for two weeks in a row now. It's not a super big deal - I'm being paid as a Captain, and I was an FO recently enough that I still know the duties well. That said, by the time I lose my job, I'd really like to have some decent turbine PIC under my belt. I'm seriously contemplating bidding a CDO line for next month to avoid flying as an FO on reserve. True, I'd get less sleep, but it's not like us airline pilots are sleeping that well lately anyways.

18 comments:

Marty said...

Best of luck, Sam. It's amazing how objectively you can write about the potential implosion of your job situation--I couldn't be nearly so calm about it :-)

Just curious if you think re-regulation might be an answer. As a near-libertarian, I'm increasingly convinced that commercial aviation is an oxymoron and possibly the only "open" market where it makes sense to have Uncle Sam nudge the laws of commerce a little.

Might save us all a little by reducing bankruptcies and their resulting ill effects on the economy at large...

Hang in there!

Marty

Matt said...

Kinda OT, but do you think GWB will go down in history as the worst President in modern times? The economy is crap, he sent you (the US) to war based on lies and they've racked up over $600 Billion doing so, not to mention the thousands killed. It's crazy that most Republicans think he's done a good job. I don't think Jan 2009 can come fast enough!

Sad to hear that you may be downgraded. I hope everything works out for you. I really enjoy your blog.

Ryan said...

Hang in there!

Fuel has gone from 1.25 cents per available seat mile for the majors in the second quarter of 2000 to near or over 4.00 cents in 2008.

We've got record high costs of oil, plus the bank failures, business failures, the mortgage mess, the highest amount of personal bankruptcies in this nation's history, the 10 trillion-dollar defecit and on and on... It will (I hope so) get better shortly. Hopefully this oil bubble will pop and prices will come back down a little. The airlines are now tightening their belts and it's now a game of whoever has the largest market cap wins in the end. UAL might be our next casualty. Sad to say but may come true.

HANG IN THERE!!!

Anonymous said...

I think two things will happen that will help the airline situation in the U.S.: 1. oil will go up some more but it will go down in the mid-term to below current levels(within 6 months). Some of the current high prices are driven by OPEC production levels being too low, and pure speculative futures buying oh the part of investors; 2. the change in administrations will spark the economy: whoever gets the presidency, economic policy will change for the better. So, you may just about have timed it right.

Anonymous said...

Sam - you're still young enough. Have you given thought to joining any of the air reserve components (AF Reserve or Air National Guard)? As a guy on the inside, I can tell you, we're being used like we're full-time even though we're part time...

Windsor said...

So whats your exit plan? Going to try and find a job flying or make some money in the real world?

Things with NW and DAL are ugly for all of us. It stinks having our careers in limbo for the time being. I dont think things are looking good for anyone that has been hired in the last few years at any of the carriers involved both mainline and regional.

I dont know if you plan on ever going to Southwest, but if you do get furloughed, there is a Govt. program that will pay for you to get the 737 type rating, or any type of your choosing.

Good luck to us all,
Windsor

Tracy said...

Sam,

My response was going to be too long for a comment, so I posted it to my blog AroundThePattern.

Rick Barlow said...

Aviation.

More powerful than Crack.

Brian said...

Sam,
I thought about posting this the other day. Though there's little I can say to offer any sort of real hope, the best I can do is to tell you that you - and your industry - are not alone.

Monday brought news of 1,400 job cuts among the nation's third-largest newspaper chain, McClatchy:

http://cancelthebee.blogspot.com/2008/06/breakdown-of-mcclatchy-job-cuts.html

Several other chains have also significantly downsized, including the one that employs me. The Washington Post has offered buyouts in each of the past few years.

Again, it's of no comfort to you. But I'd guess I and my colleagues around the country understand the uncertainty a lot more than most.

It sucks that the two industries I deeply care about are both in the financial shitter.

--B

Anonymous said...

ATTN: Hatchlings and new Pilots...

Being in the "age category" mentioned in the article by this 'snotnose' phrase:

"I hope the guys staying past 60 enjoy their extra five years. Their newfound freedom to "fly 'till they die" is going to set back a lot of junior guys' careers at least five years."

HARUMMMPH!!...As an old seasoned geezer pilot I can unshamefully say...we earned the right to stay the extra years...and we suffered long and mightily in the slow hiring years, and furlough trenches, and losses in such major carriers (re: pilot positions) as Eastern, PanAm, and many more 'giants' that fell. We did this long before many "WHINERS" today even sported their first set of diapers...much less a flightsuit..

Don't blame us 'old guys' for your personal woes (rather self centered sentiments aren't they??).

If you really want to be a pilot....PAY YOUR FRIKKIN' DUES...JUST LIKE WE ALL HAVE DONE...

Sam said...

I'm guessing you pick up premium pay trips with guys on the street, too. After all - you EARNED the right, you suffered so the "whiners" should just suck it up and enjoy their furlough!

For all the "dues paying" you may have done in the past, at least most of it was inflicted at the hands of management and not your fellow pilots. I'm willing to pay every bit of "dues" you paid...being on the street so someone could fly to 65 was NOT one of them.

Anonymous said...

Sam

You are 27yo...very young and unseasoned and self-centered it appears.

I know, I know,...you have a couple thousand hours and are the bestest pilot there ever was...uhhuh..right..
(oldsters have heard this refrane more times than imaginable.)

When and IF you cut the mustard, and stay in the airlines, (or keep "guttin' it out" at staying with the industry), When you approach 55-60 (and YOU will) you will get a completely different perspective than you have now...GUARANTEED!!

So, you need to take the BAD times with the GOOD times...And, believe me, that's all part of the game, but you never ever wish ill will toward others that have made it thru the "hard way" as well. If you do, you won't last long.

Guess what Sam?, older senority pilots just happen to be YOUR "fellow pilots" too!!

And, if this airline industry hardship stuff does'nt agree with you...Well Sam, there's always Barber College!

Sam said...

"Anonymous"--

Believe it or not, I've spent a bit of time flying with the older set at my last airline and most of them were super guys who I learned a lot from. A very small percentage of them were arrogant bastards that dripped with contempt for younger, less experienced crewmembers. Flying a four day trip with one of them made me want to strangle myself with a piano string. Your condescending tone is therefore familiar, although few of them were big enough jerks to use terms like "snotnose" or "hatchling." I'll chalk that up to internet anonymity, though.

You presume a bit about my state of mind. I consider myself a pretty average pilot and I know my 5300 hours is fairly paltry in the scheme of things, and I have no doubt that I have more dues to pay in this industry. I know I'm not owed anything, and I know that anything pilots get in this industry is because they fight for it. I volunteer for ALPA, flawed as it is, and make my views known to my reps.

Believe it or not, I'm actually sympathetic to raising the retirement age to 65 for those who lost pensions and were otherwise robbed by management in the last few years. Some, like Tracy who posted a response in his blog, make a compelling argument on that basis. A lot of the 60+ guys' arguments, however, seem to consist of "It's MY seat, I earned it, you have no right to get me out of it, I had 3 furloughs and 2 downgrades so you should too!" Any logical response to that - like pointing out that today's older pilots themselves benefited from others leaving at 60 - invites accusations of whining and self-centeredness.

Incidently, I'd probably wouldn't be beating this old horse to death except it's not the first time the current generation of senior guys sold out the "whippersnappers." The adoption of a "C-scale" in the 90s via the wholesale outsourcing of short-range & narrow gauge flying to the regionals was agreed to in exchange for contracts that paid well at mainline but ultimately lasted less than 5 years. It really was selling Manhattan for a few trinkets & beads, but it didn't affect the old guys. Contrast that to '85 when the UA guys went on strike to prevent a B-scale affecting guys not even on the property yet.

I'd be a whole lot more enthusiastic about the old guys hanging around another 5 years if they used the extra time helping us figure out how to straighten out this scope mess - but I don't see too much interest. I have no idea what my state of mind will be when I'm 50-55 but I hope that I'll be working to leave the profession to the next generation in better condition than I found it, rather than trying to extract every last dollar from its smoldering wreckage.

Anonymous said...

Thanks for the comeback (thin-skinned tho it was).

Now then, sorting thru the riff-raff and pot-shots we arrive at:

quote: "Believe it or not, I'm actually sympathetic to raising the retirement age to 65 for those who lost pensions and were otherwise robbed by management in the last few years."

This phrase is where my interest in your blog begins and ends. Now if you had put a period after "65" and dropped the rest of the sentence we'd have no disagreements.

THe drivel that precedes and follows this "one statement" only paints a further word picture of yourself and Im not interested much in that...but some might be.

Which might I say, is something to consider since you paste your face and personal facts on the net. Did it not occur to you that future employers(management) might take note of your sentiments?

One final thing. You appear very negative to management. I've met many pilots thru the years that blame all of their pilot woes on mangement. GET OVER IT. Management marches to a completely different drummer than do pilots. And, they own the planes and own YOU (don't forget that). As a pilot in the airlines you are and will be "useful" as long as you contribute to the bottom line. You are expendable and will always be expendable.

My start was in the DC-3...so that gives you some idea. The airlines is a tough industry with a lot of bad knocks and hardship...whatever I write doesn't matter much except for the fact that "Ive been there and done that"...JUST HATE TO SEE PILOTS EATING THEIR OWN OR THROWING FELLOW PILOTS UNDER A BUS...5 extra years at the top of the game is well deserved and appreciated by most senior pilots (we all PAID our dues!!)

Sam said...

*sigh* I'm not gonna change your mind with further argument and it's getting old. Take my original advise and enjoy the extra five years.

Anonymous said...

Sam,

Nope. You will not change any experienced pilot's well established opinions. Nor will you be allowed to state your opinion as a FACT without proper rebuttal.

Younger pilots need understand that life in general doesn't revolve around good old "NUMBER ONE"! The "entitlement mindset" of today is unfortunately creeping into the comraderie that was once an esteemed part of being a pilot.

Sam said...

That's freaking rich. You get five extra years at the top of the payscale that none of your predecessors since 1959 have had, while thousands of pilots at the bottom take furloughs into a horrible job market (for some, their second since 9/11) - and you say YOUNGER pilots need to understand that life doesn't revolve around #1!!!

I'm done arguing this. Good day.

lupadi said...

ATTN: Long reply....

Hi Sam.

Just finished wading through your last couple of year’s worth of blogs. What can I say, great job. It was most entertaining and since you are always so generous with sharing the details of your life, going so far as to sponsor free meals to others, I am, as payment for the entertaining read, hereby offering you ( and Dawn ) a bona-fide free meal and drinks in a real German restaurant if you ever make it to Frankfurt again. I work as an atc in the centre here.

The problem in your industry as I see it, is that there are simply too many people willing to work for slave wages, just to fly. The perception is that flying is all glamour and fun, and few people realise that it’s actually damn hard work. Your blog illustrates that perfectly (I have flown as an ACM on long range as well as some 5 day short range trips so I know of what I speak). We also have pilots working for feeder airlines and LCC’s, who have to take the same road that you have. Except getting a flight instructor job here is very difficult, due to the high cost of flying=few students (At my flying club the instructors work for free just to keep their licences current).

Finally, I think that as long as there are people willing to fly for free, things will never change. You need to change the perception of the job, in the industry, and of the next generation of pilots, and make them understand that being a pilot is a job like any other, that bears great responsibility.
A little solidarity amongst pilots would also help (haha, good luck with that). If the top lot would be prepared to take a little less so that the bottom lot could get a little more, we could have a winner (that will only work in an environment not ruled by fear of furlough’s, firings etc.) However as long as “paying your due’s” is an accepted part of the program, expect no change (the fact that airline management generally sucks doesn’t help either).
When we privatized, one of goals of our union was “same work, same pay”. I have never understood why a pilot flying a “heavy” with 300+ passengers should earn way more that one flying 80 passenger. Are 300 lives worth more than 80? Not to me if I’m one of the 80.
In our case why should a 20 year veteran like myself earn 5 times as much as a young controller (especially seeing that the youngster is probably doing a better job). Also should I earn less for just working regional’s and more when the heavy’s come through? BTW working those little planes with the four hairdryers are the bane of my life. Give me some megawackers or heavies any day.
You also need to get the young guys/girls to understand that’s not acceptable to work for slave wages. I find this whole concept of paying one’s due’s very strange. When I fly I want well paid, motivated, well rested pilots on the flight deck, not people busy trying to “pay their due’s”, worrying about the next downsizing or whether they will have enough money to pay the grocery bill.

My company launched a scheme a while back where they wanted to make atc’s pay for their training. ( it costs around €250 000 to train a controller ) . Guess what……………no takers. So that plan ended up being trashed again.
Moral of the story: being a controller isn’t glamorous, we don’t have fancy uniforms, and no image, so that bull just didn’t wash in our industry. It also means ( at least here in Europe ) that we have decent working conditions, make a good salary and are generally well rested when we get to work. ( except after the third early shift ;-))

Grüße aus Deutschland

Lupadi