The bean counters race to the bottom in the US Aviation Industry

eatmyshorts

Credit to http://m.bizjournals.com/bizjournals/blog/seat2B/2014/02/commuter-airlines-face-pilot-shortage.html?r=full

Thursday, February 20, 2014, 1:23pm EST

How miserly airlines created their own pilot shortage



The nation's big airlines want you to know that there's a dreadful pilot shortage and they apologize profusely if their commuter-carrier partners cancel flights to your hometown airport due to the debilitating shortfall.

The nation's big airlines don't want you to know that their commuter carriers, which operate half of all the nation's commercial flights, often pay pilots so little that it's often financially wiser to drive a truck or flip fast-food burgers than fly a plane.

And the bosses of the nation's big airlines certainly prefer that you don't conflate the fact that they're cashing in big time with the reality that they continue to insist on financial concessions from their existing pilots.

In case you missed the impossible-to-ignore, cut-to-the-chase conclusion, the pilot shortage is another nasty side effect of the airline's industry race to the bottom of everything from employee wages and benefits to passenger service and comfort. And airline bosses are shocked—shocked!—to find that potential aviators aren't flocking to an industry that offers minimum wages to new employees who've spent hundreds of thousands of dollars to qualify for the job.

Let's start with the immediate business-travel crisis, shall we? In the past few days, at least three carriers have abandoned routes or grounded aircraft due to a lack of pilots Wyoming-based Great Lakes Airlines (Nasdaq: GLUX) dumped six cities in the Midwest and Plains States due to what it called "the severe industry-wide pilot shortage." Republic Airways (Nasdaq: RJET), which flies commuter service for all four of the surviving legacy airlines, is grounding 27 planes and blames the lack of pilots. And United Airlines (NYSE: UAL) claims the decision to eliminate its Cleveland hub is at least partially due to a lack of aviators.

The airlines never mention salaries, of course. Their explanation: a wave of retirements as pilots reach the mandatory retirement age of 65; new federal regulations that require additional crew rest; and federal safety edicts that increase pilot training time.

There's some truth in those excuses, but they were hardly unpredictable occurrences beyond the airline industry's control. Anyone with an actuarial chart could have seen the retirements coming and acted to stock up on younger fliers. The new federal rules that increase the rest that pilots must have connect with shifts that went into effect at the beginning of the year. But they were announced two years ago. The new pilot-training rules, which require a minimum of 1,500 hours of experience compared to the previous threshold of 250 hours, went into effect on August 1, 2013. However, they were more than four years in the making after the fatal 2009 commuter-aircraft crash near Buffalo, New York. In fact, everyone from U.S. senators to the Transportation Department's inspector general criticized the slow rollout of those regulations.

And you know what H.L. Mencken said: "When somebody says it's not about the money, it's about the money." The pilot shortage is most definitely about the money.


There are many sources of data on pilot salaries, but let's look at statistics pulled together by airline consultant Kit Darby and analyzed by the travel site Skift.com.

A first-year co-pilot at a commuter airline may earn as little as $19 per flying hour. After five years with a commuter airline, the average salary is just $40 an hour. For the lowest-paid pilots at a carrier such as Mesa Air Group, which operates flights for both United and US Airways, a 60-hour work week means an effective pay rate of just $8.50 an hour. That's barely above the national minimum wage of $7.25 an hour and below the more than 10 bucks President Barack Obama is making federal contractors pay their workers.

Faced with what it claims is this catastrophic, route-shedding, plane-grounding, hub-killing shortage of aviators, you'd think the airline industry would react with across-the-board pay increases. After all, isn't that how it works in a capitalistic society? When faced with a labor shortage, companies raise their pay scales to attract more workers. You'd think this would be especially true for airline pilots, whose learning curve is steep and expensive and in whose hands rest the lives of passengers and the reputation of their employers.

Yet instead of raising pilot pay rates, airlines are insisting on concessions. One example: the particularly ironic developments at American Airlines Group (Nasdaq: AAL), the parent company of the recently merged American Airlines and US Airways.

According to the Dallas Morning News, the crew that arrived from US Airways back in December to run American Airlines and AAL netted a cool $79 million in stock sales during the last month. That covers chief executive Doug Parker, president Scott Kirby and four other top managers.

At the same time, however, American pressed for another concessionary contract at American Eagle, its wholly owned commuter airline. When the leaders of the pilots union last week decided not to put the contract to a vote of rank-and-file aviators, American management immediately retaliated by deciding to reduce the size of the American Eagle fleet. American's newly enriched managers also claimed that they would search for cheaper commuter carriers to do American's flying.

Whether that is a real-world possibility given the industry-wide pilot shortage remains to be seen. But the incongruity of newly arrived US Airways bosses feathering their financial nests while demanding concessions from their scarcer-than-hen's-teeth pilots did not escape the notice of commentators on a leading airline bulletin board.

American's new bosses "are just cashing in on the fact that they haven't given raises [at US Airways] since 1991," one poster claimed. "They terminat[ed] most of the company contribution to our retirement plan, canceled retiree health care benefits and contracted our work to companies where workers qualify for food stamp."

The commentator's bitter conclusion? "This is where we are in America."

pepe the prawn

Very good article, thanks for posting.

Sadly it echoes true to Europe also, the aviation industry is in a race to the bottom...

Tenger

I slightly amended the title to reflect the source and the target of the article.
I don't want to see this descend into accountant vs aerosexual arguments.



While the US does lead the way in aviation industrial practice's, luckily here in Europe we have minimum wage, no Chapter 11 bankruptcy restructure options, and less of a big 3 monopoly situation. We aren't as bad as the US yet, but still smart idea to watch what is happening over there.

The flight crew of Iberia Express, Ryanair, GermanWings, Hop, Stobart, Transavia etc, may of course disagree with me.

ProfessorPlum

No minimum wage if you're a 'self employed' contractor with essentially a zero hours contract either. Bloody awful state of affairs.

martinsvi

Tenger wrote: »

I slightly amended the title to reflect the source and the target of the article.
I don't want to see this descend into accountant s aerosexual arguments.
While the US does lead the way in aviation industrial practice's, luckily here in Europe we have minimum wage, no Chapter 11 bankruptcy restructure options, and less of a big 3 monopoly situation.

The flight crew of Iberia Express, GermanWings, Hop, Stobart, Transavia etc, may of course disagree with me.

how does minimum wage apply to a pilot when one is not hired directly through an, let's say, Irish based airline, but through some resourcing company based in Caribbean?

Growler!!!

Tenger wrote: »

The flight crew of Iberia Express, GermanWings, Hop, Stobart, Transavia etc, may of course disagree with me.

On a point of order ( my new phrase for this week:D), all the listed airlines are low cost subsidiary versions of their parent companys bar one.

The price of tickets on this one surely reflect they are not lo-co!!

donkey balls

It is not only flight crew that this applies to if you look at a certain part of the transport industry within Ireland & UK,(Truck Driving) this occupation since the recession has seen the wage being slashed from a living wage to the min wage.
With that happening a lot of people have got out of the industry or have moved to another sector within the industry or up skilled and have left the industry all together.
I know personally of two friends who happened to be truckers whose company was being taking over by another well known British PLC,They knew what was going to be coming down the line if they accepted the new T&C from this UK employer both jumped ship before hand.
The two lads are qualified EMT now training both in the US&Canada up to Paramedic level,I left the driving end of things years ago as well due to the poor wage & conditions but I'm still involved within the transport & aviation industry.(I still cannot make a clean break from it:P)
As this is continuing to happen within the driving end of things there will be a shortage of skilled & experienced drivers,Again it is on par with the pilot shortage in the USA why go through the training and pay all that money and end up getting paid the same as someone flipping burgers etc.

Tenger

martinsvi wrote: »

how does minimum wage apply to a pilot when one is not hired directly through an, let's say, Irish based airline, but through some resourcing company based in Caribbean?

Well it doesn't apply at all. I don't think anyone who works in the industry and has a love for aviation would think self employed contracted flight crew on zero hour contracts are a good thing.

Growler!!! wrote: »

On a point of order ( my new phrase for this week:D), all the listed airlines are low cost subsidiary versions of their parent company bar one.

The price of tickets on this one surely reflect they are not lo-co!!

Well that was the point I was trying to make.
The airlines named by me above are attempts by the larger legacy airlines to cut their staff costs through creation of a two tier system. In my view this is aping the US system, there you have United Express, Delta Shuttle, American Eagle all operated (in legacy livery) by a 3rd party airline. I would see Aer Lingus Regional as a similar operation.

Irish Steve

There's plenty of other issues that are part of the bigger problem

Self funded type ratings, the cost of regular medicals, airlines that move crew to a different base at the drop of a hat, all of these are moving costs that should really not be the responsibility of the individual, and certainly not if they are being then forced into shadow employment contracts via third party organisations that are not really airlines or operators.

Not sure it's going to change any time soon, and I'm also not sure that the result of these changes is going to be good for the industry, but changing back to a better model won't be easy.

Stovepipe

...and still the airlines are beating away people who want to give them thirty grand for a TR and then work for the kind of Ts and Cs that prevailed on building sites.........the way it is now, the aircraft bringing you on holidays is being flown by two individuals whose joint annual income is about Eu 70K max and they subsidised the airline by paying for everything that got them into the seats and in effect, they have no credible terms and conditions and the aircraft has been serviced by the lowest grade of technician (an A-license trainee, not even an apprentice) and signed out by a guy whose B1 license/good name/industry reputation is effectively under threat every time the aircraft flies. The rest of the staff are paid similar wages and couldn't care less if your bags go missing and are under orders to charge you as much as possible for anything and give out as little usable information as possible and will go missing at the drop of a hat if you start shouting at them. The aircraft are owned by a bank or a leasing company so the operator has no connection to them and couldn't care less about them as long as they fly for more than 12 hours a day. The CEO pads his salary with wage and share options that are unavailable to the rest of the workforce and he pays for nothing whatsoever....I'm glad I got to see the airline industry when it still had a bit of actual glamour about it but now it's about on a par with third-rate porn.

regards
Stovepipe