Airlines: Some Costs They Can't - And Shouldn't - Cut 86 comments
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Today, like most every day, just over 44,000 of the world's most experienced airline pilots employed by the 9 largest airlines in the United States will accept full responsibility for over 1.5 million lives sitting on the other side of their locked cockpit doors. Over the next 24 hours, these pilots will make over 13,500 take-offs literally around the world. Through every imaginable type of weather, they will be in command of over 36,000 hours of flight time. And, if today is like most days, you will never hear or read about even one of those flights.
There is a perception that salaries are an important key to discretionary cost-cutting by the airlines. Charts below attempt to put that information in perspective as regards pilots.
So what does it really take to be a commercial pilot?
First, similar to a doctor taking years to get qualified in the operating room, there are no 'entry level' pilot jobs at the major airlines. Before being hired by a major airline a commercial pilot will likely have a college degree and either been trained as a pilot in the military or have spent several years acquiring thousands of flight hours experience on smaller aircraft.
Fully depending on the airline’s growth, it could take as many as 20+ years to move from a co-pilot to captain.
Airline pilot wages, benefits and working schedules are based on company seniority. If a pilot leaves one airline he/she will start at the bottom of the next airline’s seniority list as a new hire.
Once hired by a major airline, regardless of prior experience, a pilot goes through several weeks of training and testing before being qualified on that airline’s specific aircraft operations. Every time he or she moves to a different type of aircraft or moves from co-pilot to captain he will again require more weeks of training and testing.
Pilots have to pass a medical check every six months with an annual EKG required as they get older. Due to very stringent medical requirements, approximately 15% of airline pilots are forced to retire before they reach their mandatory retirement age.
The FAA has strict limits on the maximum number of hours pilots are allowed to fly: The maximums are 1,000 in a year, 100 in a month and 30-32 in 7 days (international flight limits are slightly higher than domestic). In order to actually get an hour of flight time, depending on your seniority and the airline’s schedule, you can expect to be away from your base from two to four times actual flight hours. For the most part, a pilot only gets paid when the aircraft is moving. (Note: Pilots do not get premium pay for working holidays or weekends.)
What is a pilot worth?
Actually the important question should be: In the future, is the job going to be worth it for those individuals you want and expect to be responsible for so much?
Since 9/11 and the bankruptcy or reorganization of every legacy airline, pilot hourly pay rates have been reduced to what they were almost 20 years ago. In addition, work rule changes force pilots to work more and longer days than they ever have. Pilots from United (UAL), Delta (DAL), Northwest (now merged with Delta) and USAir (LCC) all lost significant amounts of their pensions as those airlines went through bankruptcy after 9/11.
Recognizing the above, how much of the average passenger airline ticket fare is now used to pay pilots to accept the responsibility they do? Not very much!
Tables below use industry data to calculate the average 'cockpit' wage cost for two pilots per hour of flight for the average passenger fare. Data considers reported passenger revenue kept by the airline and does not include taxes and airport fees. (USAir data includes America West pro forma. Delta and Northwest merged in October 2008. Aircraft movement is considered flight time for this report. )
For year 2008 the average cockpit wage cost per average passenger fare per hour of flight was $3.73. See figure 1 for specific airlines.
Figure 1
Since 9/11, United, Delta, Northwest and USAir filed bankruptcy. American (AMR) and Continental (CAL) reorganized outside of bankruptcy in 2003.
In the past seven years, while inflation increased by 20%, the average hourly cockpit wage cost for the average passenger fare dropped by 29%.
See figure 2 for the year over change since year 2002.
Figure 2
When comparing year 2008 with 2002, Southwest (LUV) and JetBlue (JBLU) were the only two airlines that had their passenger fare ratio of cockpit wage costs increase. (In 2002, both of these airlines had the lowest fare ratios in the industry.) In figure 3 you can see how the average cockpit wage cost ratio of the average passenger fare per hour of flight changed for each selected airline since year 2002.
Figure 3
As you can see, on average, the coffee you purchased in the terminal before your flight cost more than what both pilots will earn from your passenger fare for each hour of flight they accept responsibility for your safety.
Whether it is in the operating room or an airline cockpit, if you want the “best” individuals there, you will have to provide the incentives to get them first.
The bottom line questions are: In the future, who do you want replacing these aging and very experienced veteran pilots? Is it worth a few dollars more to attract the “right stuff” to be responsible for such an important job?
Data source: SEC filings and BTS reports
Disclosure: At the time of writing, the author and his family hold stock and derivative positions in AMR.
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I'm convinced of your devotion to the job you are doing, but flying planes has been moving from the heroic ( early XX century) to automatic control, today you can tell that fighting pilots are in the last generation, the next Fxx will be without pilots will be more capable with more G's force turns and less training and expense.
As a DARPA scientist friend told me once "the only reason to have pilots in a plane today is the psychology impact in passengers", but day will come, today people moves in automatic train in air terminals, tomorrow will move their cars in automated highways.... that day passengers planes will be automatically operated, we are 15 years away of it.
the pilots are the only thing keeping it going!
On Oct 31 03:38 PM mdwmann wrote:
> The pilots will be the demise of AA!
Your comments are unbelievable. Who said experience and experience alone is all that is required to make a safe pilot? Only you. Your argument is against yourself. Unbelievable.
A pilot should have 4 things:
(1) Aptitude
(2) Training
(3) Performance history
(4) Experience
4 items. Clear on that?
4 things. Got it?
Don't substitute 1 for the other 3. Comprendo?
Don't assume lack in 1 area can be made up for by extra in another. Understand?
Why do you suppose that for decades JAL hired only English speaking pilots. The reason is because Insurance companies would only insure their airplanes if they did. The reputation of Japanese pilots was not good. I am not taking away anything from them but for the longest time they were amomg the world's worst instrument pilots. I was TDY once to the JMSDF for purposes of ferrying a C-118 from Burbank to Tokoyo because they didn't have anyone they could trust to do the job.
The previous post by seaav8tor states it perfectly !
On Nov 02 11:50 PM Milano wrote:
> Unbelievable! Who is this guy and how does he equate experience with
> safety? These two things have only a minimal correlation. > no experience in the cockpit. Some of these "excellent" candidates
> have never even flown as a passenger inside of a commercial plane.
> Yet they go on to become some of the best pilots in the world. Really
> now, how can a Japanese pilot who is 32 years old land a 747 just
> as competently (if not more competently) than a a 55 year old U.S.
> pilot who is more experienced? No doubt that experience is an important
> criterion. However, I believe that diligence and work ethic are more
> relevant factors to being a safe pilot. Case in point is the very
> experienced Northwest pilots who recently overshot the MSP airport
> by 150 miles. They both had decades of experience and an excellent
> safety record yet apparently had no regard for the safety of their
> passengers. I would say that they were neither diligent employees
> nor did they hold a high degree of work ethic. This author needs
> to focus on the other factors that compromise safety. Experience
> is a way to scare people and ask employers for more money. The salary
> of large commercial jet pilots needs to decrease, while the salary
> of small jet and small prop pilots need to increase. The danger lies
> with these smaller regional operations where the lack of pay together
> with extreme fatigue causes unsafe conditions.
On Nov 03 03:37 AM seaav8tor wrote:
> Milano,
>
> Your comments are unbelievable. Who said experience and experience
> alone is all that is required to make a safe pilot? Only you. Your
> argument is against yourself. Unbelievable.
>
> A pilot should have 4 things:
>
> (1) Aptitude
>
> (2) Training
>
> (3) Performance history
>
> (4) Experience
>
> 4 items. Clear on that?
>
> 4 things. Got it?
>
> Don't substitute 1 for the other 3. Comprendo?
>
> Don't assume lack in 1 area can be made up for by extra in another.
> Understand?
My opinion is that airlines have become ATMs for CEOs and the like. Every penny that they save (take away) from a pilot does not go toward another valuable cost. It goes directly to the Executives' pockets. There are many areas where greater costs can be achieved, and in most cases they are. Such as landing fees, aircraft leases, engine leases, fuel hedging, and an array of other things. However, lining their pockets while taming labor must be a nice profitable game to play.
These non-labor savings are probably the biggest reason why airlines are able to bring cost efficiency to the traveling public. Paying pilots a reasonable salary would only increase their costs by a few cents. However, most CEOs must feel that they are entitled to that money and not the pilots (a calculated risk perhaps). Yes, some of it may have to do with supply and demand, especially after 911. The problem however, may come in the near future when the supply of not only pilots, but well qualified pilots could be in short supply. No college student in their right mind should pursue this career. Not when he/she can expect to make $20,000 their first year and not very much more for many years after that.
I for one have not, and will not take my 12 yr old son flying on a small airplane. Why? Because he's an ingenious kid and I'm terrified at the idea of him liking it to where he'll want to pursue it as a career. I'm simply not prepared to take that risk with him. Not with these CEOs who want to Walmartize this industry. Furthermore, I don't know too many other airline pilots who would encourage their own kids to pursue this career either.
Unions: Unions are a necessary evil in this industry. Without them, the majority of airline pilots would probably qualify for food stamps. It's not an exaggeration, it's a fact. The talent at the top (CEOs) now at days appear to have been trained by the likes of the elites in third world countries, such as Mexico and Guatemala. Where the rich are super rich while down the street there are people starving and living in cardboard boxes. If you've been to any of these countries you've probably witnessed it.
Most of these Executives are not interested in creating a good product, or reasonable wages for their employees. They're merely interested in the size by which their bonuses can be increased each year. Sadly, pilots due to our investment in our careers and the lack of mobility, have become good targets of opportunity for them. Even worse, the laws over years have been tailored to their convinience to make it easier to achieve this goal. Just like Wallstreet and Bankers, taking all they can because they can.
Our argument is not merely pay for the sake of pay. Rather it is pay commensurate with the upkeep, responsibility, liability, and training that a professional pilot has to endure. Things such as Medicals every six months, EKGs if over 35yrs of age, jeopardy checkrides every six months or every year for First Officers, dealing with the stresses of congested airspace, congested ramp areas and taxi ways, and last but not least, being left with huge amounts of debt from student loans for most. For some these loans can exceed $100,000. Yet most will not make much more than $70,000 for the better part of the first ten years of their careers. The pay and treatment of pilots by this wave of Executives is simply not on par with what it takes to be in this profession.
The fact of the matter is that you didn't do anything to contribute to high salary, high quality airline jobs. You are simply a beneficiary of some guys who had some principles and balls a few decades ago. When it's all said and done, you will have extracted much more from this industry than you gave. I can smell you from here.
On Oct 31 04:20 PM 757okie wrote:
> yeah and all the regionals would love to take majors jobs for the
> regional price
On Nov 03 08:28 AM Talon wrote:
>. As far as "performance history", isn't
> that experience? Comprendo? Understand?
No it is not.
A pilot can have 10,000 hours of experience..... But, if he/she,
Busted out of military pilot training, then,
Went the civilian route and busted the Private check ride,
Busted the Commercial check ride,
Failed the first attempt on the ATP exam,
Busted the ATP check ride,
Has 2 FAA incidents, 3 violations,
1 aircraft accident, hull loss, pilot error, resulted in a temporary suspension,
1 DUI
Then, the pilot has a significant amount of experience but a poor performance history.
As many can tell, I hardly ever post. But this article and many of the comments compelled me to do so.
I "assumed" that a quick mouse drag and copy would clearly indicate I was making comments relating to YOUR post. Sorry for the mistake.
I was only trying to add and clarify SW's current pay structure and why they are at the top. I thought that it would give more ammo to your comments. That is all. I'm clearly not the brightest on blog technology, but I'm certainly not trying to steal your thunder. Peace.
Vote TL
hokieincane...: Comments (10) FollowVote TL,
You are guilty of gross plagiarism, as you posted two of my paragraphs (which I posted this morning) as your own without any attribution.
hokie...
On Nov 02 01:44 PM Vote TL wrote:
> People are overlooking the reason that Southwest currently has better
> pay packages at the moment. They were moved to the top of the list
> due to legacy airlines going bankrupt and being bailed out. ie...
> massive labor cost cutting and pay reductions Most of the concessions
> with these companies were made by Labor and Unions to save their
> jobs. Now Southwest looks like they pay the most...only in comparison.
> The reason they haven't had to go through this is that they have
> managed to stay profitable for 30 years. (only this may not hold
> true in this economy)
>
> Management can make mistakes again and again, and still get bonuses
> and pay raises. Pilots can usually only make a mistake once...with
> terrible consequences.
>
> Because air travel is so common now and reasonably affordable, most
> consumers are very jaded. The American sense of entitlement at all
> levels will hopefully be successfully reevalutated when it comes
> to this particular issue with lives at stake. And it won't take continued
> tragedies before companies wake up to the coming dilema of experienced
> pilots shortages that are already escalating.
>
> Unfortunately when it comes to executive pay, whether in the airlines
> or wall st. it seems that the status quo of greed and inefficiency
> still reigns over reason and common sense.
>
> Be careful what you wish for when it comes to cheap travel.
Vote TL only. Hokie to follow
> Southwest can pay its pilots better because they are much more productive
> than the pilots of a typical legacy airline. They also have been
> profitable, and thereby have not needed to pass through bankruptcy
> court--not even once! Their fares are relatively low, and they (along
> with other low cost airlines) are setting the fares on many routes
> and steadily taking market share domestically from the legacies.
>
>
> Look at total cost per available seat mile, not just at pilot pay
> and benefits. Southwest is still one of the lowest cost majors--they've
> lost their cost lead recently to AirTran.
>
> On Nov 01 08:22 PM CAVU wrote:
Your comment speaks for itself.
On Oct 31 03:38 PM mdwmann wrote:
> The pilots will be the demise of AA!
Years ago, I met a pilot who'd just started flying. He didn't tell me about the thousands he expected to make in 10 years, or the chalet he just purchased in Snowmass. He told me how happy he was to be able to do something he loved. He told me he would do it for free and couldn't believe he was actually getting paid for it. As far as executive compensation goes, it was you, the stockholder (and you probably have some airline stock) that hired him. You offered him a certain amount of money and he said OK. You did it through your board of directors that you elected. That CEO is getting as much as he can, just like you... and me, I might add. But, if you don't think he's worth it, fire him. I saw a guy on the street corner who would be MORE than willing to be your CEO for well under 100K. All that savings could be split up amongst you and your colleagues ... until your company folds (I hope you don't have too much airline stock).
It is what it is. The economy, consumers, employers and employees alike have been confronted with some of the most incredible challenges we've ever faced. Each of us is trying to make it through the day-to-day. We're trying to pay for our house, our car, tuition for our kids... and put food on the table. My folks didn't pay for my college... which was a lot less, I might add ... till the profs began telling people how important THEY were. Anyway, maybe our dollars would go farther if we ate out less and practiced a little frugality
I've been in this business for over 35 years. I've seen my "real" income slashed by over 50%. But thank goodness I don't need to buy expensive American "Union made" tools and toys like I used to! The Chinese have enabled me to live the "beyond-my-means" lifestyle I've become accustomed to. I just saved $22 on a pipe wrench last week! I can use that savings toward that Sony 55" TV I've been eyeballin'. I shouldn't hafta tighten my belt. It's everyone elses fault our economy in the skids... and my credit cards are all maxed out at 29.99%. Airlines let me fly coast to coast for less than a hundred bucks and I can finance my car for 7 years now... so the $500 a month for that compact, full-sized Chevy Impala won't break my bank.
To maximize your earnings potential, you need to research the jobs that are actually in demand. Nurses are able to name their hours. As the boomers, and airline pilots, age, there'll be a greater need for health care professionals... Doctor.
Oh yeah, lest we forget, wasn't it a pair of experienced airline pilots who just happened to overfly Minneapolis by some... what was it, 150 miles... cuz they were playing Mah-Jong Challange on their laptops? At least the commuters don't have enough room for computer shelves in the cockpit.
OK, future sense? There won't be enough pilots cuz they're now all into nursing. The airlines won't have enough to fly all the planes so they'll hafta cut back. Passengers will compete for the fewer seats with more bucks. Enhanced revenue per ASM will mean airlines' bank accounts will be flush with cash. The pilots that are left will be able to command higher wages.
OMIGOD! Make more, pay more... make less pay less. We may be on to something here!
On Nov 01 03:25 PM Robert Herbst wrote:
> Ben,
>
> For the most part, what you appear to want is just what is occurring
> now. i.e., pilot wages unadjusted for inflation are "free market"
> albeit a ~20 year low hourly pay rate.
>
> The -problem- I attempted to show is a future one. Because the compensation/benefits
> for the (pilot) profession has deteriorated so much, there is simply
> no incentive to encourage the type of individual you will want/need
> and expect to be responsible for what is required to be the pilot
> of a commercial jet liner.
>
> Currently some of the largest airlines have a majority of their pilots
> well into their 50's. While I don’t have the data to prove it, I
> have no doubt the average age of the pilots for most of the legacy
> carriers has never been as high as it is. Most major/legacy airline
> pilots of today are too old to just leave and start a new career.
> To make-up for lost compensation and pensions, more and more pilots
> are starting side businesses which, is also adding to the fatigue
> issue.
>
> TODAY, pilot experience for the major/legacy airlines is not an issue.
> Airline cutbacks caused by the recession forced the furloughs of
> thousands of airline pilots, many of which are now flying for the
> smaller regional carriers. In addition, two years ago the mandatory
> retirement age was increased from 60 to 65. Three years from now
> those age 65 mandatory retirements will create thousands of pilot
> vacancies every year for at least the next decade plus.
>
> In the past, well trained military pilots use to fill a high percentage
> of airline jobs. Retired military pilots are no longer going to the
> airlines when they can earn so much more in other professions. Because
> the pilot profession use to have desirable benefits, it attracted
> the very brightest and most responsible individuals.
>
> This -story- is all about the safety of the future. As the relatively
> old but very experienced pilots of today retire, what type of qualifications
> do you -expect- from those who replace them? Flying a jetliner and
> having the responsibility for hundreds of lives is not as simple
> as many want to believe.
>
> Robert Herbst
> AirlineFinancials.com
>
> =====================
>
> On Nov 01 01:42 PM Ben Simonton wrote:
Some intelligent discussion.
Much sad commentary by some very short sighted and ignorant fools, sound like congressmen.
Enjoy the "free" safe ride you are getting from my 32 years of perfect "performance history".
You take all the risks you want, but you won't catch me riding in a commercial airliner behind some 30 day wonder with "foolproof technology" when my generation has moved on!
Call it whatever the hell you want, there is absolutely no safe substitute for experience in aircraft operation, none.
On Nov 01 10:47 AM finmah@yahoo.com wrote:
> Interesting article but while wages appear to be low - what about
> all the work rules? This is often forgotten unitl you are management
> trying to schedule and also figure in retirement packages with health.
> Aren't JetBlue and Southwest different -nonunions? Same for auto
> worker - it isn't only the actual hourly wage but the restrictions
> like lack of cross functionality ie some airline pilots help with
> the luggage or ticketing?
>
> It would be interesting to calculate how much the mechanics make
> and compare education and training.
One of my lifetime best friends was a pilot for United Airlines and what I know about him is that he was screwed tattoo and put out to pasture in the harshest way a man going into retirement could every be treated. He lost $$millions$$ of dollars in his lifetime pension annuity retirement income benefits to the stupid management decisions and failure to put enough monies away to fund promised pension payments for his and his fellow United Airline pilots pension plan. So much so it was forfeited over to GPBC (Guaranty Pension Benefits Pension)and reduced to 1/4 of it's required payments for life. Sadly GPBC itself is being overloaded with GM,C, and many other banks and hundreds of to come bankruptcies and failures in corporate America. So these lifetime faithful employees, Flight attendants, tarmac workers will ultimately see GPBC go busted as it's now almost in default by billions of dollars to end with up all of these wokers losing everything th ey saved and after a dedicated lifetime of working?? FAIR? NO...a disaster for all of these retirees.
Who in the hell is crazy enough to INVEST in these AIrlines.Companies starting out losing money going thorough their entire existence losing money??Daaaa Something's wrong with that picture./ This article as good as it is only points out a small part of the horrible outcomes for all of these employees.
As a financial planner, investment consultant all my working life I had the privilege of working with many old Piedmont Airlines and US Air pilots etc and actually talking them into taking early retirement and demanding a lump sum payout settlement on every possible penny that they could get and putting their fund in Section 72 IRA Roll Over plans and diversify their entire retirement program. Lucky for them my advise to them, they are all happy campers now with their full boat withdrawals setting in their own self managed plans. Because of their decision to take early retirement and a lump sum settlement rather than a paid monthly pension payout.They've had the sad privilege of watching their fellow airline employees who choose not to do that see their invested funds, pension funds plans get destroyed like so many of the United Airline pilots have in the last 8..9 years.
Sadly I couldn't convince my dear friend to do the same with his United Airline Funds and UAL stock back then. He like his fellow retirees have somewhat lost it all..no lump sums..the airlines stopped allow that years ago. What has happened is he's had him monthly pension reduced to 1/4 of what he should be getting. He now stands to even lose that payment option when we will end up seeing the GPBC go the way all of us will see Medicare and Social Security crash around our heads!! Sad Sad state of future affairs!
NO AIRLINE STOCK INVESTMENTS FOR ME EVER!!!
AIRLINE MANAGEMENT SUCKS!!! IRLINE stocks are worthless fancy paper after all said and done!