Graduated Concessions

[atabuy]

I posted this a long time ago and have reposted it here one other time..
I am curious, as how this would have worked, for every wage scale.

When you factor in all the concessions you have made plus cash, does the wage reductions here seem better or worse.

Remember, this would flucuate with the bottom line, so Ual would never have a loss.
Wages would have increased automatically if they made more money.
The more money Ual made the more your wage would go up.
What I thought, made this appealing was, you never would have to renogotiate for things you already had.

Yes, high wage earners give up the most, but they also have the most to lose.

Percentage Salary Concession New salary
10.00% $30,000.00 $3,000.00 $27,000.00
10.25% $31,000.00 $3,177.50 $27,822.50
10.50% $32,000.00 $3,360.00 $28,640.00
10.75% $33,000.00 $3,547.50 $29,452.50
11.00% $34,000.00 $3,740.00 $30,260.00
11.25% $35,000.00 $3,937.50 $31,062.50
11.50% $36,000.00 $4,140.00 $31,860.00
11.75% $37,000.00 $4,347.50 $32,652.50
12.00% $38,000.00 $4,560.00 $33,440.00
12.25% $39,000.00 $4,777.50 $34,222.50
12.50% $40,000.00 $5,000.00 $35,000.00
12.75% $41,000.00 $5,227.50 $35,772.50
13.00% $42,000.00 $5,460.00 $36,540.00
13.25% $43,000.00 $5,697.50 $37,302.50
13.50% $44,000.00 $5,940.00 $38,060.00
13.75% $45,000.00 $6,187.50 $38,812.50
14.00% $46,000.00 $6,440.00 $39,560.00
14.25% $47,000.00 $6,697.50 $40,302.50
14.50% $48,000.00 $6,960.00 $41,040.00
14.75% $49,000.00 $7,227.50 $41,772.50
15.00% $50,000.00 $7,500.00 $42,500.00
15.25% $51,000.00 $7,777.50 $43,222.50
15.50% $52,000.00 $8,060.00 $43,940.00
15.75% $53,000.00 $8,347.50 $44,652.50
16.00% $54,000.00 $8,640.00 $45,360.00
16.25% $55,000.00 $8,937.50 $46,062.50
16.50% $56,000.00 $9,240.00 $46,760.00
16.75% $57,000.00 $9,547.50 $47,452.50
17.00% $58,000.00 $9,860.00 $48,140.00
17.25% $59,000.00 $10,177.50 $48,822.50
17.50% $60,000.00 $10,500.00 $49,500.00
17.75% $61,000.00 $10,827.50 $50,172.50
18.00% $62,000.00 $11,160.00 $50,840.00
18.25% $63,000.00 $11,497.50 $51,502.50
18.50% $64,000.00 $11,840.00 $52,160.00
18.75% $65,000.00 $12,187.50 $52,812.50
19.00% $66,000.00 $12,540.00 $53,460.00
19.25% $67,000.00 $12,897.50 $54,102.50
19.50% $68,000.00 $13,260.00 $54,740.00
19.75% $69,000.00 $13,627.50 $55,372.50
20.00% $70,000.00 $14,000.00 $56,000.00
20.25% $71,000.00 $14,377.50 $56,622.50
20.50% $72,000.00 $14,760.00 $57,240.00
20.75% $73,000.00 $15,147.50 $57,852.50
21.00% $74,000.00 $15,540.00 $58,460.00
21.25% $75,000.00 $15,937.50 $59,062.50
21.50% $76,000.00 $16,340.00 $59,660.00
21.75% $77,000.00 $16,747.50 $60,252.50
22.00% $78,000.00 $17,160.00 $60,840.00
22.25% $79,000.00 $17,577.50 $61,422.50
22.50% $80,000.00 $18,000.00 $62,000.00
22.75% $81,000.00 $18,427.50 $62,572.50
23.00% $82,000.00 $18,860.00 $63,140.00
23.25% $83,000.00 $19,297.50 $63,702.50
23.50% $84,000.00 $19,740.00 $64,260.00
23.75% $85,000.00 $20,187.50 $64,812.50
24.00% $86,000.00 $20,640.00 $65,360.00
24.25% $87,000.00 $21,097.50 $65,902.50
24.50% $88,000.00 $21,560.00 $66,440.00
24.75% $89,000.00 $22,027.50 $66,972.50
25.00% $90,000.00 $22,500.00 $67,500.00
25.25% $91,000.00 $22,977.50 $68,022.50
25.50% $92,000.00 $23,460.00 $68,540.00
25.75% $93,000.00 $23,947.50 $69,052.50
26.00% $94,000.00 $24,440.00 $69,560.00
26.25% $95,000.00 $24,937.50 $70,062.50
26.50% $96,000.00 $25,440.00 $70,560.00
26.75% $97,000.00 $25,947.50 $71,052.50
27.00% $98,000.00 $26,460.00 $71,540.00
27.25% $99,000.00 $26,977.50 $72,022.50
27.50% $100,000.00 $27,500.00 $72,500.00
27.75% $101,000.00 $28,027.50 $72,972.50
28.00% $102,000.00 $28,560.00 $73,440.00
28.25% $103,000.00 $29,097.50 $73,902.50
28.50% $104,000.00 $29,640.00 $74,360.00
28.75% $105,000.00 $30,187.50 $74,812.50
29.00% $106,000.00 $30,740.00 $75,260.00
29.25% $107,000.00 $31,297.50 $75,702.50
29.50% $108,000.00 $31,860.00 $76,140.00
29.75% $109,000.00 $32,427.50 $76,572.50
30.00% $110,000.00 $33,000.00 $77,000.00
30.25% $111,000.00 $33,577.50 $77,422.50
30.50% $112,000.00 $34,160.00 $77,840.00
30.75% $113,000.00 $34,747.50 $78,252.50
31.00% $114,000.00 $35,340.00 $78,660.00
31.25% $115,000.00 $35,937.50 $79,062.50
31.50% $116,000.00 $36,540.00 $79,460.00
31.75% $117,000.00 $37,147.50 $79,852.50
32.00% $118,000.00 $37,760.00 $80,240.00
32.25% $119,000.00 $38,377.50 $80,622.50
32.50% $120,000.00 $39,000.00 $81,000.00
32.75% $121,000.00 $39,627.50 $81,372.50
33.00% $122,000.00 $40,260.00 $81,740.00
33.25% $123,000.00 $40,897.50 $82,102.50
33.50% $124,000.00 $41,540.00 $82,460.00
33.75% $125,000.00 $42,187.50 $82,812.50
34.00% $126,000.00 $42,840.00 $83,160.00
34.25% $127,000.00 $43,497.50 $83,502.50
34.50% $128,000.00 $44,160.00 $83,840.00
34.75% $129,000.00 $44,827.50 $84,172.50
35.00% $130,000.00 $45,500.00 $84,500.00
35.25% $131,000.00 $46,177.50 $84,822.50
35.50% $132,000.00 $46,860.00 $85,140.00
35.75% $133,000.00 $47,547.50 $85,452.50
36.00% $134,000.00 $48,240.00 $85,760.00
36.25% $135,000.00 $48,937.50 $86,062.50
36.50% $136,000.00 $49,640.00 $86,360.00
36.75% $137,000.00 $50,347.50 $86,652.50
37.00% $138,000.00 $51,060.00 $86,940.00
37.25% $139,000.00 $51,777.50 $87,222.50
37.50% $140,000.00 $52,500.00 $87,500.00
37.75% $141,000.00 $53,227.50 $87,772.50
38.00% $142,000.00 $53,960.00 $88,040.00
38.25% $143,000.00 $54,697.50 $88,302.50
38.50% $144,000.00 $55,440.00 $88,560.00
38.75% $145,000.00 $56,187.50 $88,812.50
39.00% $146,000.00 $56,940.00 $89,060.00
39.25% $147,000.00 $57,697.50 $89,302.50
39.50% $148,000.00 $58,460.00 $89,540.00
39.75% $149,000.00 $59,227.50 $89,772.50
40.00% $150,000.00 $60,000.00 $90,000.00
40.25% $151,000.00 $60,777.50 $90,222.50
40.50% $152,000.00 $61,560.00 $90,440.00
40.75% $153,000.00 $62,347.50 $90,652.50
41.00% $154,000.00 $63,140.00 $90,860.00
41.25% $155,000.00 $63,937.50 $91,062.50
41.50% $156,000.00 $64,740.00 $91,260.00
41.75% $157,000.00 $65,547.50 $91,452.50
42.00% $158,000.00 $66,360.00 $91,640.00
42.25% $159,000.00 $67,177.50 $91,822.50
42.50% $160,000.00 $68,000.00 $92,000.00
42.75% $161,000.00 $68,827.50 $92,172.50
43.00% $162,000.00 $69,660.00 $92,340.00
43.25% $163,000.00 $70,497.50 $92,502.50
43.50% $164,000.00 $71,340.00 $92,660.00
43.75% $165,000.00 $72,187.50 $92,812.50
44.00% $166,000.00 $73,040.00 $92,960.00
44.25% $167,000.00 $73,897.50 $93,102.50
44.50% $168,000.00 $74,760.00 $93,240.00
44.75% $169,000.00 $75,627.50 $93,372.50
45.00% $170,000.00 $76,500.00 $93,500.00
45.25% $171,000.00 $77,377.50 $93,622.50
45.50% $172,000.00 $78,260.00 $93,740.00
45.75% $173,000.00 $79,147.50 $93,852.50
46.00% $174,000.00 $80,040.00 $93,960.00
46.25% $175,000.00 $80,937.50 $94,062.50
46.50% $176,000.00 $81,840.00 $94,160.00
46.75% $177,000.00 $82,747.50 $94,252.50
47.00% $178,000.00 $83,660.00 $94,340.00
47.25% $179,000.00 $84,577.50 $94,422.50
47.50% $180,000.00 $85,500.00 $94,500.00
47.75% $181,000.00 $86,427.50 $94,572.50
48.00% $182,000.00 $87,360.00 $94,640.00
48.25% $183,000.00 $88,297.50 $94,702.50
48.50% $184,000.00 $89,240.00 $94,760.00
48.75% $185,000.00 $90,187.50 $94,812.50
49.00% $186,000.00 $91,140.00 $94,860.00
49.25% $187,000.00 $92,097.50 $94,902.50
49.50% $188,000.00 $93,060.00 $94,940.00
49.75% $189,000.00 $94,027.50 $94,972.50
50.00% $190,000.00 $95,000.00 $95,000.00

 

[casual rat]

You tie the concessions to profit/loss, but what's the starting point? When do salaries escalate? There is also the danger (and there is overwhelming evidence to support this) that Management will try to give away service for free, and compensate their own wages in the form of bonuses. It's too simplistic, with too much potential for exploitation on the part of the administrators.

 

[FWAAA]

Given that jetBlue already pays its Captains $110 to $123 per hour, I think it is unlikely the pilots would have agreed to work for even less (which is where a 50% cut would place them).

Besides, the pilots HAD a lot to lose, and they already lost it - their pension. They no longer have so much to lose, so they probably wouldn't agree to shoulder most of the pay cuts.

 

[mweiss]

There is also the danger (and there is overwhelming evidence to support this) that Management will try to give away service for free...

[post="246712"][/post]​

Really? Care to post some of this evidence? Anecdotal doesn't count.

 

[casual rat]

Really? Care to post some of this evidence? Anecdotal doesn't count.

[post="246726"][/post]​

Ok, I was exaggerating a tad perhaps, but yields are too low farewise to support profits. Fuel costs aren't built in to the fares, obviously, as fares haven't kept pace with the rise in fuel. Don't you agree? Everytime a carrier tries to raise fares in relation to fuel, another carrier puts the 'kabosh' on it. So, companies attack wages and benefits instead. Am I out of line thinking they won't do more of the same?

 

[Winglet]

U's Captain pay would have to fall to about 80k before you'd see significant desertions.

 

[mweiss]

casual rat, you're just misunderstanding how market pricing works. By design, we don't have monopolies in most markets, which puts downward pressure on prices. This has almost nothing to do with costs.

Regardless, "Management" doesn't try to give away anything. Profit sharing wouldn't change that.

 

[atabuy]

You tie the concessions to profit/loss, but what's the starting point? When do salaries escalate? There is also the danger (and there is overwhelming evidence to support this) that Management will try to give away service for free, and compensate their own wages in the form of bonuses. It's too simplistic, with too much potential for exploitation on the part of the administrators.

[post="246712"][/post]​

I do not always make myself understood, so I will try to ask in a different way.
All the contracts that were negotiated, after the esop was over, put all contract workers at the highest rates they have ever been.

If you take the hourly wage and benefits paid then to what you have lost in wage and benefits to this point, how would the chart I posted compare. Add to that the losses incurred in esop stock.

The chart was made with numbers I took out of thin air, and you could use any numbers, as long as it was a constant amount per thousand.
In fact, depending on what the bottom line became, the percentage per thousand could flucuate up or down.

This plan would have kept us out of bk and given us a chance to find other ways to save money.

Bonuses would not be given out to anyone.
All of this is in hindsight, so it is not a way to fix the system now.

In fact, when this was posted, there was a lot of criticism to this plan. And I am sure it would not have ever been voted on then.

I am just very curious how this compares to all the losses employees have taken and will continue to take until things turn around.

 

[casual rat]

casual rat, you're just misunderstanding how market pricing works. By design, we don't have monopolies in most markets, which puts downward pressure on prices. This has almost nothing to do with costs.

Regardless, "Management" doesn't try to give away anything. Profit sharing wouldn't change that.

[post="246782"][/post]​

Costs are always a component of pricing. The only profitable carriers the past quarter were Southwest ($32 million--ballpark) and JetBlu, the latter making very little ($5.3 million--ballpark) in comparison to their historical performance. Every other carrier in the US lost money. I'm thinking we're not charging enough for fares, but we try to match fares with carriers that enjoy short term cost advantages. The Internet 'dynamic' is their rationale for this. Even though our product is better, we charge the same as a competitor who offers less--and is able to charge less. You simply must charge a fare that's going to cover your costs and deliver a profit. Why would you want to produce something and demand less than what it cost you? Losses are just that in essence are they not? While we have an advantage in the economy of scale (aka our route structure), we seem to ignore its advantages. We Market "get on our plane, get off our plane", we don't advertise the hassles customers transferring on SW have, going to the claim area, getting their bags and rechecking them, do we? We sell nice piano music and impressionistic renditions of business travel, which the general public doesn't really relate with. I think $100 million for a new Ad Agency might get some seats in our seats, where's Ted anyhow? I might be clueless about the current events, but what ever we're doing now doesn't seem to be working, I offer our $600 million loss as evidence. I don't have the answers, nor will I pretend that I do. All I know is hard work needs to be rewarded, crap work needs to be resolved--not the other way around.

 

[Borescope]

we don't advertise the hassles customers transferring on SW have, going to the claim area, getting their bags and rechecking them, do we?

[post="247082"][/post]​

You should get a job with the Democrat or Republican Parties, they are both very good at negative ads The general public doesn't figure out what a hassel it is to fly WN until they've had the experience :down: . WN also doesn't always have the "lowest" fares even though they advertise it. They have just done a super job of advertising, making the customer think they got a fantastic deal when they may have paid quite a bit more. Why do you think that you can't find WN fares, on Expedia or one of the other online sellers, that you can compare along side the "legacy" carriers. They don't want you to see that you might be able to get a cheaper or same fare on a different carrier and get more than a bag of peanuts.

 

[Busdrvr]

casual rat, you're just misunderstanding how market pricing works. By design, we don't have monopolies in most markets, which puts downward pressure on prices. This has almost nothing to do with costs.

Regardless, "Management" doesn't try to give away anything. Profit sharing wouldn't change that.

[post="246782"][/post]​

Well, now that schools over you can't casually leave out short vs long term pricing, "sticky" prices, a natural oligopoly with too many firms (leading to the "sticky prices"), de facto govt intervention, and how those factors play in a game theory model.



The Internet 'dynamic' is their rationale for this. Even though our product is better, we charge the same as a competitor who offers less--and is able to charge less. You simply must charge a fare that's going to cover your costs and deliver a profit. Why would you want to produce something and demand less than what it cost you?

Rat, you're right. We price our product too low. Fuel costs, in and of themselves have virtually NOTHING to do with our ability to turn a profit. The differance is if we were in a long term equilibrium cost and price enviroment, it would take a deliberate action by a firm to cut into our already 0 economic profit model. When costs go up, with too many players in the market, every firm concerned knows it would benefit them to raise prices. HOWEVER, if everyone else raises prices a little faster than you, YOU get a huge revenue bump from all the low price seekers.

Now, lets consider WHY we price tickets below costs and still bother to sell them. In the short term, you will match production to MARGINAL COST. The Jets are bought, we're paying interest on the loans, sending off the lease check, and paying all our employees. These costs happen whether or not we turn a wheel. Lets assume your fixed cost at a certain level of production equaled 50% of total cost and "marginal cost" (by definition) equaled the other 50%. If putting that jet in the air results in revenue that exceded marginal cost by $1, then you put them in the air. Yes, you lose BIG money, but not as much as if you were to park the fleet.

Why won't people pay more for a ticket on an airline that gives a "better value"? Simply put, we have the exact opposite problem that the healthcare provicers have. If you have health insurance (not an HMO, but REAL HI), and you feel you need to see a Dr, you do it. If they say you need an expensive test, you say "I'll take ten". The person paying the bill is NOT the person making the purchasing decision. In our case, the "customer" or passenger is often NOT the one who decides who he gets to fly on. the guy in the travel dept does. He's looking for the LOWEST price. If it means 18 hopes with a 5 hour layover in Des Moines, so be it. His dept saved $2 for the company over the cost of the direct flight with a meal and movie.

Will it all change? Will travel "choice" again be a bargaining point in executive compensation negotiations? I don't know. We are also hit with the additional problem that a good number of folks who DO get to travel in style (price is no object) now have found private jets to tool around in. In short, we're getting squeezed from the top and bottom.

 

[mweiss]

Costs are always a component of pricing.

Only in a macroeconomic sense, when speaking of oligopolistic competition.

Even though our product is better, we charge the same as a competitor who offers less--and is able to charge less.

"Better" is in the eye of the beholder, but your point is valid. One would expect a premium price for premium service. However, this works only when one has a business that is targeting a particular demographic.

We're in the UA room, so I'll speak in terms of UA for the moment. There are not enough passengers who value the premium service sufficiently to cover the additional costs of providing the premium service. At least, not enough to support an airline the size of UA. CO is, in my estimation, about the right size for such a demographic.

Why would you want to produce something and demand less than what it cost you?

I had a rather lengthy series of posts in the AA room (the thread entitled "Why don't the airlines just raise fares?"), discussing exactly why you would want to do this. It's too lengthy to repeat here, but Busdrvr did a good job of touching on the high points.

where's Ted anyhow?

Ted's problems are much the same as other airlines-within-airlines of the past. People can't choose to fly Ted. They choose to fly UA, and they end up on Ted. Or, perhaps, people who had a good experience on Ted choose to fly Ted, but end up on UA. Serious brand confusion.

Well, now that schools over you can't casually leave out short vs long term pricing, "sticky" prices, a natural oligopoly with too many firms (leading to the "sticky prices"), de facto govt intervention, and how those factors play in a game theory model.

No, you can't casually leave those points out, except when you are posting quick responses on an Internet board. It takes waaay too long to go through the whole thing.

In our case, the "customer" or passenger is often NOT the one who decides who he gets to fly on. the guy in the travel dept does.

That's true in some instances, but the passengers often have a degree of influence, provided the fare differentials aren't exorbitant.

 

[casual rat]

You should get a job with the Democrat or Republican Parties, they are both very good at negative ads   The general public doesn't figure out what a hassel it is to fly WN until they've had the experience :down: .  WN also doesn't always have the "lowest" fares even though they advertise it.  They have just done a super job of advertising, making the customer think they got a fantastic deal when they may have paid quite a bit more.  Why do you think that you can't find WN fares, on Expedia or one of the other online sellers, that you can compare along side the "legacy" carriers.  They don't want you to see that you might be able to get a cheaper or same fare on a different carrier  and get more than a bag of peanuts.

[post="247100"][/post]​

Sometimes perception is everything! Perhaps an Ad campain centering around computerized cows boarding and deplaning as passengers at SWA do. Feature the 'dehumanization' of air travel...I dunno

 

[mweiss]

Sometimes perception is everything! Perhaps an Ad campain centering around computerized cows boarding and deplaning as passengers at SWA do. Feature the 'dehumanization' of air travel...I dunno

[post="247341"][/post]​

AirCal did that in an aggressive advertising campaign against PSA in the 1980s.