Mgt To Reduce Cost By 25%

[Arthur]

Recently, someone on this board stated that Mgt wanted to reduce total costs by 25% and they further said that if all costs were absorbed by labor then the labor cost reduction would be 50%. Well, it appears it's actually worse than that. By the way he also said that labor costs were 40% of total costs. It turns out that if all this is true then the labor reduction will be, sadly enough, 62.5%. Here is the breakdown in numbers:
where T = Total Cost
L = Labor Cost
O = Other Cost
r = percent Reduction in Labor Cost if Total Cost is
reduced by 25%

T - .25T = L - r(L) + O
.75T = L(1 - r) + O
= L(1 - r) + T - L
= L(1 - r) - L + T
= L((1 - r) - 1) +T
0 = L((1 - r) - 1) + T - .75T
-L(1 - r - 1) = .25T
rL = .25T
r = .25( T/L ) where L = .4T (Labor is 40% of Total)
r = .25 (T/.4T)

r = .25/.4

r = .625

r = 62.5%

 

[flyin2low]

Oh, now I understand it so much more clearly. It is impossible to get labor costs (L) that low at US Airways. We must go after the "O".

 

[PITbull]

Guys,

It is worse than we can imagine.

If you put it in simple terms to conceptulize....

Summer and Winter consessions yielded management a labor cost savings of approx. $1.1 Billion. And that is the conservative end. Actuality, more cost savings was TAKEN during the year by violating our agreements... all groups. Also, more "head count" reductions during the year saved the company even greater cost reductions.

When management states 25% total reduction across the board, and being that labor and fuel is U's highest cost, $1.5 Billion translates to summer and winter combined and some, and coming from 27,000 employees vs. 46,000. The only costs that can be "controled" are labor costs. You can't control fuel costs.

This will be where management gets everyone at LCC wages and benefits and work rules.

DOESN'T MATTER WHAT PLAN THEY HAVE, if you get these kinds of cost savings that they seek, along with further head count reduction...ANY PLAN WILL WORK.

Bronner is right when he was quoted in the media, you don't need a "written plan".