jack mama said:
funguy,
3 problems i see with the numbers: unable to factor in the the increased cost due to outsourcing everything, rasm will likely continue to decline with pressure from DAL, LUV and GOFares, and from what i can tell you've assumed everyone elses CASM will stay the same, even though DAL and CAL have announce major cuts. Its a race to the bottom, and even through all this, UAIR is just middle of the pack....
I want to be positive, but I just don't see a profit in the future...can't every one just raise fares by $1. It would be interesting to see someone calculate the losses for the industry per year and the amount the average fare would have to be raised to offset the difference. I wonder if the number is small or large???
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Jack:
WILL there be an increase in costs to outsource certain
functions? If the baseline cost to perform a function
with US personnel is $9.00 per hour, plus the cost
of medical benefits and retirement, and the outsourced
vendor offers to do the job for $9.00 per hour, and
absorbs the cost of the medical, retirement, and
vacation benfit (if they are offered at the vendor), then it
stands to reason that the outsourced vendor will cost
less than a company employee.
The cost savings can then be returned to the bottom
line, which in the end, produces a profit versus a
deficit. This is where things have come to. The
company can hire an outside vendor to do the job
much less expensively than they can do it themselves.
All of the liabilities of having a company paid
employee can be shifted to the vendor, and more
often than not, the vendor can provide the service
for a lower cost.
For this reason, with close to 50% of the employees
being outsourced, US Airways should have the tools
to make a profit in 2005.