Regional Elite Ground Handling Shutting Down

[Airlinelifer]

Could this news be have positive affect on mainline groundhandling?

Any stations that D E L T A might open up to Dept 120 (mainline ramp operations) employees?

Are the RE People going to be offered employment with other subsidiaries?

DATE: August 7, 2012
TO: Regional Elite People
FROM: Don Stephens, Senior Vice President
RE: RFP Results and Regional Elite Transition
Throughout the airline industry – and in many cases the global economy – organizations large and small continue to look for ways to stay competitive. For us, this means providing the safest, highest quality service to mainline and regional customers, while driving toward greater efficiency and value. Delta’s recent RFP for ground handling services across more than 100 regional stations is one of many examples of this trend.
Our team has worked hard to run a strong operation for our customers. However, our cost structure kept us from effectively competing with other aviation service providers in this RFP. Unfortunately, we were not awarded the work in the vast majority of these locations, which will mean higher overhead costs spread across a smaller number of stations.
With very limited opportunities to maintain or grow our business, we will not be a viable company moving forward. As a result, we have made the decision to transition all of our remaining work to other aviation service providers by the end of the year. Having said that, we believe this transition will result in jobs being available at the same locations with the new providers for the vast majority of our people.
In light of these changes, yesterday Delta also issued an RFP for the DTW and MSP regional hub operations we currently handle. This work will transition to another service provider as well, with the result of the RFP being communicated to us in early September. Since the scope of work in the hub RFPs is the same as we currently provide, we also anticipate that the new supplier will need most if not all of our hub people.
The decision to transition Regional Elite operations was not easy, nor made lightly, and it certainly is not a reflection of your professionalism or dedication to each other and the customers you serve every day. It is a reflection of the current state of the airline industry. Mainline carriers like Delta face incredible cost pressures and the ongoing reductions of smaller regional jets have added significant pressure on regional suppliers. We’ve seen this with the recent announcements that Comair and PinnPro Ground Services are ceasing operations. ExpressJet and SkyWest have drastically reduced their ground handling services as well. As we’ve seen more mainline aircraft showing up in regional stations, traditional aviation service providers have gained a presence in regional markets – many of which competed with us and won this Delta business.
I know you will have many questions about what this means for you and your families. Your leadership team is committed to providing you with the tools and information needed to make an informed decision. In these transitions from one service provider to another, it is very common for the new provider to need most, if not all, of the skilled professionals currently working in a station. Our goal is to help preserve as many jobs as possible during this transition, and severance or retention packages, as applicable, will be available for everyone.
In the coming days, you can expect to receive additional briefings from your leaders – including field town hall conference calls and hub town hall meetings. Additional communication specific to your station also will be available.
Your leadership team and People department are here to answer any additional questions you may have, and you have my commitment to share additional information about the transition timeline and job opportunities with the replacement providers as quickly as we know it.
Over the past three years we’ve strived to be the best at providing regional handling services, but now the regional industry is undergoing significant change. While I regret this outcome, I remain proud of and grateful for all you do every day. Thank you for staying focused on running a safe operation, and taking care of each other and our customers as we work through this transition.

 

[ContUNITEus]

This letter is so well written that it makes me wanna

.

 

[Airlinelifer]

Great pic ContUNITEus, I'm sure many are feeling the same way.

 

[wings396]

I can't seem to understand why DL ever started this operation up when they already had DGS.

 

[eolesen]

Yep, starting up a lower low-cost ground handling subsidiary was odd, but hey, not every idea attempted can be a winner.

 

[Kev3188]

I can't seem to understand why DL ever started this operation up when they already had DGS.

I hear ya, and not to get too nuanced here, but REAS wasn't a "new" company per se. Rather, they took the ground employees of Comair, Mesaba, and Compass (who, ironically, didn't have any frontline employees), and fused them all into a combined entity. I think the idea behind it was to have all the employees' pay/benefits/pass travel/etc. aligned. The company also talked a lot about wanting a "consistent product," which I suppose is easier to achieve when everyone is under the same roof.

All 3 companies were wholly owned at the time, BTW...

 

[wings396]

Thanks Kev.....

 

[WorldTraveler]

I hear ya, and not to get too nuanced here, but REAS wasn't a "new" company per se. Rather, they took the ground employees of Comair, Mesaba, and Compass (who, ironically, didn't have any frontline employees), and fused them all into a combined entity. I think the idea behind it was to have all the employees' pay/benefits/pass travel/etc. aligned. The company also talked a lot about wanting a "consistent product," which I suppose is easier to achieve when everyone is under the same roof.

All 3 companies were wholly owned at the time, BTW...

part of the genesis of common contractors stemmed from DL's decision to not allow any DCI carrier to "own" a particular market as a result of the Comair strike which effectively shut down huge parts of DL's network. DL also pushed network efficiencies involving DCI carriers that allowed a flight arriving in OKC, for instance, from MSP to operate a flight to CVG and then out to another city, maximizing usage of each aircraft and its crews. Because no city "belonged" to any DCI carrier, they wanted to minimize the "ownership" that one DCi carrier had in a particular city.
It is also true that DCI carriers did not - probably still do not - work as well with each other as they did/do with ma DL (who happens to hold the checkbook). A common ground handling company(s) was a way to ensure that ground handling for regional carriers was more connected to DL than to the regional carriers.

I think there is plenty of evidence that DL's strategy eliminated some of the small city variations that existed before a common ground handler was enacted.

But it is also true that w/ DL's fleet restructuring and as DL gains the benefits of the merger, that there is less of a need for multiple ground handling companies. DL is the largest US airline in terms of service to small and medium sized cities. WN's network is heavily focused on a relative handful of medium to large airports while UA's is heavily focused on hubs in large cities; AA is a mixture between DL and UA's. DL's network is built around connecting medium and small cities to national and global markets (as did NW's). That is part of why the DL/NW and CO/UA mergers both made alot of sense from a network standpoint - both "partner's" networks had the same type of philosophy with respect to small and medium cities.

I would also argue that DL's station staffing model is fairly stable now as a result. There will always be many small and medium sized cities that don't have the mass necessary to justify mainline staffing which DL can get at the hubs and the existing medium sized cities, esp. those that were PMNW mainline staffed.

AA is moving more to DL's airport staffing model; UA and US were closer there - perhaps w/ less centralization; and WN is talking about the need to outsource some of its own station operations, esp. if it is to keep many of FL's small stations as well as some that WN has from its own network.

Most important for DL and DCI/ground handling employees is that DL's domestic network is stable - they have been very successful in limiting the growth of low cost carriers, DL is the #1 carrier in many small cities and #1 or #2 in many medium sized cities, and DL has the network size in most cities to gain efficiencies of scale which allows it to compete fairly effective w/ other carriers.

OTOH, there is no doubt that DL is happy to have a large number of ground employees work for a limited period of time, use the pass benefits they are offered as a perk and enticement (and DCI/ground handling employees use pass benefits disproportionately more than DL mainline employees), and then move on. For many college students and people between jobs or phases in life, it is a decent job w/ the flexibility that both sides need. There will aways be a need for career employees - and the level of "career" is dependent on how large the city is where DL operates and DL's ability to consistently keep that city as a strong revenue base. notably, DL has maintained or grown its presence in the medium sized cities it acquired from NW that were mainline staffed and those cities are solid contributors to DL's bottom line.

On that note, Kev, what is the comparision between DL RR salaries and DCI or ground handling salaries?

 

[Kev3188]

Ready Reserve:

Starts at 11.07/hr.
Tops out at 11.27/hr. after 1 year (goes to 11.75/hr. eff. 1/1/13)

No benefits at all, save pass travel.

REAS and/or DGS:

IIRC, it starts at $8.50/hr. Not sure what it tops out at.

 

[737823]

Ready Reserve:

Starts at 11.07/hr.
Tops out at 11.27/hr. after 1 year (goes to 11.75/hr. eff. 1/1/13)

No benefits at all, save pass travel.

REAS and/or DGS:

IIRC, it starts at $8.50/hr. Not sure what it tops out at.

Kev, in the event that the IAM does get reelected at DL what do anticipate will happen to the RR program? Would they reach an agreement to keep the program but limit its growth and usage or do most want the program gone?

Josh

 

[700UW]

Everything would be negotiable.

 

[WorldTraveler]

Ready Reserve:

Starts at 11.07/hr.
Tops out at 11.27/hr. after 1 year (goes to 11.75/hr. eff. 1/1/13)

No benefits at all, save pass travel.

REAS and/or DGS:

IIRC, it starts at $8.50/hr. Not sure what it tops out at.

thanks for the update... but I don't think the differences are really that large between a DCI/DGS staffed station and a DL staffed station other than the senior FT workers who we would certainly hope deliver alot of value small stations cannot.... and again, DL people are in stations where there is strong revenue-generating capabilties.
I'm not sure there should be any expectation of regaining DL jobs in small or medium stations but I don't think there is much to be gained if DL tried to convert a city to contract handled.

Everything would be negotiable.

I would like to Kevin's response but it would be very difficult to expect to regain something either in a negotiated contract or in mediation that has been established as the norm.
DL has used the equivalent of ready reserves for decades - long before deregulation - and I don't think they are going to give much up.

RR type employees provide a lot of peak season flexibility in DL's staffing model at relatively incremental costs. They are the equivalent of having a fleet of 20 paid-for and reliable DC9s or M80s that can be pressed hard for a season but on which you don't have to or want to rely on them on a year-round basis.

The key is whether they protect the jobs of their remaining FT employees.

 

[Kev3188]

Kev, in the event that the IAM does get reelected at DL what do anticipate will happen to the RR program? Would they reach an agreement to keep the program but limit its growth and usage or do most want the program gone?

Josh

My opinion: It stays, but with firm caps on the numbers (or percentage) allowed.

I don't know if "most" people want it gone (though in my circles that's certainly the case). What most people would like to see is a curbing of it's rampant growth. All new hiring (and much of the backfilling) is done via the program, so there's not a lot of upward movement for those that would like to become regular employees, and of course there's downward pressure on those that already are...

Everything would be negotiable.

Absolutely.

I'm not sure there should be any expectation of regaining DL jobs in small or medium stations but I don't think there is much to be gained if DL tried to convert a city to contract handled.

I suspect the only reason they haven't done that yet is that there are still enough pro labor people around, and they know it'd only help the drive for representation.

Iwould like to Kevin's response but it would be very difficult to expect to regain something either in a negotiated contract or in mediation that has been established as the norm.

Which is why you negotiate to curb it's growth...

DL has used the equivalent of ready reserves for decades - long before deregulation - and I don't think they are going to give much up.

That may true, however it's a far cry from the TPT program of old (NW had a similar version of that, BTW). What is a new development is the exponential growth of the program. Per the company, it's tripled in size in just the last few years, and shows no signs of slowing down.

RR type employees provide a lot of peak season flexibility in DL's staffing model at relatively incremental costs. They are the equivalent of having a fleet of 20 paid-for and reliable DC9s or M80s that can be pressed hard for a season but on which you don't have to or want to rely on them on a year-round basis.

That's the theory, anyway... In reality, in many stations, there's not much flexing up/down; it's more of a slow burn all year long, like PT used to be at NW. Remember, there's also the "seasonal" program for heavy travel in the summer...

 

[WorldTraveler]

I don't disagree that DL has shifted its airport operation to the lowest cost source and that includes greatly expanding the level of less-than-full-time employees.....

Alot of cities, like the airline industry as a whole, has alot of peaks and valleys in flight activity. SLC, as has been reported, is heavily RR staffed - but SLC's schedule is very heavy at a couple times per day but not busy at all at others. SLC, so far as any of us know, is a stable city for DL, particularly given the city continues to push plans to rebuild the airport, an effort that would only be possible if DL supported it.

Perhaps a union could obtain some caps on RR, but I'm not sure they would ever be meaningfully different than what exists right now.

I have always believed that DL employees have long benefitted from the THREAT that they could unionize and I encourage the PMNW people to help keep that pressure on DL - since the company's fear of unionization can't ever be allowed to come to an end. DL employees have benefitted from having many of the benefits of having a union w/o having one... and in reality haven't fared much differently on the down side.

but it also says that the difference in an incremental employee in a mainline station compared with one in a DCI/DGS staffed station is not that much. The difference comes w/ the topped out DL employees - and I am just not sure that DL is ready to risk unionization to realize a fairly small labor cost, esp. since the stations where DL employees remain are financially stable and strong stations.

DL's relationship with its pilots has been different from what has existed at other carriers. Other airline pilot groups think DL pilots continue to sell out scope and other airline pilots have to live with it. That may be true but DL has allowed its pilots to benefit from the company's growth as much as or better than what its peer airlines have provided. Therefore, DL pilots have not objected to DL's growth of RJs because DL pilots themselves have obtained something in return for what they have given the company.
The whole issue of scope for other work groups is much less of an issue as long as the jobs of full-time DL employees are not threatened.

It is also worth noting that DL has been very successful in defending its network against low fare carriers - far better than AA or UA has done... and that was a common thread that DL and NW shared. Cities like STL and IND are strong cities for low fare carriers but DL not only is holding its own but growing its presence relative to other network carriers. Job security comes from a profitable business plan.

 

[737823]

My opinion: It stays, but with firm caps on the numbers (or percentage) allowed.

I don't know if "most" people want it gone (though in my circles that's certainly the case). What most people would like to see is a curbing of it's rampant growth. All new hiring (and much of the backfilling) is done via the program, so there's not a lot of upward movement for those that would like to become regular employees, and of course there's downward pressure on those that already are...

Thanks Kev. It seems RR works well for DL, all the DL employees I've dealt with have appeared to be happy, professional and competent they're much better than the UA employees and some of the CO employees (EWR especially). Here in BOS many of the RRs are college and graduate students as one would expect. They seem to work well and balance their school schedule with work. Wouldn't be a bad gig to get free travel passes to fly to visit friends and explore new places on their free time. Probably in FLL or TPA you'd have more retirees looking to supplement their retirement income.

As for the compensation how much more are fulltimers paid? It seems the $12 range would be competitive with other jobs in less desirable conditions like retail, restaurants, libraries, etc. Much better to work for DL and get NRSA passes than work at a restaurant and get occasional free food. That's just my opinion some may disagree.

Seems the program gives DL flexibility to staff commensurate to flight schedule across seasons, days of week and time of day. Sure some would prefer having all fulltime people yearound but that's just not reasonable. Plenty of stores, restaurants and other season businesses adjust staffing across seasons. Ever notice all the shops in the mall start hiring temporary help before Thanksgiving and Christmas? Beaches (unless its Manhattan Beach, CA I suppose), swimming pools, Disney, etc all have variable season staffing needs. DL is no different.

Josh