Thanks Doug: US Outsourcing 7 cities

[Jester]

If I'm an outsourcing contractor, my $12.00/Hr people aren't going to work any faster or better then the current $12/Hr folks who have the jobs now. So why switch? Several reasons actually.

And I will provide another one that I touched upon in an earlier post... there may not be enough flights into that station which justify having dedicated company employees to handle the flights. I asked the question, should we realistically expect even one mainline flight per day to be handled by US fleet service agents, and much to my surprise someone emphatically stated, "Yes!" So assuming it takes one hour to turn a plane, and there is minimum number of 4 hours someone can be called in to work, at $12/hour, thus it is a minimum $48 per shift (plus benefits), and would cost $48/hour of actual productive work for ONE employee? So it makes sense to use a contractor (even if it cost more than double the hourly rate) to assign a ramp crew in-between handling other airline flights they are working. In fact, it it not unusual to have mainline ramp agents, working other mainline aircraft from another airline with union ramp agents on a few flights a day, as I have seen it.

Some may say that one flight a day is an extreme example, but even 4 mainline flights a day spread throughout the day, for example, 0800, 1200, 1600, 2000, would create the same inefficient economics where a ramp crew is handling only one flight in 4 hours. As a sidenote, the minimum number of mainline flights into some stations translates into 4 daily flights, or 28 mainline flights per week, and why I believed that 28 flights per week to be a remarkably low standard given the potential inefficiencies associated that few number of flights spread-out during the day.

So Calculates Jester.

 

[necigrad]

Callaway, thanks for the thorough reply. I can see where this would go, so I'm going to agree to disagree.

 

[Jester]

There is nothing inherent in WN’s business plan that creates a sustainable advantage that network carriers can’t copy – or said another way, the network carriers, US included, have enough of their own advantages that they can produce benefits to their employees.

Actually, there are inherent advantages to WN's business plan for which network carriers could not copy without a complete overhaul of their operations, which would nearly certainly fail. For starters, Southwest does not consider itself to having a "hub" (or network) operations, as they are mostly P2P flying. Not to say there aren't transfer passengers in their various "focus cities", but they are not blocking out two hours for a bank of 50 flights to arrive, turn and depart either, which is the typical network operation. As a general rule, US turns average between 40 minutes to an hour (or longer), and anything less than 40 minutes is considered to be a quick turn. Southwest on the other hand, 30 minute turns of the norm, and in part it is due to more efficient work crews and the plane is not stuck in a large bank waiting for other arriving passengers from other flights to arrive during the bank.

Also because of a lack of traditional bank of flights, Southwest is able to achieve higher worker productivity, because they lack the downtime between flights. For example, during an 8-hour shifts, a Southwest ramp crew will turn 6-8 flights, while it is rare for an US ramp crew to turn more than 5 during that same period of time. Other improvements in the Southwest model include flight attendants to pick-up the trash and clean the plane, even while is making its final approach. In essence, Southwest obtains greater efficiencies and productivities through its inherent business model, and a good reason as to why the airlilne has been profitable, and part of the (Warning: economics speak) "rent sharing" enjoyed through higher wages amongst employees. Frankly, and I cannot speak for other work groups at US, but the Company would need to hire full-time paramedics if it expected US fleet service to turn planes with 150 bags on the upload and download in 30 minutes, and do it more than 6 times a day.

So States Jester.

 

[SparrowHawk]

And I will provide another one that I touched upon in an earlier post... there may not be enough flights into that station which justify having dedicated company employees to handle the flights. I asked the question, should we realistically expect even one mainline flight per day to be handled by US fleet service agents, and much to my surprise someone emphatically stated, "Yes!" So assuming it takes one hour to turn a plane, and there is minimum number of hours someone can be called in to work, at $12/hour, thus it is a minimum $48 per shift (plus benefits), and would cost $48/hour of actual productive work for ONE employee? So it makes sense to use a contractor (even if it cost more than double the hourly rate) to assign a ramp crew in-between handling other airline flights they are working. In fact, it it not unusual to have mainline ramp agents, working other mainline aircraft from another airline with union ramp agents on a few flights a day, as I have seen it.

Some may say that one flight a day is an extreme example, but even 4 mainline flights a day spread throughout the day, for example, 0800, 1200, 1600, 2000, would create the same inefficient economics where a ramp crew is handling only one flight in 4 hours. As a sidenote, the minimum number of mainline flights into some stations translates into 4 daily flights, or 28 mainline flights per week, and why I believed that 28 flights per week to be a remarkably low standard given the potential inefficiencies associated that few number of flights spread-out during the day.

So Calculates Jester.

You pretty much nailed it. Consider then how unions can and often are their own worst enemies. Speaking of US in specific and the small station you described. We'll Call it "ISZ" (Ice Station Zebra) and lets for discussion say that IZS has 4 flights per day. First flight is at 6AM in order to connect with the first outbound bank in PHL, Last flight leaves at 5:30PM. This leaves us with a 14 hour workday, give or take with four of those hours taken up turning aircraft.

Now herein lies the problem. Ramp is IAM and Agents are CWA so there can be no cross training between work groups. Fact is that while skill sets are different they are not mutually exclusive. I've seen one contract person issue tickets, go to the boarding area and board the aircraft and watch the same person sling the bags so it is possible. Granted it was a turbo prop station pretty far off the beaten path.

If the IAM and CWA want to keep dues paying members employed and not outsourced then they have to come up with a way to make keeping them cost effective.

 

[Dont call me Shirley]

Now herein lies the problem. Ramp is IAM and Agents are CWA so there can be no cross training between work groups. Fact is that while skill sets are different they are not mutually exclusive. I've seen one contract person issue tickets, go to the boarding area and board the aircraft and watch the same person sling the bags so it is possible. Granted it was a turbo prop station pretty far off the beaten path.

The CWA contract does allow for cross utilization (can't remember the hour cap, maybe 20%). Of course, the company has not chosen to avail itself of that option. That said, IMHO, it would have been better for all the station agents (to use a PI term) to be in one group, rather than split into different "class and crafts". The split, as I recall, was really more driven by the different unions looking to represent the groups rather than being driven by the company. I do think that the customer service agents have more in common with the ramp service group than the res people. And that they would have been better served by being in the same union.

Sparrow brings up a great point about the same agent working in both areas; it is common at regional carriers and even was used at HP in the carrier's early years. I remember a news story featuring an agent checking in passengers, then donning a jumpsuit and loading bags. True, it can be argued that something like that works better at an out station than a hub, but there are a lot of out stations.

 

[Kev3188]

We used to have cross-utilized stations at NW. All were shuttered during BK. It was very efficient, and I was sad to see it go. In a place that has M/L agents, and a vendor outside, one could make the argument that it'd be cheaper to go to cross utilization. The company gets increased productivity, and labor gets increased job security. Seems win-win to me...

 

[Jester]

We used to have cross-utilized stations at NW. All were shuttered during BK. It was very efficient, and I was sad to see it go. In a place that has M/L agents, and a vendor outside, one could make the argument that it'd be cheaper to go to cross utilization. The company gets increased productivity, and labor gets increased job security. Seems win-win to me...

I recall seeing that in HHH several years ago with Express operations on a Dash-8. The ticket counter woman about 20 minutes to push back donned a safety vest and tossed in a few bags, and later escorted the passengers to plane across the ramp. While she did a decent job, I also realized that from a customer point-of-view, would the traveling public accept a hot, sweaty, smelly CSA who on an earlier flight just loaded 100 bags on a mainline aircraft?

There is something to be said for division of labor as a great ramp agent maybe a lousy customer service agent, and a personable CSA might be ill-suited to work in the bins loading heavy bags. I always thought that was a flaw in the early days of the America West model.

So Reviews Jester.

 

[UPNAWAY]

Business changes over time and it is one of the biggest drawbacks with having unions is the lack flexibility in contracts. It also trickles down through the organization. Prior to the merger with HP the US employee handbook read like labor contract. Non union positions hand all kinds of union like language in the rules to the determent of everyone. I assume the company adopted language like that trying to make things as consistent as possible.

 

[SparrowHawk]

Business changes over time and it is one of the biggest drawbacks with having unions is the lack flexibility in contracts. It also trickles down through the organization. Prior to the merger with HP the US employee handbook read like labor contract. Non union positions hand all kinds of union like language in the rules to the determent of everyone. I assume the company adopted language like that trying to make things as consistent as possible.

I have worked in places where no union ever existed and I have seen employee handbooks with enough legalese to give a Supreme Court justice a woody. It's more of a style issue really. When you spell things out there is little opportunity for interpretation. Expectations are clearly defined which is a positive for Management & Labor union or not.

Unions and flexibility are an issue that will not likely be worked out anytime soon, as the baby boomers will have to be retired in order for attitudes to change. In a global economy unions and companies must be nimble and what was status quo today is likely old news tomorrow.

 

[WorldTraveler]

Several notes, Jester.

WN does connect about 50% of its passengers at MDW and BNA among other "hubs" which is comparable to what other carriers do in large hubs.
WN has had to connect more and more passengers in order to create the mass necessary to make large operations necessary in competitive cities. WN could not obtain the market presence in a city like CHI if it did not carry lots of connecting passengers.
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Few network carriers do not have anywhere close to 2 hrs of ground time... in fact few have more than 1 hr for narrowbodies. For some carriers, 45 minutes is the norm. Most network carriers have some form of rolling hub... most hub airports couldn't handle the volume of traffic on the runways if flights left all at the same time... or you would have 2 hr ground times on some flights if you had to maintain a core time of 30 minutes for all flights to be at the gate for transfers. Further, large hubs like ATL, DFW, EWR, ORD etc have multiple frequencies to the same destination so schedulers do not try to make every flight connect to every flight on the same bank.
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Keep in mind that WN does not fly red-eye flights IIRC which nearly every other carrier does... which decreases efficiency.
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As for bags, because WN is more of a shorter haul carrier, they do not have the volume of luggage - checked and carry-on that other carriers have.
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Other carriers' FAs pick up trash, prepare the galleys etc.
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Further, WN's on-time numbers have dropped significantly in the past couple years. Particularly as they expand in the NE and add the 738 which will seat as many passengers as the 757 or 321 do for other carriers, WN's ground times are likely to go up.
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Once again, WN looks fine until you compare them on an equal or at least very similar basis with other carriers.
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WN's original business model of operating short haul flights in the southwest w/ few connecting passengers did provide a lot of efficiencies.... but as WN grows, they are having to sacrifice some of those efficiencies in order to grow revenues. The fact that WN continues to pursue even more "complex" sources of revenue says it is worth doing so, which is exactly what every other carrier has figured out.
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Kev can comment w/ specifics - as can some of the AA people - but DL inherited a number of small cities that had mainline ramp personnel as part of the NW merger - the IAM succeeded in getting NW not to contract out those stations. Most of those stations are in the middle of the country and thus have fairly large operations to multiple DL hubs now. Even though some of those stations may only have 4-5 mainline flights per day - some more - they have boatloads of RJs coming in and out all day long. In terms of passenger boardings, DL and WN are very similarly sized in alot of stations although DL often runs more flights, many of which may not be on mainline aircraft. Part of what DL got w/ the NW merger was a large enough presence in alot of cities such that they have efficiencies, some of which have allowed for more mainline flights or larger RJs... but stations are more efficient. AA is obviously struggling w/ the efficiency issue and wanting to downgrade many cities from mainline ramp to contract/AE but they still have a number of cities where they have alot of flight activity, even if more and more of it is on RJs.
I think it is very possible for small to medium sized network carrier stations to be just as efficient as WN is.
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Most people who do well in one area (above wing) are not necessarily the best people to work below wing and vice versa. Also keep in mind at many airline there are representation differences between the two as well.

 

[BoeingBoy]

WN does connect about 50% of its passengers at MDW and BNA among other "hubs" which is comparable to what other carriers do in large hubs.

Yes they do at some "focus cities" but not all - their system average is under about 30% connecting traffic. They also have less of the peaks and valleys of airplane flow at their "focus cities" than most legacies, so achieve better productivity of people, planes, and airport facilities.

Few network carriers do not have anywhere close to 2 hrs of ground time... in fact few have more than 1 hr for narrowbodies.

I believe if you'll go back and check, Jester said "40 minutes to an hour (and sometimes more). The point is that hub/spoke ops may have 40 mainline and 30 express flights arriving over a 30-40 minute span, passengers on the last arrival connect to the first arrival, then the flights all leave over another 30-40 minute period - meaning that a bank may take 1:20 or more from first arrival to last departure. Then little happens till the next bank starts arriving. All that is why WN can run 8-10 flights a day from a single gate while the legacies run 6-8.

Most network carriers have some form of rolling hub

One has enough of a rolling hub to match WN. The rest don't.

most hub airports couldn't handle the volume of traffic on the runways if flights left all at the same time....

They don't arrive or depart at the same time nor did anyone suggest they did, but for a 40 minute period at a hub like PHL the planes are all sitting there. Add in the time for all a bank's flights to land and then depart, the bank can spread over much more time than the turn time for any of the flights. Go to MDY, LUV, LAS, BWI. watch the gate and see what percentage are empty at any given time. More that US at PHL, UA/OC at ORD, IAH, EWR, AA at ORD, DFW, MIA, DL at ATL, JFK. With WN at the bigger focus cities it's almost a continuous process - an airplane arrives at a gate, 30-40 minutes later it leaves, 15 minutes later another plane pulls into that gate, repeat throughout the day.

Keep in mind that WN does not fly red-eye flights IIRC which nearly every other carrier does... which decreases efficiency.

Yes it does but that's about the only place they're less efficient than the legacies. Take US - something like 8-10 redeyes (not counting eastbound Europe flights) out of over 3000 flights/day. Not much of an efficiency gain over WN. When you look at the things that increase their efficiency relative to legacies, not flying red-eyes doesn't amount to a rounding error.

Once again, WN looks fine until you compare them on an equal or at least very similar basis with other carriers.

WN still looks pretty good. Name one legacy carrier that's been profitable for the last 3 years. How about the last 5 years? WN has a cost advantage over even your beloved DL.

Jim

 

[luvn737s]

WN picks the 5 or 6 highest-yielding cities out of a given airport (let's use BNA for example) and once at one of those cities (let's say MDW) they pick 5-10 of the highest yielding cities from that stop and so on. This requires that flights keep on moving, so mechanical problems, while not an immediate problem for passengers due to frequency, become a real headache for the airline as it tries to catch up on the pattern a particular aircraft was to fly. RedEyes are frequently discounted (WN makes money due to high productivity, not high load factor) and offer ample opportunity for aircraft to break down cascading problems throughout the system.

Now WN has resorted to infiltrating the hubs of big boys and sacrificing the efficiency of quick turns so that they can become the market makers/price setters at the choke point for it's competition. DL might have been able to make money off a MSY-CDG (just a wag) on both legs, now DL will be forced to decide which leg they want to shift the higher fare to. As WN adds more cities, the noose around DL tightens.

US tries to serve lots of cities that might not have the service, but charge them high fares to do it. The strategy WN used iin ATL against DL doesn't work quite as well in PHL because they couldn't bloom and really put the hurt on US. If CLT were to offer to build a terminal for WN in CLT it would be lights out for US.

 

[BoeingBoy]

Now WN has resorted to infiltrating the hubs of big boys and sacrificing the efficiency of quick turns so that they can become the market makers/price setters at the choke point for it's competition.

Barring ATC holds or mechanicals, that isn't quite right. Granted the time a plane spends on the ground increases at the bigger, busier airports but turn time is gate arrival to gate departure and isn't much affected by where the turn happens. The extra ground time comes almost exclusively from taxi time.

Jim

 

[HPearlyretiree]

I have worked in places where no union ever existed and I have seen employee handbooks with enough legalese to give a Supreme Court justice a woody. It's more of a style issue really. When you spell things out there is little opportunity for interpretation. Expectations are clearly defined which is a positive for Management & Labor union or not.

Unions and flexibility are an issue that will not likely be worked out anytime soon, as the baby boomers will have to be retired in order for attitudes to change. In a global economy unions and companies must be nimble and what was status quo today is likely old news tomorrow.

I've had to write those handbooks. Think its easy? You have to cover your behind like you won't believe and you have to constantly make changes. And, I've worked in two of the most union environments you can have, Airlines and Solid Waste Management, both Fortune 500 companies. Labor laws are written to punish companies, and they are as obsolete as traveling via railway in this day and age. You wouldn't believe the amount of BS that gets in the way of doing things.

But, some things are easy, like everyone agreeing on binding arbitration. Make an agreement, live with the decision, that is NOT rocket science.

 

[SparrowHawk]

I've had to write those handbooks. Think its easy? You have to cover your behind like you won't believe and you have to constantly make changes. And, I've worked in two of the most union environments you can have, Airlines and Solid Waste Management, both Fortune 500 companies. Labor laws are written to punish companies, and they are as obsolete as traveling via railway in this day and age. You wouldn't believe the amount of BS that gets in the way of doing things.

But, some things are easy, like everyone agreeing on binding arbitration. Make an agreement, live with the decision, that is NOT rocket science.

I was hoping you'd weigh in on this. As an "HR Guy" your perspective adds to the debate. With the possible exception of the last sentence you are 100% spot on in your assessment IMO. Punish might be a bit strong but they are certainly slanted to one side. You actually hit on a key point. Most of the laws were written when rail was king.