Thanks Doug: US Outsourcing 7 cities

[CallawayGolf]

Depends. Is that why the east rates are below market? Wouldn't you have to say the the RLA and our CBA have effectively kept us below market? I might say that collective bargaining agreements in general do that, but it is much the fault of poor management that would let them rise above what is a healthy balance, as what happened here with parity +1%, which was,IMHO, envisioned as a cutting provision. To "blame" is on the union, and maybe you are not trying to do that, is short sighted.

There is an easy way to determine market rates as opposed to industry standards and that is to advertise to fill the job at a certain rate and see if any qualified applicants show up. Are you honestly saying that if US Airways was allowed to offer NB Captain positions that paid 25% less than LOA93 rates, with non-contract benefits, that you don't think ANY qualified candidates would apply? Are you saying there is no one willing to fly commercial Airbus for less than what LOA93 pays? I'm skeptical to say the least. Is there no one willing to to be a police officer, fireman, bus driver, lineman or what have you that would not work for less than what a CBA calls for?

That's the very point I have been making. There are companies out there willing to do ground handling and AC maintenance work for less than what the company is forced to pay to represented workers. How can these outsource providers find people to take these jobs if no one was willing to work for less than the company already pays? The answer is that outsourcing is only feasible if union wage scales are in excess of market rates. Otherwise the company would be endlessly seeking to outsource but no one would take them up on it. The forces of supply and demand never go away and they cannot be avoided. The company has to deal with these same forces on the revenue side too. If supply exceeds demand, prices (or wages) must fall in response. If demand exceeds supply, prices (wages) will rise until demand falls back in line with the supply.

Government price fixes have been tried in order to not let market forces run their natural course, but they always fail too. The government could set the wages for all NB pilots to $150/hr but then they would also have to set the ticket prices for air travel, buses, ferries, gasoline, bicycles or any other mode of transportation in order to force consumers to make they choices government desires so that the airline can make a reasonable return on investment. That is essentially communism and that system really doesn't have much going for it that we should want to aspire to.

 

[Pi brat]

There is an easy way to determine market rates as opposed to industry standards and that is to advertise to fill the job at a certain rate and see if any qualified applicants show up. Are you honestly saying that if US Airways was allowed to offer NB Captain positions that paid 25% less than LOA93 rates, with non-contract benefits, that you don't think ANY qualified candidates would apply? Are you saying there is no one willing to fly commercial Airbus for less than what LOA93 pays? I'm skeptical to say the least. Is there no one willing to to be a police officer, fireman, bus driver, lineman or what have you that would not work for less than what a CBA calls for?

That's the very point I have been making. There are companies out there willing to do ground handling and AC maintenance work for less than what the company is forced to pay to represented workers. How can these outsource providers find people to take these jobs if no one was willing to work for less than the company already pays? The answer is that outsourcing is only feasible if union wage scales are in excess of market rates. Otherwise the company would be endlessly seeking to outsource but no one would take them up on it. The forces of supply and demand never go away and they cannot be avoided. The company has to deal with these same forces on the revenue side too. If supply exceeds demand, prices (or wages) must fall in response. If demand exceeds supply, prices (wages) will rise until demand falls back in line with the supply.

Government price fixes have been tried in order to not let market forces run their natural course, but they always fail too. The government could set the wages for all NB pilots to $150/hr but then they would also have to set the ticket prices for air travel, buses, ferries, gasoline, bicycles or any other mode of transportation in order to force consumers to make they choices government desires so that the airline can make a reasonable return on investment. That is essentially communism and that system really doesn't have much going for it that we should want to aspire to.

Of course there are those that would work for less than LOA 93 rates, AWA had no problem finding pilots for years, right?

My point is that you seem to be laying it all at labors feet. It doesn't belong there. If you want a completely free market, it has to be completely free, i.e. no RLA. If we had no union and no RLA, and 80% of the east pilots decided they would not go to work tomorrow, could the company operate? No, it couldn't train the people in time and would have to shut down for a while. They would then have to decide whether it was worth. As it is now, we cannot legally do anything to fight the company over LOA 93, that's why we went to court in CLT, right. The pendulum has swung to the airlines favor and they have learned to use the RLA to their advantage. Spirit was the last airline to be release and I think if they had been a really large national carrier, they would not have. The government decided, what a century ago that the transportation system needed some help. So, IMHO, that "help" has helped put us where we are as much as anything.

That's my point, if you want a completly free market, it has to be free on all sides. I think that genie is out of the bottle.

 

[CallawayGolf]

Of course there are those that would work for less than LOA 93 rates, AWA had no problem finding pilots for years, right?

My point is that you seem to be laying it all at labors feet. It doesn't belong there. If you want a completely free market, it has to be completely free, i.e. no RLA. If we had no union and no RLA, and 80% of the east pilots decided they would not go to work tomorrow, could the company operate? No, it couldn't train the people in time and would have to shut down for a while. They would then have to decide whether it was worth. As it is now, we cannot legally do anything to fight the company over LOA 93, that's why we went to court in CLT, right. The pendulum has swung to the airlines favor and they have learned to use the RLA to their advantage. Spirit was the last airline to be release and I think if they had been a really large national carrier, they would not have. The government decided, what a century ago that the transportation system needed some help. So, IMHO, that "help" has helped put us where we are as much as anything.

That's my point, if you want a completly free market, it has to be free on all sides. I think that genie is out of the bottle.

Sounds good to me. Let's have a completely free market in all aspects of the economy. We certainly don't need the RLA anymore. Any yahoo can lease an aircraft and start flying passengers around the country with little to no personal risk. It's not like it was when rail companies could shut down the country because of the significant barriers to entry for competition.

I've seen the scorched earth, let's all walk out on the same day tactic used in the past and it rarely has the desired effect in a completely free market. I suspect if the union and RLA went away, US could offer enough pay to entice those 80% back to flying for a long enough period of time to replace them with qualified pilots willing to accept market rationalized rates. Either way life would go on and the country would be healthier for kicking this drag on free markets to the curb.

 

[Pi brat]

The other thing that I believe you have to look at with outsourcing is the cost vs. quality issue. I'm glad to see ATL coming back in house because I have probably had more problems with that contracted ramp operation than any other. As Gordon Bethune said, something like you could make a pizza out of cardboard, but no one would eat it.

 

[Pi brat]

Sounds good to me. Let's have a completely free market in all aspects of the economy. We certainly don't need the RLA anymore. Any yahoo can lease an aircraft and start flying passengers around the country with little to no personal risk. It's not like it was when rail companies could shut down the country because of the significant barriers to entry for competition.

I've seen the scorched earth, let's all walk out on the same day tactic used in the past and it rarely has the desired effect in a completely free market. I suspect if the union and RLA went away, US could offer enough pay to entice those 80% back to flying for a long enough period of time to replace them with qualified pilots willing to accept market rationalized rates. Either way life would go on and the country would be healthier for kicking this drag on free markets to the curb.

Maybe so, but I doubt you will ever see it happen in this country, at least until it completely sinks into anarchy and ashes. On the field we have now, and especially at this company, unions have a place.

 

[CallawayGolf]

Maybe so, but I doubt you will ever see it happen in this country, at least until it completely sinks into anarchy and ashes. On the field we have now, and especially at this company, unions have a place.

Yes, and that place is to sit and watch as jobs are outsourced to contractors and express operations. On the other hand, if the unions wanted to ensure jobs stayed under the mainline umbrella they would work with Management and their members to set wages that were on par with the other alternatives Management can choose from via outsourcing. I don't see it happening either which is why my original premise still remains: unions = lost union jobs.

Union representation is down to what 7% on a national basis? Where did US manufacturing go? Do we make textiles here? Do we make electronic here? Do we produce steel here? Those jobs left because the work can be done cheaper somewhere else. Its just an undeniable reality. So instead of tackling the problem of irrational labor agreements and onerous federal regulations we just keep borrowing more money to pretend these problems don't exist. The head in the sand approach is what got us here and it will take real guts and determination to overcome the false notions that government programs and unions can actually provide for all Americans better than the liberties and freedoms offered by a free market approach.

 

[Black Magic]

Thanks for the charts Crash Pad, interested reading for sure!

Callaway since you seem to have all the answers. Why in today's market has the average compensation of a ceo risen to 500 times that of the average worker?! In 1980 it was 40 times that of the average worker. Why the continued growing disparity? There must be an explanation..lol

 

[Pi brat]

On the other hand, if the unions wanted to ensure jobs stayed under the mainline umbrella they would work with Management and their members to set wages that were on par with the other alternatives Management can choose from via outsourcing. I don't see it happening either which is why my original premise still remains: unions = lost union jobs.

Didn't ALPA do just that with the company on the E190's? Yet, despite pay rates that are less than some regional contract operators, they parked a large chunk of the fleet. Doesn't that go against your argument?

 

[SparrowHawk]

Yes, and that place is to sit and watch as jobs are outsourced to contractors and express operations. On the other hand, if the unions wanted to ensure jobs stayed under the mainline umbrella they would work with Management and their members to set wages that were on par with the other alternatives Management can choose from via outsourcing. I don't see it happening either which is why my original premise still remains: unions = lost union jobs.

Union representation is down to what 7% on a national basis? Where did US manufacturing go? Do we make textiles here? Do we make electronic here? Do we produce steel here? Those jobs left because the work can be done cheaper somewhere else. Its just an undeniable reality. So instead of tackling the problem of irrational labor agreements and onerous federal regulations we just keep borrowing more money to pretend these problems don't exist. The head in the sand approach is what got us here and it will take real guts and determination to overcome the false notions that government programs and unions can actually provide for all Americans better than the liberties and freedoms offered by a free market approach.

Being a free market Libertarian at heart, I would argue that Unions absolutely have a place at the table. Those who don't deserve a seat at the table is Government who through a series of costly and often asinine regulations thwarts both labor and management from acting in their own best interest. Organized Labor in a true unfettered free market, as in free from bureaucrats and other assorted government drones would balance wages at true free market levels. We don't need the FAA, DOT, DHS, RLA, NMB to dictate how airline professionals choose to do business. You can fix half the crap just by getting rid of the RLA and allow the free market to determine the wages paid. You get rid of RLA and NMB goes with it. FAA could and should privatize ATC as Canada has done.

The problem isn't Management or Labor it's Government.

 

[CallawayGolf]

Didn't ALPA do just that with the company on the E190's? Yet, despite pay rates that are less than some regional contract operators, they parked a large chunk of the fleet. Doesn't that go against your argument?

Perhaps, but wouldn't you suspect there is more going on with that fleet than just the favorable pilot wage rates? If all other factors were constant and E190s were being parked in favor of express which paid at a higher rate then I would want to know why Management is wasting money by choosing express over E190 mainline operations. I don't know the answer on that one, but I suspect it has little to do with the rates ALPA agreed to.

 

[CallawayGolf]

Being a free market Libertarian at heart, I would argue that Unions absolutely have a place at the table. Those who don't deserve a seat at the table is Government who through a series of costly and often asinine regulations thwarts both labor and management from acting in their own best interest. Organized Labor in a true unfettered free market, as in free from bureaucrats and other assorted government drones would balance wages at true free market levels. We don't need the FAA, DOT, DHS, RLA, NMB to dictate how airline professionals choose to do business. You can fix half the crap just by getting rid of the RLA and allow the free market to determine the wages paid. You get rid of RLA and NMB goes with it. FAA could and should privatize ATC as Canada has done.

The problem isn't Management or Labor it's Government.

Okay, unions have a place at the table in a free market system. I won't argue that collective bargaining should not be allowed in a free market, but if government doesn't force companies to accept collective bargaining why would Management set aside their at-will rights in favor of a labor agreement? Perhaps there is some benefit to agreeing with all labor, but it's hard to imagine that there would be enough benefit to outweigh the risks of having labor dictate company policy rather than Management.

At any rate I fully agree with your statement about the problem residing with government.

 

[CallawayGolf]

Thanks for the charts Crash Pad, interested reading for sure!

Callaway since you seem to have all the answers. Why in today's market has the average compensation of a ceo risen to 500 times that of the average worker?! In 1980 it was 40 times that of the average worker. Why the continued growing disparity? There must be an explanation..lol

Why should anyone care about a pay disparity? What business is it of anyone to tell someone else how much they can or should make (employer to employee relationships notwithstanding)? Wages are paid, or should be at market rates. If a person's skills are considered entry level that anyone else can do without much training, then they would naturally get entry-level pay. If a person has highly specialized skills that are also in high demand, then he would get paid a wage that is commensurate with those skills and that demand.

Tom Hanks is a highly-skilled and in-demand Hollywood superstar. Should he not get paid more, and substantially more, for what he does than the extra who walks across the street in the background of one of his movies? The difference is based on skill, demand and the amount of value he brings to the financial equation. Americans would be much better off by not focusing on what certain people make but rather by doing everything they can to better themselves and the skills they can offer. That way they can be compensated by a wage that meets their reasonable expectations. And if a person doesn't like the wage they are offered, they can always go into business for themselves and earn as much money as their skills and ambition will allow for.

 

[nevergiveup]

Unions can be very good for safety reasons. Just ask any coal miner about the history of mine safety!

 

[BLUTO]

One should look no further than the crash of Air Midwest 5481 in Charlotte in 2003 to see the ramifications of letting the free market reign in an environment of loose regulations. It was determined that "outsourced" maintenance personnel were largely responsible in that accident that killed 19 passengers and both crew members.

We are getting poisonous toys, glassware and food products from China, all in the name of maximum profit for US Corporations.
Essentially, this country had been outsourced to the "lowest' bidders in unfriendly lands!

No amount of "this is the way it has to be", let the free markets police themselves talk will make the formula work!

 

[CallawayGolf]

One should look no further than the crash of Air Midwest 5481 in Charlotte in 2003 to see the ramifications of letting the free market reign in an environment of loose regulations. It was determined that "outsourced" maintenance personnel were largely responsible in that accident that killed 19 passengers and both crew members.

We are getting poisonous toys, glassware and food products from China, all in the name of maximum profit for US Corporations.
Essentially, this country had been outsourced to the "lowest' bidders in unfriendly lands!

No amount of "this is the way it has to be", let the free markets police themselves talk will make the formula work!

You are describing an entirely different situation than letting free markets operate in the arena of wages and prices. I am a strong believer in limited government, but I am not an anarchist who believes government has no legitimate role to serve. Government should be about doing for everyone equally what they cannot logistically do for themselves. For example the general public cannot logistically build roads and bridges for private and commercial travel, so this is a legitimate function of government because every citizen has the opportunity to benefit from the public project. Likewise, passengers have no ability to evaluate the airworthiness of an aircraft and would likely do more damage if they tried to inspect the plane themselves. Thus government should establish standards and monitor commercial aviation for safety compliance. Again this is a potential benefit to all citizens and it is legitimate for government to do so.

However, these examples are quite different than the government getting involved with telling business how much to pay their workers or that they must accept collective bargaining of workers which is not a legitimate function of government. People can negotiate their own wages without the government. Additionally every citizen cannot gain value from government intervention between an employer and an employee. Rather most of the public is actually harmed because the free market forces have been corrupted by an overreaching federal program.

With regard to toys and such, consumers have to take responsibility for their own purchases. Caveat emptor and all. Do a little research. Use common sense. Don't buy from China if you don't trust their manufacturing practices. Let private consumer advocacy non-profit groups lead the charge to help eradicate harmful products which can and do operate without government involvement. We don't need government involvement in such matters.