US Airways Trims Capacity for 2nd Half

[ALCARLOS]

Wow, what a shock that the capacity reduction comes in the form of 737s and not by getting rid of some of the 800 contract regional jets clogging up the airports and skies.

Isn't labor cost less, and possiblr competition among contractors ?

 

[BoeingBoy]

Isn't labor cost less

If that was all that US paid for, you'd have a point. Since US pays for the whole operation plus profit, what's your point....

Jim

 

[ALCARLOS]

If that was all that US paid for, you'd have a point. Since US pays for the whole operation plus profit, what's your point....

Jim

My belief has been that the USAirways Management Strategy was to move capacity as much as possible to potentially lower cost competietive contract cariers. Is there a different slant on this I should consider? Not trying to be argumentative here, but would like to understand.

 

[BoeingBoy]

My belief...

And the evidence that the contract carriers are less expensive when all costs - sales, passenger handling, baggage handling, advertising, insurance, landing fees, fuel, etc paid by US - are included is?

Jim

 

[aquagreen73s]

And the evidence that the contract carriers are less expensive when all costs - sales, passenger handling, baggage handling, advertising, insurance, landing fees, fuel, etc paid by US - are included is?

Jim

Management will never answer your sort of question directly. They will only refer to indirect benefits of having outsourced RJ flying such as "adding $X hundred million to the bottom line." A few years ago I asked Parker directly if he could explain why Independence Air was failing and he went off on their operational problems without really touching on costs. I tried to corner him on the cost issue but he kept saying they had a revenue problem. (Well, obviously....they need to make 20 cents a mile to make a profit with such high CASM airplanes.) I had one last follow-up question about Midway II which died with an all CRJ200 fleet and he feigned ignorance as to their particular situation. Then he went on answering other questions. I could have asked him several more questions such as why Airtran discontinued all RJ service. Joe Leonard is on record as saying the little jets do not fit a low cost model; but we all know that just by looking at the number of RJs in Southwest's fleet.

For the life of me I would like to know why ALPA hasn't produced a working group on the true costs of RJs. Some might say there would be a conflict of interest since ALPA represents a multitude of RJ pilots, but that in my book that is still not an excuse to do a neutral analysis of what those little RJs actually cost. If someone would publish the truth, then a meaningful discussion could begin as to what a better model would look like. It's not like the regional pilots are benefitting at the expense of mainline; the quality of life at the regionals is abominable. Instead, ALPA does nothing, mainline managements outsource like crazy (probably because it makes it easier to control mainline pilots during contract negotiations), and then mainline employees are the ones who make up for the additional RJ CASMs through pay cuts. It's just diabolical and ALPA never does anything about it. Just think how much better the current situation would be at mainline if just half of the express departures went back to mainline cockpits. Suddenly, the Nic award wouldn't be all that big of a deal.

 

[EMBFA]

Just think how much better the current situation would be at mainline if just half of the express departures went back to mainline cockpits. Suddenly, the Nic award wouldn't be all that big of a deal.

Great post and great point. Just bringing back the 70 and above seaters...

Ideally you would have a mainline with a large fleet of Embraers. Mainline's costs on this airplane are more than competitive with any outside provider. Flight attendant costs are not enough of a cost to even consider. The additional support- maintenance etc- is still cheaper than paying an outside company entire cost plus. Your average labor costs go down as larger aircraft are replaced, pilots retire on one end, and on the other end low cost new employees are hired.

On the Express side of things you would ideally have very few regional jets doing only what they were designed for- long thin routes. The bulk of Express flying would be 70 seat turboprops, and some 50 seaters. The ecomonics of the Q400 blow an RJ out of the water with the same if not better customer experience. The operational and administrative benefits of a single operation, and in my opinion morale, outweigh any labor concerns, particularly if a solid flow-through is established.

US chooses the other route though. The game is to get as much flying to contractors as poissible, shrinking the actual airline US Airways Inc into a small, easily sellable shell. So far they have cut it in half, so they've been pretty successful. They've also managed to gain the loosest scope clause in the industry. Surprising given that of all the majors US is the most regionalized with the shortest stage lengths and smallest aircraft... maybe not so surprising with the narrow-minded unions on the property combined with apathetic employees.

The other part of thier game is to have as many contractors as possible competing, theoretically lowering costs. This isn't quite working at the moment since they are tied up with alot of restrictions with them- only Mesa is allowed in the west- Air Wisconsin bought thier way in- and Republic is the only capacity provider that offers the EJets. US has lost alot of its power with these companies. So their costs for the convoluted Express cluster are probably pretty outrageous, considering most of the entire US operation is contract Express. Not to mention the obvious operational, customer service, and employee morale issues.

 

[BoeingBoy]

For the life of me I would like to know why ALPA hasn't produced a working group on the true costs of RJs.

Probably because it would be almost impossible to do because a significant percentage of the cost of outsourced Express flying is hidden from all but the company. How much does the average contract RJ operator pay for advertising (what little there is), res system, ticket sales, ticket counter space, gates & gate space, baggage handling, food/lodging vouchers for misconnects/cancellations, misplaced baggage delivery, etc, etc? Little to none - those costs are borne by mainline or the wholly owned carriers.

Without allocating their share of all those costs to the contract operators, there's no way to determine their true CASM vs the wholly owned.

Jim

 

[aquagreen73s]

Probably because it would be almost impossible to do because a significant percentage of the cost of outsourced Express flying is hidden from all but the company. How much does the average contract RJ operator pay for advertising (what little there is), res system, ticket sales, ticket counter space, gates & gate space, baggage handling, food/lodging vouchers for misconnects/cancellations, misplaced baggage delivery, etc, etc? Little to none - those costs are borne by mainline or the wholly owned carriers.

Without allocating their share of all those costs to the contract operators, there's no way to determine their true CASM vs the wholly owned.

Jim

I see what you are saying Jim, but ALPA could put together an analysis based on what is discoverable, such as: cost figures from the aircraft manufacturers, typical lease rates, fuel prices, wage rates, etc. They could then assign a margin of error to the caluclation and given what most of us know about operating costs of jets (none of them are cheap), I'd wager that even with the margin of error in management's favor, the cost of RJs would far exceed that of a mainline CASM and mainline RASM. In other words, the strong inference would be that it is imossible for RJs to be profitable anywhere in the aviation system. Aggregate cost would be less, but that goes without saying. After estimating the operating costs of the RJ, the same data could be collected on mainline jets which would then allow anybody and everybody to make apples to apples comparisons. If there were a bias or error in the estimation, all airplanes would be affected proportionally. If the bias effects were not propotional, then we could certainly welcome whatever input other sources would be willing to provide. Managements could be invited to examine the model and point out whatever errors or biases they find. My point is that we have allowed management to get away with the mantra that RJs can make money whenever a mainline aircraft cannot. That is only true in a very narrow range of circumstances. We pilots have known this, but we've done nothing to rebut. Why? We just let management educate the masses with whatever misinformation that is helpful for their needs.

 

[ussnark]

I see what you are saying Jim, but ALPA could put together an analysis based on what is discoverable, such as: cost figures from the aircraft manufacturers, typical lease rates, fuel prices, wage rates, etc. They could then assign a margin of error to the caluclation and given what most of us know about operating costs of jets (none of them are cheap), I'd wager that even with the margin of error in management's favor, the cost of RJs would far exceed that of a mainline CASM and mainline RASM. In other words, the strong inference would be that it is imossible for RJs to be profitable anywhere in the aviation system. Aggregate cost would be less, but that goes without saying. After estimating the operating costs of the RJ, the same data could be collected on mainline jets which would then allow anybody and everybody to make apples to apples comparisons. If there were a bias or error in the estimation, all airplanes would be affected proportionally. The point is that we have allowed management to get away with the mantra that RJs can make money whenever a mainline aircraft cannot. That is only true in a very narrow range of circumstances. We pilots have known this, but we've done nothing to rebut. Why? We just let management educate the masses with whatever misinformation that is helpful for their needs.

Good direction. It seems silly that individual pilots have not figured this out yet.

Jahlmer Johnson of ALPA National, one of the few I trust, said you could, but the error bars are dependent on each carriers situation and nearly every analysis would be basically skulking through the underbrush. Until the government requires better accounting techniques, we will always be in the dark.

 

[BoeingBoy]

I see what you are saying Jim.....

Actually there's an easier way to get the basic CASM of the publicly traded contract carriers - their quarterly filings with the SEC. Of course, that leaves out all the stuff they don't pay for so you'd have to come up with some approximation for that.

For just one data point, Mesa had a CASM of 14.3 cents in the quarter ending March 31st. They fly equipment from the B1900 to the CRJ900, so you'd have to adjust for the equipment they operate for USX, also. But of all the US contract RJ operators, they probably have more service under their name than any other since they fly some out west and the Hawaiian Go operation as stand-alone. Which means they do incur some cost for all those odds and ends, just not flying USX. In fact, their CASM is about 3 cents higher than before they started Go.

Jim

 

[insp89]

So to paraphase, "Figures don't lie, but liars figure"

Wow Bob ! There's still hope for you yet.. :lol

Your paraphase applies to EVERY airline in this screwed up industry.

 

[Elevation]

Probably because it would be almost impossible to do because a significant percentage of the cost of outsourced Express flying is hidden from all but the company. How much does the average contract RJ operator pay for advertising (what little there is), res system, ticket sales, ticket counter space, gates & gate space, baggage handling, food/lodging vouchers for misconnects/cancellations, misplaced baggage delivery, etc, etc? Little to none - those costs are borne by mainline or the wholly owned carriers.

Without allocating their share of all those costs to the contract operators, there's no way to determine their true CASM vs the wholly owned.

Jim

Internal United airline documents (2002) set the costs of Air Whiskey/ACA/Skywest in the $2900-$2400 per hr range (50 seat RJ). Mesa was around $2100. These cost do not include the items you mention above BB but there is usually a performance clause that is included in the contract. The costs of RJ's has gone down since early 2000 but the yields on these markets has dropped faster. This puts there CASM in the mid teens+.

 

[BoeingBoy]

This puts there CASM in the mid teens+.

US says about 18 cents for the full Express operation in the latest investor guidance.

Jim

 

[RowUnderDCA]

Actually, express is going to grow, with a projected gain of 14 E175's (Republic) vs a loss of 5 E170's (Republic), 2 E145's (Chataugua), and 2 CRJ200's (???).

Jim

And I think the 175s are the uncomfortable ones and the 170s are the comfortable ones, pitch-wise. Right? IAH to PHL on a 175 was miseralbe. PHL to DCA on a 170 was more comfortable than necessary.

 

[BoeingBoy]

And I think the 175s are the uncomfortable ones and the 170s are the comfortable ones, pitch-wise. Right?

That's what I understand, though I haven't been on either. However, the 170's are supposedly going to have another row of seats added to bring the capacity to 76, so pitch-wise they may end up being about the same.

Jim