Unions and Airlines (2010)

http://philip.greenspun.com/flying/unions-and-airlines.html

by luu • 12 years ago

94 67 12 years ago

philip.greenspun.com

jtolle• 12 years ago

Not directly related to the piece (from 2010, although still interesting), but the first comment has a link to Brad Templeton's website, which was nice to discover!

krrrh• 12 years ago

His older posts on self-driving cars were a revelation to me at the time. Google eventually hired him. His post on the BSG finale is also a classic.

nickhalfasleep• 12 years ago

A great deal of hand waving and not many numbers. Quick dismissal of the success of Southwest with their Union. A better explanation might be that they have a rare healthy relationship between their management and unions, and the productivity and efficiency they create together.

toehead2000• 12 years ago

I don't understand your comment about Southwest. He doesn't give a "quick dismissal," he mentions things about Southwest that are unique and seem to make them an exception to this general trend. What exactly is your critique of his argument? Your comment is far more hand wavy than this article.

ekianjo3• 12 years ago

Excellent extract:

All jet pilots are held to the same stick-and-rudder standards of the FAA Airline Transport Pilot practical test (see faa.gov). A 70-seat jet presents the same flying challenge as a 150-seat jet. The captain and first officer trade "pilot flying" and "pilot monitoring" roles on each leg of a trip. When the actual jobs are so similar, how is it possible that some airline pilots earn $16,000 per year and others earn close to $300,000? The captains, of course, do have more experience and that experience has value to the employer, which is why non-unionized air carriers may establish a 2:1 or 3:1 difference in pay between their most senior and most junior pilots. But how can we explain a 19:1 pay differential for workers with similar training and tasks? The answer is to look at who controls the pilot's union: very senior pilots. The airline management is mostly interested in what percentage of its revenues are paid out to pilots; the distribution of the money among the pilots does not affect profitability. The very senior pilots on the other side of the table say "We need the most senior pilots to get $300,000 in pay and benefits." The airline's response is "The only way that could work is if we pay the new pilots $16,000 per year." The group of senior pilots responds "We can live with that."

And this is scary:

From the point of view of safety, common sense would argue against pairing up a company's least experienced pilots with the company's least experienced captains and then driving them both to exhaustion. But that's how nearly all unionized U.S. airlines do it.

handelaar• 12 years ago

Remove the union. Now everybody gets paid $16,000 and the "percentage of revenues paid to pilots" can be slashed.

Is that

a) Better? b) The other thing?

(Yes, the current situation sucks and those unions certainly don't help it any. This is not an argument for the status quo.)

ekianjo3• 12 years ago

If you remove unions from all airlines, then it's very likely going to bring the salaries up for inexperienced pilots, because then the airlines have more flexibility as to how much they pay pilots per head, and will likely compete just like they do on the marketplace in other categories of jobs.

Strang• 12 years ago

I'm not sure why you assume that removing the union will result in all pilots making a pittance. I am not in a union, yet I make more than $16,000.

mcv5• 12 years ago

The problem is that those unions seem to operate in a very short-sighted selfish way with no regard for the consequences or even the interests of their own junior members.

Thing is, I hear lots of stories about how American unions devastate their own industries. Why is that? Dutch unions make sure their members (including the young ones) are fairly compensated, but they are invested in the long term health of the industry, because that is also the long term livelihood of their members. Generally there are regular talks where employers, unions and government discuss this on an equal footing and reach an agreement that everybody can live with.

So why don't US unions work like that?

tgb• 12 years ago

I don't understand the basic premise here. It seems to be that the unions have very effective strikes. Okay, but that just turns negotiations into playing the "ultimatum game" which isn't great but shouldn't consistently give one side almost all of the winnings.

cperciva• 12 years ago

Workers can find work with other employers. Employers can't hire replacement workers.

dublinben• 12 years ago

Employers can't hire replacement workers.

Sure they can. They're called scabs or strikebreakers.

notatoad• 12 years ago

have i missed a bunch of airline news today? first the boeing article and now this, what's the context?

qq66• 12 years ago

When one person posts something, it reminds other people of other things they've read on similar topics.

lutorm• 12 years ago

Aren't unions democratically organized? If the majority of pilots are junior, as one would expect, I don't see why their interests aren't represented.

Spooky232• 12 years ago

The core tenet of a union is seniority.

Their interests are represented. The alternative to a shitty deal compared to the senior pilots is an even worse deal.

mcv5• 12 years ago

The core tenet of those particular unions. It's not even remotely a requirement for unions in general. Plenty of unions in the world have a much healthier way of operating. Are there specific laws in the US that force unions to operate in such a destructive manner?

eropple• 12 years ago

My guess (and it is a guess) hearkens back to Steinbeck's temporarily embarrassed millionaires.

brc2• 12 years ago

In theory, yes.

In practice, no.

I know of no union which have secret ballots. Nearly all use a 'show of hands'.

I don't know which the pilots unions would use.

jellicle• 12 years ago

Sooo... your allegation is what, that the senior pilots will beat up the junior ones if they don't vote as they are told?

fancyketchup• 12 years ago

Airline unions appear to be, but the way the seniority incentives work give us the current outcome.

If you assume that total pilot pay for the airline is fixed and pay goes linearly with seniority (just to keep it simple and concrete), then increasing the wages of entry-level pilots requires reducing the wages of senior pilots. If you further assume that all pilots are perfectly selfish (that is, they'll never vote themselves a pay cut), then 50% of the votes automatically go to keeping new pilot wages low.

There will also be a contingent of just-below-median pilots who have paid their dues and are looking forward to the fat paycheck that comes with being in the top 50%. Transferring pay from high-seniority to low-seniority hurts the lifetime wages of this group, so they'll vote against it, too.

Thus new pilots are paid a pittance and old pilots are paid handsomely. I'd think this still works even if the pay scale is strangely-shaped.

VLM• 12 years ago

Very few pilots are blind (sorry for the joke). Much like public K12 school teachers, they know Exactly what they're signing up for and are cool with it (or they wouldn't have signed up...). Folks outside might very well be amazed at what they agree to, at the staggering difference in their own compensation schemes. That doesn't mean the participants are ignorant.

It would be like claiming a school teacher would be surprised at having to spend a lot of time with children, or claiming a pilot would be surprised to learn he would be expected to fly an airplane.

What you're really asking is why people outside the organization are completely frozen out because they refuse to participate in the compensation model and should big brother intervene in a conformist manner to make the compensation scheme "more normal" for a self selected group who do not want it.

Its much like "you can't be a MD without working 36 hour shifts" or "you can't be a (real) programmer without working 120 hour weeks in open plan offices" it freezes out a large segment of the population, and that's just kind of how it is. Obviously the vocational skills of doctoring and writing programs have no inherent need of abusive working conditions, but that is the industry standard and those participating like it and there's no shortage of applicants, so...

mapgrep• 12 years ago

The last comments at the bottom of the linked article, from "Capt Kaos," bring up some excellent points Philip missed:

-Philip says the senior pilots, the best paid, hold down wages for the junior pilots. But the contracts are decided by a simple majority vote, and the senior pilots are a small minority (and often not even the negotiators): "Senior Pilots make up the the smallest percentage of any Pilot Group, so they are not in control of what passes. Often, Contracts are passed with improvements for junior pilots that outstrip the improvements for senior pilots. I have seen this happen, and if you are in this Industry a little longer, you will, too."

(So why do junior pilots accept low entry-level wages at regional airlines? Same as any entry level employee: Hope for training to move up to the next rung.)

-Philip says the airlines are severely constrained in fighting strikes, but neglects to mention that the pilots are also severely constrained in when they can strike. "Getting the the NLRB to release a union to strike takes years, which benefits the Airline by keeping the Pilots working under the old Contract for as many as 5 or 6 additional years"

ekianjo3• 12 years ago

"Getting the the NLRB to release a union to strike takes years, which benefits the Airline by keeping the Pilots working under the old Contract for as many as 5 or 6 additional years"

How do things work with the NLRB when you want to organize a strike ?

ahi2• 12 years ago

Depends on industry. I am not familiar with airline unions, but in unregulated industries unions can strike pretty much whenever they want provided they are willing to risk scabs or endless litigation.

crdoconnor3• 12 years ago

It's simple game theory.

The issue with pay based upon subjective measures is that it can be gamed by the employer in order to "divide and conquer" the workforce and ultimately break the union apart.

Even if management are given a clear set of rules in order to to decide promotions based upon merit, they can normally fudge it in some way to make sure that workers who put fealty to management ahead of loyalty to union get ahead quicker.

Once that gets started it gives other workers an incentive to do the same. Gradually that will chip away at the union's strength as more and more workers defect until eventually management can gather enough scabs, cut the union out altogether and pay everybody 14k/year.

Seniority is not an ideal measure of competence, but it is at least an OBJECTIVE measure that will correlate with competence and (most importantly) can't be gamed by either side.

So it's a normal compromise that makes a lot of sense that unions and management will agree to.

If there were other, better non-gameable metrics I'm sure their negotiations would probably converge on them instead.

jpatokal2• 12 years ago

Paying everybody 14k/year might work if they were hiring people to dig ditches. However, it's a seller's market for pilots right now: if they try to cut the salary of a captain who's been flying widebodies for 20 years to 14k/year, he'll be off to Emirates faster than airline management can say "Oops".

And to complete the circle, said shortage is largely caused by the fucked up seniority system, which makes it a huge gamble to become a junior pilot:

http://www.ainonline.com/aviation-news/aviation-internationa...

crdoconnor3• 12 years ago

Paying everybody 14k/year might work if they were hiring people to dig ditches. However, it's a seller's market for pilots right now

So why are pilots still earning less than bus drivers and having to apply for food stamps?

However, it's a seller's market for pilots right now: if they try to cut the salary of a captain who's been flying widebodies for 20 years to 14k/year, he'll be off to Emirates faster than airline management can say "Oops".

Where, as Greenspun points out, they'll be paid the same as the rest of the new hires.

drob• 12 years ago

Does anyone know the specific rules or statutes that underpin this argument? What are the actual rules designating how much experience a pilot/team needs with a particular airline before they're allowed to fly?

It'd be interesting to dig into the history behind them. (Did pilots lobby for them, or did they make sense at some point for safety?)

btgeekboy• 12 years ago

It used to be that the captain had to have an ATP (Airline Transport Certificate), which implies 1500 hours of experience. The first officer could have a standard Commercial certificate, which requires only 250 hours. This changed just recently, so now that both pilots must have an ATP. By 2016, both will be required to have a type rating as well.

This link http://www.pilotscafe.com/new-first-officer-atp-rules-explai... explains it in pretty simple terms.

larrys• 12 years ago

Good points but avoids the reason why pilots actually start at such a low salary. It's not just the senior pilots.

Essentially it is supply and demand.

The supply of people that want to fly an airplane [1] exceeds the demand for pilots. So we have a race to the bottom in starting salaries.

There are people that love flying enough that they are willing to work for peanuts and that excess supply drives the salary down to the levels mentioned - "$16,000 per year" (I will assume that is correct.)

Remove that excess supply and everything changes in the equation and what the unions and airlines can do (with an established airline as well as a startup).

This is really similar to what happens in several industries with desirable jobs (entertainment is one of those).

[1] And will do so for the salary that is currently offered to start in other words.

prostoalex• 12 years ago

Worth pointing out that as the speed of flying (hopefully) increases, it brings in different level of economics - such as a Norwegian company with Norwegian employees serving domestic routes in the United States

http://www.rollcall.com/news/us_carriers_wary_of_norwegian_a...

ubernostrum• 12 years ago

such as a Norwegian company with Norwegian employees serving domestic routes in the United States

Not quite. Norwegian Air Shuttle is operating international routes to and from the US. Non-US airlines are forbidden under cabotage laws from flying domestic (i.e., from one location in the US to another location in the US) routes, and even from offering such flights with a connection in a second country -- for example, a US-based airline can fly you from New York to San Francisco, but Air Canada can't, and also can't offer New York to Toronto to San Francisco.

vl• 12 years ago

As other reply points out, due to regulations, outside companies can't fly domestic routes. Interestedly, parent article mentions this fact as well.

But another interesting fact is that speed of flying is not going to increase - it actually decreased just recently with termination of Concord service. All new planes are developed to be more economical, not faster (which is more expensive due to laws of physics). NY to London in 7 hours is considered fast enough, very few people want to pay more for faster service.

bjourne2• 12 years ago

Should the economy turn down during the contract period, the pilots, having expected to collect 95 percent of the airline's profits, will in fact be entitled to 115 percent of the airline's profits.

That statement is tautologically false since pilots are paid salaries which decidedly is not profit. According to this thread in 2002, the pilot's share of all operating expenses are 3-5%: http://www.airliners.net/aviation-forums/general_aviation/re...

I.e the 95% figure needs a cite otherwise it's bullshit.

danielweber3• 12 years ago

Not that this other pg doesn't play pretty loose with the facts when it suits him, but I think it's clear he's not talking about literal bookkeeping "profit," but what the airline has left after making all payments besides pilots' salary. I.e., if you were the pilots' union, after examining the books and holding other parties as fixed, this is the pile of money that is going to be divided between you and the shareholders.

Airline profit margins are around 1% of revenue, BTW. (And there's always a question of who captures the surplus from trade.)

Airlines and their unions have a very rough relationship. In a prior life I helped a client who was managing the firewall for an airline union. They were constantly under serious attack, and asking me how they could make their attackers' lives miserable.

bjourne2• 12 years ago

See: http://www.airlinefinancials.com/uploads/2013_Network_Annual...

Looks to me like pilot salaries are more like 50% of revenue which is 3-8% of operating expenses, not 1%. At least the 95% number is bogus.

Theodores• 12 years ago

From the article I was getting the impression that everything wrong with the airlines could be blamed on the unions. I guess the author would have said the same about trains had he been travelling a century ago.

Airlines are a bit like football clubs or Formula 1 teams - the way to make millions at it is to start with billions. Airlines are also like railways a century or more ago - big wage bill, big fuel bill, lots of infrastructure spread out over a geographically large area, a constant need to keep everything maintained and the ever present danger that some disaster might happen. Compare that with your 'Instagram' companies that have similar sized stock market valuations.

Did anyone make money out of the boom in railways? Or were all railways some type of speculative bubble where mergers, state bailouts and bankruptcy were all par for the course?

In Europe the airlines don't pay tax on their fuel. If they did then there probably would not be many airlines.

Whether it is trains or planes the key to making money out of it is to have some kind of trick. When you see a train or a plane packed to the gills it is impossible to imagine that the venture as a whole is anything but profitable, but, big picture, take away the tax-payer provided subsidies, the tax-payer provided infrastructure, the tax-payer provided loans and other incentives and, unless there is that trick, then it is a mug's game.

The future of airlines is already here with some of the European low-cost carriers. Essentially the staff no longer have jobs that are any more glamorous than that of a coach tour driver's. In the turn around it is the cabin crew that hoover the plane, pick up the sweet wrappers and make things good for the next horde of passengers. There are no specific cleaners to do the job whilst the cabin crew waltz off to enjoy a well earned break. I quite like this new reality, I also liked travel in the days of Pan Am and TWA when planes had a jet-set feel to them. However, regardless of the staff and what they have to do, running an airline is no easy way to make money and you cannot blame the unions when it doesn't work out.

mcv5• 12 years ago

If this story is correct, then the source of the problem is that the junior pilots accept the senior pilots as union leaders. If the junior pilots started their own union, the senior pilots would have less leverage, because if they go on strike, there's a replacement batch of pilots that can take over the most important operations, so the airline won't immediately vanish. So the unions need to come to an agreement where the junior pilots get better treatment.

Zigurd• 12 years ago

The unasked question here (and in the case of ISPs, health care, and other domains where constructing a working market is difficult) is "Should all enterprises be investor-owned and capitalized through private markets?"

Air travel is such a heavily subsidized and generally government-involved business that investor-owned, TBTF airlines are a travesty of capitalism. Why not cut through the bullshit and make airlines into competing cooperatives chartered by the government? Or some other structure that is not a charade covering what amounts to a skimming of subsidies into investors', or in this case pilots', pockets or outright rescue of investors from a situation of their own making?

The situation is inherently corrupting. The only way to win is to tilt the flow of subsidies in your direction. In this case the senior pilots win because they institutionalized their levers of power.

Many people here fantasize about a libertarian approach to problems like this. Does anyone here have a serious libertarian model for air travel? Land acquisition for airports and surrounding infrastructure? Would Boeing exist without airplanes being a superpower strategic good?

michaelochurch• 12 years ago

As a passenger, you might get on a plane with a senior crew. Your pilots have slept a full 8 hours every night for the last week and are fresh from spending a four-day weekend with their families. The captain has been with the airline for 20 years. The first officer has been flying this type of airplane for 10 years and could do the entire flight by him or herself if necessary.

Alternatively, you might get onto a plane with a junior crew. Your pilots are exhausted from being on the last day of a four-day trip. Each night they've gotten a 9-11-hour "rest period", but that includes waiting for a shuttle to the hotel, riding the shuttle to and from the hotel, showering, eating, and possibly trying to sleep at an unusual hour. Perhaps they've slept 5 hours each night. The first officer joined the airline a few months ago. He or she has some simulator training, but is struggling to stay ahead, mentally, of the airplane.

Get rid of the unions and every crew would be exhausted, underpaid, and undersupported. You can't trust corporate management. Source: centuries of observation.

Pilot salaries aren't that expensive. A pilot logs about 40-45 flight hours per month (the guideline is 40, but that doesn't include takeoff and landing) for a total around 500 per year. Since length of flight and passenger count are correlated, and since we're talking about the highest-paid pilots, we can assume an average passenger count of 150. That's 75,000 passenger-hours per year. For a $300k pilot, we're talking $4 per passenger-hour. That's nothing, compared to the price of a ticket.

The reason airlines are so brittle, and suffer when business cycles go against them, is that they have enormous fixed costs while being in a commodity business. Also, the bulk of their profit doesn't come from leisure travel but semi-discretionary business travel (hence the premium paid for airline tickets less than 14 days in advance, and for business class) and that goes away quickly in a downturn, now that videoconferencing is an option.

ahi2• 12 years ago

I wonder if some of the disparity in junior vs senior pay is elated to deregulation. When the airlines were tightly regulated 6 figure pilot salaries were very common. Pilots from that era are all retired by now, but many of the senior pilots today likely flew alongside people making huge salaries so it will take long time for the contracts to adjust.

S_A_P• 12 years ago

So the Capt Sully incident is mentioned in this article, and the article implies that he landed in the Hudson because he had flown across the US the day prior. So he hit a flock of birds at take off- is that because he was tired or sleep deprived? I think its because a flock of birds where in a bad spot during take off. And by all accounts Capt Sully did a fantastic job of saving lives in this case.

Then there is the footnote of Southwest Airlines. He mentions how the unions are happy to negotiate unfavorable terms for junior pilots/airlines, and then contradicts himself by saying, well maybe Southwest's pilot union isn't doing that. I fly southwest quite frequently(in the past 6 months I have been on at least one round trip per week 60% of the time) and I certainly notice that the culture of the airline is very different than say, United. Southwest, while not perfect, are pretty cheap to fly most US domestic locations I frequent. They don't nickel and dime you with fees(checked bags, changes, etc). I flew united a couple of months ago and ended up having to change my ticket. I lost 200 dollars, had to pay 60 dollars to check a bag and generally had a poor experience at the "luxury" of getting to choose my seat ahead of time(which ended up being a "premium" seat for an extra charge.)

My point is this, most carriers have a management style that pits pilots against both themselves(junior vs senior) and the airline. As long as this continues, the cycle of boom/bust for most airlines will continue. I believe southwest is different in several ways:

- only fly one plane type(737) simplifying maintenance, making pilots more interchangeable on routes and probably improving safety in general.

- customer focused service, and from what I have read about the airline, a culture of taking care of employees.(a good example being when Southwest sold a plane instead of laying off workers in their early days)

- not following the "regional" model of air travel yet still serving many of those "regional" destinations. From what I have seen its mostly these regional airlines that have deplorable pay and flight schedules.

I personally am pretty anti union, but I cant point the finger at them in this case as being at fault. I think that unions may have some effect on how pilots are paid and treated, but they are by no means the only reason.

mabhatter2• 12 years ago

This article is painfully wrong.

The motivating factor for airline wages is experience, and availability of airplanes to fly. Experienced pilots come primarily from the US military. For a civilian trying to get into that market you are essentially a liability the first five years of flying. Military guys come out with 8-20 years experience... And thousands of hours, And Uncle Sam paid all their practice time. As a civilian you are only worth $16k per year because that's what the military pays junior flyers. (Which sucks because jet instruction is hundreds of dollars per practice hour to fly the smallest little Lear, easily $20k out of pocket) There are are only a fixed number of jets in commercial service.. There are far more entry level pilots than available jobs, several times over.

At the Top end, the number of qualified pilots thins out dramatically... It takes thousands of flight hours and hundreds of instruction hours. So those pilots are worth $300k... Probably more except a fair number of them would be living off Military retirements.. Which forces wages below the actual cost of acquiring the skills.

Commercial piloting is an MLM scheme... Lots of people are willing to work for crap wages just to get wings and a shot at the bigger planes you can ONLY get from airlines. There is zero leverage for new employees.

Also, if airline are only paying pilots 5% of operating expenses, then pilot wages were NEVER the problem... They're just easy to blame. If you are running a business so close to the red you cannot have 5% wiggle room your business model has far bigger problems than Unions wanting slightly better wages. Blaming the employees because you cannot pay a fair wage is just being a pussy of a business owner.

Unions and Airlines (2010)

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