More questions than answers:
On a recent vote – and by a slim margin of 3,001 out of 6,000 union members – Delta’s pilots have again agreed to take a 14 percent pay cut to keep their line afloat while the bananas in the front office try to stay out of bankruptcy court. This comes on the heels of a 32.5 percent pay cut deal over five years approved in 2004.
The pay cut reported today reduces the average Delta hand’s salary from $170,000 to $146,000.
As a coach passenger, I wonder how long the big three – American, Delta and United – can hang on. I'm considered by some to be quite business savvy, and have helped guide my business to solid growth in all of our six years. I say this because it is hard for me to understand how lines like Jetblue, Southwest and AirTran can make money, while the big three bleeds serious red ink on a daily basis.
Discussing the business models of the legacy carriers vs. the “low cost” carriers would take far more space than allocated here. I am convinced however that it must be something other than union wages that is causing the Big Three to flounder. If I were a betting man, I’d throw my coin on the causes being a “Dilbert” mentality and style of management at the top. It is no secret that major U.S. corporations are top-heavy when it comes to managers making too much for running under-performing companies. Again, I bring up the Costco model and Jim Senegal – the most humble CEO on Earth – who makes only $360,000 and runs a tight ship that makes gobs of money.
I worry about the future of commercial aviation, and wonder how we as GA pilots can interest our youth into embarking on a journey down the road to an airliner’s left seat when the legacy carriers struggle to survive. Yes, $146K is still serious money, but will that matter if the Bigs can no longer operate without Federal subsidies, like the current Amtrak model? We know that is a train wreck waiting to happen, pun intended.
As the quality of commercial coach travel deteriorates, there is, however, a huge upside. Business aviation and its related industries is in the midst of a huge boom right now. I have one client selling Pilatus PC-12s as fast as they can fly them over here from Switzerland. When the VLJs hit the airspace soon, look for pressure to be applied on the Bigs to somehow trim management, improve service, and slash prices to match the low cost guys. Do this, and they survive. Business as usual, and it may be a great time to invest in the numerous upstart air taxi operations who have standing, paid orders for hundreds of economical VLJs waiting to change the air carrier playing field as we know it.