Earlier Commentary From Captain Herbst...
American Airlines and US Airways merger-
In-depth analytical report (April 19,2012)
DFW Airport Analysis With Focus on American Airlines-
This report details passenger markets from DFW airport and the impact from regional partners and mainline competitors (April 2012)
Largest Passenger Markets For Network Carriers and Southwest Airlines-
This report details each airlines' largest markets with air fare, yield and market share ratios (April 2012)
Interview with John McCauley- Airline industry and American Airlines (MP3 format)
FM Radio station KBPK (January 2012)
Link to one-on-one interview on American Airlines (October 28, 2011)
The Deal Magazine
Link to one-on-one interview with Christopher Elliott (December 2009)
"At times it feels as if the airline industry has been pushed over a cliff"
Links to IAG pod casts-
The resurgence of US Airways - 17:59 audio September 2010
3rd quarter 2010 analysis Robert Herbst and William Swelbar - 26:18 audio October 2010
Link to Bloomberg interview on the airline industry - August 2009
Robert Herbst provides commentary for the airline industry on:
Airlines finally find the course to profits: May 18, 2010- AirlineFinancials.com estimates the nine largest US passenger airlines will end the 2nd quarter with over $1.4 billion in profits. This could increase to $1.8 billion if....
United and Continental airline merger-Inside look at labor:
May 4, 2010- And so it goes after years of trying, United Airlines finally found a competing airline to say “yes.”.....
Allegiant Airlines - Who are they?
April 29, 2010- How about it is the only consistently profitable US airline for the last 29 consecutive quarters?......
Hey Southwest Airlines, where's the beef:
April 26, 2010- After only $99 million profit on $10.4 billion in revenues last year, the best Southwest could do for the recent 1st quarter was a paltry $11 million profit ($24 million after excluding special items) on over $2.6 billion revenue.....
Ten years ago American Airlines:
- Was the largest of six major network carriers. Today, of the four that remain, American is by far the financially weakest and the distant third largest network carrier
- Was the largest airline employer with over 100,000 employees. Today, American only has 64,000 employees (mainline operations)
- Operated over 2,700 flights per day. Today, American operates only 1,800 flights per day (mainline operations)
Most important to recognize is that all of the above occurred –without-- American merging with another carrier. Furthermore until the DOJ’s actions this week, American was on track to exit their ongoing bankruptcy and merge with the industry’s smallest network carrier, US Airways.
To in any way compare the –current-- airline industry to what the industry was in 2001 and before the 911 tragedy is ludicrous. 911 was the direct cause of airline bankruptcies, billions in financial losses, tens of thousands of jobs lost, and the loss of passenger demand. Just as the industry was bailing out of its 911 demise, it was hit with skyrocketing fuel increases soon followed by the economic collapse of 2008.
Contrary to the Attorney General’s accusations, the loss of capacity, airline jobs, and higher air fares had nothing to do with airline mergers.
Here’s what the Attorney General left out from his outrageous vote pandering actions to stop the American and US Airways merger.
- Starting with year 2001 through year 2005, Delta, Northwest, American, United, Continental, and US Airways lost money –every-- year. In fact, excluding $billions in additional bankruptcy losses, the major network airlines above accumulated $33 billion in losses over those five years!
Since year 2000, excluding relatively small profits in 2006 and 2007, American has lost money every year and has accumulated over $12 billion in NET losses over that time period. That loss excludes several $billion more in losses that will be accounted for when American exits their ongoing bankruptcy.
Since year 2000 and through year 2012 and after accounting for the last three profitable years, no major network airline to date has a NET profit. In fact all six of the major network airlines noted above had an accumulated NET loss of $30 billion as they started this year.
Southwest’s profit margins since the 2008 Delta/Northwest merger averaged a depressing 2.4%. As low as that was for Southwest, they led the industry in profit margins over the past five years. For some perspective, Southwest’s profit margins for the five years prior to 911 averaged 9.1%.
- By any credible analyst’s accounting, it was only due to the recent mergers that the year-after-year industry loss of $billions finally stopped. While several airlines were able to achieve record profits over the past couple of years, their profit margins were in the low single digits which would be financially unacceptable for most business sectors.
- In 2012, excluding special items, Delta had the network carriers’ –highest-- profit margin with a paltry 4.2%. US Airways margin was 3.9%. Southwest Airlines margin was a dismal 2.4%. Once again, American had another loss and reported a negative .5% margin. Note that Delta’s network leading margin was less than half of what it was in the later 1990’s.
- In 2008, Delta (DAL) and Northwest skated through their merger. In 2012, Delta controlled 25% of the industry’s* capacity
- In 2010, in order to compete with a significantly larger merged Delta, United merged with Continental and once again, there were no DOJ objections. In 2012, United/Continental controlled 27% of the industry’s* capacity
- In 2011, Southwest Airlines (LUV) was losing market share to their much lower cost competitor Air Tran. Once again, the DOJ allowed the Southwest-Air Tran merger to sail through with no objections. In 2012, Southwest/Air Tran had the industry’s highest domestic market share (Air Tran operates a small amount of routes to the Caribbean and Mexico). It’s important to note that the Southwest-Air Tran merger pushed Southwest into the nation’s largest domestic airline
Prior to Southwest’s acquisition of Air Tran only two years ago, Air Tran was one of the nation’s –lowest-- fare airlines. In fact, immediately prior to that merger, Air Tran’s average fare per mile was 20% --less-- than Southwest.
So where did the DOJ’s prior to this week’s open door merger policy leave American and US Airways (LCC)? In 2012, American controlled just 18% of the industry’s* capacity, and US Airways was well behind with 10%
* Industry capacity uses the cumulative total of United, Delta, American, US Airways, Southwest, Alaska (ALK), and JetBlue (JBLU) and their regional affiliates
While it –sounds-- great to hear how keeping American and US Airways separate will somehow magically create stronger better and more competition and thereby keeping air fares lower, nothing could be further from the reality of what will occur.
The facts are that Delta, United, and Southwest –all-- with their recent DOJ approved mergers have now become so large and so financially strong, that it is pure fantasy to suggest that either American and/or US Airways will be competitive as stand-a-lone airlines.
The DOJ’s Anti-Trust Lawsuit makes several preposterous “claims”. One of those claims is that the prior approved mergers –supposedly—were the cause of higher air fares and reduced service/capacity. It’s incredibly obvious that the DOJ knows nothing about the industry, where the airline industry has been, and more-so, why it is where it is today.
Here are some “air fare” facts the DOJ conveniently left out of their anti-trust suit:
- Just ten years ago (2002), the (spot) price of jet fuel was .69 cents/gallon. Fuel expense for the industry was less than 14% of industry revenue. Last year, jet fuel averaged $3.06/gallon, a 344% increase. For 2012, 36% of industry –record-- revenues were needed to pay for fuel.
- Ten years ago, the industry average passenger fare to fly one mile (yield) was 11.48 cents. Adjusted just for inflation and excluding the exorbitant increase in fuel costs, the average passenger fare per mile in 2012 would have been 14.65 cents. The actual industry average passenger fare per mile in 2012 was 14.70 cents and barely above simple inflation. After accounting for the increase in ancillary fees and fuel costs, air fares have simply not increased as the Attorney General claims.
For a more visual look at air fares and just how outrageous the Attorney General’s claims are, let’s look at Southwest’s air fares. Note that Southwest operates the most capacity to the most airports in the US and is recognized as the “low fare” airline. Southwest does not have baggage fees. Southwest is typically used by politicians as the “airline” all airlines should be like.
Southwest’s average passenger fare per mile (yield) and year-over-year change
Year - cents - y/y change
2002 – 11.77
2003 – 11.97 +1.7%
2004 – 11.76 -1.8%
2005 – 12.09 +2.8%
2006 – 12.93 +6.9%
2007 – 13.08 +1.2%
2008 – 14.35 +9.7%
2009 – 13.29 -7.4%
2010 – 14.72 +10.8%
2011 – 14.97 +1.7%
2012 – 15.64 +4.5%
Total air fare change since 2002 for Southwest was +3.87 cents/mile (+33%). CPI inflation over the same time period was 28%.
When comparing the 2012 passenger fare per mile to year 2002, the largest network merged carriers all had smaller fare increases than (unmerged) Southwest and especially (unmerged) JetBlue.
Change in average passenger fare per mile from 2002-2012
JetBlue = +51%
Southwest = +33%
Delta = +31%
United = +30%
American = +25%
US Airways = +10%
Furthermore, when looking at air fare/mile changes over the past five years, Southwest again had the highest increase of all competitors.
The DOJ’s law suit suggests US Airways market share at Washington Regan Airport (DCA) is anti-competitive. Reality is if it weren’t for the DOJ recently approving US Airways trading over a hundred (restricted) landing slots at New York’s LaGuardia Airport (LGA) for Delta’s (restricted) landing slots at DCA, Delta would not now be in control of LGA and US Airways would not have their high market share lead in DCA.
Now after Delta has already achieved their dominance at LGA, the DOJ makes an issue of the DCA landing slots that US Airways gained from the Delta swap. Furthermore, if it weren’t for US airways having so many “slots” to/from DCA, dozens of small communities would not have non-stop flights to the DCA airport.
Here are some more facts Attorney General Holder left out in his law suit reasoning.
- At Chicago Midway Airport, there were 16.7 million passengers last year. Southwest carried 90.2% of them, and their Air Tran merger adds another 3.8%
- At Houston Hobby Airport, there were 10.2 million passengers last year. Southwest carried 88.6% of them, and their Air Tran merger adds another 4%.
- At Dallas Love Field Airport, there were 7.7 million passengers last year. Southwest carried 96.3% of them.
- At Baltimore MD Airport (competes with DCA), there were 21.5 million passengers last year. Southwest carried 59.2% of them, and their Air Tran merger adds another 12.4%.
Would it be better to have three more-or-less equally strong airlines competing or four? The only legitimate option going forward is to have a fourth –equally strong—competitor for United, Delta, and Southwest. The merger of American and US Airways is the best choice and better for the industry, the communities they serve, and especially for the consumer.
Dozens of once great airlines went out of business for one primary reason: they failed to remain competitive with the –industry--. Without a merger, there is simply no possibility American and US Airways will be able to compete over the long-term in what is now a much consolidated industry.
Since the 2001 terrorist attacks, over seven billion passengers have gone through US airport security and not a single terrorist has been caught!
For clarification, I am not a “security expert”; however, I am a recently retired airline pilot with over 35 years of experience going through security screening thousands of times at hundreds of airports around the world. Every time I was in command of an aircraft, I was also the official security coordinator of that flight. There’s no argument from me that my view of credible airport security is worlds apart from that of the political bureaucrats wasting $billions on airline/airport security which – effectively – does little more than make airline passengers “feel” safer.
Let’s look at some of the ugly facts:
Just over nine years ago, 19 terrorists under the auspices of a hijacking, commandeered four US airliners, caused the deaths of over three thousand innocent people and headed our country into one of our worst economic downturns.
911 likely would have never occurred except for FAA pilot procedures which were in effect on that fateful day. What is virtually unmentioned by the media and unknown by the public, is up until September 11, 2001, it was a policy for pilots, as a last resort, to allow a hijacker access to the cockpit. Note: Cockpit doors, at that time, albeit of weaker construction than today, were securely locked. The fact is, the 911 hijackers had no weapons beyond some knives. If the “policy” then was as it is today, those 19 hijackers would likely have never gained access to the cockpits, and the world we now know would have been unbelievably different.
Unfortunately, but in typical, government, knee-jerk reaction, post-911, airline passengers have been saddled with ever-growing security procedures which have gone from confiscating finger nail clippers to the recent naked body x-rays and sexually groping pat downs.
Since 911, the only two terrorist threats to US airlines were the shoe bomber (December 2001) and the underwear bomber (December 2009). Both of these individuals rang every bell there was to say, “Look I am a terrorist!” Both of these terrorists came from foreign airports and passed through security checks which should have stopped them long before they walked onto airliners. It should be noted these new full body scanners, would not have singled out either of these two individuals that checked in for international flights with one-way tickets purchased with cash and no luggage! Furthermore, it was the passengers and flight attendants who stopped these would-be bombers, not the TSA!
Airline travel has and will always involve some risk to it. In the US, where approximately two million people board planes every day, there has been only one fatal airline crash in the last three years (regional carrier in Buffalo, NY). This compares with approximately 35,000 people losing their lives each year on the highway and half that many murders each year.
One of the best known terrorist targets, Israel’s El Al airline, has developed one of the most successful security programs in the world. El Al’s security starts before anyone approaches the airport screening lines and incorporates layers of verification using well-trained, security professionals.
It’s absurd to focus 100% of our screening resources on 100% of the passengers when real life screening should focus on the 5-10% who behave suspiciously.
Are those in control of airport security so dumb as to think a – real – terrorist would risk exposure by going through the larger, more secure airports?
Do any of the TSA so-called experts understand any wannabe terrorist can simply avoid all of the hyperbole security by checking in at any one of hundreds of smaller airports that have no body scanners and typically do not do unreasonable pat-downs to include the touching of private body parts? And then, connect directly to any major airport terminal gate they choose without any additional screening?
· Do these TSA experts accept that weapons routinely get undiscovered by the TSA agents watching the baggage go by on the conveyer belts?
· Do these TSA experts realize how easily a well trained terrorist could hide broken-down weapons and even explosives in their carry-on luggage?
While we waste our resources groping and harassing millions of innocent families going on family vacations, we completely miss the focus on those who should be more thoroughly scrutinized.
Our military is successfully using dogs to sniff out explosives. Customs agents routinely walk the international airports with drug sniffing dogs.
· Wouldn’t our skies be safer if we spent our tax dollars on training dogs to discover explosives and have them work throughout the airports searching out potential threats?
· Wouldn’t our skies be safer if connecting passengers arriving from the smaller, less secure airports had some type of secondary screening before walking across the concourse to connect to an international flight?
· Wouldn’t our skies be safer if we used the security procedures employed by some foreign countries and had layers of well-trained experts who, by asking simple questions can recognize those who appear suspicious?
· Can anyone explain why the very pilot’s we trust with our lives are expected to lock themselves behind a virtually non-penetrable cockpit door with full access to a crash axe? But before they are allowed to fly us to 30,000 feet and back, they must go through the same security as their passengers to make certain they aren’t hiding something that they could supposedly harm someone with? Note: US airline pilots are finger printed and have gone through security checks.
Like all airline pilots, employees and passengers, I want and expect “real” airport/airline security. Unfortunately, what we have today is little more than a TSA government jobs program which is simply out of control wasting $billions and giving power to TSA personnel to grope your body and harass anyone they choose without legitimate reasons or repercussions for doing it.
# # #*************************************************************************************
AirlineFinancials.com, estimates the five US passenger airlines with European operations are collectively losing $35.8 million in revenue per day since Friday, April 16 (losses for Thursday, April 15 and the start of the European shut-down are estimated at $17 million).
After accounting for savings from unused fuel, landing fees not paid, lower labor costs, less maintenance, etc. the estimated operating loss for all five airlines comes to approximately $21.9 million per day with half that amount for Thursday.
Because Delta has the highest amount of traffic to/from the closed European airports, they will incur the largest losses with United not far behind.
As long as European airports remain closed, AirlineFinancials.com estimates the following daily losses for each of the US airlines.
Ø Delta (DAL) - $10.4 million loss in revenue with an operating loss of $6.5 million.
Ø United (UAUA) - $8.4 million loss in revenue with an operating loss of $5.2 million.
Ø American (AMR) - $7.6 million loss in revenue with an operating loss of $4.6 million.
Ø Continental (CAL) - $5.6 million loss in revenue with an operating loss of $3.4 million.
Ø US Airways (LCC) - $3.7 million loss in revenue with an operating loss of $2.2 million.
In addition to the above, JetBlue (JBLU) is likely losing a relatively small amount of passenger feed to/from their European partners.
# # #
Is airline management finally “getting it” and acting responsible? For American (AMR) and JetBlue (JBLU), based on last week’s announcement, the answer is yes! At least this time!
AirlineFinancials.com estimates the new “interline ticketing agreement” announced last week will add at least $14 million to JetBlue and $55 million to American’s operating income with virtually no increase in costs. These amounts could easily double as American will connect 12 of their popular international destinations with 18 JetBlue US domestic airports.
Additionally, each airline has the opportunity to further strengthen their route networks and increase revenues from the other part of the “deal” which will transfer 12 of JetBlue’s valuable JFK slot pairs (landing and takeoff spots) to American while JetBlue finally gets to add new service to Washington’s DCA airport by getting eight DCA slot pairs from American. Note: JetBlue also gets one of American’s slot pairs for White Plains, NY.
By the numbers-
For year 2009
At New York’s JFK airport, JetBlue, by far, had the largest market share with 41.7% of the passenger traffic. Delta (DAL) was #2 holding 19.8%. American was #3 with 14.1%.
At Boston’s airport, JetBlue once again had the highest market share with 17.4% of the passenger traffic. American was #2 at 15.1%.
At Washington DC’s Regan airport, US Airways was #1 with 22.3% of the passenger traffic. American was #2 at 13.5%. JetBlue plans to start operations at DCA later this year.
Note: Market shares above do not include traffic from regional/affiliate partners.
The following provides the JetBlue daily average passenger traffic to Boston and New York’s JFK airports that are expected to be included in the new interline agreement connecting with American’s international flights (number in brackets is the average daily one-way passenger traffic based on the most recent data available):
Washington Dulles 
New Orleans 
West Palm Beach 
Portland, OR 
Portland, ME 
Fort Meyers 
Salt Lake City 
Collectively, the daily average JetBlue one-way passenger traffic from all of the cities above to New York JFK and/or Boston was 7,547.
As part of the “interline ticketing agreement”, the following are the American international destinations that JetBlue passengers will be able to connect with:
Buenos Aires, Argentina
Sao Paulo, Brazil
The reality of the industry is that without this American-JetBlue ticketing agreement, international passengers between any of the destinations above would likely chose Delta, United (UAUA), Continental, or US Airways for their travel opposed to using JetBlue or American.
JetBlue now becomes a stronger domestic competitor by providing connecting service to American’s international destinations. Without this agreement, the only way for American to compete for passenger traffic from the JetBlue cities above would require American to add costly domestic routes that would only drive fares lower due to unnecessary additional capacity.
AirlineFinancials.com estimates for each one percent increase in JetBlue’s passenger traffic that is driven by American’s international connections will add $6.9 million to JetBlue’s operating income and four times that amount for American. This additional income comes at virtually no increase in costs to either airline.
Conclusion- Over just the past two years, US airlines have lost approximately $9 billion. Even what once were the most successful and low cost airlines, have become more-or-less break-even for profits.
Contrary to popular belief and political efforts, these industry losses did not come from costs that were too high. The losses came from not enough revenue.
The fact is while the real cost for new aircraft, real estate, terminal rents, fuel, taxes, etc. has easily kept up with inflation. Current airfares are more-or-less what they were 25 years ago. If airfares were adjusted for normal inflation, fares would be approximately twice what they currently are.
As I have frequently stated: “More focus needs to be on making the industry better and not just cheaper.” The only way for this to occur is for the airline industry to stop adding capacity until there is enough demand at a high enough fare to operate profitably.
This new deal between American and JetBlue is a positive move in that direction and makes both airlines stronger.
Data source for above was SEC filings and BTS data. Projections and estimates make assumptions that may or may not prove to be accurate.
# # #
This article analyzes nine key financial and operational categories. A brief 2010 outlook is also included.
The “industry”, for this analysis, considers the nine largest US airlines: Delta (DAL), American (AMR), United (UAUA), Continental (CAL), Southwest (LUV), US Airways (LCC), JetBlue (JBLU), Alaska (ALK), and Air Tran (AAI). Except where noted all data includes regional/affiliate partners.
Collectively, these airlines and their affiliate partners carry over 88% of the US domestic passenger market share. Note: Delta and Northwest merged in October 2008. For this analysis, Northwest’s data has been combined with Delta pro-forma.
Operating Revenue (total of nine airlines)-
2008 = $126.2 billion
2009 = $106.7 billion
When comparing the prior year, every airline had lower operating revenue in 2009. In general, the larger the airline the larger the drop in revenue.
Operating Income (total of nine airlines)-
2008 = -$4.3 billion (loss)
2009 = +$662 million
Operating income is the difference between total operating revenue and operating expenses. Note: For this analysis, recognized one-time and special charges were removed from operating expenses.
Over the last two years, United had the largest cumulative operating loss at $1.6 billion with American close behind at $1.5 billion. The smaller carriers outperformed the large legacy airlines with Southwest and JetBlue being the only two airlines to have positive operating income in each of the last two years. American was the only airline to have an operating loss in 2009 and it was significant at -$833 million.
Long-Term Debt (total of nine airlines)-
2008 = $49.4 billion (39.1% of total operating revenue)
2009 = $52 billion (48.7% of total operating revenue)
As a ratio of operating revenue, excluding Southwest which stayed approximately the same, every airline increased debt in 2009 when compared with 2008. For this analysis, Long-Term Debt is LT-Debt less current maturities plus capital leases.
JetBlue has by far, the highest debt ratios.
Cash liquidity- (total of nine airlines)-
2008 = $17.3 billion (13.2% of total operating expenses)
2009 = $21.9 billion (20.7% of total operating expenses)
Cash liquidity for every airline improved significantly in 2009. JetBlue and Alaska had the highest cash ratios. US Airways and Delta had the lowest. For this analysis, cash includes short-term investments.
Stock market capitalization- (total of nine airlines)-
2008 = $25.1 billion (Q4 median)
2009 = $25 billion (Q4 median)
Market capitalization is the stock-share price times the outstanding shares. Southwest and Delta have significantly higher market caps than all of the other airlines.
Market share of passenger miles- (total of nine airlines, includes regional affiliates)-
2008 = 768.6 billion passenger miles
2009 = 730.7 billion passenger miles
Each airline’s percentage of 2009 passenger traffic was little changed with 2008. Southwest picked up most of the reduction from Delta, American, and US Airways.
Regional affiliate impact to market share- (total of nine airlines)-
2008 = 68.8 billion (regional affiliate passenger miles)
2009 = 69 billion (regional affiliate passenger miles)
There was very little year-over-year change in total regional/affiliate passenger traffic miles. For 2009, excluding American, the five airlines with regional/affiliate partners all increased net market share after including their regional/affiliate traffic.
EBITDAR and margin- (total of nine airlines)-
2008 = $5.5 billion
2009 = $9.7 billion
EBITDAR is a common financial term used to measure a corporation’s operating earnings before including interest, taxes, depreciation, amortization, and aircraft rent. The following chart shows the EBITDAR ratio of operating revenue for each airline.
United and US Airways were the only two airlines with a negative EBITDAR in 2008. Both United and US Airways made significant EBITDAR improvements in 2009. American and Southwest had the most negative change in year-over-year margins.
Outlook for 2010-
Advance ticket sales - (total of nine airlines)-
2008 = $16.3 billion (14.4% of 2008 passenger revenue)
2009 = $15.9 billion (16.8% of 2009 passenger revenue)
Each quarter, airlines report the amount of passenger revenue collected for future travel (ATL). The following chart shows each airline’s Air Traffic Liability as a percentage of the previous 12 months passenger revenue. For this analysis, FF miles expected to be used in the next 12 months may be included as ATL.
Year ending 2009 data suggests the larger legacy airlines have higher future passenger bookings than the smaller carriers. This should push fare yields and revenues higher in 2010 than they were in 2009.
Conclusion- For year 2010, it is the opinion of AirlineFinancials.com that all airlines noted above will see year-over-year increases in top line revenues. In addition, provided crude oil prices remain at or less than $85/barrel, current profit estimates are likely to be conservative.
The Pilot Story You Won’t See on TV Tonight-
Today, like most every day, just over 44,000 of the world's most experienced airline pilots employed by the 9 largest airlines in the United States will accept full responsibility for over 1.5 million lives sitting behind their locked cockpit doors. Over the next 24 hours, these unnoticed pilots will make over 13,500 take-offs literally around the world. Through every imaginable type of weather, they will be in command of over 36,000 hours of flight time. And, if today is like most days, you will never hear or read about even one of those flights.
There is nothing simple about putting hundreds of lives into an aluminum tube using jet engines to propel it 35,000 feet above the ground traveling close to the speed of sound to eventually land safely on a stretch of concrete most anywhere in the World. Make no mistake about it, flying is dangerous. It is only made less dangerous by the dedicated men and women who work in the industry putting the safety of their passengers as their number one priority.
When an unexpected in-flight emergency occurs, there is no shoulder on the road to pull over, call 911, and wait for help. It won’t make media headlines today, but like every day when something breaks on an aircraft or someone makes an unintentional mistake, some pilot will use his/her training, knowledge and experience turning an in-flight emergency into a routine landing that will save hundreds of lives.
Every day some licensed mechanic uses his/her experience to repair some part of an aircraft to prevent a future tragedy. Many times every day, flight attendants use their training, experience and on board medical safety equipment to keep passengers alive after a heart attack and deal with a multitude of other in-flight issues.
This year we witnessed how decades of knowledge, experience and training gave two previously unheard of pilots the ability to land a commercial jet with no engine power on a river and not lose a single life. Unfortunately, we also learned how mistakes from the cockpit cost the lives of so many in the Buffalo crash. And just this past week, pilots were reminded of the consequences of not doing their job in a responsible way.
Contrary to what many have been led to believe, commercial jets do not just fly themselves. While technology has improved reliability and added many safety features, jet engines still fail and weather will always be a significant factor which requires knowledgeable and experienced pilots to navigate safely through.
Many passengers are surprised to learn only a few runways are equipped to allow an automatic landing. The fact is most landings are being hand flown by pilots as over 95% of the runways commercial airlines use do not have the technology required for auto pilot landings.
Note: Every auto pilot landing has pilots diligently monitoring the instruments with their finger on the switch to take over if any ground or aircraft system fails.
So what does it really take to be a commercial pilot?
Since I have flown commercially for the last 40 years, I’d suggest I’m qualified to share a few facts you may not know.
First, similar to a doctor taking years to get qualified in the operating room, there are no -entry level- pilot jobs at the major airlines. Before being hired by a major airline you will likely have a college degree and either been trained as a pilot in the military or have spent several years acquiring thousands of flight hours experience on smaller aircraft.
Fully depending on the airline’s growth, it could take as many as 20+ years to move from a co-pilot to captain.
Airline pilot wages, benefits and working schedules are based on company seniority. If a pilot leaves one airline he/she will start at the bottom of the next airline’s seniority list as a new hire.
Once hired by a major airline, regardless of your prior experience, you will go through several weeks of training and testing before being qualified on that airline’s specific aircraft operations. Every time you move to a different type of aircraft or move from co-pilot to captain you will again require more weeks of training and testing.
Every 9 months for the duration of a pilot’s career, he/she will go through several days of training and check-rides to make certain they are prepared to deal with dozens of emergency procedures.
You will routinely and unknowingly, have a company and/or FAA inspector show up for your flight and sit in the cockpit to monitor your performance.
Pilots have to pass a medical check every six months with an annual EKG required as you get older. Due to very stringent medical requirements, approximately 15% of airline pilots are forced to retire before they reach their mandatory retirement age. Commonly used medications for typical colds and medical issues are not allowed to be used by pilots on duty.
Unacceptable performance on any of the above will remove a pilot from flight status and depending on the circumstance, a pilot can be terminated.
FAA has strict limits on the maximum number of hours pilots are allowed to fly: The maximums are 1,000 in a year, 100 in a month and 30-32 in 7 days (international flight limits are slightly higher than domestic). In order to actually get an hour of flight time, depending on your seniority and the airline’s schedule, you can expect to be away from your base from two to four times actual flight hours. For the most part, you only get paid when the aircraft is moving (Note: Pilots do not get premium pay for working holidays or weekends. Pilots can also expect to miss many special events as they are working a multi day flight sequence.)
Before every flight, an airline captain must sign a release stating he/she is accepting responsibility, and authority for an aircraft valued at tens of $millions carrying hundreds of lives. Similar to a surgeon in the operating room, there is a large support group of fellow employees to make it possible for all of the objectives to be safely accomplished. But in the end, it is the captain that must use his/her knowledge and experience to make critical and occasional life saving decisions.
Is the job worth it?
Actually the important question should be: In the future, is the job -going- to be worth it for those individuals you want and expect to be responsible for so much?
Since 9/11 and the bankruptcy or reorganization of every legacy airline, pilot hourly pay rates have been reduced to what they were almost 20 years ago. In addition, work rule changes force pilots to work more and longer days than they ever have. Fatigue is a growing problem as long scheduled days get even longer when weather and maintenance delays are encountered.
Note: Pilots from United (UAL), Delta (DAL), Northwest (now merged with Delta) and USAir (LCC) all lost significant amounts of their pensions as those airlines went through bankruptcy after 9/11.
Recognizing the above, how much of the average passenger airline ticket fare is now used to pay pilots to accept the responsibility they have? Not very much!
Tables below use industry data to calculate the average -cockpit- wage cost for two pilots per hour of flight for the average passenger fare.
Note: Data considers reported passenger revenue kept by the airline and does not include taxes and airport fees. USAir data includes America West pro forma. Delta and Northwest merged in October 2008. Aircraft movement is considered flight time for this report.
For year 2008 the average cockpit wage cost per average passenger fare per hour of flight was $3.73. See figure 1 for specific airlines.
Compare this to what a surgeon is compensated for the responsibility of one life at a time.
Since 9/11, United, Delta, Northwest and USAir filed bankruptcy. American (AMR) and Continental (CAL) reorganized outside of bankruptcy in 2003.
In the past seven years, while inflation increased by 20%, the average hourly cockpit wage cost for the average passenger fare dropped by 29%.
See figure 2 for the year over change since year 2002.
When comparing year 2008 with 2002, Southwest and JetBlue were the only two airlines which had their passenger fare ratio of cockpit wage costs increase. In year 2002, both of these airlines were the lowest in the industry. In figure 3 you can see how the average cockpit wage cost ratio of the average passenger fare per hour of flight changed for each selected airline since year 2002.
On your next airline flight, as you walk by the cockpit, you now know on average, the coffee you purchased in the terminal cost more than what both pilots will earn from your passenger fare for each hour of flight they accept responsibility for your safety.
If your flight crew appears tired, it is because they are likely to be in some part of their duty day that will routinely go more than 12 hours and end with a short layover at some airport hotel before they start over the next day.
Whether it is in the operating room or an airline cockpit, if you want the “best” individuals there, you will have to provide the incentives to get them first.
The bottom line questions are: In the future, who do you want replacing these aging and very experienced veteran pilots? Is it worth a few dollars more to attract the “right stuff” to be responsible for such an important job?
[Data source: SEC filings and BTS reports]