Is that true for other forms of transport too? Probably true for trains. Cars as well? all the road construction and maintenance costs are eaten by the taxpayer.
I would be fairly sure that the canal business (eg in the UK, not later ones like Panama) was generally unprofitable as a general transport business, being mostly replaced by railways before paying back its build costs.
The railways are less clear, the build costs were huge, and written off many times by bankruptcy, but the impression you get from say http://www.guardian.co.uk/world/1947/dec/30/transport.uk was that in the first half of the 20th century in the UK they were competing well against road transport, efficient and profitable ("they were conveying more passengers than the whole of the United States railroads put together"). Other countries may vary though.
The car business does not have a very good long term profitability record, I am sure if you lump in the cost of road construction you will probably end up at a loss, although that is not exactly fair as that is not the way the market was structured.
It's patronizing PR pablum, I'll admit. But part of me thinks hey, at least it's the lesser of two evils (the other being the actual taking of a massive salary).
Even the least sophisticated Virgin employee is probably savvy enough to understand that Sir Richard doesn't need a salary, and that his enrichment from ownership of the company does not come from such. Accordingly, they probably understand that his "I'm not taking a salary" line rings a little hollow. Nevertheless, in their eyes, this is probably better than "I'm only taking $9 million base this year instead of the customary $15mm."
There are plenty of Founder-CEOs who do take hefty salaries on top of their equity stakes, even in lean years. By comparison, Richard Branson isn't necessarily a saint, but he's better than many.
As for whether or not he needed to call this out in his letter, I dunno. Decent PR move with probably little to no risk of blowback.
Very well communicated and presented by Mr Branson. At times of crisis, its important to be level headed about things and objectively look at both sides of the story. I also like his transparency approach, i think it will work extremely well in his favour, or at least i hope so.
I haven't heard anything about the pilot strike mentioned in the article. That aside, I have the following to say which is oriented more towards flight attendants than the pilots whom you don't normally interact with.
Of any airline I have ever traveled on, the Virgin lines (Atlantic and America), have been my favorite. This ranges from the very basic things like more leg room than their competitors to wifi in the sky, to the excellent way almost every Virgin employee treats their customers.
This last point is the most important. I was on a flight last year where my friend and I got to the airport about 10 minutes late. The flight we were to catch from SFO was already boarded and ready to taxi by the time we got to the gate. We were put on standby and were seriously in danger of not getting a standby flight till late in the evening. However, at the last minute the plane (which still hadn't taxied) opened its doors, and 5 flight attendants got off.
These ladies were off-duty and were using their free flight options to go to Vegas for the weekend. Somehow they heard there were 3 passengers (us and another fellow) who had missed the flight. They all ended up getting off and giving us their seats. They didn't have any compunction about waiting a few extra hours to catch their flights and start their weekend, so that we could make our flight and start ours.
I've had other experiences on Virgin that are similar. The staff that have to deal with thousands of potentially unruly travelers every week almost always bend over backwards to make sure we are happy or at least mollified if we're pissed about something or another that really has nothing to do with Virgin, and especially if it is.
The point I'm getting to is that after a few candid conversations I've had with flight attendants, these people are paid shit. Fucking, low-grade shit. Pardon my language, but its true. Pilots earn a bit more, but its still crap.
2 years ago, one flight attendant I got to know coming back from D.C. said she earned something like $30k after several years. The average pay is lower.
Its utterly ridiculous that some of the nicest, caring people in the airline industry have to deal with such people as the general public (myself included, of course) and yet make less money than a manager at a McDonalds franchise. Day in, day out.
I'm assuming that the pilots union doesn't include the flight stewards. Given that, I would encourage the flight attendants to strike as well for better pay. They well deserve it.
I'm the kind of person that will pay a little extra for quality. I do it with food, personal products, and travel. I don't fly Virgin because its cheaper, though it often is. I fly them when I can because I enjoy the experience and don't want to be stressed out when I get to where I'm going. If it means that I pay an extra $10-$20 to fly Virgin so that their employees directly benefit, that's something I would do gladly.
In "Capitalism, A Love Story", Moore claims that new pilots average the same as a McDonalds low-level manager. If this is true, it would make Virgin pilots comparatively well paid.
I think by "new pilots" they mean "new pilots at regional carriers," not "new pilots at the majors." Of course, these days, the regional carriers have become the primary path to employment in the majors (it used to be the military), so most airline pilots have to endure a few years of that. The fact is, a lot of people love to fly (at the controls, not in the back), so getting paid to fly for a living is an incredible draw. When you add in the great benefits and the high pay for experienced pilots, you're bound to get a situation where people have to pay some serious dues to break into the majors.
My dad is a retired airline pilot, so I've heard plenty about the airline industry from him. For airline pilots, seniority is everything. Part of it is the pay scale, which as you pointed out, is unbelievably steep: the new guys get paid almost nothing, the oldest hands make (at least) the kind of money people normally associate with lawyers and doctors. However, other things that dramatically effect lifestyle are also driven by seniority, such as scheduling and vacation. The senior pilots are able to schedule themselves for contiguous trips and to be home for weekends. My dad used to pull a trick where, if we were planning a vacation, he would book himself up solid with flying for the first two and a half weeks of the month and then hit his legal monthly limit for flight time, after which he got the last week and a half of the month off without having to take any vacation. New guys, on the other hand, get stuck with crazy schedules where there are inconvenient gaps between flights, leaving them with low ratios of hours flown/days worked. Seniority also determines where you can get stationed: the most senior get to pick their home station, the more junior must select less-desirable stations. The most important aspect of seniority is furlough: least senior gets furloughed first. In a cyclic industry with big swings of expansion and contraction, this is a very big deal. When my dad first got out of the Navy and went to work for Pan Am, they gave him an offer: start immediately as a flight engineer and move up to co-pilot in a year, or wait six months to hire on directly as a co-pilot. Even though he wanted to get back into the pilot's seat as quickly as possible, he chose to hire on immediately and delay co-pilot status. He didn't know it at the time, but it turned out to be the best career decision he ever made: a few years later there was a major furlough, and he was just a few seniority numbers above the furlough line. If he had waited those six months, he would have been furloughed and out of work for several years.
It's not set up this way because of the airlines, its because of the pilots' unions. Part of it is driven by position: Captains get paid more than co-pilots, and pilots of bigger jets (longer flights) get paid more than pilots of smaller jets (shorter flights). Even that is driven by seniority, though: the most senior pilots get the big jets. Some aspects of the seniority system make complete sense: you don't want the airline to use a furlough as an excuse to get rid of its most highly-paid pilots. However, the pay scale doesn't need to be nearly as steep as the unions make it, and if it wasn't so steep then the airlines wouldn't have to lay off as many junior pilots to save a given amount of money.
It's worth pointing out that Virgin America is a completely independent company of Virgin Atlantic and that your experience seems to be mostly based on Virgin America.
You talk about increased pay - the only way to increase staff pay would be to raise fares which customers don't want.
I believe that being a flight attendent is seen as a desirable job, and therefore they just don't need to pay more. They can get keen and well suited people to apply for any job openings they may have, regardless of what the airlines are paying.
This is true, but this same logic applies also to pilots. The key difference is that pilots are very expensive to train and therefore more difficult to replace, whereas flight attendants are relatively easy to train and replace.
Right. And most customers want their pilots to have as much experience as possible. Having senior experienced pilots on your payroll is seen as a plus. Sullenberger, the guy who successfully managed to put a plane down on the Hudson river, basically epitomizes how you want your pilots to look:
On the high end (why pay a pilot 200k a year, etc) that argument may hold, but on the low end, it causes sleep deprivation as pilots struggle for workable living conditions close to work, etc.
I'm fine paying $10 more a ticket if the low end pilots make 40k or more a year and can afford a good nights sleep. They're someone I don't want many mistakes from.
Pilot rest time is regulated by the FAA in the U.S., regardless of salary. The regulations specify minimum rest-opportunity time prior to flight duty, as well as maximum hours of flight duty per day, per week and per month.
The problem is that there are plenty of ways to undermine these rules. For example, most junior pilots commute to work because your duty station is a function of seniority and they don't want to live in the shitty places they have been assigned to. So, such a pilot might start his day in the city where he actually lives, catch a ride in the jump seat from there to his duty station and then begin his work day, which is allowed to be up to 16 hours long (the actual hours of flying allowed is less than 16, but the time from when he shows up to work to when he has to stop flying is 16 hours unless the airline imposes a more conservative limit). Depending on how long his commute was, he might make his final landing after being awake for well over 20 hours.
And what compounds the reply Lucas made just above (below?) mine here is that you've got entry level salaries for pilots often as low as $20-30k and senior pilots making $150-250k. (Philip Greenspun has a great write-up on this if you care to google for it).
So when you've got that kind of disparity, you're going to have guys who are quite ambitious and willing to sacrifice long hours to move up into the more livable parts of the salary range available in their profession.
Are you stating that flight attendants worldwide should go on strike, or just the Virgin ones?. My friend has just completed flight attendant training at Virgin, it's an intensive 6 week course with exams etc and the 40 or so that went through th training were selected from in excess of 2,000 applications.
I think your experience of Virgin is great, but I think your comment that they should go on strike because they offer great service is way off. The experience you had is most likely due to the sheer quality of the training and their impeccably high standards, it's also these qualities that mean they are extremely highly regarded talent in their industry.
- "Its utterly ridiculous" "They well deserve it."
Why?
You seem to be forgetting the basics of economics. It really doesn't matter what you think they "deserve" or how hard you or they think it is to deal with the general public.
What matters is how many people could/would be willing to do their jobs. And the answer is quite a few, whereas there are many fewer people who could manage a McDonalds.
Thus demand is low for flight attendants, and thus the price is low.
I'm all for people negotiating for as much as they can get, but I certainly don't think it's ridiculous that the market offers different prices for different services.
If this is the case, then the "basics of economics" sucks. If Virgin really cares about customer service as much as Branson's letter purports, then they should have no problem paying people who do their jobs at a level far above industry standard appropriately.
Maybe I'm being naive but I'd much rather pay a flight attendant who constantly goes beyond the call of duty and does his/her job at an extremely high standard, say $50K rather than paying someone else 30K, just because they're willing to do the job for less money.
You get what you pay for, right.
And I'd happily pay a premium to an airline with this philosophy.
Aside from that, arguing that he is ignoring the basics of economics also sucks.... 'the basics of economics' are not an end in and of themselves.
(However something like the 'greater good' or 'the right thing to do', which is what the op seems to be arguing, actually can be construed as a reason).
You seem to think the market for jobs operates with something approaching market economics. If this were true then we should be running PSAs to encourage people to become investment bankers because the incredibly high salaries paid are indicating a severe shortage. Instead I see commercials encouraging people to become teachers - if there were really a shortage wouldn't salaries rise by market forces?
The truth is economists have long recognized that the job market is different than the market for most other products. For one thing wages are "sticky," they don't change every couple of days the way the price for gas or a loaf of bread does.
Yes, labor is not exactly comparable in market terms to other products--more sticky prices, more difficulty in estimating value, etc.--but the principle and its consequences remain.
We DON'T HAVE to run PSAs to encourage people to become investment bankers precisely because there are high salaries. The salaries are the advertizement and they're incredibly effective.
As far as teachers, we don't have a shortage. We don't need more teachers, we need better teachers. How to attract those better teachers is unclear--a strictly higher salary would attract more of all caliber of teachers which would not help. I suppose commercials are thought to be one way and I think it's likely better compensation will have to be a part of it as well.
The labor market is different than a commodity market, but that doesn't mean economics don't apply. There are switching costs, people are not fungible, and labor skills represent a huge time/money investment.
But this misses the point. We want our economic system to be as fair as possible, and in most cases (and certainly in the case of flight attendants), the "fairest" solution and the one that pays what flight attendants "deserve" to make is the fair market wage.
If demand is low, no-one will miss them much when they strike. If they are missed, basic market economics dictates that they should get paid more.
Further, there are two sides to the demand curve. There is supply - how many people are prepared to do the job, and there is demand - how much those who pay them, directly or indirectly, appreciate what they do. Now, clearly there is some variation in the demand - you perhaps have little demand for their services, whereas some commenters value them more highly. So I guess in the fullness of time, perhaps with the aid of a strike for clarity, we'll see who's in the majority.
Noone will miss them much when they strike? Regardless of how "large" the supply of cabin-crew is; a strike that cancels flights will still affect my hypothetical holiday, and I will miss them an awful lot. That's more because there's a latency in the training duration and short-term availability of staff, than because there's a labor shortage for aircrew. (My understanding is that cabin crew is an exceptionally competitive job with many more applicants than successful employees).
I had a very similar experience with Virgin Blue (Australian national flight service). We arrived an hour late to a flight (daylight savings mixup) and fortunately the plane had been delayed. Not only did a Virgin Blue staff member get us to the front of the line, they let us purchase space for luggage and check it in late (we had cheap no-luggage tickets), and made sure to check with flight staff that the luggage would be on our flight and that our seats were still available.
Contrast with Qantas, where being less than 45 minutes early to a flight usually means you cannot board (you certainly cannot check-in luggage).
> Its utterly ridiculous that some of the nicest, caring people in the airline industry have to deal with such people as the general public (myself included, of course) and yet make less money than a manager at a McDonalds franchise. Day in, day out.
If you want to give them more of your money, or start a company that pays them better, or take up a collection for them, nothing is stopping you.
The airline is paying them a salary and you are paying them nothing. Yet you are mad at the guys who are providing their job in the first place?
What a vapid comment. GP is perfectly within his rights to gripe about people performing a stressful job admirably while receiving less money than they deserve. Saying "start your own airline" hardly advances the conversation. As a counterpoint, you could have linked to median wages for all flight attendants and pointed out a systemic issue.
While I don't think it was presented as such, the "start your own airline" comment is, to me, the correct response to "people aren't being paid what they deserve". It turns out we are unlikely to agree as to what people deserve to be paid for their jobs, so we have decided the most fair thing to do is rely on labor markets and competition.
1) OP's opinions about flight attendant pay are his. Others think it's a bit more exciting to fly around the world than to manage a McD's, and that pay isn't the only measure of comp.
2) There are many things OP could do besides starting his own airline. Do some Kickstarter like thing for the ostensibly underpaid flight attendants. Do a Hipmunk like thing where there's a wage surcharge on each ticket, given directly to the flight attendants.
In short, do something to put money in their pocket rather than pointing a finger at Branson, the guy who is actually putting money in their pockets today.
Otherwise, it's all too easy to be generous with other people's money.
I'm the kind of person that will pay a little extra
for quality. I do it with food, personal products, and
travel. I don't fly Virgin because its cheaper, though it
often is. I fly them when I can because I enjoy the
experience and don't want to be stressed out when I get
to where I'm going. If it means that I pay an extra $10
$20 to fly Virgin so that their employees directly
benefit, that's something I would do gladly.
I feel similarly, although I think most people don't see it that way, or at least aren't willing to pay more unless they know about the end result. Otherwise, average people just as well assume the company is money hungry "like everyone else". I think Branson does a good job in reaching out to customers, sadly the average person probably doesn't see it.
Proof of that is the success of airlines like Ryan Air. The CEO (don't remember his name) said something like: people don't care about drinks and pretty stewardesses, they care about getting cheaply from A to B (even if it means shitty seats, no food, earlier boarding times, etc...).
Michael O'Leary is a brilliant example of a CEO who is almost the complete polar opposite of Branson in every way except one: he uses his own persona and personality in the media to really drive Ryanair's value propositions forward. His widely publicised (and blue-sky) proposals, amongst others, to have only one co-pilot per flight, ask passengers to load their own baggage, and have standing-only sections are great examples of this.
Edit: his proposal to remove all but one lavatory to make room for extra seating and charging for use of the remaining one is textbook.
Somehow they heard there were 3 passengers (us and another fellow) who had missed the flight. They all ended up getting off and giving us their seats.
They heard you were there because the gate agent went aboard and told them (nicely, I am sure) to get off the plane.
Employees flying standby are always at the mercy of late arriving paying passengers.
And, sure they had no compunction about getting off because
1) they were told to
2) employees are keenly aware that grousing in front of the customers is a Bad Idea.
I'm sure they were actually in good spirits about it: flying non-rev you know you can be bumped and after all it's in favor of people paying your salary.
On the matter of paying a little extra for better service shouldn't we consider the option of "tipping" our flight attendants then?
I know this won't fly in general, especially outside the US where tipping is not nearly as customary, but this has been a method to offset low paying jobs where service level influences our overall spending.
I don't know what the lifestyle of a flight attendant is, but if the advancement of flight has reduced their positions to that of a McD's manager, blame us, the general public, because we've forced Airlines to optimize for scale transport.
As for Pilots...it gets tricky because they are very much vital. The seniority crap sucks but is understandable in a job market with a very finite requirement of personnel. To be a Senior Captain with a large carrier, like Singapore Airlines, means you'd be in the 200k+ salary club.
The number of short-hop vs long-leg flights is probably indicative of why there are so many junior level pilots paid less than senior level pilots paid more.
Furthermore, I'd say aircraft like the Airbus 380 compounds this problem by basically forcing a hub and spoke model where the large "carrier" aircraft can only be manned by senior pilots. If we had more direct-direct flights it would open up room for many semi-senior pilots and potentially distribute wages better.
I was completely unaware of the situation at Virgin Air before reading this letter, so I had no context when I started, but after reading just the first three paragraphs, I was already thinking "If I was an employee of this company, I would be skimming down to the last two paragraphs to see how many people just lost their jobs." Maybe "bad news" letters from executives all have the same format of "give a little history, mention problems the company is facing, promise that we'll get through this a stronger company, and then drop the bomb", because I've seen my share of "5% pay cut" and "layoff" letters in the past, and this one just reeked of bad news for somebody.
That said, it was a well written letter that showed that he had spent time studying the issue and wasn't just sugar-coating a "screw you" letter (I've seen my share of those as well).
It sounds like he's not really connected to the situation very well. He keeps deferring to management. "Management told me this", "Management showed me that.", "I can't speak with the union head, that's something management is better equipped to handle".
I am not sure anyone would ever expect Branson to say anything other than the company line, that he agrees with managements offer. That he feels those who are striking are hurting the image of the company.
If I were a pilot, the last opinion I'd care about would be the eccentric billionaire CEO's.
Your union representative also publicly asked to meet with me personally. I believe that would only cause more publicity which would further damage the airline and I am not best placed to deal with the details of the negotiation.
He has no plans to meet with the union. His personal meetings with pilots are probably more to brow beat & pressure them, instead of a gesture of goodwill.
I seriously doubt he intends any browbeating. Much more likely is that he would just try to make them feel appreciated and create a personal connection with them. They would be a lot more willing to deal with their friend than some "evil corporation."
He has already agreed with the evil corporation. He _is_ the evil corporation. A wolf in sheep's clothing. I doubt he's inviting any of the pilots with him the next time he jet skis with a naked model clinging to his back.
Let's just say becoming friends with a billionaire because you've been invited to meet him due to the fact that you're on strike at one of his companies is unlikely.
I'm sure this is true if you have a blanket mindset of "all corporations are evil" but you're doing a Branson a disservice - he's one of the few progressive modern CEO's around.
Actually it doesn't sound like things have changed.
Here's a recent article detailing how Branson gave 8,500 Virgin Atlantic employees 2 week's holiday + 2 free tickets to fly anywhere on the airline's network as a 'birthday bonus' for loyal service:
...again, I am not saying Virgin is inherently evil. The original post suggested that an employee on strike might go to Branson thinking he is a friend and not part of the "evil company". My point was that Richard Branson is the founder & the president of the company & has sided with management already in his open letter. That is what I meant by "he is the 'evil company'". I would hold little hope that a pilot is going to have much sway with Mr. Branson.
Now the conversation has veered off into if Branson is a friend of his employees. It sounds like he's partied with employees during the good times. But it's physically impossible for him to be a true personal friend with all his employees. While it's good to be on friendly terms with the founder/president/executive team, you must always keep in mind their position of power & what their motivations might be.
Good companies probably do layoff people. But there is this concept that if you fire someone on a friday it's better for them, or right before their weekend or you give a bunch of employees free travel bonuses while sacking 7% of them. It's slight of hand.
I think there's a bit of a difference writing an opinion piece on the blog vs going to a negotiating table with the union. Also the union management is not the pilots. They're there to engage the airline management & perhaps they thought asking for Branson might get more publicity or maybe he'd bring something new to the table. I am doubtful the pilots expected his opinion would differ much from management.
Wonder if when times are better, pilots get good raises... But is there anything as "better times" for these kind of companies (as opposed to startups and other technology based ones) when it comes to prize their employees when management and shareholders take their millions from the profits? I would like to believe that there is...
As far as I'm aware there are no 'salary cutbacks', the argument the union is having with the employer is the fact that the offered pay rises over the next 3 or so years are below inflation and this is the dispute they're trying to raise.
The thing is I don't think this strike will raise that much sympathy from the UK public, pilots must get paid at least £100,000 (probably more) which is 4x the average salary in this country. I'm not saying pilots don't deserve that sort of compensation, because they do, it's just I don't think the strike will bring that much in terms of public support.
Especially when most private sector workers in the UK are having their salaries frozen or any pay rises they do get are below inflation
I found the offer to open the books and work through the financial logic appealing. That demonstrates a high level of faith in the fiscal actions and also a high level of faith in the judgement by management.
Getting a 404, here's the text in it's entirety from Google Cache:
Dear Virgin Pilots,
The very founding of Virgin Atlantic in 1984 was born out of an idea to reinvent the airline industry. To create an airline where the staff were united to offer a wonderful service to their customers. An airline with a special culture where the people working for it were treated well and where the company was responsive. It literally takes a lifetime to build that kind of culture – well 27 years to be precise! And what a great airline everyone has created.
The frightening thing is how quickly that culture can be lost. Therefore although I haven’t been involved with managing the airline for a number of years, as its founder I take a keen interest in its future, the future of its people and wish to make sure that no one makes a decision that damages or destroys it. It would be just too sad.
Keeping this kind of culture when the going gets tough is particularly challenging and a particular challenge for all of us.
Virgin Atlantic has withstood the toughest conditions in the aviation market since 9/11. You’ve all battled against a deep recession, the impact of volcanic ash clouds, earth quakes in Japan and severe snow storms on both sides of the Atlantic to name but a few.
The airline and our customers continue to face rising APD taxes, sky high fuel prices, a weak pound, increased competition on most routes and uncertain consumer confidence.
Although you may not always agree with senior management decisions, I believe that the team has built a great airline. Starting with just one second hand 747 few people thought we would survive for more than a year or two, let alone expand to create as many jobs and careers as we have. “Too young to Fly, too old to Rock n Roll” were Lord King’s famous remarks at the time.
In the intervening years Virgin Atlantic has grown, while the industry has seen a number of airlines such as British Caledonian, Laker Airways, Dan Air, Air Europe, XL, People Express, Air Florida fail resulting in many lost jobs. A lot of our older pilots were casualties of these bankruptcies and only managed to get a job again due to the tremendous team that was building our great airline, keeping the planes flying and ensuring the public wanted to fly with us.
In America the internal strife in the airlines led to almost every one of them going bust; but importantly some of the jobs were saved by going into Chapter 11 and launching again. A luxury that doesn’t exist in the UK - you are either bust or you are solvent.
In the last week I have spent a lot of time trying to understand whether the management team at the airline has treated everyone fairly and whether the company can afford to go further with its pay offer.
The balancing act our Chief Operating Officer and board have is that if we go further for one sector of the workforce, especially in these difficult times for everybody, we have to do the same for all sectors. And from looking at the figures it will mean asking the public to pay higher fares and in this difficult economic climate, we simply cannot do that at this time.
The management have told me they are happy to share up to date corporate accounts with your union so they can understand the financial context from where the offer has been made. As shareholders we’ve also got to ensure the airline is strong enough to withstand the many challenges it faces in this constantly changing market.
I have looked at the details of your offer and believe it is fair. From the company’s point of view possibly a little too fair! It is one of the best in the industry, along with many other commitments that offer real value to you. If you haven’t read it I would suggest you do.
The COO has to balance the interest of everyone at Virgin Atlantic and I don’t envy his job especially as we’ve had three very tough years in a row. I believe over the last 27 years the team has got it about right. As a result, Virgin Atlantic has survived and jobs have been secure.
To create an airline where the staff were united to offer a wonderful service to their customers.
Sounds great, pity it's PR rubbish. The service that I got from Virgin Atlantic in December 2010 when Heathrow was troubled with a little snow was nothing short of crappy.
They may be good in the air, but if you have to call them to sort out a problem, you are already screwed.
I have avoided flying with them since.
The December airport closure was out of Virgin Atlantic's control, and affected all carriers, but their lack of information, the inability to take any calls on the helpline for 48 hours afterwards, and the slowness and opacity of the process of offering the bare legal minimum of a refund for a wrecked Christmas holiday leave everything be desired.
They offered a statement about the "unprecedented" conditions. I don't care and it doesn't matter if the conditions had precedent or not. Stuff that hasn't happened before happens every day. What matters is if it was predicted (it could have been, it was not) and if it was managed acceptably (likewise).
This is an analysis of the negotiation and everything needs to be said to understand the situation.
In almost every airline negotiation with pilots, airline management has a far greater position in the negotiation, except in the case of Virgin where the pilots probably still have a worse position, but a much more equal playing field!
Here is why:
There is something that is EXTREMELY important to understand about the economics of being a pilot at an airline. Pilots cannot switch airlines without starting at the very bottom. They cannot leave the airline they are with! If they do, they will go from $100-$150K to $30K.
Pilots are not promoted based on how good they are, they are promoted by seniority which means that if a pilot is a captain with Virgin and they switch to whoever is hiring now, they will never make their previous salary for the rest of their career.
There is a second piece of airline economics that is EXTREMELY important. If the pilots strike, the losses an airline would take while trying to replace them will easily bankrupt any airline. The fixed costs, long training time and lack of trained pilots in the market makes a strike an airline killer.
When you combine these two factors, you would normally say that both management and pilots are both in really bad positions to negotiate and MUST come to an agreement or they will both loose badly. But, the reality is that pilots loose far worse than management…
Why? Well, management can take their skills to a different company whereas pilots cannot transfer their skills for the same money. This puts the negotiation power directly in management hands, with one exception… Richard Branson.
He is getting involved and trying to get everyone together because he knows that if the pilots strike, management cannot afford their demands and the airline will be bankrupt. If this occurs, he takes a capital loss which will suck, but the real blow is to his ego and the Virgin brand. No other airline management is in this position.
A lot of airlines will be facing strikes over the next few years, great management will bridge the gaps, talk to both sides and keep the airlines running. Terrible management will allow them to fail and move on to the next company.
78 comments
[ 4.1 ms ] story [ 144 ms ] threadIs it normal for them to offer to show up-to-date books to the unions? on that would they even be able to do anything with it?
The railways are less clear, the build costs were huge, and written off many times by bankruptcy, but the impression you get from say http://www.guardian.co.uk/world/1947/dec/30/transport.uk was that in the first half of the 20th century in the UK they were competing well against road transport, efficient and profitable ("they were conveying more passengers than the whole of the United States railroads put together"). Other countries may vary though.
The car business does not have a very good long term profitability record, I am sure if you lump in the cost of road construction you will probably end up at a loss, although that is not exactly fair as that is not the way the market was structured.
http://www.sciencedirect.com/science/article/pii/01912607849...
http://www.centreforaviation.com/news/2010/06/25/us-airlines...
"What's the best way to become a millionaire? Start off as a billionaire and launch an airline."
http://www.independent.co.uk/opinion/commentators/simon-cald...
Even the least sophisticated Virgin employee is probably savvy enough to understand that Sir Richard doesn't need a salary, and that his enrichment from ownership of the company does not come from such. Accordingly, they probably understand that his "I'm not taking a salary" line rings a little hollow. Nevertheless, in their eyes, this is probably better than "I'm only taking $9 million base this year instead of the customary $15mm."
There are plenty of Founder-CEOs who do take hefty salaries on top of their equity stakes, even in lean years. By comparison, Richard Branson isn't necessarily a saint, but he's better than many.
As for whether or not he needed to call this out in his letter, I dunno. Decent PR move with probably little to no risk of blowback.
> Since Singapore Airlines bought into the company 10 years ago both of us have invested more money into the airline than we’ve taken out
Of any airline I have ever traveled on, the Virgin lines (Atlantic and America), have been my favorite. This ranges from the very basic things like more leg room than their competitors to wifi in the sky, to the excellent way almost every Virgin employee treats their customers.
This last point is the most important. I was on a flight last year where my friend and I got to the airport about 10 minutes late. The flight we were to catch from SFO was already boarded and ready to taxi by the time we got to the gate. We were put on standby and were seriously in danger of not getting a standby flight till late in the evening. However, at the last minute the plane (which still hadn't taxied) opened its doors, and 5 flight attendants got off.
These ladies were off-duty and were using their free flight options to go to Vegas for the weekend. Somehow they heard there were 3 passengers (us and another fellow) who had missed the flight. They all ended up getting off and giving us their seats. They didn't have any compunction about waiting a few extra hours to catch their flights and start their weekend, so that we could make our flight and start ours.
I've had other experiences on Virgin that are similar. The staff that have to deal with thousands of potentially unruly travelers every week almost always bend over backwards to make sure we are happy or at least mollified if we're pissed about something or another that really has nothing to do with Virgin, and especially if it is.
The point I'm getting to is that after a few candid conversations I've had with flight attendants, these people are paid shit. Fucking, low-grade shit. Pardon my language, but its true. Pilots earn a bit more, but its still crap.
2 years ago, one flight attendant I got to know coming back from D.C. said she earned something like $30k after several years. The average pay is lower.
Its utterly ridiculous that some of the nicest, caring people in the airline industry have to deal with such people as the general public (myself included, of course) and yet make less money than a manager at a McDonalds franchise. Day in, day out.
I'm assuming that the pilots union doesn't include the flight stewards. Given that, I would encourage the flight attendants to strike as well for better pay. They well deserve it.
I'm the kind of person that will pay a little extra for quality. I do it with food, personal products, and travel. I don't fly Virgin because its cheaper, though it often is. I fly them when I can because I enjoy the experience and don't want to be stressed out when I get to where I'm going. If it means that I pay an extra $10-$20 to fly Virgin so that their employees directly benefit, that's something I would do gladly.
My dad is a retired airline pilot, so I've heard plenty about the airline industry from him. For airline pilots, seniority is everything. Part of it is the pay scale, which as you pointed out, is unbelievably steep: the new guys get paid almost nothing, the oldest hands make (at least) the kind of money people normally associate with lawyers and doctors. However, other things that dramatically effect lifestyle are also driven by seniority, such as scheduling and vacation. The senior pilots are able to schedule themselves for contiguous trips and to be home for weekends. My dad used to pull a trick where, if we were planning a vacation, he would book himself up solid with flying for the first two and a half weeks of the month and then hit his legal monthly limit for flight time, after which he got the last week and a half of the month off without having to take any vacation. New guys, on the other hand, get stuck with crazy schedules where there are inconvenient gaps between flights, leaving them with low ratios of hours flown/days worked. Seniority also determines where you can get stationed: the most senior get to pick their home station, the more junior must select less-desirable stations. The most important aspect of seniority is furlough: least senior gets furloughed first. In a cyclic industry with big swings of expansion and contraction, this is a very big deal. When my dad first got out of the Navy and went to work for Pan Am, they gave him an offer: start immediately as a flight engineer and move up to co-pilot in a year, or wait six months to hire on directly as a co-pilot. Even though he wanted to get back into the pilot's seat as quickly as possible, he chose to hire on immediately and delay co-pilot status. He didn't know it at the time, but it turned out to be the best career decision he ever made: a few years later there was a major furlough, and he was just a few seniority numbers above the furlough line. If he had waited those six months, he would have been furloughed and out of work for several years.
It's not set up this way because of the airlines, its because of the pilots' unions. Part of it is driven by position: Captains get paid more than co-pilots, and pilots of bigger jets (longer flights) get paid more than pilots of smaller jets (shorter flights). Even that is driven by seniority, though: the most senior pilots get the big jets. Some aspects of the seniority system make complete sense: you don't want the airline to use a furlough as an excuse to get rid of its most highly-paid pilots. However, the pay scale doesn't need to be nearly as steep as the unions make it, and if it wasn't so steep then the airlines wouldn't have to lay off as many junior pilots to save a given amount of money.
http://www.pea.com/imd/airline-pilot-salary.html http://www.glassdoor.com/Salary/McDonald-s-Store-Manager-Sal...
Maybe they start around the same, but they certainly diverge pretty quick.
You talk about increased pay - the only way to increase staff pay would be to raise fares which customers don't want.
This is far from "the only way". Southwest Airlines, for example, has excellent fares and excellent pay.
http://en.wikipedia.org/wiki/Chesley_Sullenberger
You'll never seen an airline advertising how they have the youngest pilots in the industry.
On the other hand, having flight attendants to be as young, attractive and perky as possible is probably considered a positive thing.
I'm fine paying $10 more a ticket if the low end pilots make 40k or more a year and can afford a good nights sleep. They're someone I don't want many mistakes from.
Does the U.K. have similar rules?
So when you've got that kind of disparity, you're going to have guys who are quite ambitious and willing to sacrifice long hours to move up into the more livable parts of the salary range available in their profession.
I think your experience of Virgin is great, but I think your comment that they should go on strike because they offer great service is way off. The experience you had is most likely due to the sheer quality of the training and their impeccably high standards, it's also these qualities that mean they are extremely highly regarded talent in their industry.
Why?
You seem to be forgetting the basics of economics. It really doesn't matter what you think they "deserve" or how hard you or they think it is to deal with the general public.
What matters is how many people could/would be willing to do their jobs. And the answer is quite a few, whereas there are many fewer people who could manage a McDonalds.
Thus demand is low for flight attendants, and thus the price is low.
I'm all for people negotiating for as much as they can get, but I certainly don't think it's ridiculous that the market offers different prices for different services.
Maybe I'm being naive but I'd much rather pay a flight attendant who constantly goes beyond the call of duty and does his/her job at an extremely high standard, say $50K rather than paying someone else 30K, just because they're willing to do the job for less money.
You get what you pay for, right.
And I'd happily pay a premium to an airline with this philosophy.
(However something like the 'greater good' or 'the right thing to do', which is what the op seems to be arguing, actually can be construed as a reason).
The truth is economists have long recognized that the job market is different than the market for most other products. For one thing wages are "sticky," they don't change every couple of days the way the price for gas or a loaf of bread does.
Yes, labor is not exactly comparable in market terms to other products--more sticky prices, more difficulty in estimating value, etc.--but the principle and its consequences remain.
We DON'T HAVE to run PSAs to encourage people to become investment bankers precisely because there are high salaries. The salaries are the advertizement and they're incredibly effective.
As far as teachers, we don't have a shortage. We don't need more teachers, we need better teachers. How to attract those better teachers is unclear--a strictly higher salary would attract more of all caliber of teachers which would not help. I suppose commercials are thought to be one way and I think it's likely better compensation will have to be a part of it as well.
But this misses the point. We want our economic system to be as fair as possible, and in most cases (and certainly in the case of flight attendants), the "fairest" solution and the one that pays what flight attendants "deserve" to make is the fair market wage.
Contrast with Qantas, where being less than 45 minutes early to a flight usually means you cannot board (you certainly cannot check-in luggage).
If you want to give them more of your money, or start a company that pays them better, or take up a collection for them, nothing is stopping you.
The airline is paying them a salary and you are paying them nothing. Yet you are mad at the guys who are providing their job in the first place?
It may taste vapid to you or not -- but it's entirely valid.
In fact, Richard Branson at one point was so dissatisfied that he DID "build his own airline".
Your point was?
2) There are many things OP could do besides starting his own airline. Do some Kickstarter like thing for the ostensibly underpaid flight attendants. Do a Hipmunk like thing where there's a wage surcharge on each ticket, given directly to the flight attendants.
In short, do something to put money in their pocket rather than pointing a finger at Branson, the guy who is actually putting money in their pockets today.
Otherwise, it's all too easy to be generous with other people's money.
Edit: his proposal to remove all but one lavatory to make room for extra seating and charging for use of the remaining one is textbook.
They heard you were there because the gate agent went aboard and told them (nicely, I am sure) to get off the plane.
Employees flying standby are always at the mercy of late arriving paying passengers.
And, sure they had no compunction about getting off because
1) they were told to
2) employees are keenly aware that grousing in front of the customers is a Bad Idea.
I'm sure they were actually in good spirits about it: flying non-rev you know you can be bumped and after all it's in favor of people paying your salary.
I know this won't fly in general, especially outside the US where tipping is not nearly as customary, but this has been a method to offset low paying jobs where service level influences our overall spending.
I don't know what the lifestyle of a flight attendant is, but if the advancement of flight has reduced their positions to that of a McD's manager, blame us, the general public, because we've forced Airlines to optimize for scale transport.
As for Pilots...it gets tricky because they are very much vital. The seniority crap sucks but is understandable in a job market with a very finite requirement of personnel. To be a Senior Captain with a large carrier, like Singapore Airlines, means you'd be in the 200k+ salary club.
The number of short-hop vs long-leg flights is probably indicative of why there are so many junior level pilots paid less than senior level pilots paid more.
Furthermore, I'd say aircraft like the Airbus 380 compounds this problem by basically forcing a hub and spoke model where the large "carrier" aircraft can only be manned by senior pilots. If we had more direct-direct flights it would open up room for many semi-senior pilots and potentially distribute wages better.
That said, it was a well written letter that showed that he had spent time studying the issue and wasn't just sugar-coating a "screw you" letter (I've seen my share of those as well).
I am not sure anyone would ever expect Branson to say anything other than the company line, that he agrees with managements offer. That he feels those who are striking are hurting the image of the company.
If I were a pilot, the last opinion I'd care about would be the eccentric billionaire CEO's.
One news stories I read said he became involved at the request of the pilot's union - so I guess they do care about it :)
He has no plans to meet with the union. His personal meetings with pilots are probably more to brow beat & pressure them, instead of a gesture of goodwill.
Let's just say becoming friends with a billionaire because you've been invited to meet him due to the fact that you're on strike at one of his companies is unlikely.
Check out the "Employees First" section here - http://www.hrh.ch/whoiswho/bransonr/br_page4.html
Also your article is 13 years old. It sounds like things have changed & Branson has a more hands off approach with the airline now.
Here's a recent article detailing how Branson gave 8,500 Virgin Atlantic employees 2 week's holiday + 2 free tickets to fly anywhere on the airline's network as a 'birthday bonus' for loyal service:
http://www.dailymail.co.uk/news/article-1194942/Virgin-staff...
It has already announced an imposed pay freeze for its staff. Board directors will not take bonuses this year.
And the airline has filed to reduce its headcount by 600 staff - a cut of 7 per cent - though it says it has so far activated about 500 job cuts.
It's a bit like saying "everyone gets cake, oh and 7% of you are getting fired".
Now the conversation has veered off into if Branson is a friend of his employees. It sounds like he's partied with employees during the good times. But it's physically impossible for him to be a true personal friend with all his employees. While it's good to be on friendly terms with the founder/president/executive team, you must always keep in mind their position of power & what their motivations might be.
Good companies probably do layoff people. But there is this concept that if you fire someone on a friday it's better for them, or right before their weekend or you give a bunch of employees free travel bonuses while sacking 7% of them. It's slight of hand.
The thing is I don't think this strike will raise that much sympathy from the UK public, pilots must get paid at least £100,000 (probably more) which is 4x the average salary in this country. I'm not saying pilots don't deserve that sort of compensation, because they do, it's just I don't think the strike will bring that much in terms of public support.
Especially when most private sector workers in the UK are having their salaries frozen or any pay rises they do get are below inflation
Cooperation is a big deal.
Dear Virgin Pilots,
The very founding of Virgin Atlantic in 1984 was born out of an idea to reinvent the airline industry. To create an airline where the staff were united to offer a wonderful service to their customers. An airline with a special culture where the people working for it were treated well and where the company was responsive. It literally takes a lifetime to build that kind of culture – well 27 years to be precise! And what a great airline everyone has created.
The frightening thing is how quickly that culture can be lost. Therefore although I haven’t been involved with managing the airline for a number of years, as its founder I take a keen interest in its future, the future of its people and wish to make sure that no one makes a decision that damages or destroys it. It would be just too sad.
Keeping this kind of culture when the going gets tough is particularly challenging and a particular challenge for all of us.
Virgin Atlantic has withstood the toughest conditions in the aviation market since 9/11. You’ve all battled against a deep recession, the impact of volcanic ash clouds, earth quakes in Japan and severe snow storms on both sides of the Atlantic to name but a few.
The airline and our customers continue to face rising APD taxes, sky high fuel prices, a weak pound, increased competition on most routes and uncertain consumer confidence.
Although you may not always agree with senior management decisions, I believe that the team has built a great airline. Starting with just one second hand 747 few people thought we would survive for more than a year or two, let alone expand to create as many jobs and careers as we have. “Too young to Fly, too old to Rock n Roll” were Lord King’s famous remarks at the time.
In the intervening years Virgin Atlantic has grown, while the industry has seen a number of airlines such as British Caledonian, Laker Airways, Dan Air, Air Europe, XL, People Express, Air Florida fail resulting in many lost jobs. A lot of our older pilots were casualties of these bankruptcies and only managed to get a job again due to the tremendous team that was building our great airline, keeping the planes flying and ensuring the public wanted to fly with us.
In America the internal strife in the airlines led to almost every one of them going bust; but importantly some of the jobs were saved by going into Chapter 11 and launching again. A luxury that doesn’t exist in the UK - you are either bust or you are solvent.
In the last week I have spent a lot of time trying to understand whether the management team at the airline has treated everyone fairly and whether the company can afford to go further with its pay offer.
The balancing act our Chief Operating Officer and board have is that if we go further for one sector of the workforce, especially in these difficult times for everybody, we have to do the same for all sectors. And from looking at the figures it will mean asking the public to pay higher fares and in this difficult economic climate, we simply cannot do that at this time.
The management have told me they are happy to share up to date corporate accounts with your union so they can understand the financial context from where the offer has been made. As shareholders we’ve also got to ensure the airline is strong enough to withstand the many challenges it faces in this constantly changing market.
I have looked at the details of your offer and believe it is fair. From the company’s point of view possibly a little too fair! It is one of the best in the industry, along with many other commitments that offer real value to you. If you haven’t read it I would suggest you do.
The COO has to balance the interest of everyone at Virgin Atlantic and I don’t envy his job especially as we’ve had three very tough years in a row. I believe over the last 27 years the team has got it about right. As a result, Virgin Atlantic has survived and jobs have been secure.
Whilst on the subject...
Sounds great, pity it's PR rubbish. The service that I got from Virgin Atlantic in December 2010 when Heathrow was troubled with a little snow was nothing short of crappy.
They may be good in the air, but if you have to call them to sort out a problem, you are already screwed.
I have avoided flying with them since.
The December airport closure was out of Virgin Atlantic's control, and affected all carriers, but their lack of information, the inability to take any calls on the helpline for 48 hours afterwards, and the slowness and opacity of the process of offering the bare legal minimum of a refund for a wrecked Christmas holiday leave everything be desired.
They offered a statement about the "unprecedented" conditions. I don't care and it doesn't matter if the conditions had precedent or not. Stuff that hasn't happened before happens every day. What matters is if it was predicted (it could have been, it was not) and if it was managed acceptably (likewise).
http://philip.greenspun.com/flying/unions-and-airlines
In almost every airline negotiation with pilots, airline management has a far greater position in the negotiation, except in the case of Virgin where the pilots probably still have a worse position, but a much more equal playing field!
Here is why:
There is something that is EXTREMELY important to understand about the economics of being a pilot at an airline. Pilots cannot switch airlines without starting at the very bottom. They cannot leave the airline they are with! If they do, they will go from $100-$150K to $30K.
Pilots are not promoted based on how good they are, they are promoted by seniority which means that if a pilot is a captain with Virgin and they switch to whoever is hiring now, they will never make their previous salary for the rest of their career.
There is a second piece of airline economics that is EXTREMELY important. If the pilots strike, the losses an airline would take while trying to replace them will easily bankrupt any airline. The fixed costs, long training time and lack of trained pilots in the market makes a strike an airline killer.
When you combine these two factors, you would normally say that both management and pilots are both in really bad positions to negotiate and MUST come to an agreement or they will both loose badly. But, the reality is that pilots loose far worse than management… Why? Well, management can take their skills to a different company whereas pilots cannot transfer their skills for the same money. This puts the negotiation power directly in management hands, with one exception… Richard Branson.
He is getting involved and trying to get everyone together because he knows that if the pilots strike, management cannot afford their demands and the airline will be bankrupt. If this occurs, he takes a capital loss which will suck, but the real blow is to his ego and the Virgin brand. No other airline management is in this position.
A lot of airlines will be facing strikes over the next few years, great management will bridge the gaps, talk to both sides and keep the airlines running. Terrible management will allow them to fail and move on to the next company.