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Will pilot pay at United drive fares even higher?

Will pilot pay at United drive fares even higher?

Old Mar 9, 23, 9:40 am
  #1  
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Will pilot pay at United drive fares even higher?

There was a good article on OMAAT about the economics of pilot pay and the airlines. One sentence in particular caught my eye for the economics of the Delta contract for a one way long haul flight: "meaning the pilots alone would be earning around $25,000 for the one-way flight. That doesnt factor in any of their other benefits (health insurance, profit sharing, etc.) theyre receiving."

Essentially saying how the Delta contract is going to put United at a significant cost disadvantage, since United would have to match this pay and they have much more of a long haul operation. The $25,000 figure would simply be pilot pay, not accounting for their benefits, pay for other groups, fuel, slots, taxes etc. Seems to me the only way for airlines to make this up, would be even higher fares. I cannot imagine how this is sustainable.

Here is the article: https://onemileatatime.com/insights/...ng_haul_flying
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Old Mar 9, 23, 10:51 am
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It's going to cost UA relatively more than AA/DL, due to their more extensive widebody and especially longhaul/ultra longhaul network. You're looking at almost $2k/hr for pilot wages SFO-SIN.

It's certainly going to hurt airlines as a investment, e.g. over the next 4 years the increase in pilot wages at AA to match DL would cost them as much as all of their 2016-2019 profits. And we're already seeing the grumbling from the other work groups at AA (unionized or not) about the offer to the pilots, but the pilots across the domestic industry have the leverage to pull it off until the next reset (i.e. bankruptcy).
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Old Mar 9, 23, 11:51 am
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Well, any sort of significant labor cost increase is going to trickle to paying customers. Whether it severely impacts the massive current profitability of the airlines is another question (marginally, in all likelihood, but they are doing so well that historically it's almost going to be a rounding error).

The interesting question is going to be where the price elasticity exists. UA is already tremendously high for much of their fares, moreso than many of their competitors. They're going to have to continue to compete with the overseas airlines on many of the long haul routes, so their ability to raise prices to match the labor costs are going to depend on many other factors outside of a simple spreadsheet.

Might it impact my EWR-RDU $98 midweek one way fare? Probably. My $6500 R/T EWR-FCO in J during May? Probably not- that's already happening.
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Old Mar 9, 23, 11:55 am
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The article's math is a "worst case" scenario and, even at that, is not until the pay tops out in 2026.

They are assuming that all four pilots have 12 years on property. That is certainly not always, or even usually, the case. United is putting new-hires in the 777 and 787 who would be on first year pay, not twelfth. It's also assuming a flight time over 17 hours, of which, there are few examples.

Flying a 777 half way around the world is an expensive undertaking.
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Old Mar 9, 23, 12:15 pm
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Originally Posted by LarryJ

Flying a 777 half way around the world is an expensive undertaking.
I think a lot of the flying public doesn't realize how cheap it is to fly - you can literally fly SFO-SIN round trip for $1,022 leaving tomorrow (3/10) and coming back (3/17). I can't imagine that is profitable.

Does it really matter if airfare goes up a lot? Companies will pay it - and at the end of the day, maybe some people take less vacations (which aren't the profit centers of airlines)
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Old Mar 9, 23, 12:39 pm
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Certainly this will contribute to increased ticket prices until consumers decide that air travel is just too expensive and demand drops. However, a major could easily be forced into BK by increased operating expenses alone, without a drop in demand, especially if interest rates keep climbing. High inflation is here for at least several more years, and the pilot contracts are just a symptom of the current malaise, they are not a cause.
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Last edited by WineCountryUA; Mar 9, 23 at 2:16 pm Reason: OMNI content removed
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Old Mar 9, 23, 1:02 pm
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Originally Posted by HNLbasedFlyer
Does it really matter if airfare goes up a lot? Companies will pay it - and at the end of the day, maybe some people take less vacations (which aren't the profit centers of airlines)
I imagine there will always be folks who are independently wealthy and unconcerned about the increasing cost of air travel. Personally I am concerned about inflation and the cost of travel. 😊
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Old Mar 9, 23, 2:11 pm
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Spoiler: The answer is no.
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Old Mar 9, 23, 2:27 pm
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Originally Posted by azfanboy
Seems to me the only way for airlines to make this up, would be even higher fares. I cannot imagine how this is sustainable.
Originally Posted by gold23
Well, any sort of significant labor cost increase is going to trickle to paying customers. Whether it severely impacts the massive current profitability of the airlines is another question (marginally, in all likelihood, but they are doing so well that historically it's almost going to be a rounding error).
Yeah, I always thought fuel-prices was the largest factor; a small change in fuel prices would most likely have a SIGNIFICANTLY larger impact to overall costs of a particular flight than a few employees's salary, IMO.

I don't have a United Airlines or a recent chart, but here's one I found on the internets that is how I always imagined it. (Likely nowhere near accurate, nor complete, so only included here for illustration purposes)
Salaries make up only a small percentage of overall flight costs:

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Old Mar 9, 23, 2:36 pm
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Originally Posted by narvik
Yeah, I always thought fuel-prices was the largest factor; a small change in fuel prices would most likely have a SIGNIFICANTLY larger impact to overall costs of a particular flight than a few employees's salary, IMO.

I don't have a United Airlines or a recent chart, but here's one I found on the internets that is how I always imagined it. (Likely nowhere near accurate, nor complete, so only included here for illustration purposes)
Salaries make up only a small percentage of overall flight costs:

This is the most accurate post on this thread so far.

I remember during last contract cycle seeing a statistic that increasing pilot pay (less benefits) by 100% would cost less than $2.00 a ticket increase.
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Old Mar 9, 23, 2:43 pm
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Originally Posted by narvik
Yeah, I always thought fuel-prices was the largest factor; a small change in fuel prices would most likely have a SIGNIFICANTLY larger impact to overall costs of a particular flight than a few employees's salary, IMO.

I don't have a United Airlines or a recent chart, but here's one I found on the internets that is how I always imagined it. (Likely nowhere near accurate, nor complete, so only included here for illustration purposes)
Salaries make up only a small percentage of overall flight costs:

Looks like this chart is from 2015, so is it reasonable to assume that employee expenses now make up closer to 20% of their an airlines operating cost. (given all the recent increases) Combine that with historically high fuel costs, and it's no wonder airfares are headed higher.
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Old Mar 9, 23, 2:59 pm
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Originally Posted by azfanboy
Looks like this chart is from 2015, so is it reasonable to assume that employee expenses now make up closer to 20% of their an airlines operating cost. (given all the recent increases) Combine that with historically high fuel costs, and it's no wonder airfares are headed higher.
It's a terrible chart, as it's nowhere near representative of actual, current United numbers. (Maybe this will prompt someone to find & post a more accurate United one? )

The calculations of the OP's source are likely accurate, but I doubt this will directly impact the cost of flights in any measurable way.
It's not as if ANY particular flight price is calculated by taking its cost and being divided by passenger count and adding a fixed profit margin.
Will the overall cost increase trickle down to passengers? Sure. But it won't be reflected in individual ticket pricing. Those fluctuate based on completely different criteria than pilots' salaries/benefits.
Or, maybe they will just add another fee to the ticket: "$6.37 for UPSIF (United Pilot Salary Increase Fee)"?
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Old Mar 9, 23, 3:03 pm
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Originally Posted by clubord
This is the most accurate post on this thread so far.

I remember during last contract cycle seeing a statistic that increasing pilot pay (less benefits) by 100% would cost less than $2.00 a ticket increase.
Well, only if the carrier decided to pass those costs along on a pro-rata basis. There's close to a zero chance of that happening. There's tremendous recent history of corporations using a public data point as cover to raise prices, regardless of how much it actually impacted their bottom line. (See any professional sports team as a high profile example).
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Old Mar 9, 23, 3:16 pm
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According to United's annual report, fuel was about 30.7% of their expenses in 2022. Labor was 26.9%.
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Old Mar 9, 23, 3:21 pm
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I would think so
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