Pay based on aircraft size?

[Firebird2XC]

That's all true, but something doesn't quite add up.

In my example, we have a guy flying, say, 8 legs per day with an average passenger round-trip fare of $250. With 4 round trips with an average load factor of 78% (7 passengers), he's bringing in $7,000 per day in gross revenue. The airplane costs $500/hr to operate (pilot/fuel/maintenance), so that's approximately $2,500 in expenses. That comes out to $4,500/day in net income for the company.

Now, a 50-seat RJ with a 78% load factor (39 people) with an average round-trip fare of $250 flying 4 round trips will bring in $39,000 in gross revenue. Let's say that the airplane costs $2,500/hr to operate. In 8 hours of flying for 4 round trips, the airplane will cost the company $20,000. $39,000 in daily gross revenue minus $20,000 in operating expenses is still well more than $4,500.

That's just rough pilot math, but it's apparent that an RJ will still have higher yields than a 402. The only issue is that the RJ pilot will come to work for $23/hr (hey, I've done it), whereas the 402 guy would bail for greener pastures if the pay wasn't good enough to keep him there.

Interesting breakdown. I think that you might be overlooking things in the cost breakdowns though. How are you figuring the 'operating cost' of each airplane? I think there may be additional costs involved in the jet operation that might not be accounted for.

 

[dasleben]

Interesting breakdown. I think that you might be overlooking things in the cost breakdowns though. How are you figuring the 'operating cost' of each airplane? I think there may be additional costs involved in the jet operation that might not be accounted for.

Quite possible, which is why I said it was some pretty rough math. I was hoping $2,500/hr would encompass a lot of "other" operating costs.

What do you think I could be missing that wouldn't be a factor in a smaller operation?

 

[Firebird2XC]

Quite possible, which is why I said it was some pretty rough math. I was hoping $2,500/hr would encompass a lot of "other" operating costs.

What do you think I could be missing that wouldn't be a factor in a smaller operation?

Depends on what 'other' costs you're talking about.

That's the problem with using estimates in comparisons.

I was thinking about all the other jobs the revenue stream has to support in a large operation vs a small one.

Schedulers, rampers and bag handlers, ticket agents, managers, trainers and checkers, flight attendants, relief pilots, landing fees, gate fees, fuel cost (100LL vs Jet-A), etc, etc, ad nauseum.

A jet operator of any size vs a piston operator with a small company size would seem like apples to oranges bases on subtle differences therein, and the exponential growth of infrastructure as a company grows in size.

At least, that's what my guy tells me. I have no hard data on this. I just think it's not as simple economically as a seat count.

 

[dasleben]

Depends on what 'other' costs you're talking about.

That's the problem with using estimates in comparisons.

I was thinking about all the other jobs the revenue stream has to support in a large operation vs a small one.

Schedulers, rampers and bag handlers, ticket agents, managers, trainers and checkers, flight attendants, relief pilots, landing fees, gate fees, fuel cost (100LL vs Jet-A), etc, etc, ad nauseum.

A jet operator of any size vs a piston operator with a small company size would seem like apples to oranges bases on subtle differences therein, and the exponential growth of infrastructure as a company grows in size.

At least, that's what my guy tells me. I have no hard data on this. I just think it's not as simple economically as a seat count.

We've got all of the above. Flight attendants naturally don't exist on a 402, but we have a couple ATRs that do have them.

We do the same job, just with 402s instead of RJs; both airlines have the same basic setup and support staff. We're also larger than many other regional airlines, including TSA, Piedmont, Colgan, Commutair, Compass, GoJet, Great Lakes, Gulfstream, Horizon, Lynx, and PSA. Yet, those airlines manage to pay a whole lot less.

Where's the discrepancy?

 

[SlumTodd_Millionaire]

It costs roughly $2,500/hr just to operate the aircraft, not to mention all of the other costs associated with running an airline. Margins in the airlines are razor thin.

 

[Firebird2XC]

We've got all of the above. Flight attendants naturally don't exist on a 402, but we have a couple ATRs that do have them.

We do the same job, just with 402s instead of RJs; both airlines have the same basic setup and support staff. We're also larger than many other regional airlines, including TSA, Piedmont, Colgan, Commutair, Compass, GoJet, Great Lakes, Gulfstream, Horizon, Lynx, and PSA. Yet, those airlines manage to pay a whole lot less.

Where's the discrepancy?

Hmm. Good point. Are your crew staffing requirements the same? ie, isn't the 402 a single pilot operation?

Also- what do you do for marketing, etc? Brand placement?

There's got to be a disconnect somewhere. It just seems logical. Granted, 'seeming' logical and being that way aren't synonymous. So let's root this one out.

Thoughts?

 

[Polar742]

Hmm. Good point. Are your crew staffing requirements the same? ie, isn't the 402 a single pilot operation?

Also- what do you do for marketing, etc? Brand placement?

There's got to be a disconnect somewhere. It just seems logical. Granted, 'seeming' logical and being that way aren't synonymous. So let's root this one out.

Thoughts?

Cape Air has enough revenue to justify paying their pilots that amount.

Regionals also make enough to pay more. They just don't. They pay scales are pretty linear back to revenue generation of 19-30 seat (and some airlines did have 66 seat planes) airplanes. Like ATN said, margins are thin. RAH was looking at $185 profit per flight. Not much. However, it's still not an excuse for not paying.

AWAC started as a big airline and worked backwards. The BAe 146 scales were pretty decent if I remember correctly.

Let's throw some other ideas into the pot too. I'll bet Cape Air's fleet is unencumbered, thus Maintenance, Crew Costs and gas is all that is paid. Back in the heyday of the late 90's RJ acquisitions, most planes were financed. So, the average E145 at CHQ, I'd say was around $17 mil. So, on top of the more expensive systems (APU, Bleeds, blah blah blah), you also had that 100k/month lease payment to cover. The 402 is a pretty basic airplane (not that it's a BAD plane, just the opposite. Less crap to break.). No pressurization, no FMCs (CDUs, MCDUs, or whatever you'd like to call them), no glass tubes to replace at 60k/pop. No bleed leaks to chase down. No APU to get de-ice fluid squirted into, and requiring an overhaul.

Even training. I'll bet it's cheaper to go out and do a ride in an actual 402 than it costs to run a sim (~$700/hr IIRC).

So, I see the jet generating much more revenue, but also a higher DoC, as well as ancillary costs.

I think people slight the cost of maintenance too much.

That being said, the regional pilots are way underpaid. No one disagrees with that.

Back to the original topic, which is why pay is based on aircraft size. It has to do with productivity. Yes, in the commuter world, there are issues, such as pointed out by das leben. However, I'd submit that is more of a function of pay lagging the business model by a decade or so.

As I demonstrated in my comparison, a larger aircraft will produce more product (be it ASMs or FTKs), for the same work force. A two pilot aircraft will always require 2 pilots (assuming domestic rules). Now, those two pilots could fly a 1900 at Lakes, or a 747-400 at Delta. Yes, the 747 costs way more to operate, but it also generates way more revenue.

 

[Firebird2XC]

Cape Air has enough revenue to justify paying their pilots that amount.

Regionals also make enough to pay more. They just don't. They pay scales are pretty linear back to revenue generation of 19-30 seat (and some airlines did have 66 seat planes) airplanes. Like ATN said, margins are thin. RAH was looking at $185 profit per flight. Not much. However, it's still not an excuse for not paying.

AWAC started as a big airline and worked backwards. The BAe 146 scales were pretty decent if I remember correctly.

Let's throw some other ideas into the pot too. I'll bet Cape Air's fleet is unencumbered, thus Maintenance, Crew Costs and gas is all that is paid. Back in the heyday of the late 90's RJ acquisitions, most planes were financed. So, the average E145 at CHQ, I'd say was around $17 mil. So, on top of the more expensive systems (APU, Bleeds, blah blah blah), you also had that 100k/month lease payment to cover. The 402 is a pretty basic airplane (not that it's a BAD plane, just the opposite. Less crap to break.). No pressurization, no FMCs (CDUs, MCDUs, or whatever you'd like to call them), no glass tubes to replace at 60k/pop. No bleed leaks to chase down. No APU to get de-ice fluid squirted into, and requiring an overhaul.

Even training. I'll bet it's cheaper to go out and do a ride in an actual 402 than it costs to run a sim (~$700/hr IIRC).

So, I see the jet generating much more revenue, but also a higher DoC, as well as ancillary costs.

I think people slight the cost of maintenance too much.

That being said, the regional pilots are way underpaid. No one disagrees with that.

Back to the original topic, which is why pay is based on aircraft size. It has to do with productivity. Yes, in the commuter world, there are issues, such as pointed out by das leben. However, I'd submit that is more of a function of pay lagging the business model by a decade or so.

As I demonstrated in my comparison, a larger aircraft will produce more product (be it ASMs or FTKs), for the same work force. A two pilot aircraft will always require 2 pilots (assuming domestic rules). Now, those two pilots could fly a 1900 at Lakes, or a 747-400 at Delta. Yes, the 747 costs way more to operate, but it also generates way more revenue.

Good writeup, appreciate the input.

Ultimately I guess the reason regionals don't pay is because somebody said nix to the idea. I guess it all runs out in the greater scheme of the numbers.

A thought, though. I crunched some numbers, and based on flying a 50 seat jet around a certain number of flights a year, it came out between $2-$5 a passenger per leg to give me a $10000 raise.

If that's the case, raising fares $5 a passenger would rake in a big chunk.

Of course, if airlines did that, crews would still have to fight for it.

Still....

 

[Polar742]

A thought, though. I crunched some numbers, and based on flying a 50 seat jet around a certain number of flights a year, it came out between $2-$5 a passenger per leg to give me a $10000 raise.

If that's the case, raising fares $5 a passenger would rake in a big chunk.

Of course, if airlines did that, crews would still have to fight for it.

Still....

Just remember, every department runs on a budget, and they all want more money.

If the revenue was raised $2-5/flight, then each department would want a chunk of that revenue increase. Depending on the setup, that could entail different routes. Yield flying, you just raise your fare by $2-5, and we know how that works for the majors. The headlines "Other airlines (fight or go with) airline X's fare increase. (Optional: Airline X recalls the fare hike). Fixed-fee flying might, or might not, provide for the increase.)

Corporate politics....I'm not saying it's right or wrong. It just is.

 

[dasleben]

Cape Air has enough revenue to justify paying their pilots that amount.

Regionals also make enough to pay more. They just don't. They pay scales are pretty linear back to revenue generation of 19-30 seat (and some airlines did have 66 seat planes) airplanes. Like ATN said, margins are thin. RAH was looking at $185 profit per flight. Not much. However, it's still not an excuse for not paying.

AWAC started as a big airline and worked backwards. The BAe 146 scales were pretty decent if I remember correctly.

Let's throw some other ideas into the pot too. I'll bet Cape Air's fleet is unencumbered, thus Maintenance, Crew Costs and gas is all that is paid. Back in the heyday of the late 90's RJ acquisitions, most planes were financed. So, the average E145 at CHQ, I'd say was around $17 mil. So, on top of the more expensive systems (APU, Bleeds, blah blah blah), you also had that 100k/month lease payment to cover. The 402 is a pretty basic airplane (not that it's a BAD plane, just the opposite. Less crap to break.). No pressurization, no FMCs (CDUs, MCDUs, or whatever you'd like to call them), no glass tubes to replace at 60k/pop. No bleed leaks to chase down. No APU to get de-ice fluid squirted into, and requiring an overhaul.

Even training. I'll bet it's cheaper to go out and do a ride in an actual 402 than it costs to run a sim (~$700/hr IIRC).

So, I see the jet generating much more revenue, but also a higher DoC, as well as ancillary costs.

I think people slight the cost of maintenance too much.

That being said, the regional pilots are way underpaid. No one disagrees with that.

Back to the original topic, which is why pay is based on aircraft size. It has to do with productivity. Yes, in the commuter world, there are issues, such as pointed out by das leben. However, I'd submit that is more of a function of pay lagging the business model by a decade or so.

As I demonstrated in my comparison, a larger aircraft will produce more product (be it ASMs or FTKs), for the same work force. A two pilot aircraft will always require 2 pilots (assuming domestic rules). Now, those two pilots could fly a 1900 at Lakes, or a 747-400 at Delta. Yes, the 747 costs way more to operate, but it also generates way more revenue.

Great post. Can't say I disagree one bit.

I do believe, however, that simple supply/demand has a lot to do with it. Could many of these regionals pay more? Of course. But why would Colgan or whoever raise pay when they have a stack of resumes a foot high even when the industry is good?

 

[mwflyer]

It's like JO said, "as long as I have resumes from pilots coming in, im paying them too much."