The new airline thread

[ImNotARobot]

https://www.fool.com/earnings/call-transcripts/2022/09/23/fedex-fdx-q1-2023-earnings-call-transcript/

Was waiting for proper earnings call to respond here. A few thoughts from an uninformed cog in the Purple Machine -

While UPS continues to fiddle amid the inflationary flames, FDX has sounded the alarm. I honestly do not think the earnings call is directed at the pilot contract negotiations. The pilot group's inflated sense of self importance may disagree, but the truth is told in the 10-Q filing. Express is certainly being targeted for cost savings (which will be manifested in reducing certain routes and parking the MD-10s), but any apocalyptic pearl clutching for the future of the pilot group is unfounded. The global economy is slowing; we are taking aggressive action. And I don't think FedEx Corp has perfectly executed the COVID surge and now the post-COVID drawdown (plus inflation!), but all these mega-corps are reacting to the market in different ways. So, is UPS simply ignoring the economy, or are they a better managed organization? They sure are taking a victory lap right now. The parable of the grasshopper and the ant comes to mind here.

Bullet points that jumped out at me:  
- FDX expecting low volume through EOY
- Flight hour cut: 11% pan-Pacific, 9% trans-Atlantic, 17% Asia to Europe
- Asia economy decline seems to be the major driver, Europe to a lesser degree
- The most shocking number to me - Express adjusted operating income declined 72%. I thought there was a decimal missing. That seems impossible, but then it would make sense that Express would be the primary target for cost savings given the lower demand for air freight in August and beyond. As Raj mentioned in the Q&A, "You can't build half a building". We've stood up a robust flight schedule/hiring to support COVID volume, and now it takes time to draw that down to inflationary reality.
- All questions about problems at Ground were largely deflected by management during Q&A. I think FDX is happy individually negotiating with Ground contractors. Corps don't favor unions obviously, so I laughed when the reporter insinuated that UPS is "better" with unionized trucking. UPS would smite that union from existence if they could.
- interesting to me that FY25 targets remain hopeful. Overall message here - short term pain to adjust to inflationary reality, so long term targets will still be met. Or it could simply be waiting through next presidential election cycle.
- The second most shocking number - FDX Freight producing almost 4x the operating income of Express? Wow, I had no idea that the dropoff in air freight demand was that prolific. I've always understood the concept that Express was higher yield per package than Ground, but Ground did more volume (and therefore more income) for FedEx. But damn, Freight is leading the way.
- Finally, Raj was asked about pilot furlough. "And there is also no furlough of the pilots. That's not even a thing."

 

Is FedEx better than UPS? It's a false dichotomy. Each company has drawbacks. I was pleased when FDX cut AMZ in June 2019; the low yield/high volume vine was choking the logistical tree. I don't like UPS's position with 12%+ involvement with AMZ; those pallets of cheap chinesium garbage are blocking other high end customers (opportunity cost). I don't think AMZ will necessarily going to strangle UPS, but that AMZ gorilla must be managed going forward. It sure looks like UPS is deaf to global economic trends currently, but I'm sure they will make adjustments when necessary. Just because FDX is the first to ring alarm bells does not mean FDX is smart; just because UPS is still ops normal for another quarter does not mean they are dumb. Global economies are more nuanced than an easy sound bite can portray.

 

Air freight will survive and thrive despite a week of negative news. And historically, air freight is a much more stable career for pilots. That's not a FDX-specific observation; that's the industry as a whole. Delta went from the most profitable airline in history (Feb 2020) directly into COVID the following month. That level of turbulence is quite stressful...compared with the known post-COVID air cargo drawdown, I'd personally take my chances on the cargo side. But I wear my bias on my sleeve.

Anyway, one bored pilot's thoughts.

[SocialD]

Cabotage, War in Eastern Asia/Pacific, Amazon, single pilot ops, recession, economy slowing down...plenty of boogeymen out there.  It's all a crapshoot, none of us have a crystal ball.  Go to where you can make plenty of money with the most amount of time NOT at work, then hope for the best. LOL.

 

Anyway, how about them contract negotiations?! 

 

[SurelySerious]

Cabotage, War in Eastern Asia/Pacific, Amazon, single pilot ops, recession, economy slowing down...plenty of boogeymen out there.  It's all a crapshoot, none of us have a crystal ball.  Go to where you can make plenty of money with the most amount of time NOT at work, then hope for the best. LOL.
 
Anyway, how about them contract negotiations?! 
 

No major airline management wants to incur additional labor costs. Better vote in those strike authorizations to drive the point.

[ATIS]

This is at DCA. TWA tail feathers? 
 

[SocialD]

1 hour ago, ATIS said:

This is at DCA. TWA tail feathers? 

 

AAL probably painted that jet in TWA colors then specifically made sure TWA guys didn't fly it.  You know, just to fuck em one more time! 🤣

[TreeA10]

Paint schemes also include Air Cal, Reno, US Airways, etc. 

[herkbum]

I stayed at the TWA Hotel at JFK the other day. It’s like a time warp. Wish I had more time to check it out fully, but min ground time.


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[FourFans]

2 hours ago, herkbum said:

I stayed at the TWA Hotel at JFK the other day. It’s like a time warp. Wish I had more time to check it out fully, but min ground time.

Definitely one of the coolest layovers.  You gotta check out Connie.

[AirGuardianC141747]

The cargo side will reveal a lot more after peak is over. Perhaps a quarter or maybe two will paint a much cleaner picture and perhaps some stabilization to be hopeful once companies get their ducks aligned properly. Saw lower lines for the most part depending on base at my outfit of course. Spectator sport as a line flyer as it’s way above anyones pay grade on any forum. Always good to prepare for whatever.

[SurelySerious]

 
AAL probably painted that jet in TWA colors then specifically made sure TWA guys didn't fly it.  You know, just to em one more time! 🤣

Actually scheduled them on that tail then waited until they were at the gate so they could see it, then rescheduled them to another aircraft/city pair and extended them into an off day.

[brabus]

10 hours ago, SurelySerious said:

Actually scheduled them on that tail then waited until they were at the gate so they could see it, then rescheduled them to another aircraft/city pair and extended them into an off day.

And that reroute was a DH in the middle seat of the last row in a 73, only to canx the flight they DH’d to.

[Royal]

16 minutes ago, brabus said:

And that reroute was a DH in the middle seat of the last row in a 73, only to canx the flight they DH’d to.

And all the hotels were booked on arrival...Wait, are we talking about every single narrowbody sequence of July 2022?

[AirGuardianC141747]

Man, the pax MMA arena is rough. I like “boxes” no doubt. Definitely a funny cascade of events. Sadly, I wouldn’t be surprised by any means.

[alwyn2d]

If a 4yr degree is not required by most of the majors, then being a commercial pilot is the best paying blue collar job on the planet. Just build up those hours any way possible with that HS diploma or GED.

Edited October 1, 2022 by alwyn2d

[Royal]

What's the latest scuttlebutt on negotiations for everyone? The AAL's BOD is reviewing the TA at the moment. It does NOT look promising.

[SocialD]

30 minutes ago, Royal said:

What's the latest scuttlebutt on negotiations for everyone? The AAL's BOD is reviewing the TA at the moment. It does NOT look promising.

 

 

If what I saw earlier today is what the AAL BODs is reviewing, then we're all likely screwed.  Here's hoping it gets shot down.  

[SurelySerious]

 
 
If what I saw earlier today is what the AAL BODs is reviewing, then we're all likely screwed.  Here's hoping it gets shot down.  

All rumors at this point because the BoD has a quiet period for review of proposals, but modest pay and the same industry-lagging bankruptcy-era work rules sounds underwhelming.

[Danger41]

What’s up with UAL’s? Seems like it went from great rumors, to terrible offering, to crickets.

[SurelySerious]

What’s up with UAL’s? Seems like it went from great rumors, to terrible offering, to crickets.

Heard they were in the middle of an effort to recall everyone involved with the TA, but can’t substantiate.

[Smokin]

That is largely true.  Many of the union guys involved in or that voted for the TA faced recall. 

With inflation at a record high and the writing on the wall that profits are going up to pre-covid levels, the companies have no motivation for serious negotiations.  If I were corporate leadership, I'd start with a vastly underwhelming offer, then offer a small concession every few months just to keep kicking the can down the road while pretending to be negotiating in good faith.  Meanwhile, inflation is basically giving me labor at 10% cheaper per year while I'm selling tickets at 30-40% higher than last year.  Every year I can prolong finalizing a new contract, the better my profits.  And if the union is dumb enough to accept a mediocre offer in the meantime, then win-win.  I would bet that is why we're not hearing anything.  Inflation has given the company the upper hand and they know it.

[ViperMan]

For a newb, can someone define BOD and TA?

[SurelySerious]

For a newb, can someone define BOD and TA?

Tentative Agreement is what the union votes on to get a new contract. BOD is APA (AAL) specific, the union board of directors.

[brabus]

The speculated AA TA is hot garbage. If the truth is even close to that, I hope AA pilots aren’t dumb enough to vote yes.

[SurelySerious]

The speculated AA TA is hot garbage. If the truth is even close to that, I hope AA pilots aren’t dumb enough to vote yes.

A lot of top heavy new balance dudes still who are looking at that increase in LTD as a meal ticket.

[Hugo Stiglitz]

9 hours ago, Royal said:

What's the latest scuttlebutt on negotiations for everyone? The AAL's BOD is reviewing the TA at the moment. It does NOT look promising.

I heard Alaska is happy with their new TA? So-so pay bump, but I’m told big fixes to work rules. And I think a snap-up too? Going to be high stakes when everyone adds a snap up and it all comes down to the final major to reach a TA that’ll carry the hopes of the industry along with it.