Marian and I flew to France in mid-May and came home in early June. Everything went smoothly: the flights were on-time, everything was hassle free, and lines were short. Were we just lucky? Or did we pick the right time to go to Europe? Whatever it was, the Wall Street Journal reports that things sure seem to be fairly catastrophic right now:
This year, carriers starved of revenue planned big capacity increases for the spring and summer. But some of the steps they took to shrink in 2020 have proved to be hard to reverse.
....The pressure points include too few ground handlers to load and unload luggage, a long training period for new or rehired pilots, continued absences from Covid-19 and shortages of the air-traffic controllers crucial for safe flying.
....The biggest bottleneck involves the new-employee background checks required for airport staff. The process takes 60 days on average, but up to three months in some jurisdictions.
....Pilots need training at their new airlines, which with so many coming aboard means long waits for time with the limited number of flight simulators and instructors.
I'm beginning to wonder if CEOs of big companies are idiots. You may recall, for example, that American car companies cancelled their orders for computer chips when sales plunged at the beginning of the COVID pandemic. Then, apparently, they decided this low demand would last forever so they never put in new orders—and by the time they realized that people would eventually start buying again it was too late. Other companies had snapped up the chips and the Americans were out of luck.
The same thing seems to be happening here. Background checks? Oh yeah, I forgot about those. Pilot retraining? I guess we should have planned for that a while ago. Baggage handlers? Maybe we ought to pay more than starvation wages if we want them to return to airport work.
Beyond that, there's the question of whether there's really a pilot shortage in the first place. The pilots union says that the number of multi-engine licenses issued each year has more than kept up with demand:
This particular fight has been going on forever, with carriers insisting there's a shortage and the union saying there are plenty of pilots available if airlines would agree to hire greater numbers of experienced pilots even though they cost more. There's nothing new here.
But it's not just pilots. The New York Times reports that airlines have outsourced so many low-level airport jobs to contractors that pay has been squeezed even as the labor market tightens and inflation has made the cost of living higher:
[Marie Marivel] is among those who say such conditions are no longer sustainable. Her monthly take-home pay is around 1,500 euros (about $1,560), she said, and her monthly rent is €900. Rising prices for energy, gasoline and food now eat up her paycheck before the next payday comes around.
....Aéroports de Paris, which runs the Charles de Gaulle and Orly airports, said in a statement that it still needed to find at least 4,000 workers....During a recent campaign to hire 400 people from an unemployment center near the airport, only 20 people took a job.
Marivel is a security agent in France who belongs to a union, many of which are threatening strike actions. But the situation is much the same here: baggage handlers in the US, who mostly work for contractors who pinch pennies because they work for airlines that demand it, aren't paid much more than burger flippers at McDonald's.
There's a simple solution to this particular problem, of course, but airlines don't seem willing to plan for that either. The result is a shortage of pilots, flight attendants, baggage handlers, and practically everyone else in the airline business who are victims of crappy planning.¹ And that's not to mention us, the flying public.
Am I being too harsh? Should airline CEOs (and auto CEOs) have done a little bit better at forward planning? Or were they caught in a situation that no one handled well?
¹Except for the C-suite, of course.
It is a commonly held misconception that the job of the CEO is running the company. The reality is that the CEO is in an entirely different business, namely, the struggle for power within the company and the diversion of company assets to himself and his allies. It’s entirely likely that in a large enough company none of the top executives will be skilled at running a business or even minimally capable.
Exactly. The skills required to BECOME a CEO are opposed to those required to DO THE JOB of a CEO.
You become a CEO by consistently looking after number one, by networking, flattering the powerful and pushing other contenders out of the way.
To run a company you need to be able to cooperate, to communicate (communications crucially includes listening!), to motivate.
In times of business as usual this does not matter; middle management (where the business-specific expertise rests) will fix the errors from the top quietly. But in a crisis things are different: company wide reaction and planning is required and the poor top execs are all of a sudden required to care about something other than themselves.
+1
+1
It also helps immeasureably if you're a sociopath. And that ain't good.
"I'm beginning to wonder if CEOs of big companies are idiots."
Why, yes, Kevin, they are.
Traditionally, CEOs have come from the ranks of the sales organizations & usually understand little about actually running operations.
Compare that to Apple, where Tim Cook's previous roles were: (@IBM) Director of North American Fulfillment, Senior Vice President for Worldwide Operations, Executive Vice President for Worldwide Sales and Operations
It's easy to be a CEO when times are good. But when stuff hits the fan, that's when you're really exposed for who you are.
My wife works in the financial services industry & when the market is going up, everyone thinks they're a genius stock picker. But, when the market goes down, suddenly they don't look so smart (although 90% of those "geniuses" blame "forces beyond my control").
Some are idiots. But not many. The vast majority of CEOs of truly large firms will retire with eight, nine or ten figure net worths.
Which one will buy the Washington Nationals & rename the team the Reagan Nationals?
(Personally, I would rename them the New Blind Nationals & make the letter a in the name with a circle.)
How much somebody makes is in no correlation to that person's job performance, especially in high paying jobs.
As I suggested above, late stage capitalism has a severe agency problem that needs to be addressed if we are to avoid an increasingly dangerous series of crashes. The problem is that compensation is disconnected from performance and the skills needed to climb the greasy corporate ladder are disconnected from the skills necessary to actually manage a large company. It’s entirely possibly for CEOs to live like kings and make truly immense amounts of money even as their corporations sink into bankruptcy.
Hey! Didn't Americans actually ELECT somebody like that some years back?
But enough about the 2012 GQP nomination of Bain Rmoney.
TDAIL* that Late-Stage Kapitalism was first invoked... in 1902. It's been eighty-fo--... one hundred twenty years.
*Two days ago I learned, in a tweet reply from user @giannis_mvp.
Probably need a good Federal bailout, just to meet those golden parachute payments. Get Pelosi on the line!
To be fair, they made those decidions when the pandemic was raging and THE PANDEMIC IS STILL RAGING. I don't like them either but it's hard to predict the moment Americans would surrender to coronavirus and let it rip.
The Plandemic is still raging?
Most of the people you know are Antivaxxxers?
What the fuck are you talking about? Omicron makes no distinction between vaccinated and not vaccinated regarding infection. It's still bad as hell out there.
If vaxxx'd/boosted, Omicron is the sniffles.
Only the Operating DeSantii VII who are pwning tha libz by denying their essence to the Fauci Ouchie are ending up on a vent from Omicron.
Then, apparently, they decided this low demand would last forever so they never put in new orders—and by the time they realized that people would eventually start buying again it was too late. Other companies had snapped up the chips and the Americans were out of luck.
I have no specialized knowledge of this whatsoever, but my guess is the problem isn't that they didn't believe demand for cars would return. The problem, rather, is that they didn't anticipate chips would be hard to come by. They probably figured, in other words, that when the time came to need a bigger supply of inputs—including computer chips—they'd be able to order them as they used to. But for various reasons—a shift in global consumption pattern away from services and toward goods likely the biggest factor—a shortage of chips had developed by the time big car companies needed to ramp up production.
The computer chip shortage affected (and continues to affect, I think) lots of sectors, not just autos. And not just US firms.
I wouldn't be surprised, mind you, if the same kind of failure to predict the future badly affected the airlines, too. They likely thought going on a hiring spree wouldn't prove problematic if it came to that. I don't know why, as Kevin is suggesting, they can't raise wages more. Ditto hotels. I don't know recall the particulars of the 2020 aid to private companies approved by Congress, other that whereas the European approach was to keep people on payroll (even if they were idle) the US model focused on enhanced unemployment benefits.
This may well be what happens. But it only proves Kevin's point. To assume that everything outside your own company works as usual while yours is paused is extremely stupid.
I agree with both you and Jasper, except where it comes to pilots. Even if you assume the warm bodies are available, somebody in the organization has to know that they'll need to be re-certified before they can fly again, which means they'll need instructor and simulator time, which doesn't grow on trees. Project planning software can't be that hard to come by, or they could even just rough out how long a lead time they'll need once they pick a target date for starting up again. (Cabin crew also needed to be at least refreshed-- I don't know whether certification is involved there, but same idea. Ground crew too, for that matter.)
In part that's what all the cash we taxpayers showered on them was supposed to be for, I thought. And this is the kind of thing that inclines me to put in a vote at least for "self-satisfied know-nothings." If idiots is the only menu choice on offer I could go there too.
That started way before 2020.
But they also got immense amounts of federal aid which was supposed to be used to allow airlines to retain workers and maintain aircraft. Instead, the airlines laid off or gave early retirement to the people who do the actual work involved in operating an airline (flying, maintaining, operating, customer service, etc) and cleverly retained the considerably less useful, less valuable executives.
I have sympathy for the workers but none for the executives who spent the bailout money on themselves.
Oh, how the tables turn. Not six months ago Kevin Drum was sending hosannas to the CEO of Delta for standing up to Brutal Despot joebiden & calling for an immediate end to the airplane mask mandate. Now, the brilliant airline executives are dullards who don't know their asshole from their elbow.
I am starting to think Orange County Republiqan Drum looks at policy & ideology thru the same lens that allows Ohio Senator Rob Portman to see the humanity in his gay son while agreeing with Clarence Thomas that Obergefell must die.
I have more sympathy for mid-2020 decision makers than Kevin does - it was a really weird time! But while the chip shortage does not have an easy solution, paying people more money does seem to be a viable way out of the current problems facing airline operations.
But I have some sympathy for airline decision makers there, too - the flying public has made it very clear that they will usually buy the cheapest fare they can find. This is even more true now than 2019 and before, since business travel is still depressed even as leisure travel is fully recovered and then some - and business travelers were always less price-sensitive than leisure travelers.
In this environment, an airline that tries to compete by providing a better product at a higher price will quickly find themselves losing customers. As long as the whole industry is dropping the operations ball, each individual actor is being told by the invisible hand to keep prices low. It's a tough situation to be in!
That being said - sure, fire the CEOs. New blood probably won't make things any worse at this point, and maybe someone will have a good solution!
There was a similar, weather induced baggagepocalypse in fall/winter 2013, if not mistaken. (May have been 14.) Multiple airports had several days checked luggage just sitting unattended & unprocessed in lobbies, & most of it ended up logged as unclaimed/unidentifiable by the airlines, then sent to Little Rock, AR, for preparation for auction to the high bidder. With proceeds to the the airlines.
The airlines have been fucking around for years. Now, they're finding out.
Still raging????? Nope. I mean, are you that retarded???
But, of course, that was exactly why the federal government gave the airlines immense amounts of free money—so that they would be able to keep hard to replace employees. Not surprisingly, the airline executive dumped as many workers as possible (even knowing that they'd be difficult or impossible to replace) and spent the money on themselves.
Success and failure as a CEO is likely as much luck as skill.
The economy improved, we made money due to our bolds strategic initiatives.
The economy tanked, what can you do?
The pandemic let them lower costs, i.e. early retirement programs, reduce capacity and gain pricing power. Overall a win-win-win. So what if customers gripe--they're not going to swim the Atlantic.
Shareholder value strikes again! Cut staffing and equipment to the bone and return "value" to the shareholders through buybacks and shares to upper management. (See Airlines, Railroads, Auto Makers)
When the shit its the fan, say a worldwide pandemic....... you have no "excess" capacity or staff, since those are wasteful.
Which airlines have undertaken buybacks during the pandemic? It is far from comprehensive, but https://viewfromthewing.com/united-airlines-reverses-stock-buybacks-at-very-high-cost/ suggests United at least was offering shares, not buying them back.
The one potentially mitigating factor when it comes to chips might be the unpredictable city shutdowns in China that bollixed up all kinds of production. Even so, though, didn't these outfits have teams assigned to assess their start-up needs and sourcing? All parts, not just chips, but especially anything imported from producers that aren't captive? Assessing even just their own demand in relation to chip-making capacity from all sources? We're talking about multi-billion dollar operations here, not the local landscaper.
This was a dynamic situation, changing every week if not every day, and they knew that at some point they were going to need to start ordering again. These people are all trained now to be looking for bottlenecks. Why didn't they see that one on the horizon?
The CEOs relied on the consultants and MBAs who truly are the problem here. All those spreadsheets and analysis of spending and revenue and no focus on operational realities.
The workforce of operational physical labor is aging. The replacement workers aren't there. The robots aren't ready, and if you read the WSJ, the automation of baggage handling has a higher failure rate than the lack of labor.
There's too much reliance in past performance instead of innovating new solutions and new revenue streams.
They're incompetent, and they're greedy. Remember, the taxpayers gave tens of billions of dollars to the airlines for the express purpose of letting them weather the pandemic by keeping people on the payroll rather than doing what they did which was to pare operations and cut down on staff. Instead, that money went to dividends, executive salaries and share buy backs. That is called creating value, like the way a mugger creates value by taking your wallet.
Which airlines were doing share buybacks during the pandemic? https://viewfromthewing.com/united-airlines-reverses-stock-buybacks-at-very-high-cost/ suggests United at least was not among them, I'd be curious to know which ones were. https://www.nasdaq.com/market-activity/stocks/ual/dividend-history suggests the last dividend paid by UAL was back in 2008.
https://www.nasdaq.com/market-activity/stocks/aal/dividend-history suggests the last dividend declared by American Airlines was right at the start of the pandemic. https://www.nasdaq.com/market-activity/stocks/dal/dividend-history suggests the same for Delta. And Southwest: https://www.nasdaq.com/market-activity/stocks/luv/dividend-history
So, which airlines were paying dividends and undertaking share buybacks during the pandemic?
While my "too many links" reply showing how none of the (major) airlines have paid dividends during the pandemic (United, American, Delta, and Southwest) and that United was actually issuing shares remains in moderation, the question I asked therein remains: which airlines were paying dividends and undertaking share buybacks during the pandemic?
When a problem appears generic, the analysis should be generic. Here the real problem is the Republican tax cuts. When tax rates increase they apply only to profits, which means revenue minus costs. Higher tax rates encourages higher costs to reduce the share of revenue paid in taxes because higher costs usually means higher efficiency. Wages are a cost item, and higher wages typically acquire more efficient workers. When there is little tax penalty for inefficient operations, firms become inefficient. Raise the corporate tax rates and wages will increase along with purchases of more efficient (but more costly) machines.
Don't know any CEOs off hand, but I used to work with middle management at Boeing, and yes a lot of them (not all) were idiots. I can only assume that the CEO was an idiot to hire idiots and put them into positions of (ir)responsibility.
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The core proposition of market-economic theory is that the sociology of organizations does not, and axiomatically cannot, matter, because everyone involved in The Market is a Rational Actor; and if, by chance, someone blunders in the door who isn't, The Market (in its blind, mechanical rationality and that's supposed to be a compliment) washes them out pretty much instantaneously.
Whereas in fact, the sociology of organizations is largely dispositive. (Coase probably had something to say about this, even something right and important; but who could tell?)
The rest is the fact that all of the incentives of private business are perverse, which means that the only way to get any good outcomes is to exert overwhelming countervailing pressure against perverse incentives. This, too, mostly founders on sociology.
So as Mitch pointed out in his first comment, the only incentive that any executive had during the crisis of 2020 was to reallocate operating expenses to executive cash compensation.
(Or before.)
(Or since.)
Our family just did 17 flights in June/July to 8 airports all over Europe and the U.S. and didn't have 1 delay. Anecdotal for sure, but I do think the news loves drawing out the worst as well.
Full employment meets crappy jobs.
In the vein of your later post about how much people are willing to pay to combat climate change, how much more would you be willing to pay for your ticket to pay employees more?
Apparently, airlines are still operating at a net loss. That could be part of it. But most, as you imply, are CEOs who aren't nearly as smart as they think they are.
Summer travel is so overrated in any event. Kevin and Marian were smart to go in May. And in most of the world the weather is more comfortable then (or after the end of August). I think a lot of Americans who have kids in school would benefit from having two more evenly divided breaks (long vacations in both winter and summer) than the skimpy one around Christmas plus the long one in July/July/August of current status quo.* Here in China schoolchildren get about 6-7 weeks off twice per year: one break starting in mid January and the other starting in mid July. It still give ample time for summer travels if that's what you want, but if you prefer a long vacation in the winter, you're good to go. I think a number of European countries do something along these lines, too: a few years back I took a trip to Vietnam in mid January (spectacular place, if. you ever have the chance: I strongly prefer it to Thailand). Anyway, I saw a lot of European families with school-aged kids, but no American ones. Cophenhagen can't be much closer to Hanoi than LA, so for the Americans it's most likely a function of lack of vacation time.
*Needless to say universities in the USA typically operate on such a schedule; it's a pity K-12 doesn't. Mind you I have fond memories of seemingly endless summers growing up in New England—and in the Boston area schools typically get a week off in both February and April—so it's not all bad! But I firmly believe a mid-winter break of at least four weeks is in order for everyone.