February 24, 2009
Don't Sully That Reputation
No one will dispute the piloting skill and heroics of Chesley "Sully" Sullenberger. However, The Refugee respectfully encourages him stick to flying and forget economics.
During recent testimony before the House Transportation and Infrastructure Committee, Capt. Sullenberger bemoaned the payroll plight of pilots.
US Airways pilot Chesley "Sully" Sullenberger told the House aviation subcommittee that his pay has been cut 40 percent in recent years and his pension has been terminated and replaced with a promise "worth pennies on the dollar" from the federally created Pension Benefit Guaranty Corp.
...
The reduced compensation has placed "pilots and their families in an untenable financial situation," Sullenberger said. "I do not know a single, professional airline pilot who wants his or her children to follow in their footsteps."
The Good Captain traced the problem back to airline deregulation in the 1970's. Ah. There we have it: if we could just bring back some old time government, he could still be benefiting from the artificial market created by bureaucrats - at the expense of the millions of consumers, of course.
Before we pass the hat through coach, however, let's look at his assertions objectively. First of all, there's no doubt that pilot incomes have fallen as airlines have tried to find a sustainable business model. However, 2008 data indicates that salaries for captains of A320/737 class aircraft ranges from $123,000 to about $200,000 depending upon airline. 747/777 jockeys make substantially more. US Airways is on the lower end of the scale. But even so, these individuals are well within the top 10% of all wage earners.
Untennable financial situation, sir? If you're in the top 10% of wage earners and can barely scrape by, then you either don't have any concept of true poverty or need to hire a money manager. Moreover, why not change to a higher-paying airline on a higher-paying ride? A top pilot with 19,000+ hours surely has some job mobility.
Secondly, his testimony implies that flight safety is at risk. Facts speak differently. Commercial flight fatalities have declined since deregulation despite a huge increase in the number of flights. Air travel has never been safer.
Capt. Sullenberger does not often mention that he was educated entirely on taxpayer money at the U.S. Air Force Academy, a $400,000 value in present dollars. He also learned to fly in taxpayer-paid planes costing thousands of dollars per hour all while receiving a pretty decent officer's salary and benefits, again at taxpayer's expense. The Refugee begrudges none of this, but this is a ride available to only 1 in 100,000 students with no residual student loans.
Again, with respect, the taxpayer has already done his part to support Capt. Sullenberger. Yes, his flying skills are magnificent and actions on the Hudson heroic. It was also the job that he was trained and paid to do.
Economics and Markets
Posted by Boulder Refugee at February 24, 2009 6:32 PM
Ahem, here's an economics lesson for Sullenberger, and because he's so stretched on a meager income, I won't charge him a dime.
Richard Branson, yes that one, offered to hire Sullenberger for Virgin Atlantic. Not at whatever salary Sullenberger demands, but at double what anybody else offers -- and a pilot position on Branson's spaceships. Apparently Branson made the offer in public, not directly, and Sullenberger was unaware of it. I take it that the offer has not yet been accepted.
Prices are ultimately determined by competition, and at the margin. It isn't only what you're willing to pay for something, but what the next person is willing to pay. Conversely, it doesn't matter what someone is willing to pay you, but what the next person is willing to accept for providing substitute goods or services.
This means for airline pilots that there are enough of them who are willing to accept the pay cuts. Otherwise, by definition, airlines would have to keep offering higher salaries and benefits until the market cleared (when the number of bought items equals the number of items offered for sale, i.e. the number of hired airline pilots equals the number of desired pilots). Prices will not necessarily be the same for every unit sold over any given period of time: prices can fluctuate based on current demand for a limited or ample supply, as we see with oil prices. So if a particular airline needs just one more pilot and wants one really, really badly, they might offer $200K to someone who will start right away (as opposed to cancelling several flights because of a manpower scarcity).
But in fact with airline pilots it's been the reverse: there is sufficient supply that airlines have been able to cut their salaries, as part of broader cost-cutting measures, yet retain sufficient manpower. As remarkable and downright heroic as Sullenberger was, there just isn't that much demand for his particular expertise compared to the available substitutes of competent pilots who can do ordinary flying. Yes, it would be nice if all pilots had his skill, but that's just not going to happen. The increase in salaries would make airfare too expensive: fewer passengers lead to half-empty planes, leading to schedule reductions, leading to layoffs of these super-qualified pilots.
Sullenberger's complaint isn't that his pay isn't what he'd like it to be, but that his pay isn't what he'd like it to be while staying at his employer. At the end of last year, I turned down an opportunity at another firm for double what I'm making now. It would have been a more senior position with considerably greater responsibilities, and my particular area of compliance is also very high in demand right now. I wasn't afraid of the "big chair," but rather that I'd be working for a bank. First, I can't stay true to my principles when working for a bank receiving TARP money. Second, being at a major asset manager is a lot more stable in bear markets; I didn't want to risk getting laid off after 6 months because the bank had a couple of bad quarters. Third, it was too much of a risk to leave my current environment, where I get along great with my boss and team and implicitly trust them, for a boss I might hate like none other (or even if I like the person who hired me, I might get a new boss I hate).
So I voluntarily accepted an effective pay cut to stay where I am. Sullenberger did too, and he has no cause for complaint.
Ahem, here's an economics lesson for Sullenberger, and because he's so stretched on a meager income, I won't charge him a dime.
Richard Branson, yes that one, offered to hire Sullenberger for Virgin Atlantic. Not at whatever salary Sullenberger demands, but at double what anybody else offers -- and a pilot position on Branson's spaceships. Apparently Branson made the offer in public, not directly, and Sullenberger was unaware of it. I take it that the offer has not yet been accepted.
Prices are ultimately determined by competition, and at the margin. It isn't only what you're willing to pay for something, but what the next person is willing to pay. Conversely, it doesn't matter what someone is willing to pay you, but what the next person is willing to accept for providing substitute goods or services.
This means for airline pilots that there are enough of them who are willing to accept the pay cuts. Otherwise, by definition, airlines would have to keep offering higher salaries and benefits until the market cleared (when the number of bought items equals the number of items offered for sale, i.e. the number of hired airline pilots equals the number of desired pilots). Prices will not necessarily be the same for every unit sold over any given period of time: prices can fluctuate based on current demand for a limited or ample supply, as we see with oil prices. So if a particular airline needs just one more pilot and wants one really, really badly, they might offer $200K to someone who will start right away (as opposed to cancelling several flights because of a manpower scarcity).
But in fact with airline pilots it's been the reverse: there is sufficient supply that airlines have been able to cut their salaries, as part of broader cost-cutting measures, yet retain sufficient manpower. As remarkable and downright heroic as Sullenberger was, there just isn't that much demand for his particular expertise compared to the available substitutes of competent pilots who can do ordinary flying. Yes, it would be nice if all pilots had his skill, but that's just not going to happen. The increase in salaries would make airfare too expensive: fewer passengers lead to half-empty planes, leading to schedule reductions, leading to layoffs of these super-qualified pilots.
Sullenberger's complaint isn't that his pay isn't what he'd like it to be, but that his pay isn't what he'd like it to be while staying at his employer. At the end of last year, I turned down an opportunity at another firm for double what I'm making now. It would have been a more senior position with considerably greater responsibilities, and my particular area of compliance is also very high in demand right now. I wasn't afraid of the "big chair," but rather that I'd be working for a bank. First, I can't stay true to my principles when working for a bank receiving TARP money. Second, being at a major asset manager is a lot more stable in bear markets; I didn't want to risk getting laid off after 6 months because the bank had a couple of bad quarters. Third, it was too much of a risk to leave my current environment, where I get along great with my boss and team and implicitly trust them, for a boss I might hate like none other (or even if I like the person who hired me, I might get a new boss I hate).
So I voluntarily accepted an effective pay cut to stay where I am. Sullenberger did too, and he has no cause for complaint.
Posted by: Perry Eidelbus at February 25, 2009 10:17 AM"It will be a great day when AIRLINE PILOTS get all the money they need and the air force has to hold a bake sale to buy a ... oh, wait a minute."
Posted by: johngalt at February 25, 2009 12:38 PM | What do you think? [2]