"We Want A Piece Of The Action": Unprecedented Airline Profits Create Expectations In All Stakeholders

Transcript

Helane Becker:Good morning, everybody. Yeah, my— for those of you who haven't met me yet, yes, I'm Helane Becker. I'm with Cowen Company. We're an investment bank, and I've followed the airline and aircraft leasing industries for the firm. I've done that Since a long time, I want to say. I always say to people, more than 35 years, but less than 40. So it's— and it's all I've ever done, so I'm uniquely unqualified to do anything other than this. And I'm going to introduce each of my panel members. Jude Bricker is with us. Jude is Senior Vice President of Planning and Chief Operating Officer of Allegiant Travel, which, as you all know, is based right here in Las Vegas.

Sara Nelson:Thank you.

Helane Becker:Captain Bob Coffman, who's with the Allied Pilots Association. And for those who might not know, Bob is with American Airlines. He is— Allied Pilots is the representative union for the American airline pilots. It's an independent union and not part of ALPA. Actually, it was part of ALPA, I think, and then they spun out in, I want to say, late '50s or early '60s, right?

Bob Coffman:'63.

Helane Becker:'63. So there you go. I remembered that pretty close. Although I wasn't doing this job then. I was doing a different job. And then third, we have David Krieger, Managing Director at ALPA, the Airline Pilots Association, which is the representative body for all the other airlines, not Southwest and not American. There's probably one or two others. I guess Jude's pilots are represented by the Teamsters, so. From the Association of Flight Attendants. Sara Nelson, International President of the AFA. So that's an important role. Have a seat. And then the last person to come to the stage, but certainly not the least person, is Naomi Hudson, Southwest Airlines Senior Director of Labour Relations. So good afternoon, everybody, and thanks for participating in my panel. I have a bunch of questions, and I know we have some audience questions that we'll pull kind of midway through the presentation. And I'm going to ask everybody to discuss this first issue. In the U.S. especially, it takes a very long time to negotiate a labor contract. Either an initial contract could take as long as 3 or 4 years, it could take as long as 3 or 4 years to negotiate the— an amended contract. And of course, in the US, for those of you who may not know, contracts never expire. They become amendable. And the Railway Labor Act governs the contracts in the US, and it basically says airline company employees cannot strike unless they're released into a 30-day cooling-off period by the National Mediation Board. And you have to go a long way to get to that level. I think the last strike in the US Was in 2012. It was the Spirit Airline pilots. They were on strike for about two or three weeks in June, and they reached an agreement and and moved on. But but so so I would like each of you to answer that question: Why does it take so long to get that initial contract, and why does it take so long to negotiate that amended— amendable contract. So I guess we can start with Jude and move down, and then next time we'll start with Naomi and move up. So, Jude.

Jude Bricker:So we're in negotiations with the Teamsters. I assume you're talking primarily pilots. We're in negotiations with the Teamsters currently on our first contract, and we're almost 3 years into the process. And honestly, I don't have a good answer for why it takes so long. As a participant in the process, quite frankly, there's just a lot to negotiate with the first deal. And the new contract, both parties recognize, will be substantially different than what we operate under today. So, you know, you have to write a very substantial contract, each term of which needs to be thoroughly negotiated. So I don't think there's lack of effort on either party. Nor the NMB, which is involved in our process to get to the end line. And everybody wants it. It's just— there's just a lot to talk about, primarily.

Bob Coffman:I would love to have a contract negotiated in 36 months. I think our last time around was 8 years. And I think the couple before that were 60 months at least. I don't think there's a simple answer. I can say that I think that the Railway Labor Act needs to be examined, and the mechanism in which the National Mediation Board interfaces with the participants also needs review. They do an internal review called the Dunlop Report, which is done about every decade or so. I've participated in a couple of those. There are a variety of reasons for things taking a long time. At some time, it may not be in a party's best interest to go rapidly, particularly if one side's or the other side's expectations are either out of line or in line, but getting to that point point then puts the company at a perceived competitive disadvantage in view of what other things are going on around them. I think that American was pretty famous at about the 60 to 72 month point talking about how if they continued to drag out the negotiations a little bit further, then the pay rates at the other companies would reach parity with where they thought they would wanted to be. And so it became indicative that over the last 6 years there had been some feet dragging, and to do so created a tactical advantage. If the economy and the expectations start moving the other way, we could see pressure to go faster rather than slower. But I think clearly what was a very well-intended, well-thought-out piece of legislation that was formed in the early 1900s as a result of strike on railroad manufacturing, the Pullman Wars, that has been modified little really out of a highly fractionated— fractured industry into a highly consolidated industry where virtually any of the major carriers going out would create significant economic pressure on on both the local and national economy, we're left with few weapons but nuclear war that nobody really wants to go to.

David Krieger:So I guess from ALPA's point of view, don't completely buy into the concept that it needs to take that long. And if you look, there's been some recent examples. United recently ratified an extension— the pilots ratified an extension to their agreement with just a few months of bargaining a year ahead of the amendable date. We've had other deals. Alaska was negotiated quickly last time. And in this environment, that's something we're really focusing on. We're trying to look for pilots. And I know you also asked the question about new contracts or a first contract, which is a bit different. But when we have established contracts, pilots focusing on what's most meaningful to them and working out a process agreement with the company where It's easy to drag out contract negotiations if you put 400 items on the table, or the company does, right? As you work through the issues, it just takes time. But if you can set up a process early, a protocol agreement or something where you agree to meet certain dates, you work on certain subjects, we found it very successful in pushing the process along where you don't basically drag it through the entire process and take, you know, several years to get to that agreement. Now, it doesn't work every time, but it's something we're striving for, especially when you consider the financial environment we're dealing with many of our carriers right now.

Helane Becker:So, Sara, what do you think about that as a labor— another labor representative from a different aspect?

Sara Nelson:Fundamentally, a number of issues that you have on the table simply take up time to talk about at the table. But from our perspective, the biggest problem with these drawn-out negotiations is the diminished right to strike. And the strike is a critical component of collective bargaining because it puts pressures on both parties. So Dave was just describing some negotiations where there's been an interest by both parties to reach that agreement. But when you don't have that, when you don't have an interest by both parties to reach the agreement, then you have to have a deadline. You have to have a mechanism for coming to a conclusion. And I think that, you know, the Railway Labor Act has been interpreted to mean that there should never be a strike again because there has been this focus on Stopping an interruption to interstate commerce. The problem is, and that we've heard over the last 2 days, is that that gets in the way of reaching resolution with the employees and having them feel like they are being recognized for their contributions and feel pride in where they're working and feel like they have a real voice in that. And it is interfering with interstate commerce anyway because these airlines are not able to perform the way that they could if everyone were fully engaged in a single vision and taking pride in where they work. So fundamentally, and we're probably going to get into a lot more components about the negotiations process here, but if everyone would recognize the value of the right to strike, because it puts pressures on both parties. The employees do not want to strike. The company does not want to sustain a strike, and it encourages reaching an agreement.

Naomi Hudson:So regarding— Brand new contracts, I am in the middle of one right now with a group, a work group of about 100 people. So we've been negotiating for about a year now. However, we have another group on our property at Southwest Airlines that has been negotiating for since 19— seems like it— since 2012. It's a brand new group. And they were promised some things, quite honestly, that weren't going to be delivered. So that process has taken quite a while. So it's about expectations. You know, several of us— several of the folks here have talked about expectations, but it is about expectations as well. What is reality? What's fair to both parties and such? Now, when you talk about why an amended contract can take so long, sometimes it has to do with modernization. So I had a contract in 2002 with our flight attendants that took us about 3 years to negotiate. One of the reasons is that contract had so many provisions that were just outdated. They were— it was just old-fashioned language. So it took us quite a while. And these, you know, you know, we're not just sitting at the table negotiating. There's models run. There's so much research that's done behind the scenes. The vast majority of the work, I would say, is done behind the scenes, and that's why it would take so long. There's things that takes weeks to figure out whether or not a provision will work. Fast forward, in 2008, with that same group, we were able to ratify an agreement in a year. So that was certainly progress. Now, fast forward again, we're with that group and it's taken 3 years, but there's a lot of stuff behind the scenes that's happening. Like, we've had several different union presidents since then, new negotiating members and such. I'm not blaming it solely on that, but when you have change in the guards, there is some delay in the process as well. So it could be a number of things.

Helane Becker:Gotcha. So I just want to clarify something that Sara said, actually. She talked about the Presidential Emergency Board, and the way it works in the U.S., for those of you who may not know, And her comment with respect to the right to strike, which is very important, because it allows workers to exercise their contractual rights. In the US, the president can actually stop a strike by establishing what's called a PEB, a Presidential Emergency Board, and both sides are given 30 days, I think, to— or I think it's actually indefinite. I don't think there's a timeframe.

Sara Nelson:No.

Helane Becker:Maybe up to 6 months?

Naomi Hudson:60.

Helane Becker:60 days. Okay, so 60 days to negotiate a contract, and during that time, the employees are not allowed to strike. They have to report to work, or they can be sued by the company, and that actually happened at, I want to say, American Airlines in the '90s, where President Clinton established a PEB right after the pilots went on strike, and they were ordered back to work, and an agreement was I'm gratified that there was a lawsuit. It was ultimately settled, but it doesn't do a lot to engender great labor relations when you think about it, if you're that at odds with your management group. And that kind of brings me to my next question, which is, do you think that it makes more sense to go to European-style negotiations where you can actually just Announce that on such and such a date, we're going on strike. It's a 24-hour or 48-hour, 12-hour, whatever-hour strike, and you exercise your contractual rights. So do you think— we'll start with Naomi and wind up at Jude. Do you think, Naomi, it makes sense to go to that style as, to Bob's earlier point, you know, we rethink the National Railway Labor Act?

Naomi Hudson:No. Okay, I'll just say more than no. Absolutely, positively not. How's that one? No, I don't. And I don't think it's good for commerce. I don't think it's good for the regular traveling public. I think it's unfair. I do think companies and unions need to be fair to one another, but no, absolutely not, I don't.

Helane Becker:Okay.

Sara Nelson:So part of the problem that we have in these elongated negotiations is that you have an expectation set up at the beginning beginning, to your point, and surveys that are taken, and you have employees respond and say what their priorities are, right? And then through the course of the negotiations, those employees continue to mature in their positions. They move through the seniority scale. Different issues become important to them. The conditions at the airline change and completely change their experience on the job. And oftentimes, by the time you reach that agreement during that entire process, The priorities of the membership has actually changed, and that leads to ratification problems and other issues moving forward. So the— I don't want to move all the way to we should just not do U.S. law and move to European law, but I think there's something to be said for being able to address those issues in real time so that you're actually addressing the needs of the employees and everybody can get back to work and, again, feel like they—

David Krieger:their views are being So I guess I'll give a definitive answer. It depends. And really, you know— That's not no.

Sara Nelson:Right.

David Krieger:In any world, a strike is a failure, right? I mean, it's a failure by both sides to come to an agreement. It doesn't really do anyone any good. It's harmful to the employees. It's obviously harmful to the company. But I agree with Sara. The threat of a strike or having that sort of hanging there does what we try to do in labor negotiations is force leverage or force a decision point where people have to make hard decisions, right? So there are circumstances where you do need sort of that leverage or that hanging over you to force both parties to make, you know, choices to come to an agreement or not. So there are instances where I think it would be helpful, but if you look at sort of the labor history in Europe and sort of the success of their agreements versus the U.S. carriers, it's mixed at best. And I think while the Railway Labor Act is not perfect, and one of the big weaknesses is clearly the time it can take to negotiate, I think, you know, overall we've done okay compared to our European counterparts with agreements.

Helane Becker:Bob, do you agree with that?

Bob Coffman:Yeah, it's headed in the right direction. A little bit of a hangover from the conversation that we were having yesterday. Actually, there is no European system of work stoppage. There's 28 systems within the European environment, the UK being as far on one side of the spectrum as, say, France is on the other side of the spectrum. So there's no one perfect system. I can say that— and I'll go back to my original statement. I I think that it is time to have a contemplative conversation about this, recognizing that what the Railway Labor Act initially was after was setting a balanced playing field between management and labor. In this country, no conversation about that balance is complete without also bringing in discussion of the Chapter 11 process, particularly As it relates to airlines, which has its own very unique chapter that neither rail nor the National Labor Relations Act folks have. So I think we need to have an overall conversation about it, what the answer looks like to maintain a balance and not end up with financial Armageddon for anybody, or congressional Armageddon, even worse. I don't know what that looks like yet.

Jude Bricker:Yes, to the point that there's 28 different jurisdictions that each have their own labor laws. Some aspects of the German and UK laws I think are good, most significantly that unions in general are brought into the ownership and leadership structure of the company at higher levels in those jurisdictions more often than here in the US, and I think that's played out fairly well. But then on the other side, you know, France has extreme disruptions very frequently, and that's hurt their industry over a really long period of time and will continue to hurt it. Because when you're buying a ticket 120 days out, you don't have the assurances that that airline's going to be able to operate. I think it hurts them in the long run. So I think there's probably some aspects in Europe that we could incorporate here. But overall, I think we have a better system just because there's not— Uncertainty across jurisdictions that they have to deal with over there.

Helane Becker:Fair enough. I think Bob mentioned Chapter 11 in the US. What's very unique in the US, airline companies can reorganize under bankruptcy protection. It's called Chapter 11 of the Bankruptcy Code, and one of the provisions is they can reject contracts. They can reject leases on aircraft. They can reject contracts with employees. It— and it can be very detrimental, and we're going to talk about that. in a minute because it can be very detrimental to the employees working for the airline, and there's no recourse for the employees. So we can talk about that in a minute. But the other question I think that comes along with— it takes a long time to negotiate. We've heard some reasons about why we think that occurs. And I know from talking to everybody here and from talking to the other airlines that I'm responsible for covering, The employees, especially the leadership of the unions, poll their members, and they ask— I'm at least hoping most of them do this— what's important to you, what should we accomplish in this, either initial contract or amendable contract, whatever. And yet we still get rejections. And we've had a lot of rejections really recently. The Delta Air Lines pilots rejected. A pay increase that I think was around 22— I'm sorry, it's 14%. The Southwest pilots and flight attendants rejected contracts recently. Why? And we'll start with Naomi, since Southwest recently renegotiated 2 contracts in good faith. They seem to be, from an observer's perspective, really attractive contracts, and yet your employees completely disagreed. So, Maybe you could talk about why, why, and next steps. What happens now for everybody, traveling public, your employees, and your company?

Naomi Hudson:Well, for right now, it's status quo for the traveling public, so they have nothing to fear. I lead the negotiations for the flight attendants. I can certainly speak to that for sure. I think it's similar to our pilots. But so the unions do their polling, and just like she said earlier, they do the polling. Things happen, and sometimes the employees change their mind. They've matured in their positions. However, they do their polling, and as an example with us, we have 14,000 flight attendants. Well, that's probably about at least 14,000 opinions on what should be seen in a contract.

David Krieger:Mm-hmm.

Naomi Hudson:So as an employee, if I only wanted one thing and that one thing is not there, I'm rejecting it. That could be one thing. That's— and I am certain that's one thing. I think social media has taken over a great deal of spreading good news, bad news, but most absurdly incorrect news. So we saw some interpretations immediately after the contract was tentatively agreed to, agreed to by the company and the union and their executive board. Said, put it out there to vote. This is good for our members. We saw some immediate interpretations that were just completely wrong. Another thing is, you know, we spend all that time at the bargaining table explaining and understanding each other's perspective on things and why we agree to something, but then the members that have to vote on it, they don't have that full advantage. You know, the unions do a pretty good job, or Somewhat of a good job, I guess, trying to explain, here's what we have, here's why we got this. But it's a long story. But they get pretty much, relatively speaking, a very short version. So if it's something that's an unclear provision, rejected again. The company— and I can say that our company received, I think, 4 things in that failed TA, we'll call it.

Bob Coffman:Yeah.

Naomi Hudson:All 4 of the things our employees were highly upset about because in their minds it was concessionary, and especially that we're doing so well in this economy that the company should not ask for concessions. We don't see them as concessions because concessionary is the whole package, of course. We don't see them as concessions. We saw them as modifications, things that we need to mature, get rid of— legacy things that we no longer do anymore, but our employees didn't see it that way. So now we're back at the bargaining table 9 months later. We returned to the table— it failed July 24th. We returned to the table in December, but we really began bargaining again in March.

Helane Becker:So, and do you think it will take a full year to negotiate these provisions? How long— like, what should we expect? Is there a timetable, I guess, is the question?

Naomi Hudson:There's no timetable, but here's the thing. So the union went out and they polled their members again, rightfully so. They did that, did a great job of it. The problem is— well, I don't say it's a problem. Here's what actually happened. They polled their members, and then they came to the table with a comprehensive— that's a new style. I've never seen anybody initially come up with a comprehensive, including economics, But that's fine. Showed their cards. But they also told their members everything that they were asking for. So now the expectation bar is way up there again. And this— I mean, it's a lot that they asked for. So it's— I think it's going to take a while, to answer that directly. Okay.

Sara Nelson:Okay. So a big problem is the length of time that it takes to negotiate these contracts. But also, I'm just going to go back briefly to the right to strike, when that issue is prevalent within the collective bargaining process, there's an ownership that the employees take when you reach that agreement, because they know that the alternative is walking off the job, and that's a tremendous decision that each employee has to make. When you don't have that as part of the process, and you release an agreement to the employees, and they think it's come out of nowhere, And you can just go back and do something different, and there's no ownership there, it creates a problem. So that is fundamentally a problem. We've also seen a problem, I think, in recent years, and I think we're starting to get to this because people are having to because of social media, but there was a blackout of communications during the negotiations. So to Naomi's point about the discussions that happened between the company and the union in terms of Problem solving in negotiations. It's important to have a discussion with the employees throughout the entire process, to bring them along on these issues, because if you suddenly present this agreement that has solutions that don't look maybe like the contract that they're used to, or maybe is seen as concessionary, but maybe ultimately it's not because of the way that we've been able to work through those issues, that creates a problem when there hasn't been an opportunity to take part in the negotiations from the front lines throughout the process, to understand that this problem-solving is taking place and understand how we got to those solutions. Whether they ultimately agree that it works for them individually or not, just having the opportunity to not have that surprise factor at the end is a large component and does a lot to combat the social media. Beyond that, we have found that where we have had unions that that have done that, have had that dialogue throughout the process, and have had employees engaged on email newsletters, and have had mobilization activities where there are leaders directly in the workplace talking with people throughout the entire process. In those cases, we have seen positive ratifications. Even if you were to look on social media, you would think this thing's going down in a ball of flames.

Naomi Hudson:Yeah.

Sara Nelson:But it ends up passing because there has been that engagement and that dialogue all the way along.

David Krieger:I think that's something that we have found with our groups, but I want to take a step back. And I think we've ratified, I think, 8 to 9 agreements at ALPA during about the last year, right? So we're generalizing a bit that there's failed TAs, but if you look at the environment we're in, right, where airlines are making billions of dollars, they're giving billions of dollars to shareholders— again, I'm I'm generalizing with the largest carriers. And you have employees that, you know, 10 years ago through bankruptcy took 40-plus percent pay cuts, their pensions were terminated, right? They look back to history and say, okay, we gave up all of this, and during that time period we didn't just give pay, we gave work rules, we gave crew meals, we gave everything, right? So now that the table is turned and you have, you know, the airlines have a lot of money, Pilot expectations, and I'm sure other employee expectations, are high, right? They feel like there weren't a lot of givebacks or gets during that environment. I don't know why in this environment there would be. So what we've found is we know that's what we're dealing with, but it gets back to Sarah's point. The way we get deals ratified is one, if you you know you need to be aware that that's where your pilots or your members are, but you need to communicate each. step of the way, and so that they're not surprised. And, you know, we have an old saying we've used around ALPA: if you keep the pilots engaged, keep them informed the entire way through the process, and don't— they should not be surprised when the agreement gets in front of them. You're still going to have deals that are, you know, not going to be ratified occasionally, but you should not be, you know, agreeing to something that you don't know you have a high chance of your members agreeing to. So I think, you know, there's a lot of factors in play here, but you sort of have the environment, and communicating with your members along the way is the real key to getting something ratified.

Helane Becker:And Bob, so yeah, and you guys just got something for nothing according to Doug this morning. He just like woke up one day and decided to give you guys 5% profit sharing. It wasn't quite like that, right? Doug was very clear to Richard that it wasn't quite we woke up and did it. It was a big decision. But you did get profit sharing when you had agreed not to get profit sharing. So how do you think about that within the context of the agreements?

Bob Coffman:Well, first of all, we're— so what we're under is a joint collective bargaining agreement that is the result of a merger, and it was also on the heels of exiting a Chapter 11 contract for the legacy AA side. And legacy US was a combination of both America West And US Airways that hadn't been substantively altered since they exited Chapter 11. So, and these, the profits that we're all looking at right now weren't quite on the horizon. So we'd just gotten, we had not been eviscerated, say, as my friends over at Delta and United. Their pilots had been in Chapter 11, but it was still tough.

Naomi Hudson:Yeah.

Bob Coffman:And our board of directors had a very difficult decision to make, as Doug alluded to. He said, so I'll give you a little bit more pay or I'll give you some profit sharing. And so our folks ran the numbers on the profit sharing, and in the face of a decade of losses, and before that the record profits were on the order of a couple hundred million dollars, we took a look at what it would take to actually make something meaningful out of of what was being proposed for profit sharing, it was like, well, these guys are going to have to make $1.2 billion, and that I could see these— the members of our board of directors looking at each other going, a billion dollars? Yeah, right. Yeah, sure, they're going to make a billion dollars. No, we'll take the pay raise. That's not the way the industry's gone the last 24 months. And so if we take Doug at what you saw, I think, is a very heartfelt and earnest Trying to change the culture at American Airlines and engage engage labor. He had been getting a lot of flak about really the industry standard was changing faster than the goalposts of of the contract. So he's he has made extra contractual changes to the compensation, which Now has to go through a review process by our board of directors who are in that process as we speak, or next week they'll be meeting and talking about it. But the reality is things do change faster than contracts are. It's one of those things that we deal with.

Helane Becker:Is there— you just said it goes through a review process, so is there a chance that it would get rejected? And to follow up my question, so I'm asking 2 questions here. One is it has to go through a board review process. Does it have to go to a ratification vote, or can the board just say, okay, we accept and it's done? And if it has to go to a vote, is there a chance that your pilots could say, oh, 5% is not enough, we want more?

Bob Coffman:Yeah, I can't answer for 22 folks who are going to sit around a table next week and have that exact conversation. And to answer your question, there is a threshold of consideration at which they will hand the information over to the membership for ratification, but it's up to them within the framework of the constitution and bylaws of our association to— there is some wiggle room on what it takes to trigger a membership ratification. So the answer is this is in enough of a gray area in both places that we We do have 22 folks who are going to get together next week and talk about it.

Helane Becker:Okay, fair enough. And Jude, you said before, I think, what, you're in negotiations with your pilots for 3 or 4 years. I don't know how long it's been with flight attendants. It seems forever. Jude's flight attendants call me up and they say, we want to come to New York and meet with you, and then they complain. And finally I said to them, okay, I know your complaints, I know your issues, don't come to me anymore and complain because I can't So, I mean, like, how do you get this contract done? It's been in negotiations. Everybody wants it done. Based on the conference calls these guys do every quarter, the question comes up every quarter from the analyst community and the media. How do you get it done?

Jude Bricker:All right. Well, I think that the— yeah. I don't know, really. I mean, I think we're— I'm very encouraged by the change in the dialogue we've had at the negotiation table and also as between management and our pilots and flight attendants. And so I'm very hopeful that we're going to get something out to them for vote in both of those workgroups by the end of the year. But at the end of the day, you know, it's a 2-party negotiation, and we both have to be fair with our expectations and We face some of the same challenges Naomi was referring to around communicating what's happening at the negotiation table to manage and meet expectations of our unionized workgroups. So we're working on getting better at this. This is our first contract as a company, and we've certainly had some missteps. I think also there's been some unrealistic expectations on the point of the unionized workforces as they were first unionized. Thank you. You know, many of our pilots have 4 or 5 uniforms in their closets from carriers that have gone bankrupt over the years and they've had to move on. So we want to protect aspects of our business and, you know, we just need to be real open about what those are. And a lot of pilots that come to Allegiant like the way we fly and therefore that's why they're there. And so we need to, you know, so I think actually the easy parts of the contract would be what things you might expect expect to be difficult, like pay scales and benefits and retirement. I think largely we're there. It's really around duty rigs and things that might substantially change the way we operate.

Helane Becker:Gotcha. I think there's audience participation questions. Oh yeah, I was going to talk about this. This was going to be my next question, because you guys have all mentioned some version of the benefit between employees and shareholders, and so the question The question is, is there a fair distribution of benefits between employees and shareholders? And just the genesis for this, I will say, is that to the point that it's quote unquote different this time and airlines are earning billions of dollars, one of the things that they've done with their money is return capital to shareholders by buying back a lot of stock. And I guess there's a lot of different ways you can use your capital as an airline company, right? One is to invest in the product, and we're gonna talk about that in a minute. We've talked about that so far. One is to give your employees pay rate increases. Another is to buy new planes. And the third is return capital to shareholders. And I think, you know, I told you guys I've been following this group for 35 to 40 years, without admitting to the fact that how old I am, although I keep telling my son, I don't know how you can be 28 when I'm only 31. And he actually suggested last time that I move that up a little bit, and I said, "If you still want that platinum credit card, you better better be careful what you say." But so, and I've done this a long time, and I've seen this movie before. I've seen airlines make a lot of money. I've seen them lose a lot of money. In fact, we moved last year, and I found all this research I'd written in the mid-eighties. And what I wrote back then, I'm writing now. Only the difference was. Then it was the top 10 airlines controlled 90% of the industry capacity, 'cause we'd gone through a consolidation phase, and now we're seeing the top 4 control like 80, 85%, but Southwest doesn't think of itself as part of that group of 4. They think of themselves as a low-cost carrier, so maybe it's the top 3 with 60, one with 20, and a whole bunch of others with 20. So does it make sense, and this is a multi-part question, Does it make sense for you guys to get a lot of money now when the airlines are making a lot of money and then have to give it back when things turn south? Or does it make sense to say, okay, we've gotten our incomes restored, we still don't have our pension plans, or we've still taken haircuts on pension, the pension plans have mostly been frozen, Does it make sense for us to say, okay, we're just gonna get a 5% pay increase every year forever, plus some form of profit sharing? 5%, 10%? I don't know that 20% is the right number.

Sara Nelson:Only—

Helane Becker:and I only say that because airlines wanna think— your management teams like to think of themselves as industrial companies these days.

David Krieger:Yeah.

Helane Becker:and not as airlines, and no industrial company pays as much as 10 or 20% profit sharing. They all pay in the, like, less than 5 range. So is it— does it make sense to get what you can now because we're making a lot of money, and then give it up when things are bad, or does it make more sense to say, let's have, you know, let's throw away this contract that's, to Bob's point, you know, 100 years old, that's just been— Well, it's not quite 100, but—

Bob Coffman:Almost.

Helane Becker:That's been amended every 3 or 5 years, and let's just figure out what does it take to run an airline today? Because the aircraft today, you know, maybe not true for the MD-80s, but certainly a lot of newer aircraft, you know, almost can operate themselves. And we're going to talk about that too. We're going to talk about does it make sense to have one pilot in the cockpit and one on the ground? Does it make sense to have no pilots in the cockpit? We're going to get there, but we still have a half hour to get there. So let's start with the trade-off. So everybody here, where was that answer? I missed it. I think it was everybody wanted— okay, everybody wanted shareholders get too much. So are you all labor people here? You're obviously not all shareholders. So that was the answer. I love it. I want to take a picture of that and send it back to the office. I'm going to publish it in my book. As we always say, there's a service we use to publish our research. It's called First Call, and I always say I'm going to put it on First Call. Okay, so let's talk about this. Do you guys agree that shareholders get too much? More— Jude, you can start. You have one large shareholder you have to make happy. You have to be careful.

Jude Bricker:I mean, I don't have much to say on what you—

Bob Coffman:Fair enough.

Helane Becker:You don't have to answer the question. He can't answer the question. His boss is the company's largest shareholder. I think he owns, what, 20% of the company? So he's the largest. There's 16 million, roughly, shares outstanding. Maury Gallagher's the chairman. He owns 20% of the company. He doesn't take a salary. He just pays the dividend. He's a smart man. So Jude can't really answer the question because, you know, word will get back to his boss what he said, so we'll let him off the hook. But it's the only time. I've been on other panels with Jude, and he's famous for not helping me out.

Sara Nelson:Maybe it's the questions.

Helane Becker:No, it's the questions. I'm not trying to get you in trouble, so we'll let you off the hook, and we'll let everybody else answer. So, Sara, why don't you start, because you didn't get a chance to start yet.

Sara Nelson:Okay. So fundamentally, I'm just going to say that, yes, they're getting too much, okay? And it's not so much that they're getting too much, it's that there is a real, you know, belief from the employees that we need to get more. And the reason that that is, is because we did go through this economic downturn, and it's almost as if we're acting today like that never happened. And so, you know, we talk about the market rate for a flight attendant or a pilot. Well, you know, that is built on the backs of the employees who didn't Well, they sort of were, because shareholders were wiped out. Right, right, right.

Helane Becker:And so they were part of the process. The current shareholders may not have been.

David Krieger:Right.

Helane Becker:But shareholders in the companies did lose everything.

Sara Nelson:Exactly. But what employees see is that then they were dragged through the bankruptcy, and they also see that the investors who came along got repaid first and got repaid at a higher rate than anyone else, right? So that was their experience. experience was also that management oftentimes took extraordinary bonuses during that time. So all through those bankruptcies and the restructuring of the industry, the employees, you know, it was on them to keep those airlines running, and everything was about the cost factor, and the humanity really was taken out of the industry at that time, because what happened was that, you know, pilots and—

Jude Bricker:Flight attendants.

Sara Nelson:Flight attendants and other workers were having to make really tough decisions. They were losing their homes. They were not able to send their kids to school. They were not able to sign them up for soccer camp or whatever it may have been. And these are lifelong decisions, then, that have an impact that they still feel. So when Doug was talking this morning about, you know, the memory is very long, yes, it is. So Wall Street may think that the market rate for these jobs has been permanently changed, But the people behind that have had their lives dramatically impacted, and it— even to the point of having, you know, the personal fallout on that, okay, the divorces from the financial stress, and all of the issues that they faced during that time. And they have a huge expectation now at this point that we are going to get that back, because the rhetoric during that time was shared sacrifice.

Helane Becker:Right.

Sara Nelson:Shared sacrifice would equal shared rewards. So the— this panel, the title for this panel is about, you know, we want a part of the action too. I think that's really misnamed because what it is from the employees' perspective is we are the action. We're the ones running this airline. We're the ones making it a success. And I think that that has been echoed in different ways over the past 2 days to talk now about the humanity in this industry. We heard from the U.S. Travel Association.

David Krieger:Yeah.

Sara Nelson:Association, that it's about the people. It's about the people that we're moving on our planes. We have to be thinking about the people. We have to be thinking about why they're getting on the plane and why that makes a difference to them. I used to say as a flight attendant that I saved thousands of marriages because I could welcome people onto the plane, and you know what, they just came from a really bad business meeting, or they had a tough time in the airport, and by the time they landed, they got it all out, and they were happier, and they went home and didn't kick the dog, thank God. So, So we, we know that this industry is all about that humanity and the, and the people on the front lines who have run these airlines and where it's been recognized over the last 2 days that it's critically important that they feel pride in coming to work, not just in what they are bringing professionally themselves, because I think that is the fumes that we have been running on for the past few years, but pride in being a part of something bigger and a vision about where we're all going together, right, is incredibly important. That's been recognized. And the only way that we're going to get there is if they feel like they really are recognized for being the action that runs these airlines. So we're going to have to have a tremendous step forward, because in the employees' minds, we have not reset the market rate for these jobs. We need to recover where we lost, and then we can move forward, and we can talk about some sort of consistency.

David Krieger:Thank you.

Sara Nelson:see moving forward, where we're all sharing moving forward, and not having these incredible expectations about how we've got to come back from everything that we've lost.

Helane Becker:So before David answers, Naomi, do you agree with all that?

Naomi Hudson:Well, I don't agree with all of it, but I will tell you I agree with a lot of it.

Helane Becker:Okay, fine.

Naomi Hudson:I think a lot of it has to do with— employees are people, so when you ask, Back up just a little bit. Would it be right for the employees to do well during the robust economy and then lose some later? I don't think so. I don't think that's the way we would— I wouldn't want to be compensated that way. I wouldn't want to have my home life threatened, even though it can be, you know, as a result of, I was paid really well here, so now I'm going to be paid half or something. I don't want that for employees. I think that's a good point. employees. I think they should be paid well, but they should be paid fairly as well. I think with regard to the shareholders— now, I don't have the experience of bankruptcies, so let's put that out there. Our company has been fortunate to not have to do that, but we also are cautious that we don't put ourselves in a position where we have to do that later. We're, you know, right now it just seems like Everything is great, and it is, but I'll tell you what, 2009, that time period, that was a struggle. That was a struggle for us to increase our revenues, and we did a great job, and it's our employees who helped do the great job there. So I don't take away from what Sara said at all, but I say be very cautious. But again, I don't have that experience of a Chapter 11.

Helane Becker:Fair enough. And also, I don't think you have furloughed people ever.

Naomi Hudson:No, not involuntary.

Helane Becker:Southwest Airlines has never done a furlough either, so they don't have that, you know, memory bank. It just still didn't stop 2 labor groups from rejecting contracts.

Naomi Hudson:Yes, and still, but that happens. So now both parties have got to come to the table and figure it out, and that's what we're trying to do. We're trying to figure it out. I don't— we don't necessarily have the very same approach, but I will tell you, I believe from the union, the flight attendant union especially, that they are committed to attempting to figure this thing out so that we can get a successful TA.

Helane Becker:Fair enough. David?

David Krieger:Yeah, I think our experience is colored by the bankruptcies and the furloughs. And, you know, when you look at what is an appropriate return for shareholders, what I worry about is the airlines are in this transformation and they are in a bit of a rush to prove they're a real company, right? Or they're a company like a regular tech company or a stable company that can provide returns or dividends or buy back a bunch of stock, when in reality we still need to get through the next down cycle, I think, to really test the theory that the market has changed and that the industry has changed. So I think from our perspective, we understand there's going to be some returns to shareholders, but we would much rather see the capital invested in the product, in the employees, And maybe trying to attract a different kind of shareholder, right? I mean, there's historically people have made or lost money very quickly in the industry, right? Or you've attracted investors that were looking to catch a quick run-up or short the stock on its way down. But if we really are turning into you know companies that are more stable when they're going to return, you know if you have a more long-term investor, they may be looking at building sort of a long-term you know return in a company that you can. Look for over a longer time period. I mean, employees and pilots in particular are the longest-term investors in airlines, right? Their career— once a pilot is at a major airline, they are there, right? So we tend to look at things and give advice over a very long period of time. And to us, you know, you realize the competition that's out there, and we know that frontline employees have a lot to do with the success of how the operation runs, how, you know, customers view the product. And having happy employees, having a great product will help us compete on the longer term. And I think that, you know, paying down debt and using the capital for things that build long-term stability are a lot better use than trying to rush and say, hey, look, we're spinning off a lot of cash, we're going to buy back all this stock. And then the next downturn— and we've seen this before in the industry where, you know, United bought back $1 billion in stock, and guess what? 2 years later, later they're borrowing it at outrageous terms, that, you know, we need to live through this cycle, I think, before we rush to give shareholders, you know, sort of out-of-market returns.

Helane Becker:Fair enough. Bob, would you agree with that?

Bob Coffman:Yeah, I think all 3 answers have been contemplative and right on, and I go everywhere from wanting to talk about Peter setting up this question as, gosh, could this possibly be controversial, talking about various People who want to split up limited resources. I mean, is this a national discussion on politics, or is it a discussion on airline? So of course there's some conflict and natural controversy over how limited resources, in this case money, gets split up amongst the various people who have an interest in it. That being said, I completely echo the sentiments, having also gone through the Chapter 11 process. And, you know, a small correction. Most pensions are not frozen. They're actually terminated.

Naomi Hudson:Okay.

Bob Coffman:Folks like me, I've got— again, I want to give Doug a lot of credit for trying to change the culture and everything else. It would be great if we could erase my memory, but that doesn't change the fact in 7 years I retire, and my retirement planning has been drastically altered to the tune of 7 digits. Which is a personal— it's not a loan, it's just wiped off the face. That's what Chapter 11 does. So that's— we have to have this discussion of where things go, and I don't think that we can ever forget where we've gone. We hope the margins are such that When the next downturn comes, that there is— there's a different word, and again, it was another conversation I was having earlier about sustainability. Can we sustain where our contracts are? There's 2 different models of employment compensation. One says that the various professions, careers within the airline are worth X number of dollars per hour. That's what you pay. And when economic times are tough and your kid needs to get his arm reset, you don't go into the doctor and say, you know, it's kind of a tough time, I'm just going to give you 50%. And yet that's kind of what we do with airline employees. That's one model. Another model says, what is— what's a fair compensation given what's going on in the company? And what we've seen is morphing back and forth between those 2 models through the years. Variable compensation, and you're going to get to that, is an interesting proposal that says that while times are good, employees get more, and when times are tough, they get less, but it's not taking a Chapter 11 reset, and the less Less isn't an unsustainable quality of life. Less is a core salary that still gets you through, and then when times are good, you know, that's what variable compensation does.

Helane Becker:Fair enough. And then what was the second question? Let's put the second question up. Is employee profit sharing preferable versus salary increases? Did we answer that? Do we want to answer that again? Do you rather have profit sharing? What does it say? Profit sharing is better, salary increases are better, and a combination of both. I was going to say everybody likes the last answer. They do. Everybody likes the last answer. Okay, so what do you guys think? Do you want profit sharing or do you want more money in your pay? I know I personally like to have more money every month.

Naomi Hudson:I think it's where the employee is in their life currently, for them to answer the question. But we, again, we've been very fortunate at Southwest. We've had profit sharing. I've been there 25 years. I've enjoyed profit sharing every year. Last year we received 9 point, I think, 6% or something. I think it was 9.5%. Maybe 9.4, but it's over 9%. So one day when I retire, I'm gonna be grateful for that. When I first started with the company 25 years ago, I probably would've answered that question and say, just give it all to me right now. And I think that's, you know, how people feel when they're brand new. But once they realize that that money is really adding up and it can add up, then You know, they say, give me both, but especially give me some profit sharing.

Helane Becker:Fair enough. David, do you agree with that?

David Krieger:Well, I think it's a little bit different because yours goes, I think, into a retirement plan, right? Your profit sharing, right? So a lot of the other carriers we represent, it ends up being a cash payment. So it is sort of a real-time payment, but I think it does need to be a mix. You can clearly understand, and pilots understand, I think, that there is something attractive about a variable portion of pay, right? That we live in a cyclical industry, so the fact that, you know, an expense can go up and down depending how the company does is intuitive, right? That makes sense that there should be some portion. The question is, you know, is it on top of where they think a base pay rate should be, right? You sort of have your stable pay, and if you have a contract, and we have some of these where they think they're paid, they're relatively happy with where they are paid, then profit sharing is a nice piece to have on top of that. But where it doesn't work is when it's too large of a component or you've given up a lot of pay in the past and it is to make up for prior concessions, and now you have more than you want to have sort of on the, you know, variable from year to year. So I think the concept works. And And I think it fits with what, you know, a lot of the agreements we do, but it has to be based on pay above where we think the market rate should be.

Helane Becker:Bob?

Bob Coffman:I think that's what I just said.

Helane Becker:Okay, fair enough. And Sara, do you echo those comments?

Sara Nelson:Yeah, I mean, I think that there has to be some stability there for employees to be able to count on, and what has been sort of the reason that profit sharing Profit sharing has become such a huge part of the dialogue is because of the tremendous profits, and that is because of their experience of having sacrificed and with this idea of shared rewards. So I think that, you know, for Doug to talk about, you know, why he needed to put that profit sharing in place, I don't think it was just a hard decision. I think it was forced on him because the employees said, this is fundamentally unfair, that in times of trouble you would come to us and and say, you want us to have variable pay, but in times of plenty, you're not going to share in that. And so I think it was, you know, critical for him to make that decision in order to act on what he's saying, where the actions of management are really going to inform the employees on whether or not there's trust there.

Helane Becker:Yeah, he also made another comment about profits in the industry, right? He said in, I think, 2005, the industry lost $25 or $29 billion when oil was at $50, and last year oil was at $50, and the industry made the same amount, actually. And I always take issue with that remark when I talk to him, because the reality is oil went from $25 to $50, and the industry wasn't ready for that. It couldn't be profitable at $50, but it was profitable at $25. When it went from $100 to $50, the industry was profitable at $100, And when we talk about— and so therefore it would be much more profitable at $50. And it's reasonable that both fares come down, and we've published charts that show that there is a direct correlation between lower oil prices and lower airfares and higher oil prices and higher airfares with a 1/4 lag. And intuitively, that should make sense to everybody because fare— you know, tickets are booked anyway. I think that's a very good point. from 3 weeks to, you know, up to, I guess, 330 days in advance, and your pricing is based on, you know, what your— among other things, what the fuel prices are at the time. So there is that. There's no question in there. But it was just my editorial comment. And let's talk about, like, respect. So one of the big issues that, For employees is respect, and respect for the profession. We hear that from pilots a lot. We hear that from flight attendants a lot. I feel like being a flight attendant is something I could never do. To me, it's akin to teaching kindergarten or running a research department, 2 other things I would be fearful of doing. People are so— I have seen people be so mean to flight attendants, to gate agents, not so much to pilots, but— When you're in the airport, When you think about how rude people are, they would never talk to almost anybody else that way, and yet they think nothing of being rude and disrespectful to flight attendants. And I'm just kind of wondering, how do you deal with that? Like, do you feel like the— how do you improve— I don't know what the question should be. How do you improve the respect? I think that's a great question. Respect in the industry? How do you get people to think that, you know, you're there first and foremost for safety, not to get me another glass of water, thank you very much? You know, how do you address that situation? So maybe that's just for Sara to answer, and the pilots can answer a different question.

Sara Nelson:Okay. So a lot of it has to do with public perception. And so we have actually made a very concerted effort to recognize flight attendants as aviation's first responders. They are there primarily for the safety, health, and security. When you talk about security on the plane, and there's been a lot of publicity around planes that have had to divert because of passenger conflict on board, we are— our planes are fuller than ever. Seats are closer together than ever. Through a lot of the productivity work that the industry did. There are fewer flight attendants on board than ever. So when I talk about that idea of I saved thousands of marriages, it's not as possible to do today simply because of the ratio of passengers to flight attendants, the amenities that you're able to provide, and the space that you're able to provide for people. So we spend a lot of time on the job doing de-escalation, and not just for a pleasant trip, but in a lot of cases for for safety and security on board. And so we have done a lot of work around who we are, what our job is, and I think that we have made some advancements there. So, for example, flight attendants are part of the Known Crewmember Program, which is the alternate screening for crew members, and that was not originally the case. And what we ran into when that was first put into place was that the TSA was People are still viewing flight attendants very much in a gender-specific role and not necessarily in a positive light. Okay? And so we had to do a lot of work around, we are the last line of defense in aviation security. We are a trusted member of the crew. We carry a license just like— from the FAA, just like the pilots do, and— or a certification. So we were able to gain that known crew member really through that work of our publicity around who we are and what our role is. I think that where airlines can back us up, too, is on reinforcing that, reinforcing— they have tremendous ability now with the videos that are shown oftentimes on board that are in conjunction with the safety videos, and to reinforce that message that the flight attendant role there is to maintain a sense of peace in the cabin, and that comes from the authority of the position because we're there primarily for the safety, health, and security.

Helane Becker:Fair enough. And then for David and for Bob, my question is slightly different. So we have new rules for pilots, right? There's the— what I call the 16-13-10-hour rule, which is basically work rules and how many hours you guys can be on duty and how many hours of rest you need to have between your shifts, I guess, for for lack of a better word. And then we have the 1,500-hour rule, which basically says that all pilots, not just senior pilots, but first officers as well, have to have 1,500 hours of experience. And it used to be a 4-year college degree and 250 hours, and then that got changed to— or a military background and 1,000 hours, and that got changed to a 4-year degree plus this 1,500 hours. And Now, do you guys worry about what I was joking about before? Do you worry? Because the Air Force— we have friends who have a son who just went to the Air Force Academy and graduated. And he had a choice when he graduated of drones— or we're supposed to say UAVs, not drones. He had a choice of UAVs or wings. And he actually chose to go the UAV route. And I'm just kind of wondering, is there a real danger— probably not in my lifetime— but is there a Is this a real issue for pilots that, you know, a lot of pilots now, I think the numbers look like 27,000 approximately. David, you probably have these numbers better than me, but 27,000 roughly are retiring over the next decade out of a base of about 50,000, let's say, maybe a little more. I mean, are we getting to the point where, you know, you've made some gains, With, you know, the recent contracts, so are we getting to the point where pilots are going to price themselves out of a job because we're going to go to one on the ground, one in the air, or no one in the air and just 2 on the ground, or some crazy thing like that? That's probably not true, but there's a Google not— Google has like a driverless car, so why not a driverless plane? So Bob and David, why don't you guys take that question?

David Krieger:Wow, there's a lot we can go with that. I'll focus my comments— Bob can answer the second part of that probably better, but I'll focus. ALPA represents a lot of regional carriers as well, and I think a lot of the discussion today has been focused on the largest carriers, so maybe it's, you know, good to bring this up. I think there is a risk that the way the pilot structure— pay structure is now, pilots come into the regionals at very low pay. They also don't necessarily have a clear career path as to getting to the majors, right? They're sort of—

Helane Becker:Just define low pay so everybody knows what you're talking about. Right.

David Krieger:So, you know, you can be hired at a regional for as low as $20,000 a year, and this is after you've gone through all of your training to get your 1,500 hours. You could have several hundred thousand dollars in debt.

Helane Becker:Right, because it would be— I don't mean to interrupt. I don't— I don't want to be rude, but it would be, if you get a 4-year college degree from a state school, could be $100,000, and at $1,000 in a flight simulator, that's another $150,000. So you're talking about $250,000 in education costs, which is, you know, you could argue that you're investing in yourself, but to come out and take a job where you're going to get paid $20,000 a year, I mean, as a person—

Bob Coffman:Yeah.

Helane Becker:Just as a person, it's a frightening— it's really a frightening thought.

Naomi Hudson:It is.

David Krieger:And I think where we run the biggest risk is, you know, sort of the next generation of pilots, right? Because if you're picking between careers, and I think we all can agree we want to have the most qualified people both, you know, in the front of the plane and the back of the plane, and to do that, you have to have people who are in high school or college and choosing careers can see a path that makes sense to them, that I'm willing to go through this training because I can start— even if I start at a regional at slightly lower pay, it should be higher than where it is now, but I can see that within a period of time I can work my way through and I'll be at one of the largest carriers and can have, you know, a career, and you're going to attract the right people. We are still working our way through that right now, and I think that is a risk longer term where we need to, first of all, bring up the standards of the regional pilots so we attract more people to the industry, but just And just as importantly, negotiate— like, we have some agreements where there's either a flow or preferential interview or a clear path that people can look at the career and realize it's something they want to get into.

Helane Becker:Fair enough. And then David promised you would answer the other half. Yeah.

Bob Coffman:So let's start first with dispelling the notion that it's the 1,500-hour rule. It's the ATP rule. So a copilot In order to be in Schedule Part 121, service needs to hold an air transport rating. And there are a variety— there's currently 3 mechanisms of getting there. If it's a very informal school or almost no school, it's experience on your own, then it's 1,500 hours. The military offers a path at 750 hours, and there's another path yet at 1,250 hours. For somebody— or 1,000 hours. For somebody who's attended a 4-year aviation school in a very structured program to arrive at that experience level can then qualify for an air transport rating. This isn't entirely new. There was a period of time when regionals first came out when even though the minimum qualification legally necessary to get into the right seat, the hiring pool was so large of pilots available with a great deal of experience, it typically took about 3,000 hours of multi-engine turboprop time in order to get to the right seat to get to the regional carriers, because the regional carriers represented such a small portion of the overall domestic picture that the pathway Right. It was very clear. I want to go to the regional. I'll get upgraded to a captain. I might get a little bit of more turboprop time or turbojet time, and then I can go off to American or Southwest or whomever. As the regionals grew, and particularly the experiment in the Midwest with the Comair folks, is really where there was developed a program that would take you into an education An educational stream right out of college and move you into the right seat with 250 hours, which we have argued really isn't enough experience necessary. It's a little bit like, okay, so you've got your— you've run out— you've got your driver's license, but— You've got your CDL. All the experience you've had to that point was the training to go get the driver's license. So your parents usually set up some rules for you in those first few weeks, months, or year that you had your driver's license to minimize the risk exposure. And then when those rules were lifted, you usually went out and scared yourself a few times or got in a wreck or two. And and then eventually you you got enough experience to go get. A commercial driver's license, for all things. And this is no different. We're talking about a very— a combination of cerebral skills, of intellectual skills, and academic skills, along with muscle motor memory in order to fly an airplane. So the air transport rating has been in place for a long time. There have been several reviews of what the various things that it takes to be an airline pilot. And instead of actually decreasing what it took to become an air transport rated pilot, they've increased. There's another little simulator block of things and high altitude academics exposure and multi-crew pilot license sorts of things that have been added to the U.S. curriculum even beyond where we were. So that's to dispel where we're going.

Sara Nelson:Okay.

Bob Coffman:Now, you raised a whole bunch of other questions there. Do pilots ever price themselves out of the market? Or better yet, is there an industry push, particularly because this industry is trying to make itself like any other industry, to increase automation and decrease the number of humans on the payroll? Of course there is. That risk is always out there. The question is, is the product then safe, reliable, and I think more importantly in today's environment, secure? I think a more interesting question is, Sara, can you imagine training flight attendants and there's something going on and now you have to get a hold of somebody on the ground? There's nobody up there, right?

David Krieger:Right.

Bob Coffman:If you've got a security issue going on, and we've got a bunch of IT folks running around in here too who can tell you how easy it is to interfere with a data stream coming from the ground to the airplane by physical proximity within the aircraft fuselage. I can't imagine that we can get around the security issues alone to make an empty cockpit.

Helane Becker:Fair enough. I think we have 2 more questions. Let's put them up one after the next. Let's see, are you concerned that labor costs are growing too fast? That's a yes or no. That's easy. Okay, there's no concern there. Okay, labor costs are growing faster than other costs. Interesting. And then— okay, you have to stop voting now so we can go on to the next question. And then what's the last question? Last question. Are you concerned companies will have to go back to employees to take pay cuts during the next recession? What's— is yes the top one?

Bob Coffman:Yes.

Helane Becker:Oh, yeah. Yes is on top. No is on the bottom. Okay. All right. Well, I want to thank my panel, who I think were all very terrific today. Thank you very much for participating, for answering my questions. I promised everybody I wouldn't be too harsh on them. I hope I wasn't, but I wanted to elicit, you know, a lot of really great information. So hopefully everybody learned a lot. Thank you very much for being here. Thank you guys very much, and a big hand to everybody. Thank you.

Bob Coffman:Thank you.

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