Richard Branson's open letter to all Virgin pilots
virgin.com
virgin.com
That said, it was a well written letter that showed that he had spent time studying the issue and wasn't just sugar-coating a "screw you" letter (I've seen my share of those as well).
Even the least sophisticated Virgin employee is probably savvy enough to understand that Sir Richard doesn't need a salary, and that his enrichment from ownership of the company does not come from such. Accordingly, they probably understand that his "I'm not taking a salary" line rings a little hollow. Nevertheless, in their eyes, this is probably better than "I'm only taking $9 million base this year instead of the customary $15mm."
There are plenty of Founder-CEOs who do take hefty salaries on top of their equity stakes, even in lean years. By comparison, Richard Branson isn't necessarily a saint, but he's better than many.
As for whether or not he needed to call this out in his letter, I dunno. Decent PR move with probably little to no risk of blowback.
"What's the best way to become a millionaire? Start off as a billionaire and launch an airline."
http://www.independent.co.uk/opinion/commentators/simon-cald...
The railways are less clear, the build costs were huge, and written off many times by bankruptcy, but the impression you get from say http://www.guardian.co.uk/world/1947/dec/30/transport.uk was that in the first half of the 20th century in the UK they were competing well against road transport, efficient and profitable ("they were conveying more passengers than the whole of the United States railroads put together"). Other countries may vary though.
The car business does not have a very good long term profitability record, I am sure if you lump in the cost of road construction you will probably end up at a loss, although that is not exactly fair as that is not the way the market was structured.
> Since Singapore Airlines bought into the company 10 years ago both of us have invested more money into the airline than we’ve taken out
The thing is I don't think this strike will raise that much sympathy from the UK public, pilots must get paid at least £100,000 (probably more) which is 4x the average salary in this country. I'm not saying pilots don't deserve that sort of compensation, because they do, it's just I don't think the strike will bring that much in terms of public support.
Especially when most private sector workers in the UK are having their salaries frozen or any pay rises they do get are below inflation
Of any airline I have ever traveled on, the Virgin lines (Atlantic and America), have been my favorite. This ranges from the very basic things like more leg room than their competitors to wifi in the sky, to the excellent way almost every Virgin employee treats their customers.
This last point is the most important. I was on a flight last year where my friend and I got to the airport about 10 minutes late. The flight we were to catch from SFO was already boarded and ready to taxi by the time we got to the gate. We were put on standby and were seriously in danger of not getting a standby flight till late in the evening. However, at the last minute the plane (which still hadn't taxied) opened its doors, and 5 flight attendants got off.
These ladies were off-duty and were using their free flight options to go to Vegas for the weekend. Somehow they heard there were 3 passengers (us and another fellow) who had missed the flight. They all ended up getting off and giving us their seats. They didn't have any compunction about waiting a few extra hours to catch their flights and start their weekend, so that we could make our flight and start ours.
I've had other experiences on Virgin that are similar. The staff that have to deal with thousands of potentially unruly travelers every week almost always bend over backwards to make sure we are happy or at least mollified if we're pissed about something or another that really has nothing to do with Virgin, and especially if it is.
The point I'm getting to is that after a few candid conversations I've had with flight attendants, these people are paid shit. Fucking, low-grade shit. Pardon my language, but its true. Pilots earn a bit more, but its still crap.
2 years ago, one flight attendant I got to know coming back from D.C. said she earned something like $30k after several years. The average pay is lower.
Its utterly ridiculous that some of the nicest, caring people in the airline industry have to deal with such people as the general public (myself included, of course) and yet make less money than a manager at a McDonalds franchise. Day in, day out.
I'm assuming that the pilots union doesn't include the flight stewards. Given that, I would encourage the flight attendants to strike as well for better pay. They well deserve it.
I'm the kind of person that will pay a little extra for quality. I do it with food, personal products, and travel. I don't fly Virgin because its cheaper, though it often is. I fly them when I can because I enjoy the experience and don't want to be stressed out when I get to where I'm going. If it means that I pay an extra $10-$20 to fly Virgin so that their employees directly benefit, that's something I would do gladly.
Why?
You seem to be forgetting the basics of economics. It really doesn't matter what you think they "deserve" or how hard you or they think it is to deal with the general public.
What matters is how many people could/would be willing to do their jobs. And the answer is quite a few, whereas there are many fewer people who could manage a McDonalds.
Thus demand is low for flight attendants, and thus the price is low.
I'm all for people negotiating for as much as they can get, but I certainly don't think it's ridiculous that the market offers different prices for different services.
The truth is economists have long recognized that the job market is different than the market for most other products. For one thing wages are "sticky," they don't change every couple of days the way the price for gas or a loaf of bread does.
Yes, labor is not exactly comparable in market terms to other products--more sticky prices, more difficulty in estimating value, etc.--but the principle and its consequences remain.
We DON'T HAVE to run PSAs to encourage people to become investment bankers precisely because there are high salaries. The salaries are the advertizement and they're incredibly effective.
As far as teachers, we don't have a shortage. We don't need more teachers, we need better teachers. How to attract those better teachers is unclear--a strictly higher salary would attract more of all caliber of teachers which would not help. I suppose commercials are thought to be one way and I think it's likely better compensation will have to be a part of it as well.
But this misses the point. We want our economic system to be as fair as possible, and in most cases (and certainly in the case of flight attendants), the "fairest" solution and the one that pays what flight attendants "deserve" to make is the fair market wage.
Maybe I'm being naive but I'd much rather pay a flight attendant who constantly goes beyond the call of duty and does his/her job at an extremely high standard, say $50K rather than paying someone else 30K, just because they're willing to do the job for less money.
You get what you pay for, right.
And I'd happily pay a premium to an airline with this philosophy.
(However something like the 'greater good' or 'the right thing to do', which is what the op seems to be arguing, actually can be construed as a reason).
http://en.wikipedia.org/wiki/Chesley_Sullenberger
You'll never seen an airline advertising how they have the youngest pilots in the industry.
On the other hand, having flight attendants to be as young, attractive and perky as possible is probably considered a positive thing.
I'm fine paying $10 more a ticket if the low end pilots make 40k or more a year and can afford a good nights sleep. They're someone I don't want many mistakes from.
Does the U.K. have similar rules?
So when you've got that kind of disparity, you're going to have guys who are quite ambitious and willing to sacrifice long hours to move up into the more livable parts of the salary range available in their profession.
Contrast with Qantas, where being less than 45 minutes early to a flight usually means you cannot board (you certainly cannot check-in luggage).
You talk about increased pay - the only way to increase staff pay would be to raise fares which customers don't want.
This is far from "the only way". Southwest Airlines, for example, has excellent fares and excellent pay.
I think your experience of Virgin is great, but I think your comment that they should go on strike because they offer great service is way off. The experience you had is most likely due to the sheer quality of the training and their impeccably high standards, it's also these qualities that mean they are extremely highly regarded talent in their industry.
My dad is a retired airline pilot, so I've heard plenty about the airline industry from him. For airline pilots, seniority is everything. Part of it is the pay scale, which as you pointed out, is unbelievably steep: the new guys get paid almost nothing, the oldest hands make (at least) the kind of money people normally associate with lawyers and doctors. However, other things that dramatically effect lifestyle are also driven by seniority, such as scheduling and vacation. The senior pilots are able to schedule themselves for contiguous trips and to be home for weekends. My dad used to pull a trick where, if we were planning a vacation, he would book himself up solid with flying for the first two and a half weeks of the month and then hit his legal monthly limit for flight time, after which he got the last week and a half of the month off without having to take any vacation. New guys, on the other hand, get stuck with crazy schedules where there are inconvenient gaps between flights, leaving them with low ratios of hours flown/days worked. Seniority also determines where you can get stationed: the most senior get to pick their home station, the more junior must select less-desirable stations. The most important aspect of seniority is furlough: least senior gets furloughed first. In a cyclic industry with big swings of expansion and contraction, this is a very big deal. When my dad first got out of the Navy and went to work for Pan Am, they gave him an offer: start immediately as a flight engineer and move up to co-pilot in a year, or wait six months to hire on directly as a co-pilot. Even though he wanted to get back into the pilot's seat as quickly as possible, he chose to hire on immediately and delay co-pilot status. He didn't know it at the time, but it turned out to be the best career decision he ever made: a few years later there was a major furlough, and he was just a few seniority numbers above the furlough line. If he had waited those six months, he would have been furloughed and out of work for several years.
It's not set up this way because of the airlines, its because of the pilots' unions. Part of it is driven by position: Captains get paid more than co-pilots, and pilots of bigger jets (longer flights) get paid more than pilots of smaller jets (shorter flights). Even that is driven by seniority, though: the most senior pilots get the big jets. Some aspects of the seniority system make complete sense: you don't want the airline to use a furlough as an excuse to get rid of its most highly-paid pilots. However, the pay scale doesn't need to be nearly as steep as the unions make it, and if it wasn't so steep then the airlines wouldn't have to lay off as many junior pilots to save a given amount of money.
http://www.pea.com/imd/airline-pilot-salary.html http://www.glassdoor.com/Salary/McDonald-s-Store-Manager-Sal...
Maybe they start around the same, but they certainly diverge pretty quick.
They heard you were there because the gate agent went aboard and told them (nicely, I am sure) to get off the plane.
Employees flying standby are always at the mercy of late arriving paying passengers.
And, sure they had no compunction about getting off because
1) they were told to
2) employees are keenly aware that grousing in front of the customers is a Bad Idea.
I'm sure they were actually in good spirits about it: flying non-rev you know you can be bumped and after all it's in favor of people paying your salary.
I know this won't fly in general, especially outside the US where tipping is not nearly as customary, but this has been a method to offset low paying jobs where service level influences our overall spending.
I don't know what the lifestyle of a flight attendant is, but if the advancement of flight has reduced their positions to that of a McD's manager, blame us, the general public, because we've forced Airlines to optimize for scale transport.
As for Pilots...it gets tricky because they are very much vital. The seniority crap sucks but is understandable in a job market with a very finite requirement of personnel. To be a Senior Captain with a large carrier, like Singapore Airlines, means you'd be in the 200k+ salary club.
The number of short-hop vs long-leg flights is probably indicative of why there are so many junior level pilots paid less than senior level pilots paid more.
Furthermore, I'd say aircraft like the Airbus 380 compounds this problem by basically forcing a hub and spoke model where the large "carrier" aircraft can only be manned by senior pilots. If we had more direct-direct flights it would open up room for many semi-senior pilots and potentially distribute wages better.
I'm the kind of person that will pay a little extra
for quality. I do it with food, personal products, and
travel. I don't fly Virgin because its cheaper, though it
often is. I fly them when I can because I enjoy the
experience and don't want to be stressed out when I get
to where I'm going. If it means that I pay an extra $10
$20 to fly Virgin so that their employees directly
benefit, that's something I would do gladly.
Edit: his proposal to remove all but one lavatory to make room for extra seating and charging for use of the remaining one is textbook.
If you want to give them more of your money, or start a company that pays them better, or take up a collection for them, nothing is stopping you.
The airline is paying them a salary and you are paying them nothing. Yet you are mad at the guys who are providing their job in the first place?
2) There are many things OP could do besides starting his own airline. Do some Kickstarter like thing for the ostensibly underpaid flight attendants. Do a Hipmunk like thing where there's a wage surcharge on each ticket, given directly to the flight attendants.
In short, do something to put money in their pocket rather than pointing a finger at Branson, the guy who is actually putting money in their pockets today.
Otherwise, it's all too easy to be generous with other people's money.
It may taste vapid to you or not -- but it's entirely valid.
In fact, Richard Branson at one point was so dissatisfied that he DID "build his own airline".
Your point was?
Sounds great, pity it's PR rubbish. The service that I got from Virgin Atlantic in December 2010 when Heathrow was troubled with a little snow was nothing short of crappy.
They may be good in the air, but if you have to call them to sort out a problem, you are already screwed.
I have avoided flying with them since.
The December airport closure was out of Virgin Atlantic's control, and affected all carriers, but their lack of information, the inability to take any calls on the helpline for 48 hours afterwards, and the slowness and opacity of the process of offering the bare legal minimum of a refund for a wrecked Christmas holiday leave everything be desired.
They offered a statement about the "unprecedented" conditions. I don't care and it doesn't matter if the conditions had precedent or not. Stuff that hasn't happened before happens every day. What matters is if it was predicted (it could have been, it was not) and if it was managed acceptably (likewise).
Dear Virgin Pilots,
The very founding of Virgin Atlantic in 1984 was born out of an idea to reinvent the airline industry. To create an airline where the staff were united to offer a wonderful service to their customers. An airline with a special culture where the people working for it were treated well and where the company was responsive. It literally takes a lifetime to build that kind of culture – well 27 years to be precise! And what a great airline everyone has created.
The frightening thing is how quickly that culture can be lost. Therefore although I haven’t been involved with managing the airline for a number of years, as its founder I take a keen interest in its future, the future of its people and wish to make sure that no one makes a decision that damages or destroys it. It would be just too sad.
Keeping this kind of culture when the going gets tough is particularly challenging and a particular challenge for all of us.
Virgin Atlantic has withstood the toughest conditions in the aviation market since 9/11. You’ve all battled against a deep recession, the impact of volcanic ash clouds, earth quakes in Japan and severe snow storms on both sides of the Atlantic to name but a few.
The airline and our customers continue to face rising APD taxes, sky high fuel prices, a weak pound, increased competition on most routes and uncertain consumer confidence.
Although you may not always agree with senior management decisions, I believe that the team has built a great airline. Starting with just one second hand 747 few people thought we would survive for more than a year or two, let alone expand to create as many jobs and careers as we have. “Too young to Fly, too old to Rock n Roll” were Lord King’s famous remarks at the time.
In the intervening years Virgin Atlantic has grown, while the industry has seen a number of airlines such as British Caledonian, Laker Airways, Dan Air, Air Europe, XL, People Express, Air Florida fail resulting in many lost jobs. A lot of our older pilots were casualties of these bankruptcies and only managed to get a job again due to the tremendous team that was building our great airline, keeping the planes flying and ensuring the public wanted to fly with us.
In America the internal strife in the airlines led to almost every one of them going bust; but importantly some of the jobs were saved by going into Chapter 11 and launching again. A luxury that doesn’t exist in the UK - you are either bust or you are solvent.
In the last week I have spent a lot of time trying to understand whether the management team at the airline has treated everyone fairly and whether the company can afford to go further with its pay offer.
The balancing act our Chief Operating Officer and board have is that if we go further for one sector of the workforce, especially in these difficult times for everybody, we have to do the same for all sectors. And from looking at the figures it will mean asking the public to pay higher fares and in this difficult economic climate, we simply cannot do that at this time.
The management have told me they are happy to share up to date corporate accounts with your union so they can understand the financial context from where the offer has been made. As shareholders we’ve also got to ensure the airline is strong enough to withstand the many challenges it faces in this constantly changing market.
I have looked at the details of your offer and believe it is fair. From the company’s point of view possibly a little too fair! It is one of the best in the industry, along with many other commitments that offer real value to you. If you haven’t read it I would suggest you do.
The COO has to balance the interest of everyone at Virgin Atlantic and I don’t envy his job especially as we’ve had three very tough years in a row. I believe over the last 27 years the team has got it about right. As a result, Virgin Atlantic has survived and jobs have been secure.
Whilst on the subject of fairness I think it’s worth you knowing I have taken no salary out of Virgin Atlantic since 2005. Since Singapore Airlines bought into the company 10 years ago both of us have invested more money into the airline than we’ve taken out to deal with crises like 9/11 and to fund vital products and service innovation.
Despite this I am still committed to continuing to support Virgin Atlantic through difficult times provided those difficulties are not self-inflicted.
Which sadly brings us on to BALPA’s very public threat of a strike. I was obviously extremely sad to see threats of strike action in the press as these negative comments will have already damaged the reputation of our airline and the trust our customers place in us - which we rely on so heavily. They have also played into the hands of our larger rivals.
We are already losing business from this and are in danger of losing money again this year if the uncertainty of those travelling lasts much longer. Just look at what happened at BA over the last few years.
We need to make sure that we never inflict such damage upon ourselves and our customers and to do so in this market place would be very dangerous.
Unless BALPA withdraw its threat very soon it will leave an indelible scar on the company, impact customers’ trust in us and damage the unique and friendly culture at Virgin Atlantic. It will affect jobs and it will make it very difficult for the company to afford the current offer on the table.
Your union asked me to get involved and I’ve looked at all the facts and believe that our management have made the best offer it can. Our Chief Operating Officer, Steve Griffiths is ready to meet with BALPA and your committee again and I appeal to you to insist that they do so as soon as possible.
Your union representative also publicly asked to meet with me personally. I believe that would only cause more publicity which would further damage the airline and I am not best placed to deal with the details of the negotiation. However I would be happy to have a private meeting with as many pilots that are available to answer your questions about the future of the airline. I will have a member of my team get in touch regarding potential times.
Anyway, united we ‘sailed’ through the last 27 years together, united we’ll enjoy another 27.
I look forward to celebrating them with you. I look forward to seeing you all soon.
Best,
Richard
PS: Having spent the last few days reflecting deeply on this issue I believe that both management and union need to urgently work together on modernising both their relationship and communications.
Cooperation is a big deal.
In almost every airline negotiation with pilots, airline management has a far greater position in the negotiation, except in the case of Virgin where the pilots probably still have a worse position, but a much more equal playing field!
Here is why:
There is something that is EXTREMELY important to understand about the economics of being a pilot at an airline. Pilots cannot switch airlines without starting at the very bottom. They cannot leave the airline they are with! If they do, they will go from $100-$150K to $30K.
Pilots are not promoted based on how good they are, they are promoted by seniority which means that if a pilot is a captain with Virgin and they switch to whoever is hiring now, they will never make their previous salary for the rest of their career.
There is a second piece of airline economics that is EXTREMELY important. If the pilots strike, the losses an airline would take while trying to replace them will easily bankrupt any airline. The fixed costs, long training time and lack of trained pilots in the market makes a strike an airline killer.
When you combine these two factors, you would normally say that both management and pilots are both in really bad positions to negotiate and MUST come to an agreement or they will both loose badly. But, the reality is that pilots loose far worse than management… Why? Well, management can take their skills to a different company whereas pilots cannot transfer their skills for the same money. This puts the negotiation power directly in management hands, with one exception… Richard Branson.
He is getting involved and trying to get everyone together because he knows that if the pilots strike, management cannot afford their demands and the airline will be bankrupt. If this occurs, he takes a capital loss which will suck, but the real blow is to his ego and the Virgin brand. No other airline management is in this position.
A lot of airlines will be facing strikes over the next few years, great management will bridge the gaps, talk to both sides and keep the airlines running. Terrible management will allow them to fail and move on to the next company.
Is it normal for them to offer to show up-to-date books to the unions? on that would they even be able to do anything with it?
I am not sure anyone would ever expect Branson to say anything other than the company line, that he agrees with managements offer. That he feels those who are striking are hurting the image of the company.
If I were a pilot, the last opinion I'd care about would be the eccentric billionaire CEO's.
One news stories I read said he became involved at the request of the pilot's union - so I guess they do care about it :)
He has no plans to meet with the union. His personal meetings with pilots are probably more to brow beat & pressure them, instead of a gesture of goodwill.
Let's just say becoming friends with a billionaire because you've been invited to meet him due to the fact that you're on strike at one of his companies is unlikely.
Check out the "Employees First" section here - http://www.hrh.ch/whoiswho/bransonr/br_page4.html
Also your article is 13 years old. It sounds like things have changed & Branson has a more hands off approach with the airline now.
Here's a recent article detailing how Branson gave 8,500 Virgin Atlantic employees 2 week's holiday + 2 free tickets to fly anywhere on the airline's network as a 'birthday bonus' for loyal service:
http://www.dailymail.co.uk/news/article-1194942/Virgin-staff...
It has already announced an imposed pay freeze for its staff. Board directors will not take bonuses this year.
And the airline has filed to reduce its headcount by 600 staff - a cut of 7 per cent - though it says it has so far activated about 500 job cuts.
It's a bit like saying "everyone gets cake, oh and 7% of you are getting fired".
Now the conversation has veered off into if Branson is a friend of his employees. It sounds like he's partied with employees during the good times. But it's physically impossible for him to be a true personal friend with all his employees. While it's good to be on friendly terms with the founder/president/executive team, you must always keep in mind their position of power & what their motivations might be.
Good companies probably do layoff people. But there is this concept that if you fire someone on a friday it's better for them, or right before their weekend or you give a bunch of employees free travel bonuses while sacking 7% of them. It's slight of hand.