Description: WestJet pilots have agreed to take a 50% pay cut to keep more of them working during these interesting times. Though WestJet originally thought the effect of the pandemic on air travel would force a reduction of about 1,200 staff, the pilots’ offer has cut the number to around 450. Actions like this across the economy are helping to keep highly trained employees in their companies until the situation turns around.
Date: October 5, 2020
Source: cbc.ca
Link: https://www.cbc.ca/news/business/westjet-alpa-compensation-1.5748468
Discussion points:
1) Would you be willing to take a 50% pay cut to save your fellow-workers’ jobs?
2) Why is it so important for businesses to keep highly-skilled people employed?
3) The opening vignette of Chapter 9 in Wiley’s Financial Accounting: Tools for Business Decision-Making, tells us how WestJet depreciates various components of its airplanes. Do you think WestJet could make a case for charging less depreciation in 2020 on some of its aircraft components?
Gabriel Pascal Champagne, Davide Sebastian Colonna, Alea Sophie Büchel
1. Our group came to a consensus that if we were in the same position as the WestJet pilots, we would take the 50% pay cut assuming we could afford it. If we were able to be able to continue to pay our bills with reduced pay we would do that. Considering that the pandemic doesn’t seem to be going away, and travel hasn’t begun to comeback yet, there will likely be more layoffs in the near future before airlines begin to hire again. Taking a 50% pay cut now, and saving the jobs of your fellow workers, could mean that down the line WestJet may not have to layoff more pilots and staff which may include yourself.
2. In the case of pilots, it is very important to have highly skilled people to fly the planes. Being a pilot is a very important and difficult job that requires extensive education and training and not just anybody can be chosen for that job.
It is especially important to keep highly skilled people employed as the higher their skills are the more difficult it becomes to find the right people to replace them. That is because the higher the skill level gets the less people there are who have that skill level. This applies to all areas of work.
3. Depreciation is directly related to the life span of the long-lived asset in question. Because of the pandemic, WestJet’s planes are not being used as much. Therefore, the current lifespan of certain parts will increase due to this decreased usage. For example, the engine is not as active as it was in the previous year. Therefore, WestJet could make the case that the lifespan of certain components will increase relative to what they thought it would be before the pandemic. Since the lifespan increased, WestJet would depreciating the same amount remaining, but over more years. Therefore, they could argue depreciating less this year.
Jack Hooper, Alexa Kastner, Myaella Letourneau
1) Yes, our group decided that we would take a pay cut. A pilot’s salary is usually quite high (especially when compared to other industry salaries), so even with a 50% price cut, the money would still be fine. With the price cut in effect, many less people would be losing their jobs at the airliner, in fact, 62% less pilots would be lost. As long as the cut salary could still support us financially, we would take the cut.
2) It’s important for a few reasons. First, highly-skilled people are not easy to find in a specialized industry. Pilots go through years of training to work for an organization like WestJet, and airlines really value these people. Finding a new pilot ready to fly can be a tricky job. Secondly, experience with time is something to think about. Flying planes is not something you can walk away from for a few years and then come back to, practice is required. So, when the choice arises where an airline has the option to keep a pilot who’s been flying for ten years, and one who has never flown commercial before, obviously the company will go with the more experienced one.
3) We think that it could. Considering that the pandemic has had a serious negative effect on airline companies, that means that planes are being used less and less. In turn, that means that planes are still depreciating, but at a much slower rate.