MarEx Mailbag:
The mailbag is heavy this week, with letters addressing last week’s lead editorial. Comments come from both sides of the equation.
Last week, our lead editorial referenced the issues related to marine pilot pay, what’s reasonable and how all of that gets determined. In particular, the article brought to light a “study” done recently in the State of Florida which suggested, among other things, that pilot pay there could be pegged at the levels of other similar transportation related professions. Not surprisingly, the issue is a hot one right now and our editorial pulled in a raft of letters and some heavy “click-though” traffic. The piece, entitled, “Politics, Pilots, Pay – and Predictably, Problems…” can be read again by clicking HERE. Or, you can simply read what a bunch of our readers had to say about it below.
MarEx Editor’s remarks: The first group of letters addresses the issue of pay and expenses, net pay and how the pilot’s “infrastructure” gets funded. I said that I wasn’t sure, and the readers didn’t disappoint me with their responses. Read on:
Mr. Keefe,
(Name redacted) asked me to forward the following information:
* GalTex Pilot Association financials from 2007 and 2006(PDF document) .
* Analysis of same using USCG Great Lakes Guidelines.
(Name redacted) was copied on some of my information from previous rate hearings. This time I am an unlikely Proponent of a rate hike for the GalTex pilots, only because the industry let all other Texas groups obtain hikes this past year without a challenge, and I feel that they should approach all groups in the state with equal vigor. Galveston Pilots are no more the villains than other pilots or associations.
The current approach by Industry in Texas totally misses the mark – they should be concentrating on straightening out the tangled web of the Texas Transportation Code which allows these outrageous rates and compensation packages. Check out the methodologies of the USCG on the Great Lakes(46 CFR Parts 401-404). All maritime states should have laws similar to those, which set realistic compensation targets tied to the pay of U.S. Captains, and then work back to fair rates, adjusted for difficulty and length of pilotage.
Two further comments after reading your article:
I wonder if the WEG guys got the Captain Pay correct. I’ve never met a Captain that earned anywhere near $230,000.
I personally know that many (not all) pilots in Texas have very poor qualifications. Some with little or no college education (critical thinking skills), many with no offshore experience, some with licenses as low as 200 ton (fishing boat). Inspection of applications in one port showed less than 40% of the pilots held a captains license for the very vessels that they pilot. I suggest that you to request all application information on every pilot licensed in the state of Florida and determine what their qualifications really are.
As an executive with a company which is directly affected by pilotage in several ports, I cannot have my name used, either. You are welcomed to quote me as an anonymous responder, or use the information/comments as your own.
Dear MarEx:
You really missed the boat in paragraph 6 of your commentary regarding the infrastructure operational costs that the pilots groups bear. Locate a copy and take a good look at their financials. Their compensation is ABOVE AND BEYOND any costs associated with the operation of their business. You should also look into additional rate-supported compensation, such as retirement pay (while un-traditional, is included as an additional expense) Christmas parties, unlimited lawyer’s fees for any purpose (including suing rate-payers), etc., etc.
Name Withheld by Request
Good Morning Joseph,
I have just read your article on wages for marine pilots in the USA and found it most interesting. In Australia, we have different arrangements around the coast f or the employment of the pilots. For example, Melbourne is a private company, while Sydney used to be but has now been bought back under the state authority.
The wages you mention are what the majority of fully licensed pilots in Australia would earn. For example, Port Headland in Western Australia pay around $AUD500,000 to their pilots. And given the location, they may also throw in free rent.
Why are the wages so high in Australia? Some people put this down to the fact that we used to be an English colony, where piloting jobs were reserved for ex-patriots. These ex-patriots demanded high wages, and the tradition has continued.
Best Regards
Chris
Chris McGuire
McGuire Consulting Trust
MarEx Editor’s Remarks: I always enjoy hearing from our International readers. In this case, our Australian writer says that Aussie Pilots get paid to a similar scale to that enjoyed by their American counterparts. Here is another letter on the same subject:
Dear Mr. Keefe:
I enjoyed reading your article, which was quite informative. I am an attorney for the Port of Galveston, Texas. I don’t know about other harbor pilots, but we have had a number of recent rate increase applications filed in Galveston County, Texas, which have provided many of the details you ask about, regarding pilot compensation.
The Galveston County Pilots admit to making at least $335,000 per year in net distributions. This is net – after the following are all paid for:
• all capital costs, including pilot boats.
• all operating costs.
• a comprehensive health care plan (pilots and spouses are covered for life).
• a retirement plan worth over $1.25 million for a pilot who works 21 years (add over $100,000 to that amount for every additional year they work).
• compensation for operating staff.
This is based on the pilots’ financial summaries and hearing testimony. Although requested, the pilots have consistently refused to provide detailed capital and operating expense information, since they are not legally required to do so.
The Galveston County pilots work (or rather, are “on call”) 26 weeks per year. Additionally, state law provides that if a pilot damages a ship and/or crew or passengers, the pilot’s liability is limited to $1000 (assuming no intentional or willful misconduct is involved). Not a bad deal, I’m sure you’ll agree!
Earlier this year, the Pilots filed a rate increase application seeking increases exceeding 40% over the next 5 years. During the rate application process, the pilots agreed that a second pilot on cruise ships was no longer required for safe operations, and stipulated to this at a hearing.
After holding evidentiary hearings, the Pilot Commission (our local regulatory body) voted a 5% increase. The pilots complained, stating that when the removal of second pilots on cruise ships was factored in, the increase would be less than 5%. They talked the board into letting them recapture this as well – in effect getting the money without having to do the (unnecessary) work. Ultimately, the effective rate increase approved by the commission approached 9 per cent.
The Pilots were still unhappy, and withdrew their rate increase application. They now take the position that the agreement to remove the second pilot on cruise ships is void, as it was based on a withdrawn application. The bottom line: cruise lines are required to pay for a second pilot on ships coming into Galveston, even though the pilots stipulated this is not necessary for safety.
The Galveston County Pilots have now filed yet another rate increase application – again seeking double-digit rate increases.
Your article referenced comments about pilots “acting as arbitrators” between allegedly competing interests. Frankly, this does not make much sense. Shipping companies and cruise lines are simply not going to risk the catastrophic monetary losses and potential liability inherent in unsafe operations. At this point in time, the real question is the extent to which pilots are really even needed any more, especially on cruise ships that call on a particular port on a weekly basis.
The piloting industry arose in the days when multi-masted schooners plied the seas carrying passengers and wares to the New World. Today, with modern GPS, sonar and computerized navigation equipment, expensive pilots can seem more like the elevator attendants who used to push the buttons for us in the Courthouse elevator.
That said, there may be times when a second pair of experienced eyes at the helm of a vessel might be helpful. But at $335,000 per year plus benefits, for 26 weeks of work per year, the compensation seems pricey. Giving a legal monopoly a raise just to provide a raise is no answer – unless you want to see the business go elsewhere.
As the father of two teen-aged girls, I used to think I would like to be an orthodontist, if I could do it all over again. I’ve since changed my mind. I want to be a pilot!
Thank you for your time and consideration.
Anthony P. Brown
McLeod, Alexander, Powel & Apffel, P.C.
Legal Counsel, Port of Galveston
Hi Joe,
That’s an interesting editorial. To clarify, are you suggesting that pilots pay for the infrastructure to do their jobs? It would seem to me that a pilot’s salary is simply that—the individual’s income--and does not encompass the costs for infrastructure. Isn’t the cost of maintaining equipment, training, AND salary, incorporated in the “pilotage fee” paid by the shipowners?
Cheers,
Kathy
Kind regards,
Kathy Haugen
HAUGEN CONSULTING LLC
MarEx Editor’s Remarks: As you can see, more than one writer was reluctant to be identified on the matter – and that’s a common denominator that you’ll find as you read on below. To answer Ms. Haugen’s question, apparently, yes, the quoted salaries are exclusive of the expenses incurred by the pilots identified and the expenses are also covered. I never claimed to know the answer and I said so, in print. I have covered pilotage issues in the news for more than eight years and if there is one thing that I do know, it is that reconciling exactly what these people make, how they do it and what percentage of it goes to expenses, is rarely an easy calculation. The next group of letters address the professional and safety aspects of a pilot’s job:
Dear Joe,
Pilotage in the USA is not homogeneous, differences include (1.) how an individual obtains the job, (2.) on what the job actually requires, (3.) hazard, (4.) cost of living in the subject location and (5.) business risk. There should be a pilotage rate differential between these classes and pilot net income should relate to these factors.
1. Some pilots get their jobs primarily based on nepotism as opposed to those pilot positions that require significant previous professional accomplishment and the possibility that, no matter how qualified, the individual may never be offered a pilot position. There should be a compensation differential between these 2 classes.
2. Second consideration is the work actually performed. Some pilot positions are almost entirely that of an inland water navigator. Other positions require complex shiphandling skills in very restricted areas in addition to service as a inland waters navigator. There should be a compensation differential between these 2 classes.
3. Some Pilotage grounds subject the individual to extreme personal risk, i.e., Columbia River entrance, and some are comparatively safe, i.e., NOLA-Baton Rouge section. Some pilot grounds are more likely than others to result in civil or criminal penalties. There should be a compensation differential between these classes.
4. Some pilotage grounds require a pilot to live in a higher cost of living area than others. i.e., Honolulu and San Francisco vs. Port Canaveral. There should be a compensation differential between these classes.
5. Never considered by opponents of rate increases is the consideration that Pilotage is a risky business. Any businesses may succeed or may fail due to conditions beyond the control of the owners/investors. Self employed pilots face the financial risks normal for businesses, boats, employees, stations, plus the possibility of Geo physical events or severe weather events that can close a navigation area, i.e.: Alaska, Mobile, and the mortgages must still be paid. There should be a compensation differential based on business risk factors.
Air Traffic Controller compensation levels may be appropriate for Pilots who inherit their positions based on nepotism, require lesser prior achievement for selection, fewer skills, less personal risk, less criminal risk and low financial barriers to entry.
On the other hand, there are pilotage jurisdictions that require significant prior professional achievement, capricious selection and appointment systems, pass or washout training programs, maximum close-in ship handling, aggressive prosecution by civil authorities, high personal boarding/disembarkation risk, weather risks, Geo events (tsunamis, earthquakes) that could close pilotage areas, and high initial financial investment with recourse debts. Circumstances like these could easily justify compensations levels commonly associated with the highest paid occupations in the USA, i.e.: Goldman Sachs executives or the proverbial brain surgeon.
Name Withheld Upon Request
MarEx Editor’s Remarks: The writer is an experienced professional. The letter brings up some interesting and I think, valid points. Here’s another from someone you will recognize:
11/06/09 / Linthicum, MD
Dear Joe:
Another excellent article regarding the aspects of State Pilotage.
You touched on an important part of pilot compensation versus other professionals who need to worry about safety or have in their hands the lives of passengers or crew members.
Unlike air traffic controllers, ship captains, or airline pilots, the state pilots do have to worry about their own costs. You have pointed out the cost of a pilot boat as well as the cost of fuel. Both of these costs are rising. However, unlike the air traffic controllers, airline pilots or Ship Captains, the state pilots have to cover themselves and their families for health care, the cost of which is really rising. The air traffics controllers, airline pilots and the ship's Captains being employees have these costs provided by their employers. With a state pilotage group, these payments have to come out of whatever rate increase is given by the state rate making body.
While state pilots as independent contractors are not responsible to payment for unemployment, any employees that they have are subject to unemployment compensation and this cost has to be paid from whatever rate the state allows the pilots to charge.
You mentioned the cost of a pilot boat and I wish it was true that each pilot group requires one pilot boat. Perhaps a small port can get by with one boat. However, any port that offers 24 hour service has to have at least two boats. The cost of pilot boats and their insurance is a major cost to a pilot group.
So while a state pilot is a highly compensated individual, every one needs to be careful in how we compare the state pilot to other individuals.
Regards,
Tim Brown
MarEx Editor’s remarks: Captain Brown is the President of IOMMP. He is a regular reader and sometimes, he contributes to our discussions with thoughts of his own. Here is another opinion:
Spot on article last week, Joe. What I observe happening around the country is an attack on the safety of our nation’s ports by organized industry groups. The US coastal states all have state pilotage laws to protect the states interest in keeping their harbors open and moving commerce safely. I agree that organized groups, and there are others besides the Florida Alliance want to have control over state pilots, and the decisions they make, or better yet try and use their resources to influence state lawmakers to grant pilot exemption certificates. It’s not about safety when organizations such as the Florida Alliance or whatever an industry group calls itself comes in attacking a state pilotage structure. Pilots represent the public and sometimes the decisions they make on the publics behalf hurt the operators who are required to use them. All foreign flag vessels and US vessels under register are required to have a state pilot aboard.
Can you imagine in Florida in particular if the cruise industry were able to influence the legislature to exempt cruise ships from compulsory pilotage? Imagine a shipmaster who is at a dock during severe weather, and he/she receives a call from their office to move the vessel because the company he/she works for will suffer a considerable loss in revenue because they can’t open up their casino’s in US waters. The master can do one of two things: He/she can say no (pack their bags and walk off the ship), or he/she can take a chance and sail on their own. This is not unique to the cruise industry.
State pilots are compulsory for good sound reason, Safety. It cost money to run and maintain a pilotage service and attract the best and brightest mariners to become pilots of the future. State pilots are heavily regulated because they are compulsory. They maintain offices, staff, boats, training, communications, plus donate hours of service to local and international maritime and environmental organizations and committees. State pilots are the first to board foreign vessels entering our harbors, and if they don’t deem it is safe for the vessel to enter the transit stops until such a time it is safe to do so. Pilotage is a unique and a dynamic responsibility with great risk to ones personal being. Pilotage is a dangerous profession and requires a tremendous amount of expertise and experience to work safely.
Our forefathers were mindful enough to grant each state the ability to regulate foreign commerce and protect the states interest in commercial activity and its environment. Legislators need to understand the importance of maintaining a properly funded and supported pilotage system outside the political lobbying and campaign donations to influence state pilot laws and revenue. I remember another article you posted some time ago referring to just that.
I really enjoy reading your newsletter.
MarEx Editor’s Remarks: This individual also did not want to be identified. I think that we can all see his/her frame of reference and likely profession. Here’s another one:
Joe,
Regarding your opening remarks:
“A backlash against perceived excessive pilot compensation may, in the short run, look like the right thing to do. Down the road, the unintended consequences may outweigh the immediate 'benefits'”
Dr. Richard Jordan Gatling is said to have made his now famous/infamous Gatling Gun to reduce the size of armies and in turn reduce the deaths by combat and disease - another case where "unintended consequences" may have been overlooked.
But then, who's counting - isn't that why we have hindsight?
John Rice
MarEx Editor’s Remarks: Mr. Rice has written in before. He always has something interesting to say. This week, I think his comments go towards the safety aspect of the conversation.