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AA: Revenue Growth Will Offset High Labor Costs  
User currently offlineworldtraveler From , joined Dec 1969, posts, RR:
Posted (4 years 3 months 6 days 22 hours ago) and read 6258 times:

AMR, in a filing with the SEC today, said that its labor cost disadvantage is about $600M per year but that its revenues should improve by about $500 via alliance and network activities.... but it doesn't sound like AA has any reasonable chance of returning to profitability in the near future.

AA is banking on labor cost increases at other airlines to help offset its own labor cost disadvantages and rightly expects that there will be cost increases at some other airlines - while also failing to acknowledge that based on the contracts that have been tentatively agreed to with the TWU, AA's labor costs are going to go up as well.... and the more contentious pilot and FA contracts will likely result in even larger cost increases.

They also fail to acknowledge that only UA/CO labor costs are likely to go up significantly as part of the merger integration process while DL has already incurred most of the labor cost increases as a result of the merger (they are now reaping synergy benefits from cross-utilization of personnel) while other key carriers such as WN, US do not have merger related or other significant cost increases likely.

As of the first quarter 2010, AA's costs were 15% higher than DL and CO and 8% higher than UA.

If AA is not projecting revenue increases any higher than they are and their costs are going to increase as well, how can AA POSSIBLY return to being a profitable company?

The entire text of AA's SEC filing is below - minus the legal disclaimers....


This report provides an estimate of revenue improvement and cost savings associated with certain AMR Corporation (the Company) initiatives, as well as an estimate of the Company’s current labor cost disadvantage versus its network competitors.

Under the Company’s current plans, the Company estimates that the implementation of its Cornerstone strategy, which focuses its network on five key markets (New York, Los Angeles, Chicago, Dallas-Fort Worth, and Miami), the implementation of the Company’s proposed Joint Business Agreements with British Airways/Iberia and Japan Airlines, and various other alliance and network activities will result in incremental revenues and cost savings of over $500 million per year. The Company expects that it will be realizing the majority of these incremental revenues and cost savings in 2011, and the remainder by year end 2012. This estimate is based on a number of assumptions that are inherently uncertain, and the Company’s ability to realize these benefits depends on various factors, some of which are beyond the Company’s control, such as obtaining regulatory approvals of its proposed Joint Business Agreements and other factors referred to below.

Based on analysis of airline industry labor contracts, the Company also estimates that at the beginning of 2010, American Airlines's labor cost disadvantage (the amount by which its labor costs exceed what such costs would be if they were determined based on other network carrier labor contracts) was approximately $600 million per year. The Company expects this gap to narrow as open industry labor contracts are settled. This expectation is based on a number of assumptions, the validity of which cannot be assured. The airline industry labor contract negotiation process is inherently uncertain and the results of labor contract negotiations are difficult to predict.

51 replies: All unread, showing first 25:
 
User currently offlinecatiii From United States of America, joined Mar 2008, 3029 posts, RR: 4
Reply 1, posted (4 years 3 months 6 days 22 hours ago) and read 6210 times:

Quoting worldtraveler (Thread starter):
AA is banking on labor cost increases at other airlines to help offset its own labor cost disadvantages and rightly expects that there will be cost increases at some other airlines - while also failing to acknowledge that based on the contracts that have been tentatively agreed to with the TWU, AA's labor costs are going to go up as well.... and the more contentious pilot and FA contracts will likely result in even larger cost increases.

So chalk this up to the "wishful thinking" category.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 2, posted (4 years 3 months 6 days 22 hours ago) and read 6171 times:

We know AA's costs are "out of whack" with rest of the other carriers. I fail to see why certain people simply don't understand this.

If AA can't compete with costs, its going to become a "2nd-tiered" carrier.



"Up the Irons!"
User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6603 posts, RR: 24
Reply 3, posted (4 years 3 months 6 days 22 hours ago) and read 6135 times:

Quoting worldtraveler (Thread starter):
They also fail to acknowledge that only UA/CO labor costs are likely to go up significantly as part of the merger integration process while DL has already incurred most of the labor cost increases as a result of the merger

Except that DL still faces potential unionization issues which will require DL to offer raises to try and buy off the employees or face a union that will want raises. Not to mention that DL's pilot contract becomes amenable in only 1. 5 years and the DL pilots will want substantial raises.

With that said, I agree that AA is somewhat foolish if they think labor increases at other carriers will really save them. If AA can't do a better job on the cost side, they will struggle to make money.


User currently offlinessides From United States of America, joined Feb 2001, 4059 posts, RR: 21
Reply 4, posted (4 years 3 months 6 days 22 hours ago) and read 6023 times:

Quoting worldtraveler (Thread starter):
AA is banking on labor cost increases at other airlines to help offset its own labor cost disadvantages and rightly expects that there will be cost increases at some other airlines - while also failing to acknowledge that based on the contracts that have been tentatively agreed to with the TWU, AA's labor costs are going to go up as well.... and the more contentious pilot and FA contracts will likely result in even larger cost increases.

I think that's the point. The TWU contract will result in higher costs, but only marginally. The FA and pilot contracts are yet to be negotiated, but AA is going to have to push hard here and not give in to excessive union demands. It may come down to a big game of chicken between AA and the unions -- AA might dare them to strike in this economy, and the unions might just to through with it, who knows.

Quoting worldtraveler (Thread starter):
If AA is not projecting revenue increases any higher than they are and their costs are going to increase as well, how can AA POSSIBLY return to being a profitable company?

It all depends on how much their costs increase.

Quoting Jacobin777 (Reply 2):
With that said, I agree that AA is somewhat foolish if they think labor increases at other carriers will really save them. If AA can't do a better job on the cost side, they will struggle to make money.

I agree -- relying on other carriers' costs to increase is foolish, and while I don't think AA is solely relying on this, they are putting too much emphasis on it. The question is, what can they do? They can't deviate from their existing labor agreements too much. They have some unions who are going to fight tooth and nail in upcoming negotiations for every cent they can get. Short of bankruptcy, the only thing they can do is agree to some increases in labor costs, provided that they are accompanied by very significant increases in productivity.



"Lose" is not spelled with two o's!!!!
User currently offlineLAXintl From United States of America, joined May 2000, 25077 posts, RR: 46
Reply 5, posted (4 years 3 months 6 days 21 hours ago) and read 5891 times:

Man, seems hardly a manner to run a business in hopes your competitors suffer misfortune, or in this case substantial cost increases instead of proactively trying to manage your own house.

Even with industry wide cost creep, it seems naive to think AA will not also suffer its own increases and todays cost imbalance wont simply shift, or reappear for AA in the future again.



From the desert to the sea, to all of Southern California
User currently offlineLDVAviation From United States of America, joined Dec 2008, 1056 posts, RR: 5
Reply 6, posted (4 years 3 months 6 days 21 hours ago) and read 5774 times:

Quoting worldtraveler (Thread starter):
As of the first quarter 2010, AA's costs were 15% higher than DL and CO and 8% higher than UA.

If AA is not projecting revenue increases any higher than they are and their costs are going to increase as well, how can AA POSSIBLY return to being a profitable company?

There is nothing in this filing to suggest that AA expects to offset the $600 million cost disadvantage with the $500 in new revenue. You jumped to that wild conclusion.

AA is negotiating with its unions to achieve parity in labor rates with its legacy peers. How is it that you came to the conclusion that AA is going to end up with the highest pay rates again?

Frankly, this SEC filing tells us nothing about what AA expects its cost structure to be at the end of these negotiations. It tells us, for instance, nothing about what productivity gains AA expects to realize from the new contracts.

On the revenue side, it also tells us nothing about what revenue gains AA might realize from other initiatives, such as a relaxed scope clause, permitting the use of E-jets.

You've singled out two numbers, subtracted one from another, and come up with a $100 million loss. It's just not that simple.


User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4499 posts, RR: 33
Reply 7, posted (4 years 3 months 6 days 21 hours ago) and read 5653 times:

If I understand the posted text correctly, AA expects 1) to realize $500 million in cost savings and revenue increases through alliance activity by the end of 2012, and 2) that its $600 million labor contract disadvantage relative to "other legacy carrier contracts," whatever specifics that means, will ebb in the period in which currently-or-soon amenable legacy contracts at other carriers are settled, presumably due to cost increases at these carriers. The note about "uncertainty" leaves room to suggest--though not state--that AA would like to reduce labor costs as well. So it seems to me they're mostly banking on their competitors' costs going up.

It doesn't seem quite accurate to say that AA expects revenue growth to offset high labor costs, because part of the $500 million is coing through alliance-related savings. They *do* expect their competitors' labor costs grow closer to their own.

In any event, it seems to me a risky time for any airline to bank on a strategy of trying to offset high costs rather than reducing them. As is well known, at least two of the world's major economic centers--Europe and the US--are looking at a period of economic austerity, which among other things holds strong potential for higher taxes and reduced economic activity. Whatever one thinks of that reality--and here I'm just noting it--this is not economically the best period in which to look at high costs as something to be mostly borne rather than reduced.

Jim



Need a new airline paint scheme? Better call Saul! (Bass that is)
User currently offlinepeanuts From Netherlands, joined Dec 2009, 1438 posts, RR: 4
Reply 8, posted (4 years 3 months 6 days 20 hours ago) and read 5591 times:

Quoting DCA-ROCguy (Reply 7):
Whatever one thinks of that reality--and here I'm just noting it--this is not economically the best period in which to look at high costs as something to be mostly borne rather than reduced.

Correct.
AA, in a way, is "hoping" competitors will simply "catch up" to them. As an investor in AA, I would run from a strategy like that.
AA will benefit form BA/IB and JAL synergies, no question. But to "pacify" your costs woes to "time", is a huge error in my opinion. The competition loves it since they are still ahead. It's easier to stay ahead than play catch up.



Question Conventional Wisdom. While not all commonly held beliefs are wrong…all should be questioned.
User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 9, posted (4 years 3 months 6 days 20 hours ago) and read 5480 times:

"American Airlines flight attendants vote to strike"

http://www.marketwatch.com/investing/stock/amr

Yikes..more trouble @ AA......that being said, these union leaders are really out of touch with reality IMHO.

edit:

"NEW YORK (MarketWatch) -- Flight attendants at American Airlines have authorized their union to call a strike if the carrier doesn't ink a labor contract with better pay and benefits, the Association of Professional Flight Attendants said Wednesday. "If we do not have the framework for a tentative agreement at the end of this week, we will continue to push the [National Mediation Board] for a 30-day cooling off period at the end of which we can engage in a strike or other forms of self-help,"

http://www.marketwatch.com/story/ame...ke-2010-05-19-143420?siteid=yhoof2

[Edited 2010-05-19 11:12:06]


"Up the Irons!"
User currently offlineAirportugal310 From Palau, joined Apr 2004, 3613 posts, RR: 2
Reply 10, posted (4 years 3 months 6 days 20 hours ago) and read 5430 times:

Quoting Jacobin777 (Reply 9):
Yikes..more trouble @ AA......that being said, these union leaders are really out of touch with reality IMHO.

Yes...more pay and benefits, but no service improvements from them...just the same old angry and bitter people with short answers for everything.



I sell airplanes and airplane accessories
User currently offlinenwaesc From United States of America, joined Aug 2007, 3385 posts, RR: 9
Reply 11, posted (4 years 3 months 6 days 19 hours ago) and read 5275 times:

Quoting FlyPNS1 (Reply 3):
which will require DL to offer raises to try and buy off the employees

That tactic is already being used, hence the proposed 9.4% pay restoration in October.

Quoting LAXintl (Reply 5):
Man, seems hardly a manner to run a business in hopes your competitors suffer misfortune, or in this case substantial cost increases instead of proactively trying to manage your own house.

Yeah you'd think that, but how many times have we seen it in the last several years? I



"Nothing ever happens here, " I said. "I just wait."
User currently offlinePRAirbus From Puerto Rico, joined Apr 2005, 1136 posts, RR: 1
Reply 12, posted (4 years 3 months 6 days 19 hours ago) and read 5235 times:

90% of AA 18,000 FAs just voted in favor to authorize its union APFA to conduct a strike at American Airlines if contract talks do not produce an agreement and the NMB releases them into a 30 day cooling off period.

Currently, AA/APFA are meeting with the NMB in hopes to reach an agreement...I think I will take both parties entering the 30 day cooling off period to really come up with a settlement. Keep in mind, this does not mean they will go on strike but it sends a message to AA Management. 90% of AA 18,000 FAs voted and almost 97% voted in favor of a strike...stay tuned! :O


User currently offlineB752OS From United States of America, joined Dec 2005, 1322 posts, RR: 0
Reply 13, posted (4 years 3 months 6 days 19 hours ago) and read 5220 times:

Quoting Jacobin777 (Reply 9):
"American Airlines flight attendants vote to strike"

http://www.marketwatch.com/investing/stock/amr

Yikes..more trouble @ AA......that being said, these union leaders are really out of touch with reality IMHO.

edit:

"NEW YORK (MarketWatch) -- Flight attendants at American Airlines have authorized their union to call a strike if the carrier doesn't ink a labor contract with better pay and benefits, the Association of Professional Flight Attendants said Wednesday. "If we do not have the framework for a tentative agreement at the end of this week, we will continue to push the [National Mediation Board] for a 30-day cooling off period at the end of which we can engage in a strike or other forms of self-help,"

http://www.marketwatch.com/story/ame...hoof2

You must be joking....racket, I mean union leaders being out of touch with reality? In a perfect word not one airline employee would be a union worker. Unions have proven to be more and more useless and unneeded.


User currently offlineThePinnacleKid From United States of America, joined Feb 2005, 725 posts, RR: 8
Reply 14, posted (4 years 3 months 6 days 19 hours ago) and read 5155 times:

Quoting Airportugal310 (Reply 10):
Yes...more pay and benefits, but no service improvements from them...just the same old angry and bitter people with short answers for everything.

Hate to be a voice of reason in an otherwise normal airliners.nut debate... but people, it's time to clarify some things about those "evil" unions and the "strike votes" and "contract disputes"...

First off, I'm a union member, I have worked in airline management at a different company before as well.. and I see both sides of the coin. I personally feel unions are a necessary evil and they still have some cause for existance even today. I feel BOTH sides (company and union) will overstep their bounds and exploit the other if allowed to do so... so, the Union is simply a checks and balance and vice-versa... in addition, as a general rule, if a company has happy workers and they were treated fairly all along you would not see an unionization of the workforce (certain Delta work groups for example)...

Now, when a work group is unionized they engage in mini CPA's if you will with the "company"... in this case there is a working framework between the F/A's at AA and AA Corporate... as such, both sides at some point came to agreements on the rules in which the F/A's are compensated, duty day lengths, rest requirements, staffing levels, disciplinary procedures, etc, etc, etc... the list is very long for these contracts to what they entail. That said, the contracts are not infinite time-line contracts; when they are entered into, they are also entered with an "amendable" date... an expiration if you will... again, agreed upon by the membership and the company. Once the "amendable" date nears, the work group and company begin to renegotiate the contract... they MUST renegotiate the contract even if it is merely for both sides to agree to an extension of the original contract... should both sides agree (the negotiating committee and the company) then it goes to the general membership for a vote of approval. But there is still a vote...

Now in this case, while compensation and pay are surely sticking points, work rules are often larger issues... for most employees it boils down to "QOL" things.. "quality of life"... these are things such as 401K contribution levels, vesting dates, flight benefits, minimum days off requirements, reserve staffing level percentages, how reserves and line holders can be reassigned or junior manned, vacation bidding framework, etc...

In addition, during the negotiating process when both sides start hitting their respective heads against brick walls, a process of stalemate chess begins, including engaging in federal mediation, and mandatory 30 day cooling off periods... At some point, a "Strike Authorization" vote will be submitted to the membership... this is a general "census" if you will of the membership from the union negotiating committee to see where the work group stands on "strike" vs. "no-strike"... I

n this case... over 96% of the work group feels a strike would be acceptable and warranted... That said, an "authorization to strike" does NOT mean there will be a strike. It simply is an authorization should both sides fail to come to terms, and the cooling off period, and all other resources become exhausted, the union can call for a Strike.. at which point the F/A's have agreed to go out on Strike.

So really, this is simply a mobilization of the armed forces in preparation should negotiations fail... nothing says they will and nothing says they will go on strike... furthermore, you don't really know what the sticking points are actually on...

Also, sometimes strike votes are brought to the membership to force the company to simply enter into an agreement...for the sake of having a working guideline to follow... Negotiations can drag on for years post contract expiration sometimes... By approving a strike vote, sometimes it serves simply as a "notice" to the company that we as a work group are tired of not having an agreement and want to have a new "rule book" to follow...

The employees in general are not greedy little people... we are all people just like ya'll are... We want only things that are fair and just and we want to be happy at work and for all sides to be profitable.. We all are more than aware that if the company isn't profitable then our long term survival working there is in jeopardy.. That said, companies are living breathing things and change, sometimes for the good, sometimes for the bad, and there are points where the collective whole finally have to say enough is enough. To the argument of just quit... remember, this industry and any unionized industry does not compensate based on your experience level, a Gate Agent with 20 years of experience will lose all levels of pay generally to leave their company and go to a different airline... so while most love the job, and want to keep doing the job, they get almost pigeonholed into staying with a certain company even if it is evolving in the wrong direction. So before you condemn the people, try to understand where they are coming from...



"Sonny, did we land? or were we shot down?"
User currently offlinecommavia From United States of America, joined Apr 2005, 11529 posts, RR: 61
Reply 15, posted (4 years 3 months 6 days 18 hours ago) and read 5093 times:

Quoting FlyPNS1 (Reply 3):
Except that DL still faces potential unionization issues which will require DL to offer raises to try and buy off the employees or face a union that will want raises. Not to mention that DL's pilot contract becomes amenable in only 1. 5 years and the DL pilots will want substantial raises.

  

Obviously, Delta's own management is not quite as naive as some here, and is obviously smart enough - like the management teams at virtually every other U.S. airline - to view what is happening today at AMR as just the warm up act at what soon will be visiting them. AA's employees are basically the highest-compensated, least-efficient in the industry, and yet they are still asking for substantial raises. To think that the work groups at other airlines - who went through bankruptcy and gave up concessions far, far in excess of anything exacted on AA's employees, wouldn't want as much or more is just ridiculous.

Costs are sure to go up everywhere in the industry - including at Delta, and United (with or without a merger), and even at the low-fare carriers. This NMB rule change on unionization votes will only hasten that process. That is, of course, precisely why Delta is so opposed to this rule change and AMR has effectively endorsed it - because from AMR's perspectives, with what is already the highest labor bill in the U.S. airline industry, more unions and higher costs for competitors can only help their competitive position.

Quoting ssides (Reply 4):
I think that's the point. The TWU contract will result in higher costs, but only marginally.

Yeah - cost increases will be marginal. That is, if the contracts get ratified.

Quoting ssides (Reply 4):
The FA and pilot contracts are yet to be negotiated, but AA is going to have to push hard here and not give in to excessive union demands. It may come down to a big game of chicken between AA and the unions -- AA might dare them to strike in this economy, and the unions might just to through with it, who knows.

The company has nothing left to hold over the unions.

The unions are determined to get back what they feel they gave up temporarily, and have a fundamentally different view of the industry. From the company's perspective, the industry's prevailing average compensation package today - including lower pay, more work, less people, and no pension - is the "new normal." The unions view this as only temporary until things return to where they were pre-9/11, and thus they want all their pay back going back to those pre-9/11 payscales.

Now, personally, I think that union viewpoint is comically stupid. But, nonetheless, that's what union militancy and the internal political workings of a labor union will do for you.

Thus, we're left at the stalemate we're at now. The union members are already paid more than virtually any of their counterparts - measured by total compensation, relative to their productivity - and yet they want more. The company simply cannot afford to give it to them.

If the unions want to go on strike - then that's fine.

At this point, when - not if - it ultimately comes down to it, given how the unions are choosing to behave, the only true way for AMR to permanently lower its labor costs to competitive levels is bankruptcy. Dump the pensions, slash everyone's pay even further, lay off thousands of people, outsource everything possible, and make everyone work way more hours. That's the path every other legacy has taken - at least once. That is the path Arpey has tried to avoid, to the enormous benefit of the unions and their members, even though the unions give him absolutely no credit for it.

So where it goes from here is anyone's guess.

Quoting LAXintl (Reply 5):
Man, seems hardly a manner to run a business in hopes your competitors suffer misfortune, or in this case substantial cost increases instead of proactively trying to manage your own house.

It's not really hoping that competitors suffer "misfortune" per se, but rather just accepting the reality that the competitive dynamics with regard to labor cost are about to change. The weighted-average industry compensation level is about to go up considerably, as post-bankruptcy labor contracts are rewritten, and those labor groups recover some of what they gave up in bankruptcy. That can only help AMR.

I realize that it seems like AMR is basically sitting around passively, acting defensively, and waiting for the industry to come to them. But frankly, in this enviroment, given AMR's cost disadvantage in many areas (including, but not limited to, labor), I don't really see much else they can do - again, short of bankruptcy. Arpey sees the numbers - he knows that with the amount of cashflow AMR's operations are generating, the company can theoretically continuing operating this way for some amount of time, and he obviously feels that well within that time, other airlines' costs will come up so much that it will force them to raise fares and lower capacity, thus making AMR relatively more competitive. We'll see.

[Edited 2010-05-19 12:35:33]

User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 16, posted (4 years 3 months 6 days 18 hours ago) and read 5091 times:

Quoting B752OS (Reply 13):

You must be joking....racket, I mean union leaders being out of touch with reality? In a perfect word not one airline employee would be a union worker. Unions have proven to be more and more useless and unneeded.

I'm not so sure of your point?   



"Up the Irons!"
User currently offlinenorcal From United States of America, joined Mar 2005, 2459 posts, RR: 5
Reply 17, posted (4 years 3 months 6 days 18 hours ago) and read 5053 times:

I hope a mutually beneficial agreement can be worked out between the unions and management.

User currently offlinevin2basketball From United States of America, joined Dec 2009, 313 posts, RR: 0
Reply 18, posted (4 years 3 months 6 days 18 hours ago) and read 5042 times:

Quoting ThePinnacleKid (Reply 14):
The employees in general are not greedy little people... we are all people just like ya'll are... We want only things that are fair and just and we want to be happy at work and for all sides to be profitable.. We all are more than aware that if the company isn't profitable then our long term survival working there is in jeopardy.. That said, companies are living breathing things and change, sometimes for the good, sometimes for the bad, and there are points where the collective whole finally have to say enough is enough. To the argument of just quit... remember, this industry and any unionized industry does not compensate based on your experience level, a Gate Agent with 20 years of experience will lose all levels of pay generally to leave their company and go to a different airline... so while most love the job, and want to keep doing the job, they get almost pigeonholed into staying with a certain company even if it is evolving in the wrong direction. So before you condemn the people, try to understand where they are coming from...

but American lost $505 million in Q1


They need Chap 11 nowwwwww,


User currently offlineCrosscheck007 From Poland, joined Jan 2010, 278 posts, RR: 2
Reply 19, posted (4 years 3 months 6 days 18 hours ago) and read 5045 times:

Best of luck to AA flight attendants, but they better not be banking on other AMR employees supporting them in this strike. The strike will only complicate the jobs of their coworkers at AA/AE, let alone non-rev travel or commuting. I really find it hard to believe the $10/hr gate agent is going to sympathize with the $30/hr flight attendant...

And as for the other airlines' flight attendants who are rallying behind the striking f/as, see if you are singing that same tune when every seat on your airline fills up with displaced AA passengers and you are unable to commute/vacation!

Cheers,

007



Je l'attends pas un homme. J'apporte le parti, j'apporte le feu d'artifice.
User currently offlinecommavia From United States of America, joined Apr 2005, 11529 posts, RR: 61
Reply 20, posted (4 years 3 months 6 days 18 hours ago) and read 4992 times:

Quoting ThePinnacleKid (Reply 14):
We want only things that are fair and just and we want to be happy at work and for all sides to be profitable.

With respect, I find that hard to believe.

The unions have all seen the numbers - and they all know how to read financial reports (or at least they pay advisers who do). They know that AMR's employees are among the best compensated and least productive workgroups in the entire airline industry. They know that their base pay is higher than at all but a few airlines in the U.S., that they still have pensions being actively funded by the company, unlike almost any other U.S. airline employees, and that they are less productive than almost any other comparable airline employees.

Perhaps I have a bit of a different understanding of the words "fair and just" than the unions. To me, if basically every one of your counterparts is willing to do either more work or get paid less, or both, and provide just as good if not better service to customers then you do, then maybe what you're demanding is a bit above "fair and just."

And as for the flight attendants wanting the company to be profitable, I highly doubt that - they want to get paid. Not that I blame them - profitability is management's responsibility, not theirs. But breaking it down to the most basic level, I don't think that anyone would argue that what AMR's unions are proposing would in any way enhance AMR's profitability. It will, of course, do no such thing. Demanding massive pay increases is the exact opposite of enhanced profitability.

Quoting ThePinnacleKid (Reply 14):
We all are more than aware that if the company isn't profitable then our long term survival working there is in jeopardy.

Again, I'm not so sure.

This goes back to the fundamental disconnect over the view of the industry. The unions don't accept that this is the "new normal." They think that they aren't paid what they're worth, and everyone else who is accepting less will eventually come around to their way of thinking.

Maybe.

But in the interim, while the other 90% of the industry is allegedly coming around to their view of how they should be compensated, I again find it hard to imagine anyone arguing that what the unions are proposing could possibly be seen as enhancing AMR's "profitability" or "long term survival."


User currently offlinebiggsfo From United States of America, joined Jun 2005, 2920 posts, RR: 6
Reply 21, posted (4 years 3 months 6 days 18 hours ago) and read 4861 times:

Quoting norcal (Reply 17):
I hope a mutually beneficial agreement can be worked out between the unions and management.

I believe this will happen at the eleventh hour with both sides compromising. Whether that is considered "mutually beneficial" remains to be seen.


User currently offlineNYCAAer From United States of America, joined Jul 2004, 692 posts, RR: 3
Reply 22, posted (4 years 3 months 6 days 17 hours ago) and read 4738 times:

From everything I've seen in the AA-APFA negotiations, the F/A union isn't making excessive demands but just trying to keep some of the status quo. No one wants to take a further hit in pay and benefits.

User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 23, posted (4 years 3 months 6 days 16 hours ago) and read 4662 times:

Quoting NYCAAer (Reply 22):
From everything I've seen in the AA-APFA negotiations, the F/A union isn't making excessive demands but just trying to keep some of the status quo. No one wants to take a further hit in pay and benefits.

While in theory that sounds great, if AA can't pays its bills and is forced into bk, then look out!

Unions need to understand the only one who really "wins" in bk are bk lawyers......



"Up the Irons!"
User currently offlinecommavia From United States of America, joined Apr 2005, 11529 posts, RR: 61
Reply 24, posted (4 years 3 months 6 days 15 hours ago) and read 4480 times:

Quoting NYCAAer (Reply 22):
From everything I've seen in the AA-APFA negotiations, the F/A union isn't making excessive demands but just trying to keep some of the status quo. No one wants to take a further hit in pay and benefits.

It depends on how you define "reasonable."

AMR's labor costs are higher than virtually any of their competitors.

I've listened (here and here) to the APFA's spin on why that is. It's interesting. I want to know more about how some of the analysis that was done, because while criticizing the sinister intentions of the company, he seems to breezily blow through some of the underlying assumptions in his own analysis, but nonetheless, it's interesting.

But even if you take the APFA's own economist's clearly militant analysis, he seems to suggest that the biggest driver of AA's higher labor costs is that they they staff so many more flight attendants on international flights. Now, he summarily champs it up to a "marketing decision" and says that Arpey probably sat around with other oneworld CEOs and decided on onboard service levels including more cabins and more flight attendants.

But his dismissiveness of the magnitude of the point doesn't diminish the point itself: AA's labor costs are, indeed, higher than many of their competitors, by his estimation because of staffing levels.

So then - in order to be competitive - the company should propose thousands of layoffs and give everyone else a raise?

Would that be more "reasonable?"

Sort of reminds me of a quote I remember hearing from Crandall back around the 2003 concessions, effectively saying that he never would have cut anybody's pay or benefits, and instead would just have laid off way, way more people.

[Edited 2010-05-19 15:36:04]

25 crAAzy : OK -- I'm just gonna say it. This thread should be closed. The title of this thread and the OPs information is misleading twisted and just a waste of
26 worldtraveler : This thread is NOT about labor unions... although that is clearly part of the issue. The issue is that AA mgmt has been unable to match costs with rev
27 ckfred : A while back, Southwest's pilots rejected a tentative agreement, although the union was no where near trying to get an impasse declaration from the me
28 AAExecPlat : This whole issue is all a symptom of our greater "Entitlement Society". Everyone thinks they deserve everything the "other guy" has or gets. Everyone
29 AirNZ : How do you definitively know they won't? Surely your statement, in itself, is also pure assumption unless you can provide definitive facts to show it
30 nwaesc : Interesting. In my perfect world, we'd all be unionized, as the airlines continue to prove that a collective voice in the workplace is more and more
31 Post contains images Jacobin777 : Most companies such as IBM, Google, Bank of America, Merk, Pfizer, etc. don't have unions which dominate the workforce...
32 Post contains images m11stephen : Exactly! F/As have important roles however, there are thousands of people out there right now who would LOVE to be F/As and could be F/As in six shor
33 worldtraveler : even unionized people can have performance evaluations... and DL frontline employees do receive annual performance evaluations. Sadly, in many ways,
34 incitatus : While I agree with your perspective, you are not spreading blame as it should. A few weeks ago I was reading a book about leadership, and it quoted y
35 FURUREFA : Frankly, I find it pretty arrogant of AA management to simply expect that everyone's costs will simply rise to levels comparable to those at American.
36 lucky777 : Which is a nice way of saying DAL/CAL employees are underpaid. I find it disheartening that DAL wished to be top 3 in virtually every metric known to
37 ckfred : You have to remember one thing. AA is in negotiations with all 3 of its unions, although there is a tentative agreement with the TWU, and the APA neg
38 lrgt : Oh god it's 2003 all over again. They need to file ch.11 now... they should have done this 7 years ago to the day when they were in the exact same sit
39 usafdo : It's time for AMR to pay the AA F/A's a fair wage. The F/A's have given back over 30% of their wages in order to save the company. And to this day the
40 worldtraveler : labor compensation is a function of the market.... if a company no longer pays what the market will bear, then people will leave... and they should.
41 Post contains images BHMNONREV : I certainly hope you were either winking or had your tongue planted firmly in cheek when you wrote this, as this may be the funniest post I have seen
42 UAL777UK : Your kidding right? Whilst I agree that certain groups should get a pay rise, that is just not going to happen and if it does, you will be seeing AA
43 commavia : Do they, really? Because it only seems to be the unionized employees at legacy airlines that seem to be having all these problems. They came from the
44 ssides : These two statements are completely contradictory. The way to guide the company to profitability is to dramatically reduce labor costs, which is virt
45 Post contains images Jacobin777 : Sure, no problems.....a trip to BK will come with it though....if that's ok with you...
46 lucky777 : Do you honestly believe that the 2 are mutually exclusive of one another? You give no reason as to why a company can't provide top tier service, whic
47 worldtraveler : I'm sorry but if the mindset is that because DL is the largest, its employees should be paid the most just isn't viable. There are very few industries
48 nwaesc : What, the BBQ's, block parties & free T-shirts don't count?
49 lucky777 : We're in agreement then. Never did i insinuate that DAL employees needed to be the highest paid. However, nor do i think "Industry Standard" should b
50 worldtraveler : My personal preference would be industry average for base competition and benefits with a goal of pushing to above average to industry leading based o
51 LDVAviation : That's a lot easier to do when you are in bankruptcy, then when you are not. Today, Delta is a much bigger airline than the one that was brought to i
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