AA Management and Cargo Airlines

[Hopeful]

Looks like the good customers get a discount.
This AW article says Ryanair paid less than $30m per 737-800 where the reg price is $60m.
So maybe AA is getting a discount on its 737 and 787 orders.

But you don't here much about how much they save when youre in negotiations with three unions.


http://www.aviationweek.com/aw/generic/sto.../RYAN120909.xml

 

[Bob Owens]

Looks like the good customers get a discount.
This AW article says Ryanair paid less than $30m per 737-800 where the reg price is $60m.
So maybe AA is getting a discount on its 737 and 787 orders.

But you don't here much about how much they save when youre in negotiations with three unions.


http://www.aviationweek.com/aw/generic/sto.../RYAN120909.xml

Well that doesnt mean that AA got the same discount. For instance I heard that when we did the winglet mods the savings were diminished because we were paying nearly double what the vendor was paying for associated equipement such as Air Data Computers.

 

[Bear96]

Bob, are you really suggesting that an airline has no business buying new planes once in a while?

 

[eolesen]

You guys want raises, and yes, I think you deserve them, but that's only going to happen when you can make a profit.

We've beaten this horse to death dozens of times --- AA either needs to lower their cost structure (e.g. fewer people making more money, or a lot of people earning less), *and* have a product that people will be willing to pay a little more for.

It's pretty clear that UPS and FDX generate good margins, and can afford to pay their people better. DL is generating better margins than AA, and apparently their non-union workforce was able to get raises out of the deal...

Sitting on a 25 year old couch watching reruns, or driving a 20 year old Honda to/from work every day may be fine for you, but it's not going to do much to get return business from customers who have a choice in who and when they fly.

I've flown 4500 miles on AA so far this year, and paid approx $0.20/mile to do so. It's considerably less than what I paid last year on carriers other than AA (approx $0.29/mile).

When fares are low enough, I'm sure you'll find no shortage of people being willing to put up with the 20 year old couch. But that's not sustainable over the long run.

Until AA replaces the MD80's and finishes upgrading the interiors on the 757 fleet, you'll never be able to generate the margins you need to get the raises you expect.

 

[Hopeful]

You guys want raises, and yes, I think you deserve them, but that's only going to happen when you can make a profit.

fleet, you'll never be able to generate the margins you need to get the raises you expect.

Oh, you mean like give us back a little piece of what we gave back 7 years ago?
I won't hold my breath. This company has cried the blues even when they were profitable.

They took away decades of bargaining gains and we should jump thru hoops over thier last toilet paper alternative of a contract?

I would bet that the minute AA shows a profit for the year, there will be another reason not to give squat to the workers.
The only thing this company understands is there ranking in the DOT stats.

They want us to make them BEST IN CLASS and return what do we get?
A HOPE of an increase?

No thanks, let them show good faith first and take their toilet paper alternative and flush it!

 

[Birdman]

Until AA replaces the MD80's and finishes upgrading the interiors on the 757 fleet, you'll never be able to generate the margins you need to get the raises you expect.

You forgot the 737 IFE upgrade at $2,000,000 apiece on AA's 76 older birds. :angry:

 

[wcs]

I've flown 4500 miles on AA so far this year, and paid approx $0.20/mile to do so.

Then you're in a minority because according to the AA 4th quarter report AA charged an average of only $0.127 per mile while DL and WN were able to charge over $0.14. That's an over $400 million difference if AA charged the same amount. We should be able to charge more than WN. We have First class. We have more lucrative international destinations. It's a difference of over 10%. WN isn't charging for bags.
Is the difference the MD80 and B757 interiors? Or should we start questioning other things?

 

[Bob Owens]

Bob, are you really suggesting that an airline has no business buying new planes once in a while?

They can buy whatever they like once they give us an ILC.

 

[Bob Owens]

You guys want raises, and yes, I think you deserve them, but that's only going to happen when you can make a profit.

We've beaten this horse to death dozens of times --- AA either needs to lower their cost structure (e.g. fewer people making more money, or a lot of people earning less), *and* have a product that people will be willing to pay a little more for.

It's pretty clear that UPS and FDX generate good margins, and can afford to pay their people better. DL is generating better margins than AA, and apparently their non-union workforce was able to get raises out of the deal...

Sitting on a 25 year old couch watching reruns, or driving a 20 year old Honda to/from work every day may be fine for you, but it's not going to do much to get return business from customers who have a choice in who and when they fly.

I've flown 4500 miles on AA so far this year, and paid approx $0.20/mile to do so. It's considerably less than what I paid last year on carriers other than AA (approx $0.29/mile).

When fares are low enough, I'm sure you'll find no shortage of people being willing to put up with the 20 year old couch. But that's not sustainable over the long run.

Until AA replaces the MD80's and finishes upgrading the interiors on the 757 fleet, you'll never be able to generate the margins you need to get the raises you expect.

When sitting on the 20 year old couch gets them free tickets to vacation in Hawaii or London or Rio there are plenty of people more than willing. The fact is that its the pitch that matters most, is a new seat any more comfortable than the old ones? No.

 

[FWAAA]

Then you're in a minority because according to the AA 4th quarter report AA charged an average of only $0.127 per mile while DL and WN were able to charge over $0.14. That's an over $400 million difference if AA charged the same amount. We should be able to charge more than WN. We have First class. We have more lucrative international destinations. It's a difference of over 10%. WN isn't charging for bags.
Is the difference the MD80 and B757 interiors? Or should we start questioning other things?

Unfortunately, you used apples and oranges for your comparison with Delta. You used AA's mainline yield and Delta's consolidated yield. Delta's number includes its regional partners, and those regional yields are always much higher than mainline. If you had compared the Delta number to the AA consolidated number, you'd find that AA's yield and DL's yield is very similar.

The WN yield is higher primarily because its entire operation more resembles a regional airline than a mainline long-haul carrier. AA's average yield is slightly lower than WN's yield, but that's because long-haul routes tend to be lower yielding. On a stage-length adjusted basis, AA's yield is not much different from WN's yield. To see how the long-haul flights affect yield, look up the yield at jetBlue, which still features more long-haul flights than WN. B6's yield has always lagged WN's yield by a substantial margin.

Additionally, AA reports its bag fees in Other Income so the bag fees plus AA's passenger yield is very similar to WN's yield, despite WN's much shorter average segments.

 

[wcs]

FWAAA, You are correct. I mis-read the DL report.

 

[Bear96]

They can buy whatever they like once they give us an ILC.

Every AA employee (including the "us" to which you refer) should be very glad that you are not running the company.

 

[FWAAA]

Your statement is full of "probablys" and very rough estimates. ($2 to $3 billion, which is it, are the pilots asking for a $150,000 RAISE or just a $100,000 RAISE?? ).

I apologize for the round numbers. I realize that you demand precision. I estimated $400 million for the mechanics based on your meandering, lengthy, imprecise paragraph above.

The pilots are asking for $700 million in wage increases plus work rule improvements and pension enhancements that total about $2.3 billion each year for a total of nearly $3 billion each year. Plus a signing bonus and large one-time pension contribution.

Where are you getting your figures from?

From here:

The union’s current compensation proposal calls for a 53 percent pay increase plus annual increases of six percent plus inflation. These changes would cost the company about $700 million in 2009 and would drive AA's rates to levels that are 20 percent higher than those agreed to at United in 2000 and Delta in 2001. These contracts contributed to the bankruptcy filings at both carriers and, subsequently, a dramatic decrease in pilot compensation and retirement benefits.

Annual pilot costs would increase by almost $3 billion in recurring expenses, excluding the APA’s proposed signing bonus, one-time pension contribution and other one-time expenses. This translates to more than a $350,000 increase per active pilot.

http://www.aanegotiations.com/apaWagesAPAproposals.asp

A 50% increase in wage expense? Well if your numbers are correct, which I doubt, that goes back to how much they took away doesnt it? If someone gets a 50% paycut it takes a 100% pay increase just to get them back to where they were, does that make it unreasonable? Tack on inflation and you have to go even higher.Then you have to factor in headcount reductions which would offset the wage increase in the wage expense. Somehow your 50% seems a little off, then again I'm going from our wage expense back in 2003 when our revenues were lower, around $18 Billion, and we had around 35% more employees.

AA claims the pilots want a 53% pay increase plus the other items discussed above.

I dont know what the other workgroups are asking for nor am I negotiating for them. One of the differences is that what we're asking for others already have, most of the other departments are asking for industry leading which we should be as well seeing how wages across the industry plummeted after 2002.

You're right, Bob. What the other workgroups are demanding has relevance to your negotiations. So the pilots are demanding $3 billion and the mechanics would like $400 million. If the FAs and fleet want $300 million each, that would be $4 billion each year. I discounted AA's claimed pilots' demand by $1 billion when I estimated $3 billion to $4 billion in increased wage expenses. And your only retort is to ridicule ("$2 to $3 billion, which is it, are the pilots asking for a $150,000 RAISE or just a $100,000 RAISE??").

The list prices for 737s as of Jan 2010 were as follows:

<snip>

The article does say the prices can vary quite a bit from list, as much as 1/3 but since we weren't given that info I figured I'd stick to the low end of list.

List prices are irrelevant when discussing what AA is paying for its new 738s. You weren't given that info? AA doesn't tell anyone its airplane prices - to discover them, you need to do some digging. See Hopeful's post re: estimates of Ryanair's prices.

 

[BoeingBoy]

List prices are irrelevant when discussing what AA is paying for its new 738s.

True, but especially true when an airline can do a sale/leaseback or "mortgage" them by issuing EETC's. Both spread the cost of either use or ownership out for many years.

Jim

 

[FWAAA]

True, but especially true when an airline can do a sale/leaseback or "mortgage" them by issuing EETC's. Both spread the cost of either use or ownership out for many years.

Very true. During the conference call last month, the AA CFO said that AA's 738 deliveries this year would generate a few hundred million dollars of cash because AA is able to borrow more than the remaining payments due Boeing (after deposits) because of the favorably low price paid by AA. It looks like AA might be borrowing as much as 100% of its total purchase price. THAT's an enviable position for a cash-strapped company.