Wretched Wrench
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AA Management Bonuses - Despite More Losses
- Thread starter TWU informer
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Yes, if you exercise your options, you have a choice: either buy the stock or get a check for the value (about $17/sh exercised based on current stock price). And yes, the check comes from AA.
No real difference from the execs - they will get a check from AA for the value of their performance units.
Good questions, but the answer is:
Not exactly. When the employees exercise their options, either they buy the stock from AA at $5/sh or AA simply writes a check for the difference (today, roughly $17/sh). If lots of employees want to buy the stock rather than get the check, AA will satisfy the options out of its inventory of stock bought back in prior years and if that's not enough, it will go on the open market and buy it to sell to the empoyees for $5/sh.
When the employee eventually sells the stock (if they actually buy it rather than simply ask for a check), they will sell those shares on the open market.
Dunno whether AA took a charge against earnings for these options - but regardless of that - the CASH paid to the rank and file in April comes out of today's cash, and that's nearly $600 million as of today. That's a lotta potential cash to pay to the employees.
Excellent points. I gotta agree with you. You and scorpion make some good points. And I read your post as containing some principled objection - it ain't all "management makes too much moolah."
TWU informer
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Of course they have reduced management ranks, AA bought TWA dismantled it and got rid of management, mechanics, baggage handlers, pilots, flight attendants, stock clerks, ect.
Non-managment ranks have been reduced by at least a third maybe more through lay-offs and attrition.
And please, if we are going to start comparing "other industries" now instead of just the airline, we are going to have a good time.
Mechanics in the auto industry are making much more than AA mechanics. Railroad workers have better pay, pensions, and health benefits that Airline workers.
Even Mechanics in the airline industry are making more than AA mechanics.
Does this mean the mechanics need a million dollar perk scheme to offest deffered pay?
The flight crews and ground crews have deffered pay, benefits, and paid time off, with very little to show for it.
I think AA Management justifications for this bonus is making the matter much worse!
I believe that counting TWA the airline was up to 120,000, now its around 80,000. Thats a reduction of 50,000. So its more than a third, also the company counted the clerks they eliminated, who were non-union with no supervsory powers, as management.
Thats right, similarly skilled people where I live with the same amount of years make a lot more than I do.
Lets not forget shift and holiday pay too.
Just look at low cost SWA and UPS!
Its pure arrogance. They really dont care what we think because they know they have the unions bought off. Little Gless and Conely are too busy running around the country selling "pull together win together and they are not going to do anything that might jepordize their extra AA paychecks.
Wretched Wrench
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Sorry, inadvertant double post. 😱
"performance units".
The money thats the subject of discussion was from "performance units" that were "tied to stock performance". Since they do not lay out cash they did not invest but instead found a way to reward themselves without even making the company profitable. The rise in stock price is based upon "the expectation" of investors that the company will perform, if it doesnt the executives already got their bonuses.
He wants to know when he can collect his bonus check. 😱
11/03/2005 - Updated 3:39 PM ET
American Airlines Pilots Mull Concessions<< biz_topic:Labor;
FORT WORTH, Texas, Nov 03, 2005 (AP Online via COMTEX) -- Leaders of the pilots' union at American Airlines have agreed to consider concessions to help the nation's largest carrier survive the long slump gripping the U.S. airline industry.
The union leaders voted to open preliminary talks aimed at easing work rules to raise productivity. For example, pilots could be asked to fly longer hours each month.
Union President Ralph Hunter ruled out negotiating pay cuts, benefit reductions or layoffs.
Directors of the Allied Pilots Association voted 12-6 to direct Hunter to begin discussions with company management. Hunter argued that the union should begin preliminary talks soon and that waiting could only lead to more drastic cuts if American's financial situation worsens.
Hunter said the union's 13,000 pilots would have final say on any contract changes.
American Airlines Chief Executive Gerard Arpey, speaking to reporters before the union board vote, said the carrier was trying to involve its labor groups in solving its problems.
In recent months, Arpey has ducked questions about whether he would ask employees for wage or other concessions. He has, however, noted that three other U.S. carriers are in bankruptcy protection, which gives them more leverage to force pay and benefit cuts on workers.
Delta Air Lines Inc. and Northwest Airlines Corp. have moved to use bankruptcy court protection to scale back the terms of contracts with union workers, and Northwest has indicated it will outsource the jobs of some flight attendants.
In 2003, pilots and other union employees at American agreed to six-year contracts that included deep cuts in wages and benefits, saving American about $1.6 billion a year. American and its parent, Fort Worth-based AMR Corp., had threatened to file for bankruptcy protection without the concessions.
Passenger traffic has grown steadily over the past three years, but rising jet fuel costs and competition from low-fare carriers have led to continuing losses at AMR and many other U.S. carriers. Last month, AMR reported a $15 million loss for the third quarter despite a 15 percent increase in revenue.
Arpey said at the time that AMR's inability to turn a profit despite strong traffic "underscores the need to accelerate our cost-cutting initiatives across the board."
AMR shares rose 31 cents, to $14.50 in trading Thursday morning on the New York Stock Exchange.
---
Was this announcement good timing or what? Nothing like a good sound bite at the end of the year to get the stock moving.
American Airlines Pilots Mull Concessions<< biz_topic:Labor;
FORT WORTH, Texas, Nov 03, 2005 (AP Online via COMTEX) -- Leaders of the pilots' union at American Airlines have agreed to consider concessions to help the nation's largest carrier survive the long slump gripping the U.S. airline industry.
The union leaders voted to open preliminary talks aimed at easing work rules to raise productivity. For example, pilots could be asked to fly longer hours each month.
Union President Ralph Hunter ruled out negotiating pay cuts, benefit reductions or layoffs.
Directors of the Allied Pilots Association voted 12-6 to direct Hunter to begin discussions with company management. Hunter argued that the union should begin preliminary talks soon and that waiting could only lead to more drastic cuts if American's financial situation worsens.
Hunter said the union's 13,000 pilots would have final say on any contract changes.
American Airlines Chief Executive Gerard Arpey, speaking to reporters before the union board vote, said the carrier was trying to involve its labor groups in solving its problems.
In recent months, Arpey has ducked questions about whether he would ask employees for wage or other concessions. He has, however, noted that three other U.S. carriers are in bankruptcy protection, which gives them more leverage to force pay and benefit cuts on workers.
Delta Air Lines Inc. and Northwest Airlines Corp. have moved to use bankruptcy court protection to scale back the terms of contracts with union workers, and Northwest has indicated it will outsource the jobs of some flight attendants.
In 2003, pilots and other union employees at American agreed to six-year contracts that included deep cuts in wages and benefits, saving American about $1.6 billion a year. American and its parent, Fort Worth-based AMR Corp., had threatened to file for bankruptcy protection without the concessions.
Passenger traffic has grown steadily over the past three years, but rising jet fuel costs and competition from low-fare carriers have led to continuing losses at AMR and many other U.S. carriers. Last month, AMR reported a $15 million loss for the third quarter despite a 15 percent increase in revenue.
Arpey said at the time that AMR's inability to turn a profit despite strong traffic "underscores the need to accelerate our cost-cutting initiatives across the board."
AMR shares rose 31 cents, to $14.50 in trading Thursday morning on the New York Stock Exchange.
---
Was this announcement good timing or what? Nothing like a good sound bite at the end of the year to get the stock moving.
Great article about the stock options:
http://www.dfw.com/mld/dfw/business/13599436.htm
Unions overreacting to American bonuses
By Mitchell Schnurman
Star-Telegram Staff Writer
Sounds like old times at American Airlines.
Senior executives are getting million-dollar bonuses, and union leaders are acting as if the company is taking their firstborn.
It's almost as if American is making enough money to fight over. (It isn't.)
Or that American workers don't have more pressing things to worry about. (They do.)
So why hyperventilate over some midrange bonuses that were earned over the past three years and still leave American executives vastly underpaid?
My guess is that union members are genuinely angry about the bonuses, after the hefty pay cuts they took in 2003.
So leaders have to beat their chest in public and show the rank and file that they're not in management's pocket.
Let's hope they don't really believe what they said -- that this is the biggest crisis since the company averted bankruptcy three years ago and that American's future hinges on how it's handled in coming weeks.
If nothing is done, said Ralph Hunter of the pilots union, "AMR's executive bonuses may turn out to be the most costly ones ever paid out in this company's history."
Of course, Hunter invoked the Don Carty scandal in 2003, which cost Carty the top job and nearly killed American's restructuring in the cradle.
It's a natural quote, but it's wrong. Carty had to go because he deceived American employees and the board; he approved of a secret plan to protect the executives' retirement programs from bankruptcy, while everyone else's pensions were at risk.
It was the threat of losing their pensions that persuaded union employees to accept pay cuts totaling $1.6 billion a year.
Fast-forward to this week's uproar. Almost 1,000 managers at American will get bonuses in April, according to a pay plan that was approved in 2003 -- and shared with the unions and anyone else who read the company's annual proxy statements.
It's notable that a stock-based pay plan has been in place at American since 1988; it just hasn't paid out for years, because the company was foundering.
American is still losing money, despite cutting costs and improving efficiency.
If not for $60 oil, however, American would have been deep in the black last year. Its rising stock price reflects the fundamental improvements of the past three years.
The bonuses hinge on American's stock performance over that three-year period, comparing AMR with six competitors, including Southwest Airlines. If American ranks last, managers get nothing; but American ranked first this time, thanks to a 169 percent increase in the stock price.
Most of the competition, it turns out, ended up in bankruptcy.
American executives get a set number of units, which equate to shares of AMR stock, and they're converted to cash in April.
The company hasn't said how much money will be distributed, but the awards to the most senior executives were disclosed in the 2004 proxy.
Chief Executive Gerard Arpey declined the award, understanding the publicity implications.
Dan Garton, American's marketing chief, got the most performance units, which are worth about $1.7 million at today's stock price. William Ris, the head of government affairs, is one of three executives with a stake worth about $1.4 million.
Some managers will get as little as $2,000, according to the flight attendants union, which said the bonuses were "not in the best interests of the company."
I beg to differ: If American doesn't offer some upside to its executives, how will it keep them? (Its executive salaries are far below the going rate.) And if managers don't get the upside when the stock price quadruples, when will they get it?
A couple of million dollars is a lot of money, to be sure, but it's almost chump change in the world of executive compensation. Consider the bonus requested by Stephen Cooper, overseeing the unwinding of bankrupt Enron for four years.
Cooper has asked the court for a $25 million "success fee," on top of his $1.3 million in annual salary.
His firm has also received millions in professional fees during the company's liquidation.
Want an example closer to home? Jeff Campbell was American's chief financial officer in 2003, and the company went to great lengths to keep him, awarding him stock worth $288,000 at a time when no other American executive was getting anything extra.
Campbell still bolted for McKesson Corp., a San Francisco health care company.
Campbell was paid $412,674 at American in 2003. In his first full year at McKesson, he received more than $2 million in salary, bonus, stock awards and other compensation.
It costs more to live in San Francisco, so McKesson also threw in $288,000 to help with the relocation.
In the past several years, American has lost another chief financial officer and a top human-resources executive to companies in other industries. It's regularly raided for management talent, especially in finance and information technology, and the turnover rate in some pockets of the company is as high as 29 percent.
What would Garton and Ris command in the open market? A lot, lot more than $1.7 million, especially after three years of a turnaround.
It's hard for everyday workers to comprehend the huge paydays that are common for executives, and I've written about many of the excesses. This simply isn't one of them.
There's some danger in the unions exaggerating the situation. American is hardly home free in its business, even if Wall Street loves its prospects today, so employees will have to keep working together to make improvements.
But at some point soon, American also has to start paying the market rate for management talent.
Even Arpey, who has turned down bonuses and stock options in the past, has begun to sign on. It won't be long before he gets a major windfall, along with the rest of the management team.
http://www.dfw.com/mld/dfw/business/13599436.htm
Unions overreacting to American bonuses
By Mitchell Schnurman
Star-Telegram Staff Writer
Sounds like old times at American Airlines.
Senior executives are getting million-dollar bonuses, and union leaders are acting as if the company is taking their firstborn.
It's almost as if American is making enough money to fight over. (It isn't.)
Or that American workers don't have more pressing things to worry about. (They do.)
So why hyperventilate over some midrange bonuses that were earned over the past three years and still leave American executives vastly underpaid?
My guess is that union members are genuinely angry about the bonuses, after the hefty pay cuts they took in 2003.
So leaders have to beat their chest in public and show the rank and file that they're not in management's pocket.
Let's hope they don't really believe what they said -- that this is the biggest crisis since the company averted bankruptcy three years ago and that American's future hinges on how it's handled in coming weeks.
If nothing is done, said Ralph Hunter of the pilots union, "AMR's executive bonuses may turn out to be the most costly ones ever paid out in this company's history."
Of course, Hunter invoked the Don Carty scandal in 2003, which cost Carty the top job and nearly killed American's restructuring in the cradle.
It's a natural quote, but it's wrong. Carty had to go because he deceived American employees and the board; he approved of a secret plan to protect the executives' retirement programs from bankruptcy, while everyone else's pensions were at risk.
It was the threat of losing their pensions that persuaded union employees to accept pay cuts totaling $1.6 billion a year.
Fast-forward to this week's uproar. Almost 1,000 managers at American will get bonuses in April, according to a pay plan that was approved in 2003 -- and shared with the unions and anyone else who read the company's annual proxy statements.
It's notable that a stock-based pay plan has been in place at American since 1988; it just hasn't paid out for years, because the company was foundering.
American is still losing money, despite cutting costs and improving efficiency.
If not for $60 oil, however, American would have been deep in the black last year. Its rising stock price reflects the fundamental improvements of the past three years.
The bonuses hinge on American's stock performance over that three-year period, comparing AMR with six competitors, including Southwest Airlines. If American ranks last, managers get nothing; but American ranked first this time, thanks to a 169 percent increase in the stock price.
Most of the competition, it turns out, ended up in bankruptcy.
American executives get a set number of units, which equate to shares of AMR stock, and they're converted to cash in April.
The company hasn't said how much money will be distributed, but the awards to the most senior executives were disclosed in the 2004 proxy.
Chief Executive Gerard Arpey declined the award, understanding the publicity implications.
Dan Garton, American's marketing chief, got the most performance units, which are worth about $1.7 million at today's stock price. William Ris, the head of government affairs, is one of three executives with a stake worth about $1.4 million.
Some managers will get as little as $2,000, according to the flight attendants union, which said the bonuses were "not in the best interests of the company."
I beg to differ: If American doesn't offer some upside to its executives, how will it keep them? (Its executive salaries are far below the going rate.) And if managers don't get the upside when the stock price quadruples, when will they get it?
A couple of million dollars is a lot of money, to be sure, but it's almost chump change in the world of executive compensation. Consider the bonus requested by Stephen Cooper, overseeing the unwinding of bankrupt Enron for four years.
Cooper has asked the court for a $25 million "success fee," on top of his $1.3 million in annual salary.
His firm has also received millions in professional fees during the company's liquidation.
Want an example closer to home? Jeff Campbell was American's chief financial officer in 2003, and the company went to great lengths to keep him, awarding him stock worth $288,000 at a time when no other American executive was getting anything extra.
Campbell still bolted for McKesson Corp., a San Francisco health care company.
Campbell was paid $412,674 at American in 2003. In his first full year at McKesson, he received more than $2 million in salary, bonus, stock awards and other compensation.
It costs more to live in San Francisco, so McKesson also threw in $288,000 to help with the relocation.
In the past several years, American has lost another chief financial officer and a top human-resources executive to companies in other industries. It's regularly raided for management talent, especially in finance and information technology, and the turnover rate in some pockets of the company is as high as 29 percent.
What would Garton and Ris command in the open market? A lot, lot more than $1.7 million, especially after three years of a turnaround.
It's hard for everyday workers to comprehend the huge paydays that are common for executives, and I've written about many of the excesses. This simply isn't one of them.
There's some danger in the unions exaggerating the situation. American is hardly home free in its business, even if Wall Street loves its prospects today, so employees will have to keep working together to make improvements.
But at some point soon, American also has to start paying the market rate for management talent.
Even Arpey, who has turned down bonuses and stock options in the past, has begun to sign on. It won't be long before he gets a major windfall, along with the rest of the management team.
I could not have said it any better myself.
**Moderator Note: Please refrain from quoting a lengthy post. It just makes it easier for everyone to read follow-on posts. Thank you.**
...and just so you people don't freak out in the coming years, there was probably a stock issue in 2004 and 2005. There'll probably be a stock issue this year, in 07, 08 , etc.
The company uses this stock option plan as a manager retention vehicle and has used it for years.
The company uses this stock option plan as a manager retention vehicle and has used it for years.
The sacrifice of workers is what's just beginning to turn AMR around, not the "smarts" of the so-called executives. Those execs are the same people who drove AMR off the cliff a few years ago. I say if they don't like the pay, LEAVE . . . just like they tell the people that REALLY make AA work. AMR would be a lot better off with new and enerjectic management that's happy to work managing an airline (instead of lining their pockets) for less than seven figure bonuses and salaries.
James T. Kirk
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As the saying goes, for a man with a hammer everything is an anvil. On
this Board anything bad or wrong is the fault of the TWU. This bonus
program based on stock price was announced several years ago and
publicized in SEC filings which were then picked up by the press. It
was opposed by the TWU and the other unions back then, and Arpey told
everyone he was not going to negotiate management compensation with the
unions. All three unions have restated their opposition, but I thought
Little's statement was by far the strongest because he was the only one
who chose not to suck up to Arpey.
Corporate greed in this right wing era is not limited to AA. At UAL
management is treating itself to hundreds of millions of dollars in
stock options, in addition to the millions in perks and bonuses already
approved by the bankruptcy court. At Independence Air-remember them-
the CEO managed to find enough money to give himself a 3.5 million
dollar pay out as he was putting everyone on the street, with nary a
peep from AMFA. And at NWA... well what point is there in talking about
that train wreck.
The bonuses American intends to pay are wrong and I hope the TWU can do
something about it before they come due in April. What ever happens,
I'm sure they will get farther than AMFA or any of the other unions at
the bankrupt carriers. By the way, I just talked to a close friend of
mine who retired from UAL. He is paying 600 dollars a month for medical
and has had 1000 dollars a month taken out of his pension by the PBGC.
this Board anything bad or wrong is the fault of the TWU. This bonus
program based on stock price was announced several years ago and
publicized in SEC filings which were then picked up by the press. It
was opposed by the TWU and the other unions back then, and Arpey told
everyone he was not going to negotiate management compensation with the
unions. All three unions have restated their opposition, but I thought
Little's statement was by far the strongest because he was the only one
who chose not to suck up to Arpey.
Corporate greed in this right wing era is not limited to AA. At UAL
management is treating itself to hundreds of millions of dollars in
stock options, in addition to the millions in perks and bonuses already
approved by the bankruptcy court. At Independence Air-remember them-
the CEO managed to find enough money to give himself a 3.5 million
dollar pay out as he was putting everyone on the street, with nary a
peep from AMFA. And at NWA... well what point is there in talking about
that train wreck.
The bonuses American intends to pay are wrong and I hope the TWU can do
something about it before they come due in April. What ever happens,
I'm sure they will get farther than AMFA or any of the other unions at
the bankrupt carriers. By the way, I just talked to a close friend of
mine who retired from UAL. He is paying 600 dollars a month for medical
and has had 1000 dollars a month taken out of his pension by the PBGC.
Whether you are pro-company or pro-union, execs taking a huge bonus while the workers are under concessions is just wrong. And sure it may be in the contract but where are the ethics in this? Don't those count for something? I understand the "corproate greed", it's everywhere, but justifying it by saying that these bonuses aren't near what some of the others get is just plain stupid. Just because the greed is more or less, does that make it right??
If the company was making huge amounts of money I would not have a problem with the bonuses. I don't think anyone here would but the company IS NOT making big amounts of money so there should be no big amounts of bonuses. Damn, it's not rocket science.
Just my 2 cents. It should be interesting to see what happens. My guess, bonuses either decreased and/or the big ones not accepted. A guy can hope can't he??
If the company was making huge amounts of money I would not have a problem with the bonuses. I don't think anyone here would but the company IS NOT making big amounts of money so there should be no big amounts of bonuses. Damn, it's not rocket science.
Just my 2 cents. It should be interesting to see what happens. My guess, bonuses either decreased and/or the big ones not accepted. A guy can hope can't he??
Would it be agreeable with non-management and management employees, if the "bonus" were paid in stock (with a nonredemable clause of 3 years) instead of a cash pay out?
I completely agree that this payout is illadvised while AA is still in such a precarious financial position. Also wholeheartedly agree with others, that there is ZERO reason for our share price being over $13/share given that fuel is still in the $60 dollar range. There have been no major press releases regarding profits for 2005 or profit potential for 2006. There is still the looming giant of United coming out of bankruptcy. And Southwest has done nothing but gain momentum on the Wright Ammendment. Nothing but bad news in relation to AA's ability to regain a profit in '06. How did our shares do a 100% + increase since September? Rumour mongering and pay offs to Wall Analysts are the only reason AA's stock has had the performance it has in the last 4 months.
I completely agree that this payout is illadvised while AA is still in such a precarious financial position. Also wholeheartedly agree with others, that there is ZERO reason for our share price being over $13/share given that fuel is still in the $60 dollar range. There have been no major press releases regarding profits for 2005 or profit potential for 2006. There is still the looming giant of United coming out of bankruptcy. And Southwest has done nothing but gain momentum on the Wright Ammendment. Nothing but bad news in relation to AA's ability to regain a profit in '06. How did our shares do a 100% + increase since September? Rumour mongering and pay offs to Wall Analysts are the only reason AA's stock has had the performance it has in the last 4 months.
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