AA Management Bonuses - Despite More Losses

[TIME FOR CHANGE]

You think so?

I hear plenty of complaining and engine changes that typically took 8 hrs now take three days, or 72 hrs. So for a 25% reduction in pay it takes 6 times longer than it used to. Seems to me that a 25% reduction in pay that results in a 600% increase in turn time is not a great way to do business, especially when you factor in how much leases cost and lost revenue.

The company reduced their expenses by eliminating workers in addition to slashing compensation. Like I mentioned on other threads they doubled the savings they claimed they needed to be profitable. However they are not doing that great. What I have to wonder is, if they had just laid off and kept compensation where it was, how profitable they would be today? The loss of morale resulted in a huge loss of productivity, along with the 8 hour engine changes a lot of other things that made the difference between an "on time" flight and a cancellation are gone. While the numbers may not indicate a huge rise in delays and cancellations (although from things I've read there is a rise throughout the industry)a lot of this can be attributed to a surpluss of expensive aircraft that sit around throughout the system. Without all these "spares" my guess is that delays and cancellations would be at an all time high.

So if the goal of mangagement was destroy morale by bankrupting their employees but hoping that the golden handcuffs of debt will keep them showing up for their assigned shift then yes their plan is working. However if they want a workforce that goes above and beyond, resulting in very high productivy, profits and loves their job, then they have lost.

It used to be that most would do "what they could", now they do only "what they must". The margin between the two is huge.

Could not have said it better.
There are all ways spare Aircraft here in MIA.
We no longer work on anything at the gate.
We simply pull it out of service and bring a spare up to cover the trip.
Before the ILC (industry leading concessions) 99 percent of the equipment was worked on at the gate and usually made the trip.
Now its easier to take it out of service and let it sit at the hanger sometimes for days.
Loss of pay and benefits means no more going the extra mile to save a trip.
Let it die I still get paid the same weather I go the extra step or work by the book.
Now days I work by the book.

 

[TWU informer]

There are about 300 extra workers in Tulsa running around on too many so-called leadership teams trying to manage the company.

The concessions might have saved bean counter per head dollars, but the cost of loss productivity and the cost to "manage" the place has to be the ultimate in costly mistakes.

But hey, we at AA are indeed doing things much different than other airlines. No other airline is as stupid as this.

 

[AMFAMAN]

You think so?

I hear plenty of complaining and engine changes that typically took 8 hrs now take three days, or 72 hrs.

How true - we used to bang out two engine changes with a six man crew on a 8 hour shift. Of course they would grease us 4 over, PL, PH, and achievers points, but the plane flew every morning. Now one engine change on an MD-80 takes 2 full shifts and most times don't fly till late the next night or the following morning. The rest of the fleet, add a lot of time. This still takes less time than an engine change in at an overhaul base.

 

[Wretched Wrench]

Management is reading this and thinking, "Obviously these guys aren't scared enough for their jobs. AA's management is too soft. Nothing motivates an employee like fear."

 

[FWAAA]

The company reduced their expenses by eliminating workers in addition to slashing compensation. Like I mentioned on other threads they doubled the savings they claimed they needed to be profitable. However they are not doing that great. What I have to wonder is, if they had just laid off and kept compensation where it was, how profitable they would be today? The loss of morale resulted in a huge loss of productivity, along with the 8 hour engine changes a lot of other things that made the difference between an "on time" flight and a cancellation are gone. While the numbers may not indicate a huge rise in delays and cancellations (although from things I've read there is a rise throughout the industry)a lot of this can be attributed to a surpluss of expensive aircraft that sit around throughout the system. Without all these "spares" my guess is that delays and cancellations would be at an all time high.

So if the goal of mangagement was destroy morale by bankrupting their employees but hoping that the golden handcuffs of debt will keep them showing up for their assigned shift then yes their plan is working. However if they want a workforce that goes above and beyond, resulting in very high productivy, profits and loves their job, then they have lost.

About the bolded portion: The concessions contemplated furloughs, so there's no real "double savings." The company said that the concessions were worth $1.8 billion annually, and whaddayaknow, the labor/wages/benefits line item in 2004 was almost exactly $1.8 billion smaller than in 2002. The quarterly 2003 savings were something like $400 million in the third quarter and $450 in the fourth quarter, so that's in line with the announced savings.

Sure, the demoralized workers have engaged in a nearly three year slowdown, taking longer than before to accomplish the same tasks. So what? The airplanes are still being properly maintained, they aren't falling out of the sky (you guys continue to do quality work) and the company is saving about what it said would save. From your group alone, something in excess of $660 million each year.

The fact that fewer guys are getting the job done (eventually - with the slowdown you mentioned) just demonstrates how bloated and overstaffed the mechanics ranks had become. Once you lost pushback and de-icing, the same guys had less to do.

When AA was making $1 billion plus per year in the late 1990s, the bloated workforce wasn't a front-burner issue. Frequent flyers could just pay more for upgrade stickers. Fares could be jacked higher (11 times in 2000-2001). Stupid as you all think AA management is, ya gotta admit that they were smart enough to leave the bloated ranks the hell alone for a few years. But negative cash flow (like occurred from about July, 2001 until May, 2003) has a way of pushing uncomfortable decisions to the front burners.

Would AA like to see the mechanics work as fast as before? Probably. Is that speed worth restoring your lost $660 million each year? Dream on. The planes are still being fixed by fewer guys making (in the aggregate) two-thirds of a billion less money each year.

Sure, you would have preferred a layoff followed by an eventual recall at the same old wages. Problem was, AA wanted cake and wanted to eat, and AA got both. Furloughs and massive pay cuts that will likely be permanent, despite everyone's bravado about "getting it all back" when the contract is amendable.

I agree with you - employee morale goes hand in hand with productivity and probably contributes greatly to profits when there are profits to make. But let's face it - AA felt forced to seek an injunction against you guys in NYC prior to September 11 due to an organized work slowdown. Even before the concessions, efficient productivity were not terms anyone would use to describe AA's maintenance operations.

For christ's sake, Mr Owens - the AA mechanics have been disgruntled for years. You and Dave have posted numerous times about the 20+ years of concessions suffered by your workgroup. AA employees are legendary at reminding everyone who will listen how much AA sucks and how evil management has always been. Like cutting pay and benefits is gonna make it worse? Be serious.

Management's view about the concessions and their effect on morale was "Exactly how much worse can employee morale get?" Even when times were good, too many employees seemed to gloat that AA's labor relations were the worst of any airline and would never get better. Given those prevalent pre-2001 employee attitudes, who can blame management for not giving a damn about your morale?

Yes, the concessions worked. Even though every employee says now that they voted "No," the vast majority of them keep coming to work every day and doing their jobs. Every day they vote "Yes." Due to the crack cocaine that is union seniority, you can't realistically change your vote to "no" and go to another airline. Well, you could if you wanted to scab at NW or fight for one of the scarce openings at WN or B6. But then you'd be starting at the bottom of the pay ladder all over again. Nobody in their right mind over the age of 25-30 would do such a thing. They've got you over a barrel, and now it's their turn to call the shots. Remember those prior years when a strike threat was something AA feared and AA was generally willing to buy labor peace? You can bet that management does.

 

[eolesen]

Remember those prior years when a strike threat was something AA feared and AA was generally willing to buy labor peace? You can bet that management does.

It's simpler than that. Remember all the years when [insert workgroup here] was demanding to be paid the same as their peers at [insert airline here]?

You finally got your wish. Unfortunately, parity with peers at other airlines works both ways.

<queue rant about AA having dragged down the rest of the industry and how its a race to the bottom, blah, blah, woof, woof...>

Even after having been run over by the concession train, AA still pays better overall than most other airlines, and definitely has kept more aircraft maintenance employees on its payroll than any other non-military organization in the world.

 

[Hunter]

[...] They've got you over a barrel, and now it's their turn to call the shots.

FWAAA -

Your post is well taken. However, I am of the opinion the pendulum that is AA's ability to dictate terms to its unions is about to swing back the other direction. Without the benefit of a crystal ball, I cannot predict with any certainty when this shift will be recognizable, but if history is an indicator, it will happen.

Experience has taught me to never underestimate what AA is willing to do in the pursuit of revenue.

 

[Wretched Wrench]

Unfortunately, parity with peers at other airlines works both ways.

<

Not for us. When other airlines paid more, we were #7, #8 or #9. No parity there. Now that other airlines are paying lower, we get to share that. And our concessions still lead the others in many areas.

 

[Bob Owens]

Hmm, where do I start? How about with WRONG!!!

FWAA; About the bolded portion: The concessions contemplated furloughs, so there's no real "double savings." The company said that the concessions were worth $1.8 billion annually, and whaddayaknow, the labor/wages/benefits line item in 2004 was almost exactly $1.8 billion smaller than in 2002. The quarterly 2003 savings were something like $400 million in the third quarter and $450 in the fourth quarter, so that's in line with the announced savings.

When the company presented their "offer" it was concessions or a reduction in headcount, not both, they took both.

Sure, the demoralized workers have engaged in a nearly three year slowdown, taking longer than before to accomplish the same tasks. So what?

"Slowdown" sounds like a deliberate act, thats not what I'm talking about, if there was a slowdown things would be much much worse, what I'm talking about is workers that have no hope for abetter future who show up and only do what is required.

The airplanes are still being properly maintained, they aren't falling out of the sky (you guys continue to do quality work) and the company is saving about what it said would save. From your group alone, something in excess of $660 million each year.

How would you know? As far as the savings losing a dollar to save a penny is not such a great deal.

The fact that fewer guys are getting the job done (eventually - with the slowdown you mentioned) just demonstrates how bloated and overstaffed the mechanics ranks had become.

And whose fault was that? We were shocked when the company kept hiring even after the slowdown prior to Sept 11 started, they were even hiring after Sept 11. That was managements choice.

Once you lost pushback and de-icing, the same guys had less to do.

In the small stations most lost their jobs, it was transfer to a larger station,downgrade or hit the street.

When AA was making $1 billion plus per year in the late 1990s, the bloated workforce wasn't a front-burner issue. Frequent flyers could just pay more for upgrade stickers. Fares could be jacked higher (11 times in 2000-2001).

Really,wouldnt good management have run it so the "$1 billion plus per year" could have been more?

Stupid as you all think AA management is, ya gotta admit that they were smart enough to leave the bloated ranks the hell alone for a few years.

What is smart about that?

But negative cash flow (like occurred from about July, 2001 until May, 2003) has a way of pushing uncomfortable decisions to the front burners.

Would AA like to see the mechanics work as fast as before? Probably. Is that speed worth restoring your lost $660 million each year? Dream on. The planes are still being fixed by fewer guys making (in the aggregate) two-thirds of a billion less money each year.

But how many billions are they losing through cancellations, delays, extra leases, unneccissary parts replacements,OT, etc? Those numbers are harder to calculate and they are the numbers that make SWA profitable while others are not.

Sure, you would have preferred a layoff followed by an eventual recall at the same old wages. Problem was, AA wanted cake and wanted to eat, and AA got both.

Exactly, thats what I've been saying all along, they lied to get what they wanted, they capitalized on the tragedy of 9-11 to get their cake and eat it too.They were not nearly as bad off as they claimed to be and they grabbed a lot more than they needed and the TWU was right there in bed with them.

Furloughs and massive pay cuts that will likely be permanent, despite everyone's bravado about "getting it all back" when the contract is amendable.

Thats a given as long as they have the TWU.

I agree with you - employee morale goes hand in hand with productivity and probably contributes greatly to profits when there are profits to make.

And it could make the difference between profits and losses too.

But let's face it - AA felt forced to seek an injunction against you guys in NYC prior to September 11 due to an organized work slowdown.

Which was denied because it was proven to be a lie.

Even before the concessions, efficient productivity were not terms anyone would use to describe AA's maintenance operations.

And whose fault was that?

For christ's sake, Mr Owens - the AA mechanics have been disgruntled for years. You and Dave have posted numerous times about the 20+ years of concessions suffered by your workgroup. AA employees are legendary at reminding everyone who will listen how much AA sucks and how evil management has always been. Like cutting pay and benefits is gonna make it worse? Be serious.

I know its easy to confuse the two and it may be hard to distinguish one from the other but most of the criticism was directed towards the TWU. Most were very content with conditions after the 2001 contract prior to 2003.

Management's view about the concessions and their effect on morale was "Exactly how much worse can employee morale get?"

And how would you know that? Like I said morale was high after the 2001 contract.

Even when times were good, too many employees seemed to gloat that AA's labor relations were the worst of any airline and would never get better. Given those prevalent pre-2001 employee attitudes, who can blame management for not giving a damn about your morale?

Do you have any examples to back up that claim?

Yes, the concessions worked. Even though every employee says now that they voted "No," the vast majority of them keep coming to work every day and doing their jobs.

Its not quite as simple as that. Like I said, the golden handcuffs of debt keep them showing up to do what they must instead of what they can.

Every day they vote "Yes." Due to the crack cocaine that is union seniority, you can't realistically change your vote to "no" and go to another airline. Well, you could if you wanted to scab at NW or fight for one of the scarce openings at WN or B6. But then you'd be starting at the bottom of the pay ladder all over again. Nobody in their right mind over the age of 25-30 would do such a thing. They've got you over a barrel, and now it's their turn to call the shots. Remember those prior years when a strike threat was something AA feared and AA was generally willing to buy labor peace? You can bet that management does.

So in other words you are saying that management is more concerned about satisfying a vendetta than making money?

 

[FWflyer]

Posted on Fri, Jan. 06, 2006

Some execs to get hefty bonuses

By TREBOR BANSTETTER
STAR-TELEGRAM STAFF WRITER

FORT WORTH - Several American Airlines executives will receive million-dollar-plus bonuses this spring, thanks to the recent jump in the stock price of AMR Corp., the airline's parent.

Many more management employees will also receive payouts under the airline's performance plan, which was approved in 2003 and covered work until the end of 2005.

The plan's participants include midlevel managers and higher, said American spokeswoman Lisa Bailey, although she added that not all managers fall under the plan. About 1,000 people participate, she said.

She stressed that the awards are not traditional bonuses. Instead, she said, they are an attempt to tie a portion of management compensation to the company's overall performance.

"This was compensation that was deferred and placed at risk," she said. "We don't consider it a bonus."

The top payout will go to Dan Garton, American's executive vice president of marketing, whose award would be worth more than $1.7 million if valued today, according to company filings.

Three other executives -- Will Ris, American's senior vice president of government affairs; Henry Joyner, senior vice president of planning; and Monte Ford, senior vice president of information technology -- will receive awards currently valued at $1.4 million.

Gerard Arpey, American's chief executive, was not enrolled in the plan for those years and will not receive any money.

The payouts are by far the largest granted to top American executives in more than five years.

"Our compensation policy is designed to hold managers and executives directly accountable for the company's performance by placing a significant portion of [their] total compensation at risk when the company does not meet or exceed predetermined performance goals," Jeff Brundage, American's senior vice president of human resources, said in a letter to employees Thursday.

Under the plan, participants were awarded units that will vest in April. The value of the payouts varies according to how well American's stock does compared with other airlines'.

AMR shares jumped 169 percent from 2003 to 2005.

The stock has soared despite another year of red ink. Analysts expect the company to report losses of $600 million to $800 million for 2005 when it releases its quarterly and year-end reports Jan. 18.

Because AMR shares were the industry's best performers, each unit will be worth 175 percent of the value of one share of AMR stock the day they vest, Bailey said.

For example, Garton was granted 44,000 units in the plan, according to financial statements. At the stock's current price of $22.51 per share, that would equate to a $1.7 million payment in April.

The smallest award was 50 units, Bailey said, which would be worth about $2,000 today.

If the stock continues to rise before April, the award could be worth even more. If shares drop, however, the payment would be smaller.

American executives warned Wall Street in a financial filing last month that larger-than-expected management incentives could affect the company's costs.

American's stock options plan for employees, which was part of the 2003 concessions agreement, will also vest in April. Those options had a strike price of $5, giving the options a total value to employees of more than $568 million, Brundage said.

Management perks have been a sensitive topic at American since 2003, when employees learned of lucrative retention bonuses and retirement perks for top executives one day after painful concessions were approved.

The resulting uproar forced then-Chief Executive Don Carty to resign.

But Bailey pointed out that union leaders were told two years ago about the performance plan that will be paid out in April.

And in his letter to employees, Brundage said it is "good news" that the airline's stock has strengthened.

It is "evidence of the extent to which the financial markets have responded to our efforts to remain solvent and jointly address our competitive challenges," he wrote, "particularly true in comparison to our competitors who took the painful path of bankruptcy."

Trebor Banstetter, (817) 390-7064 [email protected]


© 2006 Star-Telegram and wire service sources. All Rights Reserved.
http://www.dfw.com

That's just shameless.

 

[FWAAA]

That's just shameless.

It's a non-event. Even if it is "shameless," the time to whine about it was 32 months ago when the company and the affected managers entered into the arrangement. If the stock were still worth less than $5, these execs would get none of this deferred comp.

If these payouts are shameful, then so are the potential payments of $568 million to the rank and file for their options. Right? Or is this just another case of paycheck envy?

Yawn.

 

[TWU informer]

It's a non-event. Even if it is "shameless," the time to whine about it was 32 months ago when the company and the affected managers entered into the arrangement. If the stock were still worth less than $5, these execs would get none of this deferred comp.

If these payouts are shameful, then so are the potential payments of $568 million to the rank and file for their options. Right? Or is this just another case of paycheck envy?

Yawn.

It may be a non-event to you, but to me this is in fact shameless.

To management bonuses while employees are under concession agreements to "save the company", actually goes beyond shameless in my mind.

You are entitled to your opinion and you are also entitled to be wrong!

Also of note is your claim to complain 32 months ago.

The report says union leaders were told 24 months ago.

And the union member is only finding out now.

 

[FWAAA]

It may be a non-event to you, but to me this is in fact shameless.

To management bonuses while employees are under concession agreements to "save the company", actually goes beyond shameless in my mind.

You are entitled to your opinion and you are also entitled to be wrong!

Well, you're entitled to be wrong as well.

I assume you're similarly outraged at the potential $568 million in "bonuses" to rank and file workers. After all, if AA can't afford to pay its management employees the agreed-upon deferred comp, it likewise can't afford to pay the rank and file the value of their stock options either, right?

Or is this just more "they make lots more money than I do and it's not fair?" 'Cause that's what it looks like.

 

[aafsc]

First, I don't think there should be any "bonuses" until the company is returned to adequate profitability on a net income basis and the concessions are restored. But as noted in another thread, these are not bonuses in the traditional definition; they are related to stock price and if the stock price was still low, they would not get anything.

Second, Arpey was not included in this plan. While I am not all that wild about the execs below Arpey getting this, it could be worse; like at the other airlines where the employees make less hourly, where work was massively farmed out, where the cost of benefits increased, and pensions and other retirement benefits were trashed; all while the top management of those other carriers were getting much more in compensation than Arpey and co.

 

[TWU informer]

Well, you're entitled to be wrong as well.

I assume you're similarly outraged at the potential $568 million in "bonuses" to rank and file workers. After all, if AA can't afford to pay its management employees the agreed-upon deferred comp, it likewise can't afford to pay the rank and file the value of their stock options either, right?

Or is this just more "they make lots more money than I do and it's not fair?" 'Cause that's what it looks like.

When discussing the rank and file millions, the reason you use the word "potential" is because that number would require that no employee has exercised options to date.

Of course given that many already have cashed in to have milk and bread then you and the other word twisters use word like "potential" when describing our options.

You and I can argue this to death and get nowhere.

I think the real debate winner will be the low morale of employees. Of course given that the union leaders gave into concessions that equal 10 times what was actually required to "save" the company. Then AA will get around low employee morale, at least for now. But long term, this company will face the employee demand for concession returns and strikes and labor strife will become the norm instead ass kissing pajama parties.

Long term issues will be the real test of both union and management, not some scheme that has executives making bonuses based on stock prices instead of profits.

In fact, this scheme actually proves that AA Exec's are really in a business as usual mind set rather than a company just a couple of years from Bankruptcy. There has been no TurnAAround or any other company buzz word change in policy. It is business as usual and what goes around, comes around.