AA vs. SWA - Maintenance

[Bob Owens]

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On 6/24/2003 2:07:58 PM KCFlyer wrote:

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You are correct. Now...how do you propose to get the company back on track? Bear in mind that the pilots, flight attendants, rampers, agents and reservations agents aren't too keen on taking cuts either. Neither are many that fall into the category of "management" yet make less than a mechanic. What's the solution?​

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Why are you asking us?

Well anyway, since you asked.

Eliminate waste.

Why is the company still fattening up managements ranks? We have guys going into management because if they dont they are likely to be laid off. Why are they still hiring supervision while reducing production? Does it make sense to take away a wrench to create another monitor? If the unions were doing this it would be called featherbedding.

If they are reducing production while increasing supervision then they are increasing unit costs, not reducing them.​

Pay where you need to pay

Why does the company insist on the same pay rates nationwide? This clearly does not reflect "market rates" because the market rate in the midlands is not the same as on the coasts. The coasts is where the revenue is generated and where employees are the most fustrated with the loss of pay. If they do not put in some means to account for the higher costs then the company is more likely to suffer labor unrest where it hurts the most, where the money is generated.

The company and the union also allow overhaul to use line maint as a means of keeping overhaul pay up and in house. By forcing line to work at a discount it makes it economical to keep work in house while still paying some workers a much higher rate than they can get elsewhere in the overhaul market (prior to the new concessionary contract). The downside is that the line guys, who the company relys upon to keep the aircraft moving become demoralized and resentful, while some in overhaul may figure its better to accept overhaul rates that more than likely still support a good living standard,than risk having to get a new job, line mechanics are forced to accept, by those in overhaul a rate that brings them way below the local market rate. This leads to delays and cancellations, which leads to unhappy customers, which sooner or later leads to even more problems.

So between the fact that the company and the union fail to take into consideration the differences between line work/ overhaul and regional cost differences the company is left with the most unhappy workers where they need for the most motivated workers to be. This is reflected in system performance which has been in a constant decline over the last several weeks, and it shows no sign of letting up depite the fact that the company has resorted to not even checking most of its aircraft on overnighters any more. This logic of extending (eliminating) maintenance is one of the factors that led to the Alaska Air disaster. AA has its own history of costly maintenance saving blunders such as the Chicago DC-10 disaster.

Its sad that we do not learn from the lessons of the past.

The last thing that AA needs is a disaster that could be attributable to the new maint program.

 

[FWAAA]

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On 6/24/2003 2:56:27 PM Bob Owens wrote:

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On 6/24/2003 11:42:48 AM FWAAA wrote:

I''d agree with you if you were writing this in 1998 when record profits were rolling in.

In 1998 the company said "We have a contract, too bad". Apparently they screwed us in the 90s by using accounting tricks to exaggerate their losses. More than likely they did the same this time, $988 million for "Goodwill", prepaid leases, accellerated depreciation, charges for "Frequent Flyer" miles that may never materialize etc.

You seem to ignore the fact that in 2003, your employer was nearly broke and could no longer afford to pay you your old wages.

Paper losses. We all had them, 401K for example, only we cant write ours off unless we actually lose money.

Again, why are our executives making more than SWA? Why dont we go to the same place that they get their executives to get ours? If it works for every other work group then why not the executives?

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From page 52 of the AMR 10-K for 2002:

Cash Flow from operations was negative $1.1 billion in 2002.

Cash Flow from investing (purchase of capital assets like airplanes) was negative $1.4 billion in 2002.

Guess what? Net borrowings for 2002 were, you guessed it, $2.5 billion in 2002.

What part of that negative cash flow don''t you understand or are you disputing? Do you have any delusions that AMR "made up" those numbers?

If you think they are not real then you should call the SEC.

You are preoccupied with the GAAP loss and all of the components of that loss, yet you are unwilling to acknowledge that your employer took in $2.5 billion less than it spent last year.

And we''ve been over it before, but here it is one more time:

Of course it''s management''s fault. It always is.

Just like at all the other major airlines which suffered negative cash flow last year.

But dwelling on who is at fault isn''t going to fill up the company''s bank account with the several billion it needs to right the ship. But cutting pay - now that was a start in the right direction.

I''ve said it before, and I''ll say it again. I want AA''s employees to be the best paid in the industry. And AA''s employees have, over the long haul, had it pretty good. Problem is, the current economic crisis highlighted just how little work AA was getting out of its highly paid staff, causing it to employ many more highly paid workers than it would if everyone would just work as hard as they do at WN.

All your talk about "reasonable expectations" and being paid comparably with your peers was coherent when major airlines were profitable, but they sound like juvenile "I want what''s coming to me" whining when your employer is broke and can''t afford it anymore.

Too bad it took you this many years to figure out that you don''t always get what you want, and no amount of union activity can change that. Welcome to the real world, Bob Owens.

 

[FWAAA]

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On 6/24/2003 9:24:57 AM Buck wrote:

Yet the average wage at American for the mechanics has been the lowest in the industry since 1983. The topped out wages may have been higher and AA had a guaranteed pension. But of course these items were paid for by the lowest average wage. We have had profit sharing programs, LeAAp and other performance incentives. I believe that WN has had a very nice stock purchase program over the years? And when a company is ran structurally sound this is the type of incentive that pays off. All AA can do is blame labor, but they never want to fix the problem. The workforce is not only there to provide a compensated service for the company, but they want to be happy with what they are doing. Why is moral at a all time low? What is easy to say is that if WN CASM is 7.5% and AA is ??, but lets say 8.5% after the labor concessions, then if AA treats it''s workforce equally with WN than labor should be compensated equally. AA''s size in itself dictates some advantage to have more of a market share. More potential to have revenue generated. I am just guessing, but if I had been working for WN and the moral was high then I would have voted as the majority did. However they still replaced their union representation, can you explain that. Industry leading contract in wages and they fired their rep???? As for the 401k, we as you know do not match as do many major corporations. This in itself is somewhat demaning when you compare benefit packages. If AA matched 401k cintributions many at AA would be satified with the wages today. However that is speaking from the top of the payscale and living in a low economic area of the country. My friend Bob Owens will tell you that those in the higher economic areas struggle daily.


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Where did you get the idea that AA''s CASM and WN''s CASM are in the same neighborhood?

WN''s Q1 2003 CASM was 7.5 cents.

AMR''s Q1 2003 (including Eagle) CASM was 11.81 cents. The concessions didn''t shave 4.3 cents per mile - they were worth only about 1.1 cents per mile.

WN''s costs are lower because they have many fewer people doing, on average, more work than AA''s employees. Yet their top wages are now higher. Their mechanics make more per hour, their pilots now make more than comparable AA pilots, and their FAs now make more than comparable AA FAs.

From WN''s 10-K:

At December 31, 2002, Southwest had 33,705 active employees, consisting of 10,920 flight, 1,900 maintenance, 16,405 ground customer and fleet service and 4,480 management, accounting, marketing, and clerical personnel.

While AMR spent a whopping 48.55% of its operating revenues on wages in 2002, WN spent a mere 36% of its operating revenues on wages.

Because WN outsources so much of its maintenance, if you add back all of their maintence items and repairs, that still only totals 43% of operating revenues. Doing the same thing to AA''s numbers (so we''re measuring apples to apples) brings AA''s wages, maintenance and repairs to a staggering 55% of operating revenues.

Remember, WN''s revenues are less, because they are, after all, a low fare airline. Yet they pay their employees top wages. How can that be? Because they have so few employees relative to their revenues, and their employees by and large work their ass off, instead of featherbedding.

WN only has 1900 mechanics. How many does AA employ (and still spends over $1 billion on maintenance items and repairs)?? What''s my answer? Work harder. Convince your co-workers to work harder. Don''t complain when it turns out that about a third of your co-workers have become superfluous because the rest of you are working harder.

Problem is, getting ahead for working harder is really not what unions are all about. WN has found a balance that currently works, and labor relations may not always be rosy at WN. But for many years the investors at AA have watched as management gave in to outrageous union demands that caused AA''s expenses to become hopelessly bloated. Both management and the labor groups are to blame. Carty''s failure to fix that problem contributed to his current unemployment. We''ll see if Arpey can avoid that fate.

 

[Buck]

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On 6/26/2003 3:29:24 AM FWAAA wrote:

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On 6/24/2003 9:24:57 AM Buck wrote:


Yet the average wage at American for the mechanics has been the lowest in the industry since 1983. The topped out wages may have been higher and AA had a guaranteed pension. But of course these items were paid for by the lowest average wage. We have had profit sharing programs, LeAAp and other performance incentives. I believe that WN has had a very nice stock purchase program over the years? And when a company is ran structurally sound this is the type of incentive that pays off. All AA can do is blame labor, but they never want to fix the problem. The workforce is not only there to provide a compensated service for the company, but they want to be happy with what they are doing. Why is moral at a all time low? What is easy to say is that if WN CASM is 7.5% and AA is ??, but lets say 8.5% after the labor concessions, then if AA treats it''s workforce equally with WN than labor should be compensated equally. AA''s size in itself dictates some advantage to have more of a market share. More potential to have revenue generated. I am just guessing, but if I had been working for WN and the moral was high then I would have voted as the majority did. However they still replaced their union representation, can you explain that. Industry leading contract in wages and they fired their rep???? As for the 401k, we as you know do not match as do many major corporations. This in itself is somewhat demaning when you compare benefit packages. If AA matched 401k cintributions many at AA would be satified with the wages today. However that is speaking from the top of the payscale and living in a low economic area of the country. My friend Bob Owens will tell you that those in the higher economic areas struggle daily.


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Where did you get the idea that AA''s CASM and WN''s CASM are in the same neighborhood?

WN''s Q1 2003 CASM was 7.5 cents.

AMR''s Q1 2003 (including Eagle) CASM was 11.81 cents. The concessions didn''t shave 4.3 cents per mile - they were worth only about 1.1 cents per mile.

WN''s costs are lower because they have many fewer people doing, on average, more work than AA''s employees. Yet their top wages are now higher. Their mechanics make more per hour, their pilots now make more than comparable AA pilots, and their FAs now make more than comparable AA FAs.

From WN''s 10-K:

At December 31, 2002, Southwest had 33,705 active employees, consisting of 10,920 flight, 1,900 maintenance, 16,405 ground customer and fleet service and 4,480 management, accounting, marketing, and clerical personnel.

While AMR spent a whopping 48.55% of its operating revenues on wages in 2002, WN spent a mere 36% of its operating revenues on wages.

Because WN outsources so much of its maintenance, if you add back all of their maintence items and repairs, that still only totals 43% of operating revenues. Doing the same thing to AA''s numbers (so we''re measuring apples to apples) brings AA''s wages, maintenance and repairs to a staggering 55% of operating revenues.

Remember, WN''s revenues are less, because they are, after all, a low fare airline. Yet they pay their employees top wages. How can that be? Because they have so few employees relative to their revenues, and their employees by and large work their ass off, instead of featherbedding.

WN only has 1900 mechanics. How many does AA employ (and still spends over $1 billion on maintenance items and repairs)?? What''s my answer? Work harder. Convince your co-workers to work harder. Don''t complain when it turns out that about a third of your co-workers have become superfluous because the rest of you are working harder.

Problem is, getting ahead for working harder is really not what unions are all about. WN has found a balance that currently works, and labor relations may not always be rosy at WN. But for many years the investors at AA have watched as management gave in to outrageous union demands that caused AA''s expenses to become hopelessly bloated. Both management and the labor groups are to blame. Carty''s failure to fix that problem contributed to his current unemployment. We''ll see if Arpey can avoid that fate.

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Actually as I indicated I was guessing. In another thread no one can obtain an answer as to the CASM at AA. What was AA''s CASM without Eagle?

Is that what AA is required to do to compete, reduce their workforce and increase producttivity?
Are the Flight Attendants part of the 10,920?

AMR spent 48.55% on wages what did AA spend?

What is the comparasion in wages of each work group?

 

[FWAAA]

Last night I posted AA''s estimated Q2 CASMs on the other thread, but some others insist on arguing about Bay area to New York airfare instead. Here it is again.

AA''s CASM for Q1 2003 was 11.39 without Eagle. With Eagle, it was 11.81. The concessions were worth about 1.1 cents per ASM (easily computed by dividing the $1.8 billion wage reductions by total 2002 ASMs).

Yesterday AA announced that its estimated CASM for Q2 was 10.6 with Eagle (AMR) and 10.2 excluding Eagle (just AA mainline). Slightly lower prices for fuel helped a little. That is in line with my expectations, and that, coupled with the announcement that May and June are cash flow positive has rocketed AMR stock this morning to nearly $11.00. Compared to the $1.25 it hit on March 12, and you can see why I am very happy. Very, Very Happy. AA is probably going to survive.

WN''s "flight" numbers of employees include pilots and FAs.

In 2002, AA spent 50.1% of its operating revenues on wages and salaries (higher percentage than AMR, which includes low-paid Eagle help). That number is simply unacceptable. AA either had to increase revenue dramatically or lower its labor costs. I don''t want to see AA employees make less money - I want them to make more. But they can''t take home half the pie. No other airline lets its help take half the gross revenues. None.

As for detailed work group by work group comparisons, that would involve more digging - sorry, outta time for today.

 

[Buck]

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On 6/26/2003 10:33:48 AM FWAAA wrote:

AA''s CASM is currently overrated as a "problem." AA''s 2002 (and first 4 months of 2003) real problem was negative cash flow. Just like you or I would have if we spent 20% more each month than we took in.

The concessions DID have a positive impact on the CASM. More importantly, they were designed to help bridge the gap between cash in and cash out. The concessions would never have worked without increased revenue (which is beginning to happen now).

Contrary to what some union types have been preaching, the concessions are only part of the picture. Some would have you believe that AA tried to solve its entire problem on the backs of the working man, when in fact, AA''s survival depends on much more than just the wage concessions. Now that they are in place, AA has access to capital markets (if needed). The good news is - AA might not have to borrow the $5 billion that AA borrowed in 2001-2003 to fund operating losses.

AA might still fail even with the concessions. But the chances of that happening are much more remote each passing day.

Contrary to what others may post, I have no vested interest in AA besides being a very frequent flyer and investor. I couldn''t care less which union is chosen to represent the mechanics - (as if it really matters anyway) - Bob Owens claims the TWU has screwed AA mechanics since 1983. If that''s true, then why not throw them out and waste your wages (on dues) to some other sorry union that is powerless to change the forces dominating the airline industry these days?? Why wait 20 years to make a change?

AA''s mechanics must be the most conservative bunch of guys in the whole world to suffer lagging wages at the hands of the TWU for 20 years.

IAM, TWU, AMFA, Teamsters - none of these unions has the ability to "make it all better," and unfortunately, that''s what too many people want.

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I believe that when it appears that the working man is taking the brunt of the concessions, it is partially the companies fault for not communicating with those involved. The question that still remains, is that what does AA need to do? If wages and benefits are just a small part what are the larger parts and why would a board of directors allow it''s company to continue to operate in such a manner?

The type of union representing the workforce can matter. This why I asked for the comparable compensation between each of the associated work groups.Why are the top mechanics at WN are paid more than the mechanics at AA and the WN''s Fleet Service is paid less the Fleet Service at AA?

As for replacing the TWU this is done by a representational election held by the National Mediation Board. Election cards must be collected representing an interest in sais election. I have been participating in this process since 1989. It does take a lot to convince the mechanics of how they would benefit from being represented by a mechanics union. The disparity lies in the economic divisions of the country. The more stagnat wages become the harder it is on the higer cost of living areas. Secondly the type of unionism; Industrial Unionism in engrained in the membership. It has come down to the "I got mine" mentality and the TWU supports this. They no longer represent the issues of the mechanics without attaching the controlling power of Fleet Service. Therefore in negotiations it is the wishes of the majority (Fleet Service) that controlls the results. The mechanics are generally left with only that which is necessary for AA to maintain a maintenance workforce that would eventually shrink as more lucrative employemnt appears elsewhere. AA still maintains the lowest average compensation for the maintenance workforce in the indiustry. The process is ongoing and when these individuals finally realize that the leadership will obtain their compensation at the behest of their membership they will take action.

AMFA not make it better, anything but what we have been going through...........

 

[Buck]

I appreciate your research. But you are indicating that the wage and benefit package that American employees took had little effect on the CASM? If this is true then where is the problem?

 

[FWAAA]

AA''s CASM is currently overrated as a "problem." AA''s 2002 (and first 4 months of 2003) real problem was negative cash flow. Just like you or I would have if we spent 20% more each month than we took in.

The concessions DID have a positive impact on the CASM. More importantly, they were designed to help bridge the gap between cash in and cash out. The concessions would never have worked without increased revenue (which is beginning to happen now).

Contrary to what some union types have been preaching, the concessions are only part of the picture. Some would have you believe that AA tried to solve its entire problem on the backs of the working man, when in fact, AA''s survival depends on much more than just the wage concessions. Now that they are in place, AA has access to capital markets (if needed). The good news is - AA might not have to borrow the $5 billion that AA borrowed in 2001-2003 to fund operating losses.

AA might still fail even with the concessions. But the chances of that happening are much more remote each passing day.

Contrary to what others may post, I have no vested interest in AA besides being a very frequent flyer and investor. I couldn''t care less which union is chosen to represent the mechanics - (as if it really matters anyway) - Bob Owens claims the TWU has screwed AA mechanics since 1983. If that''s true, then why not throw them out and waste your wages (on dues) to some other sorry union that is powerless to change the forces dominating the airline industry these days?? Why wait 20 years to make a change?

AA''s mechanics must be the most conservative bunch of guys in the whole world to suffer lagging wages at the hands of the TWU for 20 years.

IAM, TWU, AMFA, Teamsters - none of these unions has the ability to "make it all better," and unfortunately, that''s what too many people want.

 

[Bob Owens]

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On 6/26/2003 10:33:48 AM FWAAA wrote:

Just like you or I would have if we spent 20% more each month than we took in.

Unfortunately we cant go to the mortgage company, the electric company, the insurance company, the oil companies and the doctor and tell them that we have to pay them 20% less.

The concessions DID have a positive impact on the CASM. More importantly, they were designed to help bridge the gap between cash in and cash out. The concessions would never have worked without increased revenue (which is beginning to happen now).

I'm sure it did, but were these cuts really necessary for five years?

Contrary to what some union types have been preaching, the concessions are only part of the picture. Some would have you believe that AA tried to solve its entire problem on the backs of the working man, when in fact, AA's survival depends on much more than just the wage concessions. Now that they are in place, AA has access to capital markets (if needed). The good news is - AA might not have to borrow the $5 billion that AA borrowed in 2001-2003 to fund operating losses.

The question is were those losses unavoidable or were they the result of prepaying leases, accellerating depreciation, writing off "potential" liabilities, "Goodwill" etc?

AA might still fail even with the concessions. But the chances of that happening are much more remote each passing day.

AA has been ready to fail since day one. Even during height of profitabilty they claimed they were broke when labor came knocking on the door.

Contrary to what others may post, I have no vested interest in AA besides being a very frequent flyer and investor.

And thats why you hide your name and take such a keen interest in AA. Gee I pay a lot of money in Electric bills, maybe I should spend a lot of time on their web sites! Let me comment about their union structure, the utilities finances and all this other stuff just for kicks because I have nothing better to do. Maybe I should tell their employees that they should work for less so I can pay less on my bill, because after all I'm a frequent user of electricity.


IAM, TWU, AMFA, Teamsters - none of these unions has the ability to "make it all better," and unfortunately, that's what too many people want.

Maybe, but most would just like to have a union that will stand up and lead the fight.

What the company did was excessive, if they had done this the right way they would be doing better than they are now. Sure they got the wages down but now they cant get the work done. They have eliminated doing much of their overnight maint, many airplanes no longer get checked, mechanics feel that if they write up defects that management will try to fire them. It would not be the first time that an AA mechanic was fired for writing up defects. While they would get their jobs back in arbitration they apparently do not care, the back pay award is a cheap way to intimidate the rest of the workers. Look at AA's performance, the other day when I left work there were 9 airplanes still sitting at the hangar, thats a lot of tin to be sitting around, and nobody wanted to stay overtime to fix them, many were forced to stay, I'll bet they were really motivated.
Now the company is spending thousands of dollars a week sending workers to "training" to help them deal with the emotional effects of being screwed and hoping that the "feel good no matter how bad it hurts" programming they are trying to load into these guys spreads. So far the effect is the opposite, the workers come out even more annoyed. For what they are spending on this they could have given the guys back their uniforms and laundured them, THAT would have done more to motivate than sitting them in a class and treating them like morons.

Airplanes dont bring in any revenue if they dont fly. How long can the company afford to keep all these airplanes sitting around? The mechanics are not likely to come around for at least 5 years, if ever, the fact that they worked more for less is likely to leave a permanent $120,000 scar.

The best shot AA has is to lose in court and allow the mechanics to revote on the contract. Otherwise the company is doomed, when an employer screws their workers and then rubs their face in it they should not be suprised to learn that they are no longer motivated.

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[FWAAA]

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On 6/26/2003 5:42:03 PM Bob Owens wrote:

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On 6/26/2003 10:33:48 AM FWAAA wrote:

 Just like you or I would have if we spent 20% more each month than we took in.

Unfortunately we cant go to the mortgage company, the electric company, the insurance company, the oil companies and the doctor and tell them that we have to pay them 20% less.

The concessions DID have a positive impact on the CASM.  More importantly, they were designed to help bridge the gap between cash in and cash out.  The concessions would never have worked without increased revenue (which is beginning to happen now).

I''m sure it did, but were these cuts really necessary for five years?

Contrary to what some union types have been preaching, the concessions are only part of the picture.  Some would have you believe that AA tried to solve its entire problem on the backs of the working man, when in fact, AA''s survival depends on much more than just the wage concessions.  Now that they are in place, AA has access to capital markets (if needed).  The good news is - AA might not have to borrow the $5 billion that AA borrowed in 2001-2003 to fund operating losses.

The question is were those losses unavoidable or were they the result of prepaying leases, accellerating depreciation, writing off "potential" liabilities, "Goodwill" etc? 

AA might still fail even with the concessions.  But the chances of that happening are much more remote each passing day.

AA has been ready to fail since day one. Even during height of profitabilty they claimed they were broke when labor came knocking on the door.

Contrary to what others may post, I have no vested interest in AA besides being a very frequent flyer and investor.

And thats why you hide your name and take such a keen interest in AA. Gee I pay a lot of money in Electric bills, maybe I should spend a lot of time on their web sites! Let me comment about their union structure, the utilities finances and all this other stuff just for kicks because I have nothing better to do. Maybe I should tell their employees that they should work for less so I can pay less on my bill, because after all I''m a frequent user of electricity.


IAM, TWU, AMFA, Teamsters - none of these unions has the ability to "make it all better," and unfortunately, that''s what too many people want.

Maybe, but most would just like to have a union that will stand up and lead the fight.

What the company did was excessive, if they had done this the right way they would be doing better than they are now. Sure they got the wages down but now they cant get the work done. They have eliminated doing much of their overnight maint, many airplanes no longer get checked, mechanics feel that if they write up defects that management will try to fire them. It would not be the first time that an AA mechanic was fired for writing up defects. While they would get their jobs back in arbitration they apparently do not care, the back pay award is a cheap way to intimidate the rest of the workers. Look at AA''s performance, the other day when I left work there were 9 airplanes still sitting at the hangar, thats a lot of tin to be sitting around, and nobody wanted to stay overtime to fix them, many were forced to stay, I''ll bet they were really motivated.
 Now the company is spending thousands of dollars a week sending workers to "training" to help them deal with the emotional effects of being screwed and hoping that the "feel good no matter how bad it hurts" programming they are trying to load into these guys spreads. So far the effect is the opposite, the workers come out even more annoyed. For what they are spending on this they could have given the guys back their uniforms and laundured them, THAT would have done more to motivate than sitting them in a class and treating them like morons.

 Airplanes dont bring in any revenue if they dont fly. How long can the company afford to keep all these airplanes sitting around? The mechanics are not likely to come around for at least 5 years, if ever, the fact that they worked more for less is likely to leave a permanent $120,000 scar.

The best shot AA has is to lose in court and allow the mechanics to revote on the contract. Otherwise the company is doomed, when an employer screws their workers and then rubs their face in it they should not be suprised to learn that they are no longer motivated.

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If the slackers won''t work they should be fired. Too bad for their families.

 

[Bob Owens]

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On 6/26/2003 6:53:54 PM FWAAA wrote:

If the slackers won't work they should be fired. Too bad for their families.

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Thats all you have to say?

Who said that anyone was not working? There is a difference between working and getting something done. Morale can have a dramatic impact on productivity. Doing what one is told to do is different from doing as much as one can.​