American Airlines is thriving despite bankruptcy

[Bob Owens]

You may be right, but here's what 89 said:


And by comparing Parker and Horton and claiming that Parker "made a career in the airlines" but that Horton did not, he's objectively mistaken. They're both airline guys cut from the same cloth - their apprenticeship under the ultimate airline (numbers) guy, Crandall.


As Parker began his career at AA, just like Horton, as a numbers guy, then Horton is as much an "airline guy" as Parker.


Funny that you mention Crandall. I watched the Charlie Rose interview with Crandall, along with that annoying "I want to be relevant" Peter Greenberg (what an idiot) and Crandall admitted early on in that interview that he was a numbers guy, just like his crop of proteges at AA in the '80s and '90s (including Horton, Arpey and Parker). Crandall said that the airline business was a numbers business.

I understand the hatred for Horton and I understood the hatred for Arpey and Carty. I understand the idolizing of Crandall - it's been a long time since he demanded and got concessions (in the form of the B scale), so hatred for him has worn off.

My point is that Parker is no more "airline guy" than Tom Horton and that will be apparent once the merger happens and everyone's infatuation with Parker fades away. At that point, it will be apparent that he's Carty/Arpey/Horton with a different last name but the same inside. Exactly the same. Except with more drunk driving arrests throughout his career than the others combined.

I for one dont idolize any of them. If I were to pick someone to run the company it would be Herb Kelleher or Gordon Bethune. All executives in the Airline industry are numbers guys, they have to be because this is an industry with a narrow profit margin.

As far as all this USAIR stuff, I'm not willing to give Parker any more than I'm willing to give Horton (same goes for Kellereher and Bethune).

Employees need to remember that we work for the company, we do not own it. Who and how its run isnt up to us nor should we be willing to sacrifice for it or any personality the owners hire to run it. We should concentrate on one thing, getting as much as we can for our labor-period. Of course when we have achieved that its in our best interest to produce and do what we can to insure the continued existance of the company so they can continue to pay us.

The pilots and FAs have obviously approached these negotiations more intelligently than we have. While the company has increased their demands from us (in fact they admitted that they were demanding $40 million a year more from us than their Business plan needed, simply because "they can'), and we have to vote on these deals that keep getting worse the pilots, who are not at the bottom of the industry have forced the company to lower their ask by 3% and pretty much forced the company to draw yet another "line in the sand".

In 1997 the pilots, after years of negotiations, rejected a TA, shortly afterwards they were released by the NMB. That has been the pattern for 75 years. In 2010 we rejected a TA after several years of negotiations yet the TWU refused to ask for a release. In 2012 the company filed to abrogate our contracts, yet the TWU still refuses to demand a release. If the court grants the motion and abrogate the contract that puts the company at day 31 of an NMB release, however its only a one way release. The company is free to impose the terms it desired but the workers are not free to self help. While its late in the game now we should demand that the NMB release us. The NMB already withdrew from negotiations, back in August of 2011. We should have asked then but some said that since the company was still willing to talk, as they extended not only the 2003 concessions but the pay freeze as well(why wouldnt they be willing to talk?), that they didnt want to piss off the company and be put on ice.

Some claim that we will not get a release because of the Presidential election, well thats not the way the process was set up. We need to force the NMB to deliver a reason for not releasing us and see if they can come up with a reason and still comply with the intent and past precedence of the law. The economy, politics, etc should have nothing to do with this step of the process, there are other steps where that comes into play but we at least need to get there, or at least do our part to move the process along. Do I think that we would legally be allowed to strike? No, but we should be prepared to. If we move along the process then there is no need to resort to what the government considers to be "illegal activities" which would be even more disruptive than allowing the process to move forward. My feeling is, with load factors as they are, that a PEB would be put in place within 6 minutes of the Midnight hour but at least labor would be given the opportunity to be heard in a court where the objective is to reach a consensual deal and not a court where the object is to force labor to consent to what the court will hold us down and allow the company to impose. While the company may not achieve its $3billion objective the likelyhood of achieving long term success would be greater, customers would be happier and employees would probably be even more productive if we followed the process as it was intended.

 

[Bob Owens]

AA has not publicly released its EBITDAR target (it's been redacted in everything I've seen). Are you disclosing the actual (confidential) EBITDAR target or is this a number you backed into thru some revelation of the profit sharing that you claim a company lawyer disclosed?

Do you know what UAL's EBITDAR was in 2011? 15.9%. How about DAL? 14.6%

Even assuming that your oft-repeated claim of 17% is accurate, that's not an outlandish target to shoot for given the competition's actual results from 2011.

It was let out in the hearings, guess you should have been there.

2011 was an exceptional year for most airlines yet the still didnt see an EBITAR in excess of 17%.

UAL actaually exceeded the target they put forward in BK.

Why doesnt AA release its EBITAR target?

I don't know the answer to your questions, but I do know that your contract is likely to be abrogated in just over a week regardless of the answers. What UAL may or may not do in the future - that has very little to do with the here and now at AA.

Do you mean June 5 June 22 June 29th? You may be right but then the workers will do what they have to many already have. We have had around 7% of the workforce at LGA quit in less than 6 months. AA is losing mechanics left and right, not only are other airlines hiring but other industries are actively soliting Airline mechanics. In an ad in "The Chief" a NY Labor paper the MTA took out an ad that said "Aircraft Mechanics" to work on Busses and subway cars. Even Southwest is hiring down in Dallas. Guys with over 20 years are quitting and going to Fed Ex and UPS as well. Abrogation is preferable to agreeing to six years of what the company is demanding.

On that, I was wrong,

"On that" and many other things lately.

Why didn't AA seek 1114 relief? I think the answer is that 1114 is usually used for hourly payrate cuts, and since AA is attempting to cut pay via productivity and other workrule changes (that reduce headcount), there wasn't the immediate fire like there was at US and UA that caused those airlines to seek 1114 changes right away. The $4 billion in cash gave AA some breathing room to work thru the 1113 process without seeking 1114 interim relief.

In other words because if they had sought 1114 relief they probably would not have been able to prove they needed it. You could have just agreed.

Yes, your (TWU M&R) hourly payrates are at the bottom. Problem is, AA's total maintenance costs are the highest per ASM, according to AA on the DoT filings.

Of course they are when you have an old fleet and you decide to refurbish them and install winglets on them before you send them to the desert.

If I were management, spending hundreds of millions on bankruptcy lawyers and other parasites, I would probably seek the biggest cuts I could, because of the fear of not doing it right the first time - recall that USAir filed a second time not too long after its first botched Ch 11 case. If you think that filing Ch 11 is sign of failure, it's nothing compared to the failure of having to do it a second time in two years because you didn't fix the problems in the first Ch 11 filing.

When USAIR exited BK they were undercut by AA. So they had to go back a second time, there is nobody under us, we are at the biottom, even if they raised our base pay by 10% we would still likely be at the bottom by year end.

If AA's employees had any competent negotiators or negotiating skills, they wouldn't get worked up over the size of the potential profits AA wants to make after Ch 11 - they would simply make sure they negotiated iron-clad, bullet-proof, generous "me-too" clauses that would enable everyone to share in those profits before management got a turn at the trough.

Perhaps and competant Lawyers dont spend their time on blogs making wrong predictions.

For the last several weeks, AA has been picking up some business from disenchanted UAL customers. And so far in the first five months of this year, Horton & Co. have been more successful at jacking up fares (the higher unit revenue I've been talking about) than either UA or US. Only DL has kept pace with AA in PRASM increases, and AA even overtook DL in May due to Southwest targetting ATL and imposing some fare discipline on DL.

More reasons they dont need concessions from us.

 

[Bob Owens]

I have friends around town that would read this statement and then turn to me and say, "You get paid more than UA, DL and US. All you mechanics have nothing to #### about."

I wish someone would start a new topic and explain why we do have something to #### about and how we are the lowest paid with the worst benefits.

There may be many outsiders that read these post and do not understand what labor cost for the airline industry are exactly.

For example. Here is a definition labor cost when I did a search on Google.

Labor Cost
The cost of wages paid to workers during an accounting period on daily, weekly, monthly, or job basis, plus payroll and related taxes and benefits (if any).

If you read the comments below any article about AA on the Tulsa World website you will see right away how those "highest paid greedy mechanics" are hated.

I would start the topic myself but I know there are many people on this forum that are a lot more articulate than I and can explain it in a language everyone could understand. Trying to explain something is not my forte.

Forget what the public thinks, just make sure the guy working next to you knows the truth.

 

[Bob Owens]

I'm not trying to be a complete smart-ass, Buck, but nothing is stopping you from looking up the numbers and posting them yourself. I've posted numbers before, as has WT. AA's total labor cost per ASM is the highest in the industry. AA's pilots and FAs are the most expensive in the industry. Despite your lagging hourly wages (now I'm talking maintenance), AA's maintenance costs per ASM are the highest in the industry. Where can you find these numbers? AA and all other airlines file reports with the DoT. That's where WT and analysts like Bob Herbst (airlinefinancials.com) get them.

Yes, for the umpteenth time, I realize that the hourly wage of AA's AMTs lags the industry. But that does not mean that AA's maintenance costs are low; the reality is that the TWU's long history of trading pay for jobs has worked, and you end up with a bloated workforce of low-paid people, which results in very high maintenance costs.


As I mentioned above to Buck, AA's labor costs per ASM are the highest in the industry. That does not mean that AA's employees have the highest hourly pay or that AA's employees are all overpaid. All it means is that every other airline pays less per ASM for its labor than does AA. The estimates range from several hundred million compared to UAL and DAL to over $2 billion compared to US. If AA had the same labor costs (per ASM) as jetBlue, AA's labor expenses would be about $4 billion less each year.

Notice the spin, notice the switch from labor costs to maintenance costs, notice the neglect to mention that AA pays less to vendors and also has the oldest fleet which is responsible for both of those different claims.Obviously the problem is not us, we are paid the least and they do not need any concessions from mechanics to address either of those issues, both are self correcting with new fleets, if in fact either of them actually need correcting. In house of course drives up labor costs(but should drive down non-labor costs) and an old fleet drives up maintenance costs (but should drive down leasing costs and costs associated with aquiring new aircraft), the 550 new planes coming in will fix that.

This is the exact same strategy the company used on their "Ask". They sold the Term Sheet as needed "labor cost cuts" to the Judge but were in fact asking us to cut "total maintenence costs" by $212 million. Maintenance costs will decline naturally as older, higher maintenence aircraft are retired, in theory the company currently should be seeing savings as far as lower lease rates or no longer paying off older airplanes. So we are being "Asked" to fix a problem that will fix itself and give AA a bonus savings on top.



Given that AA has an old fleet there should be savings that are associated with that either through lower lease rates or that they arent paying off new planes, thats never discussed either. Old planes burn more fuel and require more maintenence, that drives up both labor and maintenance costs but they should be much cheaper to aquire and I'm sure they are but cherry picking is the name of the game and its funny how the side that does it all the time objects when others do it.

Yes AA has the highest labor costs in the industry, they also do more work in house which helps drive that figure, the real question is why are AA's non-labor costs only "in line" with the rest of the industry. Since AA does 90% in house that means they dont pay vendors to do a large portion of their maintenance, which would be very substantial given the fact that AA has an old fleet, the old fleet should also drive down non-labor costs because the lease rates and or notes associated with buying new aircraft should be paid off or lower than what they would pay for newer planes, their non-labor costs should therefore be much lower than competitors. Its not, they are 'in line'. They should be much, much lower, why arent they? THAT IS THE REAL QUESTION!!!

 

[Bob Owens]

First of all, Horton's been there for six years, and well placed to influence things.

Second, take a closer look at why Tom may have left in 2002. I know that some of this is probably a foreign concept to guys who live and die by the seniority system, but greener pastures is not always about the money. It's about increasing responsibility.

"Responsibility"?? be honest, the correct word is "POWER'.

I think I've shared this story before. My father worked for Union Carbide for over 40 years. In his later years he was the Chauffeur for the CEO and other executives. One day he was sent to pick up the first guy he drove who had retired a few years earlier, his name was Johnstone. Just as they did years before they talked Sports and other things. Later when he was driving him home Mr Johnstone sat in the front. He spoke of how it was good to see everyone again and then he said to my father that he really missed working, it wasnt the money, he said he already had more than he would ever spend. he missed the Power. He missed being in charge. In most respects todays executives are the same way, its not about the money, its about the Power. Todays executives make much, much more than their predecessors. Money does not mean the same thing to them as it does to us because they have more than they will ever need. The reason they demand so much is not because they need it, they demand it for the same reason they buy a 10,000 sq ft house or a rediculously expensive car, to publically display their power. Its their arrogance and ego that needs to satisfied and thats why they put more effort into screwing their employees than making money for the shareholders. Power over people is their ultimate high. Its not so much about what they can do with the money that they take from us, its about them feeling even more powerful by doing so. thats why no matter how much we give, no matter how far we fall below Market Rates, they will still come back for more, just to see if they can.

 

[AA89]

Look out Bob, I hear the Team Horton cheerleaders warming up.

 

[eolesen]

"Responsibility"?? be honest, the correct word is "POWER'.

Oh, I'm sure some are in it for the power, but would expect most are in it for the challenge.

Let me ask you, Bob... did you initially run for office for the power, or because you thought you were better equipped to the challenge the office demanded?

Why did you run again after being removed? It's not like you got a raise in the process.

 

[AA89]

Talk about apples to oranges.........

 

[eolesen]

Is it? How many shop stewards or crew chiefs took the job just for the power? How many took it for the challenge? How many took it just for the extra money (in the case of the crew chief)?

It's really not that different in management or executive positions. You have 5-10% who are in it for the power, 5-10% who are in it for the money, and the remaining 80-90% are in it for the challenge.

 

[FWAAA]

It was let out in the hearings, guess you should have been there.

I thought you were asked to leave the hearing before they discussed such confidential info like the EBITDAR targets.

2011 was an exceptional year for most airlines yet the still didnt see an EBITAR in excess of 17%.

UAL actaually exceeded the target they put forward in BK.

True, the competition didn't quite hit 17% last year, but the competition is planning to buy lots of extra fuel instead of new planes. EBITDAR, as you know, is Earnings Before Interest, Depreciation, Amortization and Reorganization expenses and Rents. Since AA is planning to buy lots of new fuel efficient planes and less fuel than the competition, AA's projected EBITDAR is larger than UA or DL. Once the costs of the new planes are accounted for (either thru Depreciation or Rent), the net profit (after all expenses) should be approximately the same at AA, UA or DL.

Why doesnt AA release its EBITAR target?

Dunno. Have you asked AA?

 

[Bob Owens]

Oh, I'm sure some are in it for the power, but would expect most are in it for the challenge.

Let me ask you, Bob... did you initially run for office for the power, or because you thought you were better equipped to the challenge the office demanded?

Why did you run again after being removed? It's not like you got a raise in the process.

I was asked to run by several of my coworkers. The position pays me $20k on top of my AA salary.

Power, well there really isnt any at my level other than the fact that people may listen a little more closely when you have a title.

 

[Bob Owens]

I thought you were asked to leave the hearing before they discussed such confidential info like the EBITDAR targets.

I dont know what they spoke about I wasnt there, just as you werent there but if you read the transcripts you should have read where the companys lawyer said that the business plan would net the unions $360 million a year in profit sharing and on more than one occasion the lawyers slipped about the over 17% Ebitar.

True, the competition didn't quite hit 17% last year, but the competition is planning to buy lots of extra fuel instead of new planes. EBITDAR, as you know, is Earnings Before Interest, Depreciation, Amortization and Reorganization expenses and Rents. Since AA is planning to buy lots of new fuel efficient planes and less fuel than the competition, AA's projected EBITDAR is larger than UA or DL. Once the costs of the new planes are accounted for (either thru Depreciation or Rent), the net profit (after all expenses) should be approximately the same at AA, UA or DL.

Speculation on your part.

 

[Flying low]

Is it? How many shop stewards or crew chiefs took the job just for the power? How many took it for the challenge? How many took it just for the extra money (in the case of the crew chief)?

It's really not that different in management or executive positions. You have 5-10% who are in it for the power, 5-10% who are in it for the money, and the remaining 80-90% are in it for the challenge.

I know of at least 1 person who took a crew chief position just for the OT....

 

[AA89]

"Responsibility"?? be honest, the correct word is "POWER'.

Oh, I'm sure some are in it for the power, but would expect most are in it for the challenge.

Let me ask you, Bob... did you initially run for office for the power, or because you thought you were better equipped to the challenge the office demanded?

Why did you run again after being removed? It's not like you got a raise in the process.

Talk about apples to oranges.........

Is it? How many shop stewards or crew chiefs took the job just for the power? How many took it for the challenge? How many took it just for the extra money (in the case of the crew chief)?

It's really not that different in management or executive positions. You have 5-10% who are in it for the power, 5-10% who are in it for the money, and the remaining 80-90% are in it for the challenge.

Well you were addressing Bob Owens in your comment not the motivation of human beings in general.
Only Bob can answer for sure but it just seems odd to compare an elected union president to a corporate executive.
Maybe you are right with your numbers in general but I also think that the obscene pay and the power can make some executives lose touch even if at first they are motivated by the challenge. Agree with Bob or not but I don't think local presidents are getting obscenely rich nor will they be allowed to lose touch with their members for very long.