AMR expects Q2 loss because.....

[lpbrian]

It should be noted that all labor cost comparisons I have seen exclude maintenance labor. It was noted above that insourcing and outsourcing makes a vis a vis comparison difficult. Not to mention fleet age and composition.

 

[frontline]

Fact is we won't know if it's a gain or loss until AMR actually reports. Before that it is all speculation.

Don't tell the new guys over at APA. I've talked to a couple already planning to start flipping foreclousres. 😀

 

[commavia]

Like I said the Mods we've been doing and the 3P work we do drive up our costs, they may produce revenue or operating cost savings down the road but they dont produce any ASMs. This distorts our maint casms.

Doing third party work - if AA were actually competitive at it - can only help AA's costs. Amortizing the enormous fixed costs of aircraft maintenance infrastructure over more work - whether it is AA or third party - lowers the unit costs. Sure, there is some added marginal cost associated with doing more work, but in the long-run, it is definitely advantageous to AA to do as much third party work as possible. That being said, it's a moot point since AA's costs are not competitive for a good amount of MRO work anyway, so it doesn't really matter.

It should be noted that all labor cost comparisons I have seen exclude maintenance labor. It was noted above that insourcing and outsourcing makes a vis a vis comparison difficult. Not to mention fleet age and composition.

Alright, but what difference does that make? AA's labor costs - on a unit basis - are higher than virtually all of their competitors. If AA's costs are higher because they do their maintenance in-house, then including that maintenance expense just adds to the cost disparity. And as for comparing fleet age and composition - that is true to a point, but based on data I've seen, even on near-identical fleet types, of similar ages, AA is woefully uncompetitive in virtually every aspect - from cost to TAT - versus competitors (and not just foreign ones).

I'm not saying this to be argumentative or antagonistic - I'm genuinely trying to understand the contention about including maintenance cost versus not including it.

 

[lpbrian]

Doing third party work - if AA were actually competitive at it - can only help AA's costs. Amortizing the enormous fixed costs of aircraft maintenance infrastructure over more work - whether it is AA or third party - lowers the unit costs. Sure, there is some added marginal cost associated with doing more work, but in the long-run, it is definitely advantageous to AA to do as much third party work as possible. That being said, it's a moot point since AA's costs are not competitive for a good amount of MRO work anyway, so it doesn't really matter.



Alright, but what difference does that make? AA's labor costs - on a unit basis - are higher than virtually all of their competitors. If AA's costs are higher because they do their maintenance in-house, then including that maintenance expense just adds to the cost disparity. And as for comparing fleet age and composition - that is true to a point, but based on data I've seen, even on near-identical fleet types, of similar ages, AA is woefully uncompetitive in virtually every aspect - from cost to TAT - versus competitors (and not just foreign ones).

I'm not saying this to be argumentative or antagonistic - I'm genuinely trying to understand the contention about including maintenance cost versus not including it.

If AA were competetive at it? If DAL and UA can do it so can AA. AA's costs are not higher than those 2. AA's wage rates are not much higher than they are. Infrastrucucture cost? Impossible to compare. Tulsa is in in Oklahoma, a much friendlier business state than say....Kalifornia. You nor any one else knows all the tax breaks AA gets. In any event, cost is not the issue, its the availability of qualified labor.

 

[commavia]

If AA were competetive at it? If DAL and UA can do it so can AA. AA's costs are not higher than those 2. AA's wage rates are not much higher than they are. Infrastrucucture cost? Impossible to compare. Tulsa is in in Oklahoma, a much friendlier business state than say....Kalifornia. You nor any one else knows all the tax breaks AA gets. In any event, cost is not the issue, its the availability of qualified labor.

You can dismiss it all you want, but based on the studies I've seen, AA is NOT competitive - particularly with Delta. AA's labor rates are higher, and their turn times longer, all of which adds up to added cost for the customer.

And let's be honest - as we all know, cost does matter. In fact, in this business, it's just about everything. And AA's MRO is simply not competitive on cost - in several key categories.

 

[Bob Owens]

Doing third party work - if AA were actually competitive at it - can only help AA's costs. Amortizing the enormous fixed costs of aircraft maintenance infrastructure over more work - whether it is AA or third party - lowers the unit costs. Sure, there is some added marginal cost associated with doing more work, but in the long-run, it is definitely advantageous to AA to do as much third party work as possible. That being said, it's a moot point since AA's costs are not competitive for a good amount of MRO work anyway, so it doesn't really matter.

The fact is we do a lot of 3P work and yes in the end it does help AA's total costs but when you break out the numbers seperately and use them to calculate CASMs it makes makes it look the opposite way, its really an error.

Look at it this way, if AA has 20 mechanics work a North American B check they pay those mechanics $5280, lets say North American paid AA $15680 for the labor, AA brought in $10,400 more than they paid out. The problem is that $10400 does not get calculated into the CASMs as an offset to labor costs, but the $5280 gets added as a labor cost against the ASMs, and that $5280 did not produce ANY ASMs. Do you see how this produces an error? The 3P labor costs should be kept out of the CASM figures but the company admitted that they dont even know if they make money on 3P work and they dont seperate the figures (Dec 2009, 6th floor HQ).

Over in Europe we do a tremendous amount of 3P work. Those mechanics are also the highest paid, earning around $13/hr more than their AA counterparts. They produce a lot of revenue but not that many AA ASMs. Once again the costs get added even though the costs were not associated with those AA's ASMs. It sloppy boolkeeping and the company uses the distorted figures to claim that our labor costs are out of hand.

So the more 3P work we do the more it makes our CASMs as far as labor look unfavorable, even if it actually helps AA's bottom line.

 

[lpbrian]

You can dismiss it all you want, but based on the studies I've seen, AA is NOT competitive - particularly with Delta. AA's labor rates are higher, and their turn times longer, all of which adds up to added cost for the customer.

And let's be honest - as we all know, cost does matter. In fact, in this business, it's just about everything. And AA's MRO is simply not competitive on cost - in several key categories.

Source??

 

[JFK Fleet Service]

Delta sends aircraft to Communist China for heavy overhaul work, who are we kidding here?

Those spiffy winglets on the DL 763's are installled by HAECO in Hong Kong.

Personally, I'd rather keep Americans working and feeding their families as opposed to sending it to another country in the name of profitability or cost.Especially in this craptacular economy.

So you advocate putting Americans out of work altogether or just reducing their standard of living even farther? Which is it?

China is already the largest holder of US Government debt, do they need every last one of our jobs too?

 

[JFK Fleet Service]

You can dismiss it all you want, but based on the studies I've seen, AA is NOT competitive - particularly with Delta. AA's labor rates are higher, and their turn times longer, all of which adds up to added cost for the customer.

If only the darn labor at AA would just agree to degrade their standard of living even further things would be grrrrreat!

 

[Bob Owens]

- particularly with Delta

Didnt some foreign carrier that contracted with Delta threaten to sue because Delta said they would be doing the check with Delta Mechanics then they tried to sub it out to some chop shop?

I'd like to see those "studies" as well because last December when we met with the "finace guys" they admitted that our total costs were competitive.

 

[commavia]

Source??

A proprietary study conducted for another party by a consultancy.

If only the darn labor at AA would just agree to degrade their standard of living even further things would be grrrrreat!

Actually, from what I saw, labor was just one of the areas where AA was not competitive. They also weren't competitive on other elements of cost, nor turn time.

Didnt some foreign carrier that contracted with Delta threaten to sue because Delta said they would be doing the check with Delta Mechanics then they tried to sub it out to some chop shop?

I'd like to see those "studies" as well because last December when we met with the "finace guys" they admitted that our total costs were competitive.

Again - not according to what I've seen. Now, what I've seen could be wrong, but in any event, AA didn't look to competitive in virtually any category. And as for Delta - regardless of what some carrier may or may not be suing for, the results speak for themselves: Delta's third-party MRO work continues to grow and their TechOps operation does well. Not to mention, again, from the source I've read, they are astoundingly competitive (as in basically industry-leading) on turn-times, which very much helps their value proposition to a customer (since we all know that the turn time has a major impact on the overall cost of the maintenance).

 

[Bob Owens]

A proprietary study conducted for another party by a consultancy.

That figures, he made it up.

We have someone posting under an alias citing sources he wont reveal.=ZERO credibility.

Take your shine box somewhere else Pal!

 

[commavia]

That figures, he made it up.

We have someone posting under an alias citing sources he wont reveal.=ZERO credibility.

Take your shine box somewhere else Pal!

Yes, I post under an "alias" just like virtually everyone else here and on every other internet forum. I've posted here several times before (but moreso on another forum), but follow these boards often.

I'm not making these numbers up - although that is a clever way to dismiss things you don't like to hear nor want to accept.

Whether you want to believe it or not, I'm basing this on a consultancy's analysis that examined AA MRO among several dozen other large MRO companies in the U.S. and elsewhere - done totally independent from AA (so no, there is no way "management" skewed the numbers to make labor look bad). Now, if you want to dismiss the report's conclusion that AA MRO was not competitive on cost or turn time with their competitors, then fine. But nonetheless, that was their conclusion.

There are lots of things discussed all over the web - including here on USAviation - that can't necessarily be cited directly because of the nature of the source. If that, to you, means that one can dismiss the entire veracity of the information, then fine. I could care less if you believe me - I have a copy of the report myself, so I know it's real.

 

[Bob Owens]

Yes, I post under an "alias" just like virtually everyone else here and on every other internet forum. I've posted here several times before (but moreso on another forum), but follow these boards often.

I'm not making these numbers up - although that is a clever way to dismiss things you don't like to hear nor want to accept.

Whether you want to believe it or not, I'm basing this on a consultancy's analysis that examined AA MRO among several dozen other large MRO companies in the U.S. and elsewhere - done totally independent from AA (so no, there is no way "management" skewed the numbers to make labor look bad). Now, if you want to dismiss the report's conclusion that AA MRO was not competitive on cost or turn time with their competitors, then fine. But nonetheless, that was their conclusion.

There are lots of things discussed all over the web - including here on USAviation - that can't necessarily be cited directly because of the nature of the source. If that, to you, means that one can dismiss the entire veracity of the information, then fine. I could care less if you believe me - I have a copy of the report myself, so I know it's real.

A mysterious unknown independant consultantcy firm did a study, or so some un-named guy told us.
How much validity would a court of law give to what you are offering? NONE. Why is that? Because there is no reason to believe you thats why. Sure many people post under an alias but most also cite sources . You claim to have a copy, why should anyone believe you?

If AA was so uncompetitive how come they keep turning away work?

 

[WorldTraveler]

Quarterly finacials are even less useful than annuals. Its not a big enough window for making comparasions.

Something with those numbers doesnt seem right.

AA Passenger miles flown 2009 =196,939,000,000
Delta Passenger miles flown 2009=161,904,000,000

AA Fleet size= 615
Delta Fleet size =745

http://en.wikipedia.org/wiki/World%27s_largest_airlines

If your numbers are correct the .0151cent difference is most likely because of the winglets, new interiors and other expensive Mods that AA has been doing. The question is really what would it cost AA if they sent all that work out?

AA also does a lot of 3P work, the labor costs of providing 3P work distort our maint costs/ASM because although that labor produces Revenue it doesnt produce any ASMs, thus artificailly driving our maint cost per ASM up. Ironically the company uses the 3P work against us, the more we do the more they get to use it against us.

While Delta does some 3P work as well they try to sub it out.

Another factor thats not put in there is the loss of use time.

If you look at the above numbers AA had 130 less airplanes in 2009 but produced 35 billion more ASMs. How were they able to do this? A big part is the short turn times our OH can deliver and the fact that once they send them out our guys on the line dont have to spend weeks cleaning them up. How much of a savings is there by not having to pay leases or loan payments on over 130 aircraft? Delta gets arount 217 million ASMs per aircraft per year, AA gets 320 million.

AA produced 18% more ASMs with a fleet that was 17% smaller, giving AA roughly a 35% advantage with (according to your very narrow numbers which are distorted due to the items mentioned earlier) a 28% cost disadvantage in that quarter. That disadvantage was probably easily wiped out by the cost savings of needing 130 less aircraft. Once those Mods are done the numbers will be even more in AA's favor.

So yes AA may have spent .0151 cents more for maintenance in that quarter but they got 32% more ASMs per aircraft than Delta did last year.

AA was able to produce more ASMs with less aircraft than Delta. While Delta may be saving money on maintenance they are spending it on having a fleet that is 17% bigger that delivers 18% less ASMs. Thats like buying an extra car so you wont have to change the oil as much.

Imaging what AA could save if they had a motivated workforce!!! They could continue to reduce headcount and see an increase in ASMS, but unfortunately they think they can terrorize us into giving them all we have to give. They can take away our benifits and workrules but they cant make us give them a servicible aircraft on time. For every concession they extract its that much less effort they get when that plane breaks. We , without a doubt have the best quality OH that can be had but they are still machines, and they break, and when they do thats when the real cost of concessions hit the company.

sorry, Bob, but that is the sloppiest comparison I have ever seen.
You quote half of the statistics for DL standalone and the rest for the combined DL+NW. The simple fact is that the DL/NW merger was legally completed in 2008 and all of DL's financials statistics for 2009 should reflect DL and NW COMBINED because that is the way their financials were reported. DL+NW were much larger than AA in 2009 even though NW was operated a subsidiary until Jan of this year (2010). On a comparable basis, DL did in fact run a much larger airline with a comparably smaller amount of aircraft.

The simple fact is that AA's costs are the highest industry. It is not AA's PR machine that says that....

HKG - communist China? Would you like to tell us what you DON'T BUY since China produces more consumer goods than any other country?

Delta Tech Ops is larger than AA when it comes to 3rd party maintenance. DL is the largest airline MRO in the western hemisphere.

DL subcontracts out some of its own airframe maintenance but then insources much more valuable work such as engine and component maintenance.

Of course, AA is not about to report a profit while it is deadset in the midst of labor concessions... but you can only keep shifting costs around for one quarter... AA has been trailing the industry for years in terms of profitability and it is indeed related to labor costs.

No one says AA employees need to agree to concessiionary contracts - but unless AA's labor costs are brought into line with the rest of the industry, AA will continue to shrink. You need only look at other legacy carriers - like Eastern - to see what will happen.
Or the other choice would be to get AA's productivity up to match its labor costs. Other US airline employees make good money but are much more productive.