AMR loses $452 million in first quarter, excluding special items

[jimntx]

For the same reason that the rest of us are beginning to feel that way. I am sick and tired of being told that I "cost too much" while executives are receiving bonuses for mediocre to downright incompetent performance. I have spent most of my adult life in major industry--most of it in the oil business. AMR corporation is the only one I know of that passes out bonuses to executives when the company is losing money hand over fist.

I don't care if that is the way the bonuses are structured. If the BOD approved that structure they should be brought up on charges of failing their fiduciary responsibilities. Bonuses are for over and above performance of the employee and/or the company. (And, no, simply not quitting is not over and above performance by the employee.)

I agree with hopeful. Let's get it on with the BK. Let Arpey and company explain to a Federal judge that even though they managed the company into monumental losses while others are making a profit (or beginning to lose less), they still need retention bonuses. The actions of these executives are beginning to take on the flavor of rearranging the deck chairs on the Titanic.

By the way, you do know that while they are focussing on their "cornerpost" hubs (and what table or piece of property do you own that has corners in the middle?), the routes they abandoned to/from STL are doing quite well for WN who picked them up. Another canny move by AMR. I'm sure as soon as ORD-DEN goes to Eagle, United will just have to close up shop.

 

[eolesen]

I don't think it's cheerleading as much as it is a desire for AMR to crap or get off the pot.... They've been in limbo for years waiting for everything else in the world to change around them, rather than make their own drastic changes. That goes for the employees (hoping to piggy-back on other unions' contracts with their employers) as much as management (hoping for a liquidation and/or economic recovery to even things out).

 

[FWAAA]

I'm sure as soon as ORD-DEN goes to Eagle, United will just have to close up shop.

What's wrong with flying two-class 70 seat RJs between ORD and DEN, a hub controlled by UA? It looks like later this year, half the AA ORD-DEN departures will be two-class CRJs and the other half will be mainline. UAL does the same thing between ORD and DFW - a mix of two class RJs plus some mainline. AA makes lots of stupid moves, but how is flying the right-size equipment into another airline's hub a mistake?

 

[JFK Fleet Service]

You know what FWAA, we know it would mean another haircut to wages and yeah we'd lose the pensions but the leadership of this company would have to LEAD.There has been no leadership here, we've had careful stewardship of the finances but no leadership.

All we've seen is retreat retreat retreat while Eagle grows by leaps and bounds.90% of the announcements of new service are Eagle or Eagle replacing mainline.

All the while we lose hundreds of millions a year and it's our fault, it's our work rules, it's our benefits, it's our pensions, it's our fault Delta is kicking us in the gonads at every turn and our leadership responds with cries of "Not in the face!" while running away. Eliminate mainline service to the point where we are all but forcing passengers on to the competition.

Where did this idea of lax or padded work rules come from? I don't see them on the ramp.If there are cushy union protected work rules that are handcuffing AMR I'd love to know what they are.

Flight crews fly too few hours per month? The onus for using resources to their maximum potential falls on who? Who creates the schedules? Who decides to play musical airplanes and crews all day?

This airline hasn't had decisive leadership in a decade and it shows.But we sure do reward mediocrity like clockwork don't we?

 

[JFK Fleet Service]

What's wrong with flying two-class 70 seat RJs between ORD and DEN, a hub controlled by UA? It looks like later this year, half the AA ORD-DEN departures will be two-class CRJs and the other half will be mainline. UAL does the same thing between ORD and DFW - a mix of two class RJs plus some mainline. AA makes lots of stupid moves, but how is flying the right-size equipment into another airline's hub a mistake?

Have you sat on a RJ for a segment of that length? How about ORD-IAH? 925 miles on a regional jet, that won't make me think twice about flying AA, that will make me avoid AA like the plauge.

 

[jersey777]

You know what FWAA, we know it would mean another haircut to wages and yeah we'd lose the pensions but the leadership of this company would have to LEAD.There has been no leadership here, we've had careful stewardship of the finances but no leadership.

All we've seen is retreat retreat retreat while Eagle grows by leaps and bounds.90% of the announcements of new service are Eagle or Eagle replacing mainline.

All the while we lose hundreds of millions a year and it's our fault, it's our work rules, it's our benefits, it's our pensions, it's our fault Delta is kicking us in the gonads at every turn and our leadership responds with cries of "Not in the face!" while running away. Eliminate mainline service to the point where we are all but forcing passengers on to the competition.

Where did this idea of lax or padded work rules come from? I don't see them on the ramp.If there are cushy union protected work rules that are handcuffing AMR I'd love to know what they are.

Flight crews fly too few hours per month? The onus for using resources to their maximum potential falls on who? Who creates the schedules? Who decides to play musical airplanes and crews all day?

This airline hasn't had decisive leadership in a decade and it shows.But we sure do reward mediocrity like clockwork don't we?

As far as the flight attendants are concerned, we will probably agree to fly more hours per month on this next contract. Maybe not to the extent the company is asking for but my bet is that we go from a max of 82 to 90 hours or so on international. Another large efficiency issue would be the combination of domestic and international. This seems to be something the company is reluctant on doing because of training costs. The union and membership seem willing to accept this. What you will not see are transcon turns like they have at Jetblue or Continental. Nor will you see FAA minimum layovers. The are still quite a few flight attendants that enjoy the layovers and don't want the job to become one without any enjoyment and downtime.


One problem the company is not willing to address is the seniority issue. Fully 75% of the flight attendants are at top pay with the rest of the 25% to reach max pay in 2014. That's 100% of your cabin crews making top dollar vs. other airlines having a less senior workforce and vastly less costs. The shortsightedness of this management team frustrates me because if they offered a truly appealing early out then they could replace a flight attendant making $45.00 per hr with one making $20.00 per hr. I don't understand why they don't look at the savings over a 5 year period vs the up front costs and get some fresh meat in here. Especially when you add in the fact that new hires will not have a pension which I predict will also be in the next contract.


With that said, now that most airlines first quarter results have been reported, it is hard to lay the blame squarely on labor alone. With the huge gap between AA's loss and United, Delta and Continental, there is something entirely else going on. Did AA pay $400 million more in the first quarter for labor then the rest of the legacies?

 

[FWAAA]

With that said, now that most airlines first quarter results have been reported, it is hard to lay the blame squarely on labor alone. With the huge gap between AA's loss and United, Delta and Continental, there is something entirely else going on. Did AA pay $400 million more in the first quarter for labor then the rest of the legacies?

Of course it isn't labor's fault, at least not entirely. Revenue in the first quarter was still very depressed. And lower revenue is primarily management's problem. The recession is mostly to blame, but management has failed to innovate in ways that would attract even more revenue.

Still, in the first quarter, AA paid a lot more of its revenue in labor than the other big legacies. Delta paid $1.672 billion for wages and salaries on $6.848 billion of revenue. AMR paid $1.703 billion for wages and salaries on $5.068 billion of revenue. Delta paid slightly less for wages than AMR even though it had $1.8 billion more revenue.

On its face, that looks like a huge advantage for Delta, but it's not quite as dramatic as that, since Delta's wage figure doesn't include the wages paid to its contract regionals (non-subsidiary regionals). AMR's figure includes all Eagle wages, nearly all of AA's regional flying (Republic and Transstates is a very small number). If we add the wages for the Skywest and ASA employees for their DL flying, Delta's wage figure would grow. Additionally, one would have to add the outsourced maintenance overhaul wages paid to third parties to get a better comparison (since AA performs all of its overhaul inhouse).

UA paid $948 million on $4.421 billion of revenue. Just like with Delta, we'd have to add in the regionals' wages plus the outsourced maintenance to get a more apples to apples comparison.

The same pattern repeats at CO and US. Both paid a much smaller percentage of their revenue in wages but no doubt also spent money on wages to regionals they don't own plus outsourced maintenance.

AA does not need to reduce its labor costs by $400 million a quarter, but it does need to figure out a way to pay fewer employees a lot more money. Fewer FAs could get a substantial raise in exchange for flying a lot more. Same with pilots. Higher hourly pay plus more hours flown should equal a much bigger income. The downside is many fewer employees needed. Combine that with higher unit revenue (there's the challenge for management) and the gap between revenue and expenses should narrow.

 

[jlynne]

Another large efficiency issue would be the combination of domestic and international. This seems to be something the company is reluctant on doing because of training costs. The union and membership seem willing to accept this.

Actually, it's the union that it fighting this (although, I think you're right that it's something the membership would accept). The company's last proposal to APFA would have combined domestic and international within 48 months of contract signing. I had one of our union negotiators on a flight 2 weeks ago and asked him about this issue. In a nutshell, he told me that the union was against totally combining the operations because when the international flight attendants were hired (30+ years ago), they hired into the company with the understanding that it was separate. Really?? As if nothing else in the industry has changed in the last 30 years. Instead, the union would like to just combine the reserve pool (which would save the more senior international flight attendants from having to serve reserve, by the way).

 

[jersey777]

Of course it isn't labor's fault, at least not entirely. Revenue in the first quarter was still very depressed. And lower revenue is primarily management's problem. The recession is mostly to blame, but management has failed to innovate in ways that would attract even more revenue.

Still, in the first quarter, AA paid a lot more of its revenue in labor than the other big legacies. Delta paid $1.672 billion for wages and salaries on $6.848 billion of revenue. AMR paid $1.703 billion for wages and salaries on $5.068 billion of revenue. Delta paid slightly less for wages than AMR even though it had $1.8 billion more revenue.

On its face, that looks like a huge advantage for Delta, but it's not quite as dramatic as that, since Delta's wage figure doesn't include the wages paid to its contract regionals (non-subsidiary regionals). AMR's figure includes all Eagle wages, nearly all of AA's regional flying (Republic and Transstates is a very small number). If we add the wages for the Skywest and ASA employees for their DL flying, Delta's wage figure would grow. Additionally, one would have to add the outsourced maintenance overhaul wages paid to third parties to get a better comparison (since AA performs all of its overhaul inhouse).

UA paid $948 million on $4.421 billion of revenue. Just like with Delta, we'd have to add in the regionals' wages plus the outsourced maintenance to get a more apples to apples comparison.

The same pattern repeats at CO and US. Both paid a much smaller percentage of their revenue in wages but no doubt also spent money on wages to regionals they don't own plus outsourced maintenance.

AA does not need to reduce its labor costs by $400 million a quarter, but it does need to figure out a way to pay fewer employees a lot more money. Fewer FAs could get a substantial raise in exchange for flying a lot more. Same with pilots. Higher hourly pay plus more hours flown should equal a much bigger income. The downside is many fewer employees needed. Combine that with higher unit revenue (there's the challenge for management) and the gap between revenue and expenses should narrow.

Didn't you used to work for AA? Could you espouse the reluctancy for AA to work on reducing its costs by replacing more senior f/a's with new hires? Is it the fact that management only looks at the short term hit to the balance sheet and not look at a 5-10 year window?

 

[eolesen]

Didn't you used to work for AA? Could you espouse the reluctancy for AA to work on reducing its costs by replacing more senior f/a's with new hires? Is it the fact that management only looks at the short term hit to the balance sheet and not look at a 5-10 year window?

I'm the management defender shill who used to work for AA... not FWAAA, although some seem to think we're one and the same...

Early out's look good, but the tradeoff with that is higher training costs, and while unquantifiable, a huge loss of experience.

Plus, contrary to your claim that they're being short-sighted, early outs by their nature is being short-sighted...... is AA supposed to keep buying out senior employees every 10-12 years? Maybe should they just make working conditions so bad that people don't want to stick around for 25+ years?...

The real answer is yet to be found, but buying employees out just gets rid of a few people who would have likely retired on their own within a few years.

 

[IberiaMAL]

I don't understand why Hopeful is such a forceful advocate for bankruptcy. It would mean even smaller paychecks and probably a terminated pension plan. Whatever favorable workrules remain today would likely be lessened. On top of that, the lawyers, accountants, investment bankers and various consultants would siphon off perhaps hundreds of millions, making the total expense of the PUP/PSP plans pale in comparison. UAL paid over $660 million for those expenses during its bankruptcy and I suspect the parasites would try to grab at least that much in an AMR bankruptcy.

I suspect that a Ch 11 filing is in AMR's future, but I don't see why any employee would cheerlead for it.

It's not hard to understand; American Airlines has no strategy. The "best they got" is waiting for airlines to have higher cost, ATI, and being customer friendly...

Bankruptcy is the only viable option American Airlines has. What are they going to do? What in the world can American Airlines do to turn around their 505 million quartly loss?


If I was an employee, I would not cheer about a bankruptcy. But I'm not an employee. I'm not thinking with my emotions. It's a hard pill to swallow, but that's the only thing I see.



American cheerleaders, management, and supporters constantly say "It's not fair, we have higher cost. We didn't use bankruptcy". Yes... We know... come up with a Solution... Every other airline in the USA I know (WN, B6, LCC, UAL, DAL, CAL, F9, etc.) know their basic plans. But American... All I gather is "Wait for other's cost to go up" and I don't see that as viable at all...

 

[Hopeful]

I don't understand why Hopeful is such a forceful advocate for bankruptcy. It would mean even smaller paychecks and probably a terminated pension plan. Whatever favorable workrules remain today would likely be lessened. On top of that, the lawyers, accountants, investment bankers and various consultants would siphon off perhaps hundreds of millions, making the total expense of the PUP/PSP plans pale in comparison. UAL paid over $660 million for those expenses during its bankruptcy and I suspect the parasites would try to grab at least that much in an AMR bankruptcy.

I suspect that a Ch 11 filing is in AMR's future, but I don't see why any employee would cheerlead for it.

I am not cheer leading for it, but if all we are going to continue to hear is that our labor cost are the highest, then so be it.
Should we give even more concessions to help the company once again?
How much is enough?
I got news for you....should another 9/11 magnitude type event occur, even those carriers that went bankrupt and reduced all their costs and shed thousands upon thousands of jobs, even they will have a hard time surviving.

This company tasted turning back 40 years of collective bargaining gains and they want that trend to continue.

 

[eolesen]

This company tasted turning back 40 years of collective bargaining gains and they want that trend to continue.

Playing devil's advocate, after 40 years of gains, why are you in the least bit surprised the company would want to dial things back?

 

[Hopeful]

Playing devil's advocate, after 40 years of gains, why are you in the least bit surprised the company would want to dial things back?

I'm not surprised at all. I am more surprised at those who defend the company's position. Some may call it good business, I call it greed. Just a continuation in the war on the working class.
then they play the PR game ...it's not surprising to me at all.

 

[Bob Owens]

This company tasted turning back 40 years of collective bargaining gains and they want that trend to continue.

I think you need to rephrase that to "The company tasted taking back gains that were made 40 years ago", we havent made any real "gains" in over 30 years, only concessions in one form or another.