Just finished reviewing the 2006 10-Ks of both Southwest and AMR and once again, AMR's pension contributions were much cheaper (more affordable) than the retirement contributions by that Dallas-based competitor.
AMR contributed $329 million to its DB plans last year on revenues of $22.5 billion and total wage/benefit expenses of $6.8 billion.
Southwest contributed $301 million to its employees' retirement plans (Defined Contribution) last year on revenues of $9.1 billion and total wage/benefit expenses of $3.05 billion.
And AMR's contribution was $100 million larger than the legally-required minimum contribution; without that extra contribution, AMR was required to contribute $229 million.
So even though AMR's revenues were two and a half times larger than WN's and AMR's wages were more than double those of WN, AMR's pension contribution (even with the extra $100 million) were $28 million larger than much smaller-Southwest.
Don't let management threaten to terminate the DB plan: it is substantially cheaper than the defined contribution scheme at WN.
UAL hasn't yet filed its 10-K, but my suspicion is that AMR holds a cost advantage over UAL on this issue as well. Conventional wisdom is that DB plans are more expensive and are dead, but I wouldn't be so quick to write AMR's DB plans' obituaries just yet.
For ages, we've heard that WN workers are more productive. Well, that depends on how you measure productivity. Over at WN, their total compensation expenses now consume 33% of revenue, while the "less productive" AMR employees only get 30.2% of revenue. Per dollar of revenue, those AMR slackers look pretty productive.
Sure, measured by ASM, those hyper WN employees look pretty efficient. But you don't pay your employees or the fuel bill or any other bills with ASMs, you pay it with dollars (as in revenue). And viewed in this light, AMR's workers don't look as inefficient as the conventional wisdom would have us believe.
Lastly, advertising. For the first time in several years, AMR actually increased the advertising expenditures last year, up from $144 million in 2005 to $154 million in 2006.
Meanwhile, over at WN, those advertising spendthrifts upped their ad spending from $173 million in 2005 to $182 million in 2006. If AMR spent the same proportion of its revenues on ads as WN does, its ad budget would have been $450 million. Despite the AA stadium naming deals, AMR's ad budget is relatively tightfisted compared to those drunken sailors at the WN ad department.
AMR contributed $329 million to its DB plans last year on revenues of $22.5 billion and total wage/benefit expenses of $6.8 billion.
Southwest contributed $301 million to its employees' retirement plans (Defined Contribution) last year on revenues of $9.1 billion and total wage/benefit expenses of $3.05 billion.
And AMR's contribution was $100 million larger than the legally-required minimum contribution; without that extra contribution, AMR was required to contribute $229 million.
So even though AMR's revenues were two and a half times larger than WN's and AMR's wages were more than double those of WN, AMR's pension contribution (even with the extra $100 million) were $28 million larger than much smaller-Southwest.
Don't let management threaten to terminate the DB plan: it is substantially cheaper than the defined contribution scheme at WN.
UAL hasn't yet filed its 10-K, but my suspicion is that AMR holds a cost advantage over UAL on this issue as well. Conventional wisdom is that DB plans are more expensive and are dead, but I wouldn't be so quick to write AMR's DB plans' obituaries just yet.
For ages, we've heard that WN workers are more productive. Well, that depends on how you measure productivity. Over at WN, their total compensation expenses now consume 33% of revenue, while the "less productive" AMR employees only get 30.2% of revenue. Per dollar of revenue, those AMR slackers look pretty productive.
Sure, measured by ASM, those hyper WN employees look pretty efficient. But you don't pay your employees or the fuel bill or any other bills with ASMs, you pay it with dollars (as in revenue). And viewed in this light, AMR's workers don't look as inefficient as the conventional wisdom would have us believe.
Lastly, advertising. For the first time in several years, AMR actually increased the advertising expenditures last year, up from $144 million in 2005 to $154 million in 2006.
Meanwhile, over at WN, those advertising spendthrifts upped their ad spending from $173 million in 2005 to $182 million in 2006. If AMR spent the same proportion of its revenues on ads as WN does, its ad budget would have been $450 million. Despite the AA stadium naming deals, AMR's ad budget is relatively tightfisted compared to those drunken sailors at the WN ad department.
