Analyst expects AMR to lose over $1 billion in 2011

[MCI transplant]

<_< ------ Thank you WT for your candor! And with that kind of attitude, AA management will drive the company right into the history books along side Pan AM, Eastern, and yes, TWA!!! 😉

 

[MCI transplant]

I don't think so, since AA hasn't paid any management bonuses since 2001.

Except a couple years since then, the variable pay (PUP/PSP) portion of the executives' total compensation has been substantially lower than the potential total. Objective observers would say this represents the equivalent of concessions for the executives, but I realize that objectivity is in short supply and when encountered, is relegated to third class status around here.

<_< ------- FW please don't try and insult our intelligence here! You can play games with words (PUP/PSP) and numbers, all you want, but if it walks like a duck, quacks like a duck, flys like a duck, looks like a duck,--------- By God it's got to be a Duck!!!!

 

[FWAAA]

<_< ------- FW please don't try and insult our intelligence here! You can play games with words (PUP/PSP) and numbers, all you want, but if it walks like a duck, quacks like a duck, flys like a duck, looks like a duck,--------- By God it's got to be a Duck!!!!

Thanks for proving my point, MCI. I was confident that it wouldn't take long, and I was right about that as well. Hope the weather is nice wherever you are today. 🙂

 

[WorldTraveler]

<_< ------ Thank you WT for your candor! And with that kind of attitude, AA management will drive the company right into the history books along side Pan AM, Eastern, and yes, TWA!!! 😉

Insomuch as AMR/AA mgmt is ultimately responsible for the direction of the company, yes, they are responsible for what happens. But if AA goes - or has to restructure in BK where it still has far more leverage than it did in 2003, then AA employees will pay a much higher price.

Given that AA's largest problem is a labor cost disadvantage, the problem is something that AA employees should be very engaged in solving instead of blaming AA mgmt for the problems. And, once again, the problem is not a SALARY problem (ie I have given enough) but the fact that AA's uncompetitive labor PRODUCTIVITY is what is driving AA's labor COST problem.

The impact of AA's labor cost problem - which again has its root in labor productivity - is that AA cannot compete in key markets against financially stronger and lower cost competitors - which is why AA's position in key markets like NYC and BOS has dropped significantly over the past few years and why it will spread to other major markets as other carriers attack AA's key markets in DFW, CHI, and MIA/FLL.

The notion that AA will survive becomes they have before belies the fact that AA is alot smaller than it was relative to its competitive now because of DL and UA's mergers and AA's cost differential relative to every other competitor is far worse.

Doesn't really matter who makes the contribution but the bleeding will stop because it always does.

Pretending that AA employees will return to wage rates and productivity that existed 8 years ago is well beyond reality.

 

[Deleted member 14439]

Insomuch as AMR/AA mgmt is ultimately responsible for the direction of the company, yes, they are responsible for what happens. But if AA goes - or has to restructure in BK where it still has far more leverage than it did in 2003, then AA employees will pay a much higher price.

Given that AA's largest problem is a labor cost disadvantage, the problem is something that AA employees should be very engaged in solving instead of blaming AA mgmt for the problems. And, once again, the problem is not a SALARY problem (ie I have given enough) but the fact that AA's uncompetitive labor PRODUCTIVITY is what is driving AA's labor COST problem.

The impact of AA's labor cost problem - which again has its root in labor productivity - is that AA cannot compete in key markets against financially stronger and lower cost competitors - which is why AA's position in key markets like NYC and BOS has dropped significantly over the past few years and why it will spread to other major markets as other carriers attack AA's key markets in DFW, CHI, and MIA/FLL.

The notion that AA will survive becomes they have before belies the fact that AA is alot smaller than it was relative to its competitive now because of DL and UA's mergers and AA's cost differential relative to every other competitor is far worse.

Doesn't really matter who makes the contribution but the bleeding will stop because it always does.

Pretending that AA employees will return to wage rates and productivity that existed 8 years ago is well beyond reality.

Oh W.T. , if we could only explain the productivity issues. I don`t even know where to start,blame rests with both sides. Here is a question for all of you that are smarter than I. Where do the "productivity" numbers come from? Here is one simple example from my limited view, 2 identical work cards. One is for the right main landing gear the other the left main landing gear. Identical work just different sides of the aircraft. The left card will show 8 man hours while the right shows 24 man hours. Does this kind of thing figure into "productivity" at some level? I`m asking an honest question here. My example is but one small illustration. This type of thing can be found throughout the MCM. I won`t get into the other "stuff" but would like some opinions on this simple example. Thanks

 

[WorldTraveler]

Oh W.T. , if we could only explain the productivity issues. I don`t even know where to start,blame rests with both sides. Here is a question for all of you that are smarter than I. Where do the "productivity" numbers come from? Here is one simple example from my limited view, 2 identical work cards. One is for the right main landing gear the other the left main landing gear. Identical work just different sides of the aircraft. The left card will show 8 man hours while the right shows 24 man hours. Does this kind of thing figure into "productivity" at some level? I`m asking an honest question here. My example is but one small illustration. This type of thing can be found throughout the MCM. I won`t get into the other "stuff" but would like some opinions on this simple example. Thanks

I don't doubt for a minute that your example is perfectly valid and is indeed indicative of the problem. I also see issues like the hiring of umpteen new supervisors in maintenance at JFK. The issue is indeed complex and it shows that there is a war between labor and management and neither side is solving the problem.

As I have noted before, AA's maintenance costs per ASM are about 60% higher than DL's - which has the lowest maintenance costs per ASM in the industry and about 20% higher than UA's. It's no surprise that DL is aggressively expanding its MRO business which helps to drive down DL's own costs as DL spreads some of the overhaul efficiency over a larger pool of work - some of it done for itself and some of it done for others. The latest example with DL taking over at least half of Gol's engine overhauls is an example. It is doubtful that AA could compete for that same work and make a profit although both airlines operate 737NG aircraft and have the same capabilities.

I suspect part of the reason that AA is shedding maintenance facilities is because they know they can't compete with other MRO competitors - and that hurts lots of people just like you - in addition to AMR's stockholders.

But failing to solve the problem will only lead to more harm for AA employees than for any other party.

There was an interesting article (can't even remember where) noting that the real issue between UA and CO's unions is for those employees to decide whether they want to follow the model that CO and DL had - along with other LFC carriers - which is higher productivity per employee or the AA/UA model which is higher average salary/benefits per employee but much lower productivity. DL and CO employees have received higher average compensation because they work harder and have also had more profit sharing.

If AA employees want to avoid the fate that befell TWA's employees which was continual cuts in pay rates, there must be major movement to increase AA employee productivity.

The chances of that happening outside of bankruptcy is slim - and the chances that even there, unions will agree to productivity gains instead of proportionately larger pay cuts is even more unlikely.

There is enough history in the airline industry to know how this will play out.

 

[MCI transplant]

<_< -------- Liston for a change! In 2003 AA management promised "Shared sacrifice", if the Unions took unprecedented Concessions!!!------The Unions gave them those Concessions, but Management didn't seem to think that promise of "shared sacrafice" applied to them!----- Now because of management's greed, "Labor" can't seem to understand why they should pull the Company's tail feathers out of the fire a second time!!! I wounder why!?------- Well, there's an old saying for that! ------"You lie to me once, and I fall for it, sham on you! You lie to me twice, and I fall for it, sham on me!!!!" ---------You know, why don't AA's Management try something different for a change? Like trying to work "with their Unions"? Instead of trying to figure out a way that they can get the little guy to carry them through to their next PUP payout!!!?

 

[700UW]

Your not factoring in what DL pays to outsource maintenance, and how much they make on insourcing.

 

[Rogallo]

AA management will drive the company right into the history books along side Pan AM, Eastern, and yes, TWA!!! 😉

Get 'er Done!!

 

[MCI transplant]

Get 'er Done!!

<_< ------- I don't have to do anything!------- AA's Management is doing that quit well by themselves, thank you!

 

[WorldTraveler]

<_< -------- Liston for a change! In 2003 AA management promised "Shared sacrifice", if the Unions took unprecedented Concessions!!!------The Unions gave them those Concessions, but Management didn't seem to think that promise of "shared sacrafice" applied to them!----- Now because of management's greed, "Labor" can't seem to understand why they should pull the Company's tail feathers out of the fire a second time!!! I wounder why!?------- Well, there's an old saying for that! ------"You lie to me once, and I fall for it, sham on you! You lie to me twice, and I fall for it, sham on me!!!!" ---------You know, why don't AA's Management try something different for a change? Like trying to work "with their Unions"? Instead of trying to figure out a way that they can get the little guy to carry them through to their next PUP payout!!!?

I never doubted that AA employees didn't make sacrifices 8 years ago and I don't disagree that AA mgmt should have turned the company around. But the point remains that it didn't happen, partly, I believe because AA employees DID make sacrifices but in an out of court restructuring, most of AA's other costs didn't come down to the same degree that other airlines' did in BK. The fact that DL has lower lease rates on its M88s which are newer aircraft than AA's M80s is proof of that.

The unfortunate reality is that it didn't work in 2003 and AA could very well have to resort to a much deeper cost-cutting plan in BK where they can also get other costs down.
I'm sure it will go over like a lead balloon with the union crowd but the only recommendation I can see is for AA to throw about 10K employees overboard to bring their labor costs down to levels at or better than DL's and avoid having to reduce the pay levels of everyone else.

The DL/NW representation vote and the UA/CO votes are all about whether airlines will have lots of employees who are less productive or have a fewer number of employees who are highly productive. CO and DL both had much higher productivity than AA and UA (so did NW, BTW) and the LFCs such as WN also have high productivity which translates into high overall pay rates. But among AA's network peers, the choice is whether AA wants to look like from a labor standpoint like the old UA or the new DL. UA managed to get its productivity up in BK. DL raised its in BK. But there is no doubt that part of the reason that DL employees rec'd the highest profit sharing in the industry was because of the level of productivity of DL employees - and PMNW employees didn't even get the same level of profit sharing as their PMDL counterparts because of the unresolved representation issues.

AA employees have to decide whether they want to continue to carry thousands of employees more than necessary if they had productivity rates comparable to DL or UA - and if they do, they need to make those intentions known to their unions. Given that unions are more focused on retaining large numbers of employees than increasing productivity. I believe that is precisely why DL fought hard to win the representation drives and why ultimately the employees sided with DL's approach to fewer employees making more money by working harder than having more employees, although to be fair NW's productivity was comparable to DL's so the argument was really about who had the potential to make the most money and DL threw enough money around to convince enough employees that DL's system was better.

Your not factoring in what DL pays to outsource maintenance, and how much they make on insourcing.

There are accounting standards that are used when a company insources work using its own cost base and DL follows those procedures. IF you read DL's financial statements they always adjust their cost of ASM production with adjustments for insourced work. DL allocates the costs to produce insourced maintenance revenue to the appropriate cost accounts. What DL does not do is do in-house overhauls on many of its aircraft types or on an insourcing basis because DL does not make money on that type of work. DL also outsources alot of its interior mod work because it is not as cost efficient to do it in house, esp. since doing so displaces facilities that could be used for higher value work. DL insources and focuses its own in-house maintenance on engine overhauls and component maintenance both of which are high margin work.
The point remains that AA is just as capable of doing the same type of insourcing IF it had costs competitive with DL or non-airline MROs. As long as AA's maintenance costs remains well above average, AA can't compete for that revenue.

 

[700UW]

You fail to account for the millions Delta pays to MRO's to overhaul is fleet and that is not in the ASMs.

And Maintenance is one of the few departments that can make money without a passenger.

 

[777 fixer]

There are accounting standards that are used when a company insources work using its own cost base and DL follows those procedures. IF you read DL's financial statements they always adjust their cost of ASM production with adjustments for insourced work. DL allocates the costs to produce insourced maintenance revenue to the appropriate cost accounts. What DL does not do is do in-house overhauls on many of its aircraft types or on an insourcing basis because DL does not make money on that type of work. DL also outsources alot of its interior mod work because it is not as cost efficient to do it in house, esp. since doing so displaces facilities that could be used for higher value work. DL insources and focuses its own in-house maintenance on engine overhauls and component maintenance both of which are high margin work.
The point remains that AA is just as capable of doing the same type of insourcing IF it had costs competitive with DL or non-airline MROs. As long as AA's maintenance costs remains well above average, AA can't compete for that revenue.

If you want to talk about Delta why don't you try the Delta board.

 

[WorldTraveler]

You fail to account for the millions Delta pays to MRO's to overhaul is fleet and that is not in the ASMs.

And Maintenance is one of the few departments that can make money without a passenger.

This is precisely the reason why AA can't make any progress in its labor relations because you are part of the culture of denial that exists at AA among both management and labor; "If we just argue about or ignore the problem long enough, it will just go away. And by all means deny that anyone else could possibly be doing something right."

In fact, DL accounts ifor its contracted maintenance services in its financial disclosures in the following line... this is from the last quarterliy report:

Aircraft maintenance materials and outside repairs
3 months ended Dec 2010 $395M
3 months ended Dec 2009 $284M
Difference in dollars $111M
Difference in % 39%

DL most certainly does account for its contracted maintenance services in addition to its personnel which for all carriers are under the employee salary and related costs line and it uses all of that information to calculate its costs.
To somehow pretend that DL is playing some game to make its CASM look better belies the fact that DL employees earned over $300M in profit sharing and DL had the highest margin among the network carriers for 2010.
Quite frankly, DL has a culture of productivity in all departments and it cuts across the company.
But the whole point once again is that AA would be doing the same work DL is doing for other companies if it had the cost to do it.

Note the following statement that DL consistentliy makes in its financial reports also to clearly show that its CASM is generated based on its own costs to generate its ASMs, not what it spends to do other people's work.

"Consolidated and Mainline CASM excludes ancillary businesses not associated with the generation of a seat mile. These businesses include aircraft maintenance and staffing services Delta provides to third parties, Delta's vacation wholesale operations and its dedicated freighter operations, which we discontinued on Dec. 31, 2009."

Actually, the most profitable business for the airlines is the sale of frequent flyer miles which requires next to no investment compared to maintenance and it also makes money without there needing to be a passenger present.

Once again, the bleeding will stop. It always does.
Pretending you will survive while continously bleeding has an expected outcome.

AA is the last US network airline to restructure. There is nothing that has happened at AA that hasn't happened elsewhere - and so far AA has done nothing to change the course of history that has played out in the US network carrier segment of the industry.
The formula for sick airlines that have survived is rather simple: cut costs and use the cost savings to compete more effectiveliy for new revenue which you previously could not obtain.

When you or anyone else can find a formula for AA that is different and will work, be sure and let someone know. STAT.

Right now the patient is looking rather ashen.

 

[700UW]

Dont let the facts get in your way, I dont work for AA, never have.

And your just an arm chair QB, you dont work in the industry and have no idea what airline employees endure.

GO back to the DL board and post there, this is about American Airlines, your DL's biggest cheerleader we get it.

Oh, wait, no one reads the DL boards so that is why you spew your DL koolade everywhere else.