Analyst Jamie Baker says AA won't cut labor costs as much as Horton would like

[amt66]

Anybody who thinks mechanics can shut a place down is a fool!!! You only need to look at what happened to eastern and northwest. The only reason eastern went down is the pilots joined in the strike otherwise they would have kept flying. Keep dreaming of any Retro pay u fools!

 

[Chuck Schalk]

Anybody who thinks mechanics can shut a place down is a fool!!! You only need to look at what happened to eastern and northwest. The only reason eastern went down is the pilots joined in the strike otherwise they would have kept flying. Keep dreaming of any Retro pay u fools!

What choice will we have if our contract is so inferior that I can't provide for my family! We are all struggling in the high cost areas and I don't mean that things are tight, I mean, I can not pay my basic bills and I do not want to work at american Airlines till I am 70. We gave concessions year after year we were told to protect our pay and benefits and in the end they want it all and then some! we protected nothing. If the creditors committee and the judge thinks that taking away our last bit of security is going to save the company think again it will do the opposite. Then their decisions will be what brought american down not the mechanics.

 

[TWU informer]

Well you can play whatever games you like with your numbers but let me tell you something, we aint coming out of this with anything less than what UAL settles for, we would rather shut the place down first.

Bob, When you make statements such as this, who is "we"?

I think you need to sit down with TWU BK Attorney Sharon Levine one on one and get a better understanding of what we are facing, what the law is, and what the chances are of succeeding in shuting the place down. If you think you have a plethora of followers that are going to resign, retire, face civil monetary penalty, or get terminated while following you off of a cliff, then you are in need of a reality check. You seem be fighting based on past labor history that you have read in books. I am afraid it just ins't that way anymore and the huge reductions in unionized workers is clear evidence of that.

 

[eolesen]

Bingo. Bob seems to be following Charlie Bryan's playbook, perhaps a little too closely.

I came to the conclusion that the biggest problem you guys have faced with the collective bargaining process is who is doing the bargaining. Time after time, you've been outwitted for short term gain and long term pain.

 

[JFK Fleet Service]

I think Mister Baker is going to be mistaken, this is *the* opportunity AMR has been waiting for to slaughter the sacred cow(s) of labor and they will not let the moment pass.I don't care what Horton says, the DBP is as good as gone,retiree healthcare costs are going up,labor costs are getting slashed and jobs will be cut in large numbers.

The only question right now is how large of a crap sandwich Little comes back with and how large a bite we are expected to take.

 

[WorldTraveler]

I don't doubt that you will fight to get a payraise in bankruptcy, but I see contract abrogation in your future, and I predict that there are sufficient workers, including mechanics, at AA that the airline won't shut down. Some individuals may choose to leave, but many will stay.

I don't doubt that DL isn't seeing the savings it expected. After all, it's a nonunion shop and can change work rules and pay at its option, limited only by the willingness of its mechanics to work for Delta-dictated terms. Rather telling that the company that enjoys the greatest flexibility with its maintenance workforce is not as pleased with its outsourcing.



I don't think AA will exit bankruptcy with its total labor costs "considerably higher" than DL or UA, but it looks like you agree with Jamie Baker. Now that retro is not going to happen, all those guys who were waiting around to collect it will no doubt leave, right?

yet, somehow those DL mechanics seem happy enough w/ the terms of their work to not want a union.... when you factor in that they are getting profit sharing and pay raises while their colleagues down I-20 are, well, not, then perhaps DL's ability to keep maintenance costs down while also keeping qualty is not the issue you want to make it. But you can keep trying.
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There is no doubt that the growth of aviation worldwide IS making it harder to reduce maintenance costs by outsourcing to levels that once were obtained... but it still doesn't mean that it still is not cheaper to do SOME things on an outsourced basis and it also is possible for companies to work to create their own foreign MROs.... that is what the DL/AM maintenance JV is all about. DL will create its own MRO in partnership with AM to enable it to keep costs at levels DL needs while also managing the quality of work far better than can be done in non-company controlled MROs in Asia.
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AA will gain a tremendous amount of labor savings esp in maintenance w/ its new fleet... the question remains whether it is in the long-term best interest of the company to take on $25B to reduce costs to levels that are companies are achieving w/ a much smaller investment in fleet.
BTW, when labor cost cuts are discussed, it doesn't matter whether they come from pay cuts or productivity improvements or reduced staffing. Analysts know the difference between each group but still roll it up into one line item - exactly as it appears on the income statements.
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And it still doesn't change the fact that AA's revenues continue to be pressured by competitors from all sides... given that AMR THIS YEAR has about a $2B difference in its profitability/losses compared to DL and UA and even analysts are saying that $1B in labor cost reductions may be on the upper end, AA has a huge gap to close and it can't be done off the backs of employees or by loading up the balance sheet with debt at levels that will leave AMR even after BK w/ 3X the level of debt of its peers, who will also have matched most of the strategic advantages that are part of AA's franchise today.
I'm glad to hear that the possibility of deeper pay cuts might not happen - but there is no doubt there will be job losses and if AA doesn't close the revenue gap as fast or faster than the cost gap, then AA's long-term viability still remains at risk.

 

[Kev3188]

Now seriously do you think that a judge is going to let you shut the place down.
Come on already; please stop misleading the membership.
I expect that APFA, APA and TWU will not be able to get crap
for any of us. I wish the unions would be more honest with us
and not give us a sense of false expectations.
AA will get almost everything AA wants or a judge will shove
it down our throats. That is the reality my friend.
Just asked anyone that went thru this process.

If past is precedent, AA will put it's version of a "dream list" out as it's last best offer. The TWU/APA/APFA will figure out what it's least-worst option is to make it palatable for at least a vote, and that will be that. All of you at AA would do well to see what other airline employees came out of the 113 process with in order to figure out what may be in store.

Bob, When you make statements such as this, who is "we"?

I think you need to sit down with TWU BK Attorney Sharon Levine one on one and get a better understanding of what we are facing, what the law is, and what the chances are of succeeding in shuting the place down.

See above. Levine was in the mix for most of the previous BK's, IIRC.

I think Mister Baker is going to be mistaken, this is *the* opportunity AMR has been waiting for to slaughter the sacred cow(s) of labor and they will not let the moment pass.I don't care what Horton says, the DBP is as good as gone,retiree healthcare costs are going up,labor costs are getting slashed and jobs will be cut in large numbers.

The only question right now is how large of a crap sandwich Little comes back with and how large a bite we are expected to take.

Exactly!

BTW, as far as costs go, here's what was listed as the September '11 Quarter unit costs in DL's presentation to investors yesterday:

AA: 14.59
US: 14.31
UA: 13.45
DL: 13.19
WN: 12.19

If AA's aiming to be competitive, this is their chance, and I can't see them leaving an opportunity on the table...

 

[WorldTraveler]

If past is precedent, AA will put it's version of a "dream list" out as it's last best offer. The TWU/APA/APFA will figure out what it's least-worst option is to make it palatable for at least a vote, and that will be that. All of you at AA would do well to see what other airline employees came out of the 113 process with in order to figure out what may be in store.




See above. Levine was in the mix for most of the previous BK's, IIRC.




Exactly!

BTW, as far as costs go, here's what was listed as the September '11 Quarter unit costs in DL's presentation to investors yesterday:

AA: 14.59
US: 14.31
UA: 13.45
DL: 13.19
WN: 12.19

If AA's aiming to be competitive, this is their chance, and I can't see them leaving an opportunity on the table...

note that these are consolidated costs....AA's ability to reduce its AE costs will disproportionately help it... also, WN will always enjoy a cost advantage relative to its network carrier peers due to the lack of RJs... in part this is why WN is ordering larger 738s in order to push CASMs lower.
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you are correct that AA will tell the BK court the minimum they need and labor might have some options to move things around but the total costs are not likely to move and the judge will back the company up in getting the cost cuts it needs.

 

[eolesen]

Kev, agree with all of what you said, except for the last chart. You've only included the large US based network carriers.

If AA's truly aiming to be competitive, they also have to take into consideration that next tier of airlines, including AS, HA, B6, F9, G4 and even NK. Even though they're not a US carrier, they also need to look at guys like Westjet, Easyjet and Ryanair as models of efficiency.

 

[Kev3188]

E--

Agree 100% about HA, AS, etc. The ones I listed were the only ones DL cited, but I think that that gap is what AA employees should expect at a minimum to be closed.

As far as cost cuts while in BK-and how they've been achieved previously: At NW, each group had a total "ask." Ours (ramp/csa's/stores/res) was 181M. How we got there was up to us, as long as it was met. If I was at AA, I might take a minute to review what was on the table during the Vermont Plan days here. Some of these might be already in effect by now, but others not...

If you're an FSC or AMT in a small station, get ready...

 

[Kellerguy]

Doubt Baker has a handle on the efficiency potential the current contracts have and may account for 10-15% alone and probably more in some groups. I suspect AA wants to exit from BK very quickly to get on with it's growth plans and might be more amenable to just settling for competitive labor contracts in return, but if they are prolonged and result in higher risk to be bought out they probably will set their targets on being the lowest cost.

I would question if any of the contract groups have the leadership capability recognize and deal with that, and then to go back to their members and sell it to the rank and file. That would be a tough sell particularly since they will have been viewed in some eyes as having brought them to this point. Perhaps that is what Bates (APA) was referring to when he said sometimes it's just easier to have it imposed on them then to agree to it.

 

[Buck]

Does anyone have a breakdown of labor costs based on unionized groups?

When the company says labor is to high, do they mean all of labor or isit just the mechanics, F/A's, Fleet Service or Pilots?

 

[AANOTOK]

Does anyone have a breakdown of labor costs based on unionized groups?

When the company says labor is to high, do they mean all of labor or isit just the mechanics, F/A's, Fleet Service or Pilots?

Probably Fleet Service and Building cleaners! B)

 

[JFK Fleet Service]

Building cleaners? We still have those?

Havent seen an AA building cleaner since '95-ish...

 

[Buck]

Building cleaners? We still have those?

Havent seen an AA building cleaner since '95-ish...

TUL Maintenance has them, but in the last T/A they were going to be upgraded to Untility Workers in Title II