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

[737823]

Delta pays their workers more than AA and word is out that another increase is on the way.

Sure, once we get our retro those guys will leave. Now they are also sticking around to make sure that the pension and retiree medical isn't voted away as well.

Sure speaks volumes about the benefits of being union represented!

Josh

 

[Buck]

Sure speaks volumes about the benefits of being union represented!

Josh

You have to remember that the union you speak of is not just representing the mechanics.

 

[Kellerguy]

Delta pays their workers more than AA and word is out that another increase is on the way.

Sure, once we get our retro those guys will leave. Now they are also sticking around to make sure that the pension and retiree medical isn't voted away as well.

Does anyone else really think they are going to get retro pay?

 

[787nightmare]

Does anyone else really think they are going to get retro pay?

Maybe retro hourly rates...
The twu will "fight like hell" to minimize the impact of the number of those affected. (;-)

 

[Buck]

Maybe retro hourly rates...
The twu will "fight like hell" to minimize the impact of the number of those affected. (;-)

Whose pay is causing the labor differential of $800 million?

 

[BoeingBoy]

After the 2003 concessions, it may not be so much a pay difference as it is a benefits/productivity difference. The available info says that average employee pay isn't out of line - just slightly above the average for the network carriers. But average pension/benefit cost was nearly $5000/year per employee above the next highest carrier and nearly $6000/year/employee above the average (which includes AA) in 2010. The DB pension plans are obviously a large cost that none of the competition has. F/A's, for example, being able to fly relatively little yet keeping full benefits is a productivity cost. Since I know nothing about all the groups contracts, I'll leave it at that.

Jim

 

[eolesen]

Whose pay is causing the labor differential of $800 million?

The $800m comes mainly from benefits, work rules, and scope. I can see a situation unfolding where few wind up taking hourly pay cuts in S1113, but lots of jobs are eliminated. I'm sure in Fleet and maybe Cargo you'll see the PT caps eliminated and outstations can be staffed with more PT than FT.... In M&E I don't think there is any use of PT today, but it might show up in the outstations vs. outsourcing line jobs. CC ratios might also take a hit. All that starts to add up.

 

[paul1]

The $800m comes mainly from benefits, work rules, and scope. I can see a situation unfolding where few wind up taking hourly pay cuts in S1113, but lots of jobs are eliminated. I'm sure in Fleet and maybe Cargo you'll see the PT caps eliminated and outstations can be staffed with more PT than FT.... In M&E I don't think there is any use of PT today, but it might show up in the outstations vs. outsourcing line jobs. CC ratios might also take a hit. All that starts to add up.

in maint. are base pay is below everyone except usair and ual which should move ahead of us on the 29th of Dec(hopefully) part time is a wastse of time in maint. yea maybe outstataions that op 2-4 flights, but better to contract out

break down the 800 mil if the top exec take a 10 percent pay what are we we downto 80 mil . Not being a #### but lets get real we make 70 a year yes that good money , but when my house costs 300000 plus taxes things are n't looking that good

 

[WorldTraveler]

After the 2003 concessions, it may not be so much a pay difference as it is a benefits/productivity difference. The available info says that average employee pay isn't out of line - just slightly above the average for the network carriers. But average pension/benefit cost was nearly $5000/year per employee above the next highest carrier and nearly $6000/year/employee above the average (which includes AA) in 2010. The DB pension plans are obviously a large cost that none of the competition has. F/A's, for example, being able to fly relatively little yet keeping full benefits is a productivity cost. Since I know nothing about all the groups contracts, I'll leave it at that.

Jim

except that DL DOES continue to pay DB costs - it has more pension liabilities on its books for its frozen plans and also paid more in 2011 in DB benefits on its FROZEN plans - which doesn't even include its pilots - than AMR. Plus DL has DC costs for its active employees.
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A large portion of AA's disadvantage is productivity related - their active employees are about 20% less productive than their peers.... w/o getting into another long discussion of which group is at fault, suffice it to say that AA's productivity problems run the gamut across all departments and they aren't necessarily due to AA's labor contracts... AA simply failed to reduce its workforce of a size necessary to match the size of its network post 2003 concessions.... and other carriers increased their efficiency w/ the same or fewer people in the years after their BK, something AA did not do.
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AA's costs are also negatively affected by medical costs, including retiree medical which few other carriers continue to offer to active employees.

 

[BoeingBoy]

except that DL DOES continue to pay DB costs - it has more pension liabilities on its books for its frozen plans and also paid more in 2011 in DB benefits on its FROZEN plans - which doesn't even include its pilots - than AMR. Plus DL has DC costs for its active employees.

Delta, Delta, Delta - are they the only airline in the universe? Of course frozen DB plans usually require further funding but the reason they're frozen is that it's cheaper in the long run - otherwise why freeze them. Likewise with DC plans, where the employee has the ROI risk and not the company plus they provide a known cost that can be planned for. So tell us something that we don't know...

Jim

 

[JFK Fleet Service]

Come on Jim, everything in commercial aviation is compared to the beatified Delta Airlines.

 

[BoeingBoy]

That sure seems to be the case. With all those pension costs I don't know how DL will make it - they're on death's doorstep...

Jim

 

[WorldTraveler]

Delta, Delta, Delta - are they the only airline in the universe? Of course frozen DB plans usually require further funding but the reason they're frozen is that it's cheaper in the long run - otherwise why freeze them. Likewise with DC plans, where the employee has the ROI risk and not the company plus they provide a known cost that can be planned for. So tell us something that we don't know...

Jim

I made the statement because what you said was factually wrong and because DL and PMNW employees do still have earned DB benefits which are provided by Delta Air Lines, not the PBGC... because UA and US employees lost their pensions does not mean that every other legacy airline employee did.
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And, yes, ANY employee in a DC plan shares the risk... that's the precise reason why companies in all kinds of industries are walking away from DB plans.
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What you apparently didn't know or chose to not include is the fact that DL's DB costs are higher than AMR's, DL has DC costs for active employees, and yet DL is profitable... so while a few people want to try to reduce AMR's problems down to DB costs, that is clearly a very small part of the problem - and it is a problem that at least one of AA's competitors have been able to overcome.
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And then we can't forget that AA's revenue performance is trailing its network peers by an amount that is as large if not larger on annual basis than the amount the company attributes to labor cost uncompetitiveness. When half of the problem is revenue related and employees have no responsibility for how the company chooses to deploy its resources, then the concerns of Jamie Baker about whether labor cost cuts not being sufficient combined with weak revenues - which BK doesn't fix - should indeed be a concern. We need only look at none other than US to see that despite two trips through BK, US still has a persistent revenue generation problem which dramatically affects the ability of its employees to increase their wages. It is US employees - not those of other carriers - who are obsessed with plucking up other competitors in hopes of tapping into revenue that might end - or at least remove an excuse of US mgmt - for US employees' low compensation.
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AA employees cannot afford to be stuck in the same rut that US employees have found themselves in.

 

[BoeingBoy]

I made the statement because what you said was factually wrong and because DL and PMNW employees do still have earned DB benefits which are provided by Delta Air Lines, not the PBGC... because UA and US employees lost their pensions does not mean that every other legacy airline employee did.

Earned benefits - yes, for anyone whose DB plan was frozen instead of terminated. Have a DB plan ongoing - no, benefits stopped accruing when the plan was frozen. Since I was talking about ongoing plans, still having a benefit from a frozen plan doesn't apply.
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And, yes, ANY employee in a DC plan shares the risk... that's the precise reason why companies in all kinds of industries are walking away from DB plans.

The risk is all on the employee. The only thing the company has to do is put the proper amount in the DC plan - no ROI risk there...
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What you apparently didn't know or chose to not include is the fact that DL's DB costs are higher than AMR's, DL has DC costs for active employees, and yet DL is profitable... so while a few people want to try to reduce AMR's problems down to DB costs, that is clearly a very small part of the problem - and it is a problem that at least one of AA's competitors have been able to overcome.

I said 2010 - when DL and NW were still reporting separately. Quoting 2011 numbers, after DL and NW reported combined numbers, doesn't make the 2010 numbers wrong. It just makes the DL numbers bigger. DL is a bigger carrier than AA (or haven't you noticed) - it makes sense that DL would have higher pension costs than AA since DL is so much bigger. However, DL's pension costs will come down over time due to freezing pensions. DL, because it's bigger, has much higher revenue as well. You'd be wise to stop trying to make comparisons between post-bankruptcy, post-merger DL and early bankruptcy AMR which hasn't had time to reduce costs through bankruptcy much yet. All AMR has really been able to achieve is getting rid of 24 stored planes. Their big work is still ahead of them instead of in the rearview mirror like DL. Once AMR emerges from bankruptcy and the effects of bankruptcy accounting disappear there'll be plenty of time to claim victory of your beloved DL.
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AA employees cannot afford to be stuck in the same rut that US employees have found themselves in.

On that we can agree. I wouldn't wish the fate of the US employees on my worst enemy.

Jim

 

[dfw gen]

it would be nice if world traveler would go find something else to do and maybe take Josh with him. With theses two experts I'm surprised they don't run their own airline since they know it all. Does world traveler's employer know how much time he spends on these message boards? you'd think HIS productivity would be down.......