APA releases its list of management mistakes and failures

[FWAAA]

The APA is laboring under the misconception that a thorough review of AA's history matters to the bankruptcy judge, as it has compiled a long list of management failures and mistakes:

One argument the union wants U.S. Bankruptcy Judge Sean Lane to hear is that the pilots didn't cause the bankruptcy.

"We are in bankruptcy because of decisions management has made," Bates wrote. "The events of the past decade will be an evidentiary factor in court proceedings--documenting the fact that our pilots have a long history of acting in good faith to support this airline."

The judge won't care about who is to "blame," only whether the requirements of section 1113 are met.

Here's the list:

1. Crandall created the frequent flyer program. Said he wished he had not done so due the high administrative cost and the fact that it does not create significant customer loyalty.

2. Crandall created yield management for AA. Yield management was quickly copied by our competitors. He tried to undo yield management programs across the industry with his Value Pricing Plan (see item no. 13).

3. The purchase of 37/44/50 seat Regional Jets which Mr. Arpey acknowledged to the APA board were incredibly expensive and inefficient ,but purchased "to get around the pilots scope clause". (more than $2 billion of debt for aircraft no one else wants and we can't rid ourselves of.

4. The purchase of F-100 90 seat jets. This new fleet added incredible training and maintenance costs especially after Fokker went BK. Some of these aircraft were still having leases paid as late as the date of Ch-11 filing.

5. The high cost of first opening and then subsequently closing "hubs" at RDU and BNA.

6. The purchase of TWA and subsequent disposal of numerous assets and international routes leaving a poorly performing STL hub.

7. The purchase of Air Cal and subsequent disposal of all aircraft and most routes. The void remaining in the west coast is now proposed to be filled by a code share with Alaska.

8. The purchase of Reno and subsequent disposal of all aircraft and routes again furthering the west coast void. The strong arm tactics involved in the purchase resulted in a pilot job action and massive AMR revenue loss.

9. The intentional non-funding of the pilots' pension plan for 2 years rationalized by the FAA extending mandatory retirement age. This greatly exacerbated the current underfunding.

10. Operating 3 maintenance facilities for years, (MCI, TULE and Alliance) before finally closing MCI. The alliance facility is still greatly underutilized.

11. Numerous other conscious operational decisions that resulted in record FAA fines and the grounding at one point of the entire S-80 fleet. The wire bundle debacle. The hiding of faulty repairs on S-80 pressure vessels in the chop line at Roswell.

12. The failure to purchase the Pan Am pacific routes or merge with NWA thus denying the necessary Asian presence.

13. The value pricing debacle which was costly and unnecessary

14. The "more room throughout coach" scheme which resulted in less revenue and far higher revenue differential with direct competitors.

15. The failure to provide the French Airway system, SNCR, with a workable CRS system resulting in a large financial settlement.

16. The massive HR failure and management decision to provide bonuses to senior management less than 3 years after all of labor gave up $1.8 billion/yr to restructure outside of bankruptcy. With all labor groups working far more for far less when these bonuses were announced resulted in a first ever multi union grievance which restricted the cash component but allowed unrestricted stock. Despite the incredibly obvious labor problems created as AMR entered bargaining with all 3 unions, management continued to provide themselves with annual bonuses each subsequent April.

17. The inexplicable but destructive communication failure by AMR in failing to explain to their labor groups in 2011, the dire nature of their financial situation, and after filing for reorganization blaming their failings on labor.

18. Pulling out of 2nd tier European cities (Lyon, Dusseldorf, Munich, Stockholm, Glasgow) used to feed business to codeshare partners. This made AMR over reliant on the US-LHR market and hurt AMR when the financial industry collapsed twice in a decade: post 9/11 and again during the Global Financial Crisis (GFC).

19. A premature filing of Ch. 11 based on tactical concerns ( Dec pilot retirements, roll over of some debt instruments, internal senior management disagreement ) rather than first having a strategic plan that was based on major concerns such as the timing of re-fleeting and truly evaluating other options (merger, equity investment from BA or others, approaching labor re. a possible ESOP etc). This knee jerk reaction will prove costly especially with S-80 lessors who have been handed considerable leverage in renegotiation knowing AA will need the majority of these aircraft well into 2014)

20. A stock buy back plan costing billions in cash but inflating the stock price - THE key metric in the management bonus schemes.

21. SABRE. 1 billion spent on the system that was designed to give AMR control of ticket sales, initially through travel agents and later through the internet. AMR and SABRE were sued repeatedly by competitors to gain access, which they won. That SABRE failed to enhance AMR profits led to the attempt to kill it via the Value Pricing Plan. SABRE was spun off. AMR then began expensive litigation effort to control SABRE's global distribution system. AMR lost again.

22. Failure to bid on mail contracts, and subsequent loss thereof.

23. The sick jihad.

24. The investment of hundreds of millions in Canadian Air Int'l., which subsequently went BK and defaulted.

http://aviationblog.dallasnews.com/archives/2012/02/pilots-are-spending-plenty-to.html

 

[FA Mikey]

The sale of AOA, the purchase of trancarib, the early 747's, the 1970s Pacific island service, the 1 stop service to Sydney, Not even an honorable mention by the 500,000 dollar a month pilot Go Team. Tisk Tisk.

 

[FWAAA]

I wondered why the MD-11s didn't make the cut - after all, the 75 F100s were deemed worthy.

 

[Vortilon]

I wondered why the MD-11s didn't make the cut - after all, the 75 F100s were deemed worthy.

MD 11s did not perform as advertised - they didn't have the legs to consistently make the long hauls. F 100s only had one air data system. For the "reduced minimum vertical separation" requirement - two air data systems are required. A very expensive add on. There were also some engine issues on the F 100 that needed to be addressed. That's it in a nutshell.

 

[xUT]

The APA is laboring under the misconception that a thorough review of AA's history matters to the bankruptcy judge, as it has compiled a long list of management failures and mistakes:


The judge won't care about who is to "blame," only whether the requirements of section 1113 are met.

Here's the list:



http://aviationblog.dallasnews.com/archives/2012/02/pilots-are-spending-plenty-to.html

Maybe we need a 'History' thread and hook it up to Wiki...

 

[eolesen]

They left off "failure to recognize Super Bowl Sunday as a holiday"

 

[DNTULSA]

They left off "failure to recognize Super Bowl Sunday as a holiday"

It must be wonderful to be in upper management at AA. You have no accountability or responsibility for your decisions. You get a bonus no matter what happens, and if AA goes boom, you float off on a golden parachute!

No wonder they would sell their mothers to a brothel in order to be promoted to upper management!

 

[737823]

They left off "failure to recognize Super Bowl Sunday as a holiday"

Agreed.

When I see things like this even from the "less confrontational" APA leadership, I'll be glad when the concessions are imposed and more of AA's flying goes to RJ operators and jetBlue. This is simply outrageous. I guess these jokers didn't get the memo that AAdvantage is what keeps AA in business-it's pretty much the only reason left to fly AA. Mileage purchases from Citigroup and other partners provide AA liquidity to continue operating, and they'll only continue to purchase the miles if they are deemed valuable by their credit cardholders. I'd too like to see AA fly to more destinations abroad. I guess they didn't consider that AA's labor costs make them uncompetitive in many markets where Delta, Continental, and now United can effectively compete. The sense of denial is incredible and my only sympathies for the pilots is their ineffective and incompetent leadership. Several years ago I think AirTran ALPA was publicly criticized for blasting favorable financial results when the company was unwilling to give into their outrageous demands.

Josh

 

[AA89]

They left off "failure to recognize Super Bowl Sunday as a holiday"

Let's compare the contributions to our industry by pilots and management in the past few years. This video might help.

www.youtube.com/watch_popup?v=tE_5eiYn0D0#t=109

Now lets compare compensation and see who would be more out of line to seek another paid holiday.

No I am not a pilot

 

[FA Mikey]

neither

 

[AA89]

neither

Can't hurt to ask.

 

[IORFA]

Josh is REALLY jealous! He must have been kicked out of flight school and he is STILL steamed about it.

 

[FWAAA]

MD 11s did not perform as advertised - they didn't have the legs to consistently make the long hauls. F 100s only had one air data system. For the "reduced minimum vertical separation" requirement - two air data systems are required. A very expensive add on. There were also some engine issues on the F 100 that needed to be addressed. That's it in a nutshell.

Thanks for the summary, but I'm well versed in the shortcomings of the MD-11s; that's why I asked why they didn't make the cut (why aren't they included on the APA's list of failures?).

Within four or five years of the initial MD-11 delivery, AA was already agreeing to sell them to FedEx in exchange for FedEx installing hushkits on the remaining AA 727s. Once the 777s began arriving in 1999, AA was able to deliver the remaining MD-11s to FedEx.

In keeping with the spirit of the APA failure list, which generally relies upon hindsight, here's some more hindsight-aided management failures:

The MD-11 failure is intertwined with another massive management failure: the failure to outbid UA for the PanAm Pacific operation. Had Crandall seen the light and outbid UA, Crandall might have realized that 747s were necessary (at the time) to serve Tokyo nonstop from the AA hubs. Despite the downsides of the 747 (too big, etc), they would have been a better investment than the MD-11s turned out to be. Remember that AA did acquire the 747-SPs to serve Tokyo from DFW until the loser MD-11s arrived.

Of course, had AA purchased the PanAm Tokyo hub and the fifth freedoms that UA ended up getting, UA would have been in a world of hurt and it's possible that AA would have ended up owning ORD the way AA now owns DFW. If AA had acquired PanAm's Pacific operation, and bought new 747s, AA would have probably won the early China route cases that UA won instead. But hindsight is indeed 20-20.

Having failed to buy the PanAm Tokyo operation, another failure was the refusal to buy NW in 2000 when NW demanded about $100/share (two or three times the market price at the time).

 

[777 fixer]

A lot of the things listed were decsions made by Crandall, is the APA in Boston blaming him?

 

[700UW]

The ironic thing is, none of this matters to the Judge.